Congratulations, Groupon: Your insistence on making the world a cheaper place finally seems to be paying off with the news that the company has reported its first quarterly profit thanks to tightening spending and growing both its merchant and customer base. Maybe this daily deals thing will catch on, after all…
Groupon’s operating profit margin in the first quarter of 2012 was 7 percent, higher than the 6.5 percent expected by analysts. That number capped off an impressive report that included a 33 percent growth in business from the previous quarter, its largest growth in a year. The company’s first-quarter pro-forma net income, excluding option expenses, was 2 cents per share, significantly up from a net loss of 41 cents a share in the same period last year, with revenue at $559.3 million against $295.5 million in Q1 2011. “Revenue came in much higher than expected and margins were higher,” according to financial analyst Sameet Sinha, adding that “The domestic side of Groupon’s business did well. They may be doing a better job of marketing or their new businesses may be gaining traction.”
Overall, the company reported that it has an estimated 36.9 million active customers, and dealt with more than 100,000 unique merchants during the quarter, a new record for the company. According to CFO Jason Child, the rise in revenue not only relates to those numbers, but also a decrease in marketing spending, down to $117 million compared with $230 million in the same period last year. Child says that the company is simply more efficient in terms of marketing now, keeping up customer growth rate despite the lower amount of spending.
Interestingly enough, the rise in unique merchants – and, less surprisingly, revenue – coincided with a rise in Groupon’s “take rate,” the amount of money it keeps from each transaction; the growth of competition in the daily deals space had pushed the company down from its Q1 2011 peak of 44 percent take rate, but last quarter saw the company slowly push it back from Q4 2011’s 40 percent to 41.3 percent. Presumably, this can be tracked back to the relative decrease in the number of daily deal start-ups from last year, as well as merchants seeing the results of their efforts, but it’ll be interesting to see whether or not Groupon can continue to inch their take up slowly over the next few quarters.
The news boosted trading for Groupon, with stock rising more than 18 percent to $13.21 on the Nasdaq index after the results were announced, its largest single-day gain since the company went public last November.