Groupon’s (GRPN) CEO Eric Lefkofsky on Q2 2014 Results – Earnings Call Transcript


Q2 2014 Results Earnings Conference Call

August 5, 2014, 5:00 p.m. ET


Genny Konz –Investor Relations

Eric Lefkofsky – Chief Executive Officer and Director

Jason Child – Chief Financial Officer


Heath Terry – Goldman Sachs

Mark Mahaney – RBC Capital Markets

Paul Bieber – Bank of America

Douglas Anmuth – JPMorgan

Ross Sandler – Deutsche Bank

Brian Fitzgerald – Jefferies

Arvind Bhatia – Sterne Agee

Ken Sena – Evercore


Good day everyone, and welcome to Groupon’s second quarter 2014 financial results conference call. [Operator instructions.] For opening remarks, I would like to turn the call over to the VP of FP&A and investor relations, Genny Konz. Please go ahead.

Genny Konz

Hello, and welcome to our second quarter 2014 financial results conference call. On the call today are Eric Lefkofsky, CEO; and Jason Child, CFO. Kal Raman will be available for questions during the Q&A portion of the call.

The following discussion and responses to your questions reflect management’s views as of today, August 5, 2014, only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today’s press release and in our filings with the SEC, including our Form 10-Q.

Groupon encourages investors to use its Investor Relations website as a way of easily finding information about the company. Groupon promptly makes available on this website, free of charge reports that the company files or furnishes with the SEC, corporate governance information, and select press releases and social media postings.

Our results for the second quarter reflect the acquisitions of TMON and Ideeli since their respective dates of close in January. We will, at times, discuss performance including and excluding the impact of the acquisitions for comparison purposes. Additional detail regarding the contribution of each to the quarter will be included in our 10-Q.

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On the call today, we will also discuss the following non-GAAP financial measures: adjusted EBITDA, non-GAAP earnings per share, and free cash flow, as well as FX-neutral results. In our press release and our filings with the SEC, each of which is posted on our Investor Relations website, you will find additional disclosures regarding non-GAAP measures, including reconciliations of these measures with U.S. GAAP.

Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2013.

Now, I will turn the call over to Eric.

Eric Lefkofsky – Chief Executive Officer and Director

Thanks, Genny. We made good progress in the second quarter. Our local marketplace of over 240,000 deals continued to gain broader awareness. We reached another all-time high in mobile transactions, as nearly 92 million people have now downloaded our app, and our international business continued to stabilize and is now contributing nicely to our bottom line.

Q2 was another record quarter for Groupon. Gross billings increased 29% to $1.82 billion, and revenue increased 23% to $752 million. Adjusted EBITDA came in toward the high end of our range at $59 million, up from $40 million last quarter, and non-GAAP EPS was in line with our expectations at $0.01.

Demand remains healthy in North America. Billings grew 12% to $799 million, led by a 26% year over year growth in our goods business and 44% growth in travel. North American revenues also increased 12% to $424 million. Gross profit was about flat sequentially at $180 million, and segment operating income was $15 million, up from $11 million in Q1.

EMEA billings were about flat with the prior year, at $483 million, also reflecting strength in goods, which grew 14% year over year. Revenue growth was 42%, as the mix of direct revenue was higher in the quarter. In addition, we generated $28 million in segment operating income, up from $19 million in Q1, as a result of marketing reductions.

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After much work, EMEA has now seen two quarters in a row of year over year customer growth after a few quarters of decline, and remains profitable and on stable footing. Rest of world grew 145% in billings largely driven by the acquisition of TMON.

Excluding our Korean business, rest of world grew 17% on an FX-neutral basis. Revenues grew 40%. The large difference between billings growth and revenue is related to TMON’s deal margins, which have historically been in the low teens, as are typical for large Korean ecommerce companies.

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