Groupon falls short of analyst expectations, reporting Q3 revenues of $568.6 million and earnings per share of $0.00

Today Groupon reported its third quarter financial results, including top line revenue of $568.6 million, and earnings per share of $0.00.

Update: Groupon is now down more than 10% in after hours trading. Follow along here.

Groupon lost a total of $3 million during the quarter, including “stock-based compensation and acquisition-related expenses” that totaled some $25.1 million. That compares favorably to a loss of $54.2 million, or $0.18 a share in Q3, 2011.

That revenue figure is an increase of 32% year-over-year. North American revenue for the company was up 81% year over year. Groupon passed the 200 million subscriber mark in the quarter.

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Analysts had expected revenues of $591 million, and earnings per share of $0.03. Groupon missed those expectations. In after-hours trading, the company’s stock is sharply down, losing nearly 10% of its market value at the time of writing.

On the day’s trading the firm was up several points, indicating that investors expected good news before the bell. In the middle of the day, it became known – and confirmed – that Groupon had fired around 80 of its sales staff. That trimming was due to increased automation.

TNW’s take is that Groupon had a decent quarter. Its revenue growth proves that its model remains relevant, even as the firm expands into new products. And, its exceptionally narrow loss is in fact a profit on a simple non-GAAP basis. To see the reaction that the market is currently enacting on the company almost feels like an overreaction.

Critically, the cost for Groupon to collect new users is on the way down: “Customer acquisition costs improved 55% year-over-year, enabling the reduction of marketing spend by 58% compared with the third quarter 2011.” Whether this is due to lessened competition – many Groupon competitors are simply dead – or other efficiencies, this lowered cost is key to Groupon’s long term profitability.

For the coming quarter, Groupon expects revenues to fall between $625 million and $675 million. At the high end, that would be a 37% gain on last year’s Q4. Including $30 million in stock-based compensation, Groupon expects to earn between $0 and $20 million in the quarter.

It appears that the age of losses at Groupon could be at a close.

What follows is a condensed version of Groupon’s earnings report:

CHICAGO–(BUSINESS WIRE)–Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter ended September 30, 2012.

Revenue increased 32% year-over-year to $568.6 million in the third quarter 2012, compared with $430.2 million in the third quarter 2011. Excluding the $26.0 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, revenue growth was 38% compared with third quarter 2011.

Gross billings, which reflects the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 5% year-over-year to $1.22 billion in the third quarter 2012, compared with $1.16 billion in the third quarter 2011. Excluding the $61.7 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, gross billings growth was 11% compared with third quarter 2011.

Operating income was $25.4 million in the third quarter 2012, which included stock-based compensation and acquisition-related expenses of $25.1 million. This compares with a loss from operations of $0.2 million in the third quarter 2011, which included net positive stock-based compensation and acquisition-related expenses of $1.5 million. Year-over-year changes in foreign exchange rates throughout the quarter had a $2.8 million favorable impact on operating income. Revenue and operating income in the third quarter 2012 included a one-time increase of $18.5 million related to breakage, or income related to unredeemed Groupons internationally, resulting from the clarification of a tax ruling in Germany.

“Our solid performance in North America was offset by continued challenges in Europe,” said Andrew Mason, CEO of Groupon. “Groupon Goods has evolved into a second major category that our customers clearly love. With deals on everything from designer sunglasses to big-screen televisions to most-wanted toys, we think it will be a great gifting destination this holiday season.”

Operating cash flow decreased 35% year-over-year to $42.1 million, compared with $64.4 million in the third quarter 2011. For the trailing twelve months ended September 30, 2012, operating cash flow was $370.2 million. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, was $26.1 million for the third quarter 2012, bringing free cash flow for the trailing twelve months ended September 30, 2012 to $300.4 million. This reflects an increase of 123% year-over-year compared to free cash flow in the trailing twelve months ended September 30, 2011 of $134.9 million. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term debt.

Third quarter 2012 net loss attributable to common stockholders improved by $51.3 million year-over-year, to $3.0 million, or $0.00 per share, reflecting stock-based compensation and acquisition-related expenses of $25.1 million and a diluted share count of 653.2 million. Net loss attributable to common stockholders was $54.2 million, or a loss per share of $0.18 in the third quarter 2011, including net positive stock-based compensation and acquisition-related expenses of $1.5 million.

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