Groupon’s Q1 results top estimates, raises outlook

Groupon (GRPN) shares jumped 11% during pre-market trading after the company reported better-than-expected results in the first quarter. Revenue slid 7% to $626.5 million during the quarter, but topped analyst estimates.

Adjusted earnings of $0.03 beat street estimates, prompting the firm to raise its earnings outlook for the year.

Gross billings, which show the purchase of goods and services by users, decreased 4.8% to $1.29 billion, while gross profits improved 5% due to improved performance in the International division. Active customers on the site grew 3% to 49.6 million, helped by growth in customers from North America and International segment. On an adjusted basis, EBITDA saw 17% growth, aided by income tax reforms and reduced restructuring charges.

Total units sold decreased 7% to 42.4 million in the quarter due to 11% drop in North America division. On the flip side, the gross profit per active customer rose 3% to $27.16, helped by the renewed focus to improve margins.

Groupon has been in a transition phase for over a year and has brought many changes to bring back the mojo. Last year, it reduced its presence to 15 countries from 50 a few years ago to focus on high-growth markets. It also has been trying to shift its focus from deals side of the business to services, as the former would bring in more revenues, but with paltry margins.

The deals website has entered into partnerships with the likes of Comcast (CMSCA), Expedia (EXPE), Grubhub (GRUB) etc., which would help it expand its offerings to customers. It already has all three leading payment networks — Mastercard (MA), Visa (V) and American Express (AXP) — in North America, which would help it offer more discounts to its users. Since customer acquisition costs are low, partnerships are expected to bring in higher margins and more customers. The company’s focus on improving its services side of the business is going to augur well in the long term.

Groupon has raised its outlook for the year. On an adjusted basis, EBITDA is forecast between $280 million and $290 million, compared to the earlier guidance of $260 million and $270 million.