* North American daily deals business posts strong quarter
* Co-founder Lefkofsky takes control on analyst conference
* Groupon board forms committee to start search for new CEO
* Shares rise 10 percent after-hours
(Adds executive comments and analyst comments)
By Alistair Barr
May 8 Groupon Inc's quarterly revenue
rose a faster-than-expected 7.5 percent after the company's
North American daily deals business turned in a strong
performance, stirring hopes that the struggling company may have
begun to turn things around.
Shares in the company, one of the most feted Internet market
debutantes of 2011 before daily deals mania cooled, climbed
almost 10 percent in after-hours trade. They have gained about
40 percent since the February ouster of co-founder and former
CEO Andrew Mason, who was criticized for lacking the experience
to run an increasingly global, public company.
Wall Street was cautious ahead of Groupon's results, so the
company's "solid" performance triggered a particularly big gain
in Groupon shares on Wednesday, analysts say.
"Margins came in better and they are re-affirming their
full-year income guidance. It could have been worse," said Ken
Sena, an analyst at Evercore Partners.
Groupon has been trying to revive a sluggish European
business, while juggling the fast-rising cost of ensnaring new
customers, and merchants to partner on Internet coupons for
everything from spa treatments to fine dining.
The Chicago-based company finally fired Mason in February
after a string of disappointing results wiped out three-quarters
of its market value since its 2011 IPO.
On Wednesday, it reported first-quarter revenue rose to
$601.4 million from $559.3 million a year earlier, surpassing
the $590 million analysts had expected, according to Thomson
Consolidated segment operating income, or CSOI, a closely
watched measure of Groupon's profitability, came in at $51.2
million in the latest period. Mark Mahaney, an analyst at RBC
Capital Markets, was expecting CSOI of $26 million.
Its North American revenue rose 42 percent, while
international revenue fell 18 percent.
Groupon, which has lost several other key executives, is on
the lookout for a new permanent chief executive. Interim co-CEOs
Eric Lefkofsky and Ted Leonsis continue to grapple with its
struggling European business, while expanding in the United
Lefkofsky, who co-founded Groupon with Mason and is
chairman, led the earnings conference call with analysts for the
first time, acknowledging missteps and announcing a "new
chapter" focused on the company's local commerce roots.
Analysts expect a slimmed-down company under new leadership.
"At times as an organization we spread ourselves too thin
and fail to focus on the things that will have the greatest
impact," Lefkofsky said.
LOCAL MARKETPLACE FOCUS
Groupon has been building an online deal marketplace called
Pull that lets people search for and buy deals in their area.
This is a big change from Groupon's original business, which
sent a daily email to subscribers offering one or two deals.
Emails accounted for less than 45 percent of North American
transactions in the first quarter, suggesting the Pull
marketplace is gaining momentum. A Groupon spokesman declined to
say how many transactions came from online searches.
Lefkofsky said the marketplace approach has potential
because more people are carrying smartphones and can search for
what they want to do and buy locally as they move around.
About 45 percent of North American transactions came from
mobile devices in March, up from about 20 percent two years ago,
That Pull marketplace however needs a lot of merchants to
offer deals for longer periods, something Lefkofsky said the
company was making progress on.
At the end of March, Groupon was offering almost 40,000
active deals from merchants in North America, up from about
1,000 when the company went public in late 2011.
Lefkofsky said that over half of Groupon's local
transactions in North America came from this "deal bank" of
longer-term merchant offers. In March more than 60 percent of
the contracts Groupon signed with merchants were for longer-term
deals, he said.
For now, Groupon's board of directors has formed a special
committee that has begun a search for a new chief executive for
the company, interim co-CEO Ted Leonsis said on Wednesday.
RBC's Mahaney said Lefkofsky did a "nice job" on the
conference call and asked if he was interested in the full-time
CEO role. The co-founder did not respond, asking Ted Leonsis,
Groupon's other interim CEO, to chime in.
The current leadership team is "gelling very very nicely,"
giving the search committee more time to find "the ideal
long-term CEO," Leonsis added.
Groupon spokesman Paul Taaffe said Lefkofsky has not put
himself forward as a candidate and is not being considered by
the committee for the role.
Leonsis is leading the search committee, which Lefkofsky
will not be on. Groupon's Taaffe declined to say who else is
part of the group.
(Editing by Carol Bishopric, Matthew Lewis and Eric Walsh)