Groupon Accounting Chief Needs To Bring Credibility To Its Books

by Trefis Team
-7.60%
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GRPN
Groupon
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Groupon (NASDAQ:GRPN) has appointed Brian Stevens, an ex KPMG LLP audit partner, as its new chief accounting officer. Mr. Stevens spent 16 years with KPMG prior to joining Groupon. The company has had its share of accounting woes with metrics such as Adjusted Consolidated Segment Operating Income (“Adjusted COSI”) which excluded marketing costs. In a disclosure in March, Groupon stated that its fourth quarter 2011 results were worse than earlier reported due to customer refund requests on new and expensive deals that it ventured into. In a regulatory filing, Groupon admitted that “there is a material weakness in the design and operating effectiveness of our internal control over financial reporting.” [1]

Check out our complete analysis of Groupon

Nevertheless, in Q2 2012, Groupon managed to rein in some of its costs as its marketing expenses dropped by nearly half y-o-y to $88 million. North American revenues grew by 66 percent y-o-y to reach $260 million. We have modeled our estimate based on the dropping customer acquisition costs and growing revenues. Mobile adoption is key for the growth of new business lines such as Groupon Now! and in July 2012 nearly a third of the North American transactions were completed on mobile devices, which is a 35 percent increase y-o-y.

Outlook For Q3

The company expects revenue to be between $580 and $620 million, an increase of 35-44 percent y-o-y. Interestingly, the outlook assumes no further acquisitions or investments, which indicates it may push to grow organically.

We currently have a ~$8 Trefis price estimate for Groupon, which stands nearly 90% above its current market price.

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Notes:
  1. Groupon Names Brian Stevens As Accounting Chief, www.marketwatch.com, Sept 10, 2012 []
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