Groupon shares pop 6% on mixed results

Eric Lefkofsky's first full quarter as CEO brings mixed results

In Eric Lefkofsky’s first real quarter as official CEO of Groupon, the company’s earnings were mixed. Shares plunged in after-hours trading after Groupon’s revenue missed estimates, but made a surprising rebound. Shares were up 6.3% Friday morning to $10.10 after closing Thursday at $9.50.

Analysts were expecting EPS of $0.01 on revenue of $616 million, but Groupon reported EPS of $0.02 on revenue of $595.1 million. That’s up 5% from $568.6 million in the third quarter of 2012. Why such modest growth? While North American revenue grew by 24%, it was offset by a 21% decline in EMEA revenue and a 4% decline in the rest of the world.

It’s a similar story for gross billings, which were up 20% in North America and 12% in EMEA, but down 13% in the rest of the world.

While gross billings in EMEA were decent, Groupon is struggling with its international market. Groupon has made a lot of improvements in the North American market, but “whether GRPN will be able to replicate these improvements outside the US, where its brand is less dominant and competition is more varied, remains to be seen,” wrote Macquerie analyst Tom White, in a research note.

Now for some good news: mobile is way, way up. As of September 2013, more than half of all North American transactions took place on a mobile device for the first time ever. Globally, some 40% of transactions take place on a mobile device. More than nine million people downloaded the Groupon apps in the third quarter for a total of 60 million altogether.

"Our Local business showed continued strength in the quarter, particularly in North America," said CEO Eric Lefkofsky, in a statement. "Mobile adoption continued to increase in Q3, reflected in our record 9 million app downloads. We're pleased with our progress, but we still have work to do as we transform the business from our daily deal email roots to a full ecommerce marketplace."

And Groupon’s “pull” strategy is coming along swimmingly. Groupon CEO Eric Lefkofsky previously stated his aim to “pull” customers in by creating a better, more searchable marketplace that would entice users to look for deals rather than wait for deals to be pushed to them via email, which can get very spammy. Now, Groupon is revealing that customers who search for deals spend 25% more time on the site than those who don’t, and that 6% of all traffic in North America is related to search activity.

Average yearly customer spend was down slightly to $137 from $138 in Q2 2013, but active customers grew 10% year-over-year to 43.5 million as of September 30, 2013.

In addition to its mixed results, Groupon also announced Thursday that it has agreed to acquire South Korean e-commerce company Ticket Monster for $260 million in cash and stock. Offering deals on products, local experiences, and travel, Ticket Monster is—ironically—a subsidiary of LivingSocial.

"Ticket Monster is one of Korea's most recognized and trusted brands, and we're thrilled to have them join the family,” said Lefkofsky.