Shares of Groupon Inc. (GRPN) surged 10 percent in extended trade on Wednesday, after reporting a loss for the first quarter that narrowed from a year ago, driven mainly by a 7.5 percent growth in revenues and lower marketing costs. Adjusted earnings for the quarter were in line with Wall Street expectations, while revenues trumped estimates.
Chicago, Illinois-based Groupon's first-quarter loss narrowed to $4.0 million or $0.01 per share from $11.7 million or $0.02 per share last year. Adjusted earnings were $0.03 per share. Twenty-three analysts polled by Thomson Reuters expected earnings of $0.03 per share for the quarter. Analysts' estimates typically exclude special items.
The daily deal website's revenue for the quarter grew 7.5 percent to $601.4 million from $559.3 million last year. Twenty-two analysts had a consensus revenue estimate of $588.92 million for the quarter.
Groupon's revenue growth was driven largely by strong performance at North America, where revenue grew 42 percent on higher demand for its coupons. International segment revenues slipped 18 percent.
The improved results come at a time when the company is transforming itself under the newly appointed interim Co-CEO's Eric Lefkofsky and Ted Leonsis, while the search for a permanent head continues. Groupon had fired its CEO and Founder Andrew Mason late-February, just a day after reporting a disappointing fourth-quarter financial results.
Commenting on on its first quarter performance, Lefkofsky said, "We are encouraged by our results, as our local revenues accelerated and our margins improved over the prior quarter."
Revenue growth was driven mainly by increase in direct revenues, as sales from its e-commerce site continues to flourish while daily discount deals continue to soften. However, the problem with e-commerce sales is compounded with lower profit margins.
Groupon's margins has been significantly impacted due to the costs incurred to ship physical goods. Cost of direct revenues increased to $152.4 million from $16.9 million last year. Gross margins dropped to 63 percent from 78.6 percent last year.
Total operating expenses for the first quarter declined to $357.8 million from $400,1 million in the year-ago quarter. Marketing costs for the period dropped to $49.6 million from $116.6 million last year.
Looking forward to the second quarter, Groupon expect revenues in the range of $575 million to $625 million. Analysts currently estimate revenues of $616.14 million for the quarter.
GRPN closed Wednesday's trading at $5.59, up $0.20 or 3.71%, on the Nasdaq. The stock further gained $0.60 or 10.73% in after hours trade.
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