Groupon Reports Profit as Overseas Growth Boosts Coupon Business

Company Generated 57% of Revenue Outside the U.S.

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Groupon, the largest daily-deal website, reported first-quarter profit that topped estimates as marketing costs dropped and it expanded internationally in its second period as a publicly traded company.

Profit excluding certain costs was $16.3 million, or 2 cents a share, the Chicago-based company said in a statement today. Revenue jumped 89% from a year earlier, to $559.3 million. The average analyst projection was for profit of 1 cent on sales of $530.6 million, according to data compiled by Bloomberg.

The site is attempting to rebuild investor confidence. The stock lost 48% of its value in its first six months on the public market, a period that ended May 3. Since 2001, only four companies have performed worse among newly public U.S. internet stocks.

Groupon could bounce back from accounting errors and regulatory missteps by boosting earnings from international growth and new products, said Jeffrey Houston, a Chicago-based analyst at Barrington Research Associates who recommends buying the shares.

"What it needs to do to have the stock rebound is start posting good results," Mr. Houston said in an interview before the results. "As more of cash flow is driven off of profitability, that 's going to be a huge benefit."

Groupon shares soared as much as 15% in extended trading following the report, to $13.55. They had climbed 19% earlier, to $11.74 at the close in New York.

The company generated 57% of its first-quarter revenue outside the U.S. Almost 30% of Groupon's transactions in North America were completed on mobile phones in April, up from 25% four months earlier, CEO Andrew Mason said in a letter to shareholders last week.

In February, Groupon had reported fourth-quarter operating income of $15 million but reversed that to an operating loss of the same amount after restating results in March because of higher refunds to merchants. At the time, Groupon said it had discovered a "material weakness" in its financial controls.

The company's first-quarter net loss narrowed to $11.7 million, or 2 cents a share, from $146.5 million, or 48 cents, a year earlier.

The company makes money by selling discounts -- known as Groupons -- from businesses such as restaurants and nail salons. It then splits the revenue with the businesses. Last month, Groupon said Starbucks Corp. CEO Howard Schultz exited its board, and the company added Daniel Henry, the finance chief of American Express Co., and Robert Bass, a vice chairman of Deloitte LLP, as directors.

~Bloomberg News~

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