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  • Analyst Predicts 5G iPhone Will Lead to a 2020 ‘Supercycle’ For Apple

    Analyst Predicts 5G iPhone Will Lead to a 2020 ‘Supercycle’ For Apple

    With Apple expected to release four 5G iPhones in 2020, at least one analyst is expecting it to be a “supercycle” for the company’s stock.

    Wedbush analyst Dan Ives told CNBC he believes the demand for 5G iPhones will have a significant impact on the stock price. As a result, Ives raised his target for Apple’s stock to $350, a significant increase over the $284 closing price Monday.

    As CNBC points out, recent Piper Jaffray research shows an increasing level of interest in upgrading to a 5G iPhone, with nearly a quarter of iPhone owners willing to upgrade to a $1,200 model.

    With interest that high, it’s little wonder some reports predict Apple will sell 80 million units in 2020, with at least one source placing that number as high as 100 million. Similarly, Strategy Analytics predicts Apple will easily take the 5G crown in 2020, leap-frogging the competition to take the top spot.

    Even so, not all analysts share Ives’ bullish outlook. Gene Munster, Loup Ventures managing partner, told CNBC that the first year of 5G iPhones would be a “disappointment for investors,” blaming poor coverage on the part of the carriers.

    With such different viewpoints in play, 2020 is shaping up to be a fascinating year for Apple and their 5G plans.

  • Oprah Winfrey Tweets About Love of Bread, Weight Watchers Stock Soars

    Many diets would have you abstain from carbohydrates like bread – but not Weight Watchers.

    And this is perfect for Oprah Winfrey, who loves bread. Like, a lot.

    And she says she’s lost 26 pounds on Weight Watchers while eating bread every single day.

    “This is the joy for me,” Oprah says in a Twitter video. “I love bread. I love bread. I now just manage it, so I don’t deny myself bread – I have bread every day. That’s the genius of this program. I lost 26 pounds and I have eaten bread every single day.”

    A funny thing about that tweet …

    You might recall that Oprah bought a 10 percent stake in Weight Watchers last October.

    “It was not strictly a business decision. It was a personal decision that allowed me to make a smart business decision. I always lead with my heart because the truth is, my heart is my brand,” said Oprah at the time.

    The company’s stock soared on the news.

    And guess what, Oprah’s bread tweet had a similar effect on Weight Watchers stock.

    Following the “I love bread” tweet, Weight Watchers stocks jumped nearly 20 percent, which made Oprah about $14 million richer.

    Pretty smart tweet.

  • Twitter’s User Growth Is Absolutely Anemic

    Once again, Twitter’s earnings have beat expectations. And once again, Twitter is reporting absolutely anemic user growth.

    In July, Twitter’s then-temporary CEO Jack Dorsey reported 304 million monthly active users (excluding SMS Fast Followers). “We are not satisfied with our growth in audience,” he said.

    Now, permanent Twitter CEO Jack Dorsey is reporting only 307 million MAUs for Q3.

    “We continued to see strong financial performance this quarter, as well as meaningful progress across our three areas of focus: ensuring more disciplined execution, simplifying our services, and better communicating the value of our platform,” said Jack Dorsey, CEO of Twitter. “We’ve simplified our roadmap and organization around a few big bets across Twitter, Periscope, and Vine that we believe represent our largest opportunities for growth.”

    The good news: Q3 revenue of $569 million, up 58% year-over-year, beating the previously forecast range of $545 million to $560 million.

    Here’s the bad news – user growth is stagnant.

    “Total average Monthly Active Users (MAUs) were 320 million for the third quarter, up 11% year-over-year, and compared to 316 million in the previous quarter. Excluding SMS Fast Followers, MAUs were 307 million for the third quarter, up 8% year-over-year, and compared to 304 million in the previous quarter. Mobile MAUs represented approximately 80% of total MAUs,” says Twitter.

    Twitter only gained three million new monthly active users over the last few months.

    The report sent stock plunging in after hours trading.

    Screen Shot 2015-10-27 at 4.28.15 PM

    Twitter continues to post solid revenue, and continues to be unable to grow its user base. Over the last year, shares of Twitter have fallen over 36%.

    Image via Thierry Ehrmann, Flickr Creative Commons

  • Jack Dorsey Is Giving a Third of His Stock Away … to Twitter Employees

    Twitter CEO Jack Dorsey isn’t wasting any time making friends among his company’s workforce.

    Dorsey has announced that he’s giving about one-third of his Twitter stock back to his employees. That’s about $200 million. Dorsey has around 22 million shares.

    “I’m giving 1/3rd of my Twitter stock (exactly 1% of the company) to our employee equity pool to reinvest directly in our people,” wrote Dorsey in a tweet.

    “As for me: I’d rather have a smaller part of something big than a bigger part of something small. I’m confident we can make Twitter big!”

    Also, it’s important to notice that we now live in a world where CEOs of major companies are making important stock announcements with little chick emojis. It’s the future.

    A cycnic could see this announcement as a little bit of damage control. Dorsey just announced Twitter is laying off 8% of its workforce – over 300 people. The cuts will come mostly from Product and Engineering, according to Dorsey.

    “The roadmap is also a plan to change how we work, and what we need to do that work. Product and Engineering are going to make the most significant structural changes to reflect our plan ahead. We feel strongly that Engineering will move much faster with a smaller and nimbler team, while remaining the biggest percentage of our workforce. And the rest of the organization will be streamlined in parallel,” he said in a letter to the company.

    “So we have made an extremely tough decision: we plan to part ways with up to 336 people from across the company. We are doing this with the utmost respect for each and every person. Twitter will go to great lengths to take care of each individual by providing generous exit packages and help finding a new job.”

    That package reportedly includes two months of pay and benefits through the end of 2015.

  • Oprah Winfrey Buys into Weight Watchers and Stock Soars

    Oprah Winfrey Buys into Weight Watchers and Stock Soars

    Oprah Winfrey has purchased a 10 percent stake in the Weight Watchers diet company, and it’s sent the company’s stock soaring.

    In speaking with NPR, Winfrey said that she didn’t even have to think about the investment. Weight Watchers asked, and she said yes.

    “They called me and asked would I be interested in talking to them about establishing a relationship and I said, ‘Uh … sure.’ … I didn’t even think about it. … I’ve had many, many friends do Weight Watchers over the years and so we had a meeting, yes, and I said, well, I couldn’t do anything with them without trying the program first to see if that worked for me. So far I’ve lost about 14 pounds on it.”

    This is the kind of effect Oprah can have on your stock:

    Screen Shot 2015-10-20 at 2.50.00 PM

    “It was not strictly a business decision. It was a personal decision that allowed me to make a smart business decision. I always lead with my heart because the truth is, my heart is my brand,” said Oprah.

    “The good thing about picking Oprah Winfrey is that although she is very much a really strong media personality, lots of people still see her as being a very ordinary person, a person that has struggled with things like weight loss,” Neil Saunders, managing director of retail research firm Conlumino, told Reuters.

    And that’s a good point. Oprah is a brand, and when it comes to struggles with weight, she has authenticity. Can Oprah help Weight Watchers improve its reach? If anyone can, it’s her.

  • Twitter Stock Falls Below IPO Price

    Twitter Stock Falls Below IPO Price

    For the first time ever, Twitter shares have fallen below the original IPO price.

    In November of 2013, Twitter priced its IPO at $26 a share. The company raised $1.8 billion in the offering, selling 70 million shares.

    The stock opened up at $45.10, 73.5% higher than the set price.

    Today, it fell below $26.

    Screen Shot 2015-08-20 at 3.00.14 PM

    Last month, Twitter reported its Q2 earnings and beat expectations, but showed flat user growth. That flat growth has been a concern of investors for many quarters.

    “Our Q2 results show good progress in monetization, but we are not satisfied with our growth in audience,” said Jack Dorsey, interim CEO of Twitter. “In order to realize Twitter’s full potential, we must improve in three key areas: ensure more disciplined execution, simplify our service to deliver Twitter’s value faster, and better communicate that value.”

    And that “interim CEO” thing has also been an issue, as Twitter battles concerns over leadership since former CEO Dick Costolo’s departure.

    We’ll see how the day progresses, as the price is hovering right around $26. But for a time, Twitter was in the red.

    Image via Anthony Quintano, Flickr Creative Commons

  • Was Yelp Misleading About Its Reviews?

    Was Yelp Misleading About Its Reviews?

    Yelp is no stranger to legal battles, nor is it a stranger to complaints about how it handles reviews. Now, the company faces a new class action suit from shareholders, accusing it of selling over $81 million in stock, while misleading shareholders about the legitimacy of reviews.

    Do you believe Yelp would mislead investors about its reviews, or do you think the suit is baseless? Share your thoughts in the comments.

    Named defendants include CEO Jeremy Stoppelman, CFO Robert Krolik, and COO Geoffrey Donaker.

    Joseph Curry, who filed the suit, alleges that Yelp “made false and misleading statements concerning the company’s true business and financial condition, including but not limited to the true nature of the so-called “firsthand” experiences and reviews appearing on the company’s website, the robustness of its processes and algorithms purportedly designed to screen unreliable reviews, and the company’s forecasted financial growth prospects and the extent to which they were reliant upon undisclosed business practices, including but not limited to requiring business customers to pay to suppress negative reviews.”

    The complaint adds, “The class period misrepresentations made by defendants concerning the company’s current financial and business condition, including its forecasted financial and business condition alleged herein, were each materially false and misleading when made and caused the company’s stock to trade at artificially inflated prices of over $98.00 per share on March 4, 2014, because defendants knew, or recklessly disregarded, the following facts:

    (a) Reviews, including anonymous reviews, appearing on the company’s website were not all authentic “firsthand” reviews, but instead included fraudulent reviews by reviewers who did not have first-hand experience with the business being reviewed;

    (b) Algorithms purportedly designed to screen unreliable reviews did not comprehensively do so, and instead the company allowed such unreliable reviews to remain prominent while the company tried to sell services designed to suppress negative reviews or make them go away; and

    (c) In light of the above facts, the representations concerning the company’s current and future financial condition and prospects, and the extent to which they were reliant upon undisclosed business practices, did not have a reasonable basis.”

    It goes on to allege that the defendants sold over a million shares of Yelp stock at prices as high as $98.99 per share for “insider trading proceeds” of over $81.5 million. As a point of reference, shares are $67.78 as of the time of this writing.

    Here’s the actual complaint (via GigaOm):

    Curry v Yelp by jeff_roberts881

    Yelp has suggested that the claims made in the complaint are without merit, as you would expect.

    The company was in the news earlier this week as a hotel called Union Street Guest House was charging people for posting negative reviews. As a result, people who hadn’t actually stayed there flocked to the hotel’s Yelp page to leave bad reviews. Yelp said this was against its policy, and said “reviews that are contributed as a result of media attention and do not reflect first-hand experiences run counter to Yelp’s Terms of Service and will be removed from the site.”

    Still, seemingly illegitimate reviews (including one from Hitler) have continued to appear on the page. Sometimes fictional businesses and reviews appear on the site as well.

    In April, the FTC disclosed that it had seen over 2,000 complaints about Yelp’s business practices between 2008 and March of this year. The company, which is celebrating its ten-year anniversary, released its quarterly earnings report last week, as it became profitable for the first time since going public in 2012.

    Do you think Yelp can actually do a good job of keeping reviews legitimate? Let us know in the comments.

    Image via Yelp (Flickr)

  • AOL Sees 6th Consecutive Quarter Of Revenue Growth

    AOL just released its Q2 earnings report with its sixth consecutive quarter of revenue and adjusted OIBDA growth. Total revenue grew 12% year-over-year. The company attributes this to accelerated global advertising revenue, which grew 20% year-over-year.

    The company saw 60% growth in third party platform revenue driven by growth in the sale of premium formats across its programmatic platform as well as the inclusion of revenue from Adap.tv, which AOL acquired in September.

    CEO Tim Armstrong said, “AOL’s future as a scaled media technology company continues to get stronger. AOL grew consumer usage, video, programmatic advertising, branded content, and ad pricing throughout the first half of 2014, and we will continue to make AOL one of the best operating companies in our industry.”

    Here’s an infographic they released based on the highlights of the earnings report:

    The company announced that its board has approved a $150 million share repurchase authorization.

    Here’s the release in its entirety:

    NEW YORK–()–AOL Inc. (NYSE:AOL) released second quarter 2014 results today.

    “AOL grew consumer usage, video, programmatic advertising, branded content, and ad pricing throughout the first half of 2014, and we will continue to make AOL one of the best operating companies in our industry.”

    “AOL’s future as a scaled media technology company continues to get stronger,” said Tim Armstrong, AOL Chairman and CEO. “AOL grew consumer usage, video, programmatic advertising, branded content, and ad pricing throughout the first half of 2014, and we will continue to make AOL one of the best operating companies in our industry.”

    Summary Results
    In millions (except per share amounts)
    Q2 2014 Q2 2013 Change
    Revenues
    Global advertising and other $ 451.7 $ 375.3 20 %
    AOL Properties Display 144.1 146.2 -1 %
    AOL Properties Search 98.9 93.7 6 %
    Third Party Platform 194.3 121.3 60 %
    Other 14.4 14.1 2 %
    Subscription 155.1 166.0 -7 %
    Total revenues $ 606.8 $ 541.3 12 %
    Adjusted operating income before depreciation and amortization (Adjusted OIBDA) (1) $ 121.5 $ 108.3 12 %
    Operating income $ 54.0 $ 51.9 4 %
    Net income attributable to AOL Inc. $ 28.2 $ 28.5 -1 %
    Diluted EPS $ 0.34 $ 0.35 -3 %
    Cash provided by operating activities $ 125.9 $ 89.4 41 %
    Free Cash Flow (1) $ 87.5 $ 57.3 53 %
    (1) See Page 9 for a reconciliation of Adjusted OIBDA and Free Cash Flow to the GAAP financial measures we consider most comparable.

    Q2 Consolidated AOL Revenue Trends:

    • Q2 total revenue grew 12% year-over-year, driven by accelerated global advertising revenue growth.
    • Global advertising revenue grew 20% year-over-year reflecting:
      • 60% growth in Third Party Platform revenue driven by growth in the sale of premium formats across AOL’s programmatic platform and by the inclusion of revenue from Adap.tv. Third Party Platform Revenue grew approximately 20% excluding Adap.tv.
      • 1% decline in AOL Properties display revenue, due to the absence in Q2’14 of approximately $15 million in revenue from shuttered or de-emphasized brands, including the disposition of Patch. Excluding these impacts, display grew 9% driven by improved overall inventory pricing.
      • 6% growth in AOL Properties search revenue driven by increased queries from search marketing related efforts (which came with approximately $18 million of increased Traffic Acquisition Costs (TAC)).
    • Subscription revenue declined 7% year-over-year as 4% growth in average monthly subscription revenue per AOL subscriber (ARPU) partially offset a 9% decline in subscribers. Domestic AOL subscriber monthly average churn was 1.6% in Q2 2014 compared to 1.4% monthly average churn in Q2 2013, primarily reflecting a price increase during the quarter.

    Q2 Consolidated AOL Profitability Trends:

    • Cost of revenues increased $58 million year-over-year, due to a $63 million increase in TAC, reflecting the inclusion of Adap.tv, search marketing related efforts and growth in Third Party Platform revenue. Excluding TAC, cost of revenues declined $5 million primarily due to lower headcount, including the declines related to the disposition of Patch.
    • General and administrative expenses grew $3 million in Q2 2014 from Q2 2013, which included a $6 million benefit from a favorable settlement. Excluding this benefit in the prior year period, general and administrative expenses declined in Q2 2014, reflecting lower marketing and personnel expenses.
    • Adjusted OIBDA grew 12% year-over-year, driven by total revenue growth net of TAC and reduced non-TAC operating expenses.
    • Operating Income, Net Income and Diluted EPS were negatively impacted by a $7.4 million year-over-year increase in amortization of intangible assets and by a $7.2 million year-over-year increase in stock-based compensation expense, resulting from acquisitions made late in 2013 and in the first half of 2014.

    AOL Asset, Cash & Cash Flow Trends:

    • AOL had $136 million of cash and equivalents and $105 million of outstanding borrowings under our $250 million senior secured revolving credit facility agreement at June 30, 2014.
    • On July 30, AOL completed the sale of its Dulles Technology Center (DTC) for approximately $33 million. The DTC is classified as held for sale on the balance sheet at June 30, 2014. On August 4, AOL repaid $30 million of borrowings under the Credit Facility Agreement, leaving a balance of $75 million on outstanding borrowings.
    • Q2 cash provided by operating activities was $126 million and Free Cash Flow was $88 million, both up approximately $30 million year-over-year, primarily reflecting the receipt of a significant payment from a large partner during the quarter, whereas the prior year payment was received in Q1.
    • AOL repurchased 1.6 million shares of common stock at an average price of $36.84 in Q2, or approximately $59 million in aggregate. On July 28, AOL’s Board of Directors authorized a $150 million share repurchase. Repurchases may be made under the authorization until July 28, 2015.
    DISCUSSION OF SEGMENT RESULTS
    Q2’14 Q2’13 Change
    (In millions)
    Revenues
    Brand Group 185.7 190.3 -2 %
    Membership Group 203.8 213.8 -5 %
    AOL Platforms 247.1 160.4 54 %
    Corporate & Other 0.0 0.3 -100 %
    Intersegment eliminations (29.8 ) (23.5 ) -27 %
    Total Revenues $ 606.8 $ 541.3 12 %
    Adjusted OIBDA
    Brand Group 13.1 (1.4 ) N/A
    Membership Group 143.4 151.6 -5 %
    AOL Platforms (5.0 ) (11.3 ) 56 %
    Corporate & Other (30.0 ) (30.6 ) 2 %
    Total Adjusted OIBDA $ 121.5 $ 108.3 12 %

    Brand Group

    Brand Group revenue declined year-over-year, negatively impacted by the absence of display revenue from shuttered and de-emphasized brands, including Patch. Excluding this impact, Brand Group display revenue grew 4%, driven by continued growth in inventory pricing. Brand Group search revenue grew 10% year-over-year, driven by increased queries from search marketing related efforts.

    Brand Group Adjusted OIBDA improved significantly year-over-year, due to cost savings initiatives, including savings associated with the de-emphasis and shuttering of certain brands, including Patch, partially offset by increased TAC associated with our search marketing related efforts.

    Membership Group

    Membership Group revenue reflects a 7% decline in subscription revenue, partially offset by growth in display revenue, driven by improved inventory pricing on AOL Mail. Subscription revenue declines reflect 9% fewer domestic AOL subscribers on 1.6% monthly average churn. Membership Group revenue declines were partially offset by 4% growth in ARPU year-over-year, reflecting price increases in connection with AOL’s efforts to add increased value to subscriber packages through additional features and services.

    Membership Group Adjusted OIBDA declines primarily reflect the decline in subscription revenue discussed above, partially offset by a decline in costs associated with the decline in subscribers.

    AOL Platforms

    AOL Platforms revenue increased 54% year-over-year, driven by significant growth in Third Party Platform revenue, which includes revenue from our programmatic offerings including Adap.tv. Excluding Adap.tv, Third Party Platform revenue grew approximately 20% year-over-year, driven by growth in the sale of premium formats across AOL’s programmatic platform.

    AOL Platforms Adjusted OIBDA improved significantly year-over-year, reflecting strong revenue net of TAC growth in the segment, partially offset by increased investments in our programmatic platforms and premium formats.

    Corporate & Other

    Corporate & Other Adjusted OIBDA improved slightly year-over-year, primarily driven by lower personnel costs as a result of AOL’s broader efficiency efforts, partially offset by a prior year benefit to legal costs resulting from a favorable settlement.

    Tax

    AOL had Q2 2014 pre-tax income of $52 million and income tax expense of $25 million, resulting in an effective tax rate of 48%. This compares to an effective tax rate of 45% for Q2 2013. The effective tax rates for Q2 2014 and Q2 2013 differed from the statutory U.S. federal income tax rate of 35% primarily due to the tax impact of foreign losses that did not produce a tax benefit.

    Cash Flow

    Q2 cash provided by operating activities was $126 million and Free Cash Flow was $88 million, both up approximately $30 million year-over-year, primarily reflecting the receipt of a significant payment from a large partner during the quarter, whereas the prior year payment was received in Q1.

    CONSOLIDATED OPERATING METRICS
    Q2 2014 Q2 2013 Y/Y Change Q1 2014 Q/Q Change
    Subscriber Information
    Domestic AOL subscribers (in thousands) (1) 2,338 2,583 -9 % 2,422 -3 %
    ARPU (1) $ 20.86 $ 20.03 4 % $ 19.41 7 %
    Domestic AOL subscriber monthly average churn (2) 1.6 % 1.4 % 14 % 1.5 % 7 %
    Unique Visitors (in millions) (3)
    Domestic average monthly multi-platform unique visitors to AOL Properties 171 144 18 % 170 1 %
    Domestic average monthly desktop unique visitors to AOL Properties 108 116 -7 % 114 -5 %
    (1) Domestic AOL subscribers include subscribers participating in introductory free-trial periods and subscribers that are paying no monthly fees or reduced monthly fees through member service and retention programs. Individuals who are only registered for our free offerings, including subscribers who have migrated from paid subscription plans, are not included in the AOL subscriber numbers presented above. Additionally, only those individuals whose subscription includes AOL-brand dial-up access service are included in the AOL subscriber numbers above. ARPU is calculated as domestic average monthly subscription revenue per AOL subscriber.

    (2) Churn represents the percentage of AOL subscribers that are either terminated or cancel our services, factoring in new and reactivated subscribers. Monthly average churn is calculated as the monthly average number of terminations plus cancellations divided by the initial AOL subscriber base plus any new registrations and reactivations for the applicable period.

    (3) See “Unique Visitor Metrics” on page 10 of this press release.

    Webcast and Conference Call Information

    AOL Inc. will host a conference call to discuss second quarter 2014 financial results on Wednesday, August 6 2014, at 8:00 am ET. To access the call, parties in the United States and Canada should call toll-free (800) 510.0146 and other international parties should call (617) 614.3449. Participants should reference ‘AOL Call’ when dialing into the live call. Additionally, a live webcast of the conference call, together with supplemental financial information, can be accessed through the Company’s Investor Relations website at http://ir.aol.com. In addition, an archive of the webcast can be accessed through the link above for one year following the conference call, and an audio replay of the call will be available for two weeks following the conference call by calling (888) 286.8010 and other international parties should call (617) 801.6888. The access code for the replay is 35849940.

    FINANCIAL STATEMENTS

    AOL Inc.
    Condensed Consolidated Statements of Operations
    (In millions, except per share amounts)
    Three Months Ended June 30, Six Months Ended June 30,
    2014 2013 2014 2013
    (unaudited) (unaudited)
    Revenues:
    Advertising and other $ 451.7 $ 375.3 $ 885.1 $ 747.8
    Subscription 155.1 166.0 305.0 331.8
    Total revenues 606.8 541.3 1,190.1 1,079.6
    Costs of revenues 457.4 399.9 914.9 793.0
    General and administrative 79.5 76.6 154.8 159.4
    Amortization of intangible assets 16.5 9.1 31.7 18.6
    Restructuring costs 2.9 4.3 14.5 9.1
    (Gain) loss on disposal of assets, net (3.5 ) (0.5 ) (4.0 ) (2.3 )
    Operating income 54.0 51.9 78.2 101.8
    Other income (loss), net (1.8 ) (0.7 ) (1.3 ) (3.5 )
    Income before income taxes 52.2 51.2 76.9 98.3
    Income tax provision 24.8 23.2 40.8 44.7
    Net income $ 27.4 $ 28.0 $ 36.1 $ 53.6
    Net (income) loss attributable to noncontrolling interests 0.8 0.5 1.4 0.8
    Net income attributable to AOL Inc. $ 28.2 $ 28.5 $ 37.5 $ 54.4
    Per share information attributable to AOL Inc. common stockholders:
    Basic net income per common share $ 0.35 $ 0.37 $ 0.47 $ 0.71
    Diluted net income per common share $ 0.34 $ 0.35 $ 0.45 $ 0.67
    Shares used in computing basic income per common share 79.6 77.2 79.6 77.1
    Shares used in computing diluted income per common share 83.3 81.5 83.8 81.4
    Depreciation expense by function:
    Costs of revenues $ 31.3 $ 29.8 $ 61.1 $ 60.3
    General and administrative 2.4 2.5 6.0 5.1
    Total depreciation expense $ 33.7 $ 32.3 $ 67.1 $ 65.4
    Equity-based compensation by function:
    Costs of revenues $ 11.7 $ 5.7 $ 19.7 $ 11.2
    General and administrative 5.4 4.2 10.4 8.4
    Total equity-based compensation $ 17.1 $ 9.9 $ 30.1 $ 19.6
    Traffic Acquisition Costs (included in costs of revenues) $ 158.8 $ 96.3 $ 309.3 $ 193.9
    Third Party Platform Traffic Acquisition Costs $ 123.0 $ 78.1 $ 243.2 $ 155.1
    AOL Inc.
    Condensed Consolidated Balance Sheets
    (In millions, except per share amounts)
    June 30, December 31,
    2014 2013
    Assets (unaudited)
    Current assets:
    Cash and equivalents $ 136.2 $ 207.3
    Accounts receivable, net of allowances of $9.9 and $8.3, respectively 445.4 491.0
    Prepaid expenses and other current assets 41.8 34.1
    Deferred income taxes, net 25.6 30.7
    Assets held for sale 35.1 –
    Total current assets 684.1 763.1
    Property and equipment, net 447.4 467.9
    Goodwill 1,489.8 1,361.7
    Intangible assets, net 246.7 208.4
    Long-term deferred income taxes, net 77.2 110.6
    Other long-term assets 86.5 71.7
    Total assets $ 3,031.7 $ 2,983.4
    Liabilities, Redeemable Noncontrolling Interest and Equity
    Current liabilities:
    Accounts payable $ 77.3 $ 101.0
    Accrued compensation and benefits 80.1 127.0
    Accrued expenses and other current liabilities 181.8 197.3
    Deferred revenue 67.1 67.2
    Current portion of obligations under capital leases and credit facility 160.3 55.5
    Total current liabilities 566.6 548.0
    Long-term portion of obligations under capital leases 77.5 56.2
    Long-term deferred income taxes 4.0 4.4
    Other long-term liabilities 97.1 97.6
    Total liabilities 745.2 706.2
    Redeemable noncontrolling interest 9.2 9.7
    Equity:
    Common stock, $0.01 par value, 115.1 million shares issued and 78.6 million
    shares outstanding as of June 30, 2014 and 114.1 million shares issued and 79.2
    million shares outstanding as of December 31, 2013    		 1.2 1.1
    Additional paid-in capital 3,619.7 3,592.7
    Accumulated other comprehensive income (loss), net (287.3 ) (290.4 )
    Accumulated deficit (56.0 ) (93.6 )
    Treasury stock, at cost, 36.5 million shares as of June 30, 2014 and 34.9 million
    shares as of December 31, 2013    		 (1,001.5 ) (942.9 )
    Total stockholders’ equity 2,276.1 2,266.9
    Noncontrolling interest 1.2 0.6
    Total equity 2,277.3 2,267.5
    Total liabilities, redeemable noncontrolling interest and equity $ 3,031.7 $ 2,983.4
    AOL Inc.
    Condensed Consolidated Statements of Cash Flows
    (In millions)
    Six Months Ended June 30,
    2014 2013
    (unaudited)
    Operating Activities
    Net income $ 36.1 $ 53.6
    Adjustments for non-cash and non-operating items:
    Depreciation and amortization 98.8 84.0
    Asset impairments and write-offs 11.2 1.4
    (Gain) loss on disposal of assets, net (4.1 ) (1.6 )
    Equity-based compensation 30.1 19.6
    Deferred income taxes 4.8 23.9
    Other non-cash adjustments 1.5 4.8
    Changes in operating assets and liabilities, net of acquisitions (29.0 ) (55.7 )
    Cash provided by operating activities 149.4 130.0
    Investing Activities
    Investments and acquisitions, net of cash acquired (191.5 ) (6.6 )
    Proceeds from disposal of assets, net 4.5 1.0
    Capital expenditures and product development costs (36.3 ) (33.0 )
    Cash used by investing activities (223.3 ) (38.6 )
    Financing Activities
    Borrowings under the credit facility agreement 105.0 –
    Repurchase of common stock (58.6 ) (49.9 )
    Principal payments on capital leases (36.1 ) (29.9 )
    Tax withholdings related to net share settlements of restricted stock units (17.8 ) (12.0 )
    Proceeds from exercise of stock options 6.4 17.5
    Other financing activities 3.4 1.9
    Cash provided (used) by financing activities 2.3 (72.4 )
    Effect of exchange rate changes on cash and equivalents 0.5 (2.2 )
    (Decrease) increase in cash and equivalents (71.1 ) 16.8
    Cash and equivalents at beginning of period 207.3 466.6
    Cash and equivalents at end of period $ 136.2 $ 483.4
    SUPPLEMENTAL INFORMATION – UNAUDITED
    Items impacting comparability: The following table represents certain items that impacted the comparability of net income attributable to AOL Inc. for the three and six months ended June 30, 2014 and 2013 (In millions, except per share amounts):
    Three Months Ended June 30, Six Months Ended June 30,
    2014 2013 2014 2013
    Restructuring costs $ (2.9 ) $ (4.3 ) $ (14.5 ) $ (9.1 )
    Equity-based compensation expense (17.1 ) (9.9 ) (30.1 ) (19.6 )
    Asset impairments and write-offs (0.8 ) (1.3 ) (11.2 ) (1.4 )
    ` Gain (loss) on disposal of assets, net 3.5 0.5 4.0 2.3
    Pre-tax impact (17.3 ) (15.0 ) (51.8 ) (27.8 )
    Income tax impact (1) 8.2 6.0 22.9 10.1
    After-tax impact of items impacting comparability of net income $ (9.1 ) $ (9.0 ) $ (28.9 ) $ (17.7 )
    Impact per basic common share $ (0.11 ) $ (0.12 ) $ (0.36 ) $ (0.23 )
    Impact per diluted common share $ (0.11 ) $ (0.11 ) $ (0.34 ) $ (0.22 )
    Effective tax rate (2) 39.7 % 39.4 % 39.7 % 39.4 %
    (1) Income tax impact is calculated by applying the marginal annual effective tax rate to deductible items. The income tax impacts for certain items such as gain (loss) on disposal of assets are calculated by using the actual tax expense for the transactions.
    (2) For the three and six months ended June 30, 2014, the effective tax rate was calculated based on AOL’s 2014 projected marginal annual effective tax rate. The effective tax rate for the three and six months ended June 30, 2013 was calculated based upon AOL’s 2013 marginal annual effective tax rate.
    AOL Inc.
    Reconciliation of Adjusted OIBDA to Operating Income and Free Cash Flow to Cash Provided by Operating Activities
    (In millions)
    Three Months Ended June 30, Six Months Ended June 30,
    2014 2013 2014 2013
    Operating income $ 54.0 $ 51.9 $ 78.2 $ 101.8
    Add: Depreciation 33.7 32.3 67.1 65.4
    Add: Amortization of intangible assets 16.5 9.1 31.7 18.6
    Add: Restructuring costs 2.9 4.3 14.5 9.1
    Add: Equity-based compensation 17.1 9.9 30.1 19.6
    Add: Asset impairments and write-offs 0.8 1.3 11.2 1.4
    Add: Losses/(gains) on disposal of assets, net (3.5 ) (0.5 ) (4.0 ) (2.3 )
    Adjusted OIBDA $ 121.5 $ 108.3 $ 228.8 $ 213.6
    Cash provided by operating activities $ 125.9 $ 89.4 $ 149.4 $ 130.0
    Less: Capital expenditures and product development costs 19.4 16.4 36.3 33.0
    Less: Principal payments on capital leases 19.0 15.7 36.1 29.9
    Free Cash Flow $ 87.5 $ 57.3 $ 77.0 $ 67.1

    Note Regarding Non-GAAP Financial Measures

    This press release and its attachments include the financial measures Adjusted OIBDA and Free Cash Flow, both of which are defined as non-GAAP financial measures by the Securities and Exchange Commission (SEC). These measures may be different than similarly-titled non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). Explanations of our non-GAAP financial measures are as follows:

    Adjusted OIBDA. We define Adjusted OIBDA as operating income before depreciation and amortization excluding the impact of restructuring costs, non-cash equity-based compensation, gains and losses on all disposals of assets, noncash asset impairments and write-offs and special items. We consider Adjusted OIBDA to be a useful metric for management and investors to evaluate and compare the ongoing operating performance of our business on a consistent basis across reporting periods, as it eliminates the effect of noncash items such as depreciation of tangible assets, amortization of intangible assets that were primarily recognized in business combinations, asset impairments and write-offs, as well as the effect of restructurings, gains and losses on asset sales and special items, which we do not believe are indicative of our core operating performance. We exclude the impacts of equity-based compensation to allow us to be more closely aligned with the industry and analyst community. A limitation of this measure, however, is that it does not reflect the periodic costs of capitalized tangible and intangible assets used in generating revenues in our business or the current or future expected cash expenditures for restructuring costs. The Adjusted OIBDA measure also does not include equity-based compensation, which is and will remain a key element of our overall long-term compensation package. Moreover, the Adjusted OIBDA measures do not reflect gains and losses on asset sales, impairment charges and write-offs related to goodwill, intangible assets and fixed assets or special items which impact our operating performance. We evaluate the investments in such tangible and intangible assets through other financial measures, such as capital expenditure budgets, investment spending levels and return on capital.

    Free Cash Flow. We define Free Cash Flow as cash provided by operating activities, less capital expenditures, product development costs and principal payments on capital leases. We consider Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after capital expenditures, capitalized product development costs and principal payments on capital leases, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of Free Cash Flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation on the use of this metric is that Free Cash Flow does not represent the total increase or decrease in cash for the period because it excludes certain non-operating cash flows.

    Unique Visitor Metrics

    We utilize unique visitor numbers to evaluate our performance, as unique visitor numbers provide an indication of our consumer reach. Although our consumer reach does not correlate directly to advertising revenue, we believe that our ability to broadly reach diverse demographic and geographic audiences is attractive to brand advertisers seeking to promote their brands to a variety of consumers without having to partner with multiple content providers. Multi-platform unique visitor metrics represent a measure of AOL Properties’ unduplicated audience across all digital platforms. Desktop unique visitors to AOL Properties represent the estimated number of individuals who visited any content of a website or application owned by AOL or for which the traffic has been assigned to AOL by the owner during the applicable measurement period. The source for our unique visitor information is a third party (comScore Media Metrix).

    Cautionary Statement Concerning Forward-Looking Statements

    This press release and our conference call at 8:00 a.m. Eastern Time today may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding business strategies, market potential, future financial and operational performance and other matters. Words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “will,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. Except as required by law, we are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise. Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in the “Risk Factors” sections contained in our Annual Report on Form 10-K for the year ended December 31, 2013 (the “Annual Report”) and our Quarterly Report on Form 10-Q for the three months ended June 30, 2014 (“Quarterly Report”), filed with the Securities and Exchange Commission. In addition, we operate a web services company in a highly competitive, rapidly changing and consumer- and technology-driven industry. This industry is affected by government regulation, economic, strategic, political and social conditions, consumer response to new and existing products and services, technological developments and, particularly in view of new technologies, the continued ability to protect intellectual property rights. Our actual results could differ materially from management’s expectations because of changes in such factors. Achieving our business and financial objectives, including improved financial results and maintenance of a strong balance sheet and liquidity position, could be adversely affected by the factors discussed or referenced under the “Risk Factors” sections contained in the Annual Report and Quarterly Report as well as, among other things: 1) changes in our plans, strategies and intentions; 2) stock price volatility; 3) future borrowing and restrictive covenants under the revolving credit facility; 4) the impact of significant acquisitions, dispositions and other similar transactions; 5) our ability to attract and retain key employees; 6) any negative unintended consequences of cost reductions, restructuring actions or similar efforts, including with respect to any associated savings, charges or other amounts; 7) adoption of new products and services; 8) our ability to attract and retain unique visitors to our properties; 9) asset impairments; and 10) the impact of “cyber-attacks.”

    About AOL

    AOL Inc. (NYSE:AOL) is a brand company, committed to continuously innovating, growing, and investing in brands and experiences that inform, entertain, and connect the world. The home of a world-class collection of premium brands, AOL creates original content that engages audiences on a local and global scale. We help marketers connect with these audiences through effective and engaging digital advertising solutions.

    From time to time, we post information about AOL on our investor relations website (http://ir.aol.com) and our official corporate blog (http://blog.aol.com).

    Image via AOL

  • Tesla Stock Rockets Despite Hazardous Adapter Recall

    Tesla Stock Rockets Despite Hazardous Adapter Recall

    The fourth quarter was a definite success for Tesla Motors Inc.

    The electric car maker indicated yesterday that its Model S sedan deliveries surpassed original predictions by 20 percent. As Tesla delivered about 6,900 sedans during the quarter, shares shot up by almost 16 percent.

    “We look forward to 2014 with anticipation,” said Jerome Guillen (vice president of global sales and service) at a Detroit Auto Show news conference, adding, “On the sales and service side – of which I’m responsible – it’s reckless growth.”

    Guillen later corrected himself, saying he misspoke and meant to say “relentless growth”; however, speculators might call this a Freudian slip, given the less optimistic press Tesla got on Tuesday when U.S. safety regulators classified Tesla’s move to upgrade wall adapters and charging software as a “recall”. The National Highway Traffic Safety Administration claimed in documentation that, “An overheated adapter, cord, or wall receptacle, increases the risk of burn injury and/or fire.”

    These safety statements follow the company’s Friday announcement and Sunday letter regarding a small number of fires relating to the adapters.

    Tesla announced it would provide new adapters and software upgrades to customers to avoid charging system overheating, but C.E.O. Elon Musk quickly disputed the NHTSA’s choice of words via Twitter. He explained that the software upgrade was done last month over the air and that owners would receive the new adapters via mail.

    Although the company says it will recall 29,000 chargers, it has denied that the charger itself was the cause of the fire.

    Musk declared that the software update “alone addresses any potential risk,” before describing the strategy: “I call it a belt and suspenders approach, so even though we feel very confident about the software update, the adapter is something that provides additional surety.” He then added, “We just want people to have absolute peace of mind.”

    “Peace of mind” is something Tesla investors can also look forward to maintaining, as the company’s stock continues to ascend and remains unaffected by the adapter matter. Per Guillen, the company expects its global sales and service locations to double in 2014. Meanwhile, Tesla’s Model X crossover is still in progress, as they are “feverishly” working to introduce it later this year.

    Image Via Youtube

  • Facebook Offers 70 Million More Shares, Heads To Court Over IPO

    Facebook announced on Thursday that it is offering 70,000,000 new shares of its Class A common stock, with 27,004,761 shares being offered by the company itself and 42,995,239 shares being offered by certain selling stockholders, including CEO Mark Zuckerberg, who is offering 41,350,000 shares.

    The company plans to use the net proceeds from the offering for working capital and “other corporate purposes.” The company won’t receive any proceeds from the sale of shares by stockholders, but expects that the majority of the net proceeds Zuckerberg will receive “will be used to satisfy taxes he will incur in connection with his exercise, in full, of an outstanding stock option to purchase 60,000,000 shares of Class B common stock.”

    J.P. Morgan, BofA Merrill Lynch, Morgan Stanley and Barclays are serving as joint bookrunners for the offering, with BNP Paribas, Citigroup, RBC Capital Markets, Credit Suisse, HSBC, Standard Chartered and Piper Jaffray serving as co-managers.

    Starting at the close of trading on Friday, Standard & Poor’s plans to include Facebook Class A common stock in the S&P 500 index. Shares will be offered primarily to index funds whose portfolios are based on stocks included in the index, Facebook says.

    Facebook stock is on the decline in pre-market trading.

    On Thursday, a judge ruled that Facebook and numerous banks will have to face a lawsuit alleging that the company misled investors about its health ahead of its IPO.

    Reuters shares a statement from Facebook: “We continue to believe this suit lacks merit and look forward to a full airing of the facts.”

    Meanwhile, Facebook begins running a potentially major source of revenue today with its new autoplay video ads, which it thinks can give television advertising a run for its money.

    Image: Mark Zuckerberg

  • Square Eyeing 2014 IPO, According to Report

    Square Eyeing 2014 IPO, According to Report

    Today, everyone is talking about the big Twitter IPO. Next year, we may be talking about Square putting forth an initial public offering.

    The common thread here is Jack Dorsey, of course. The Twitter co-founder is also the founder and CEO of mobile payments company Square – a company that may be eyeing an IPO of its own.

    The report comes from The Wall Street Journal, who cites someone familiar with the matter who says that Square has already held discussions with banks, including Goldman Sachs (who’s leading the Twitter IPO) and Morgan Stanley. Although Square isn’t profitable right now (even with nearly $1 billion is sales, per source), it appears that they have a plan to turn it in the direction over the next couple of years.

    Square started with the basic Square Reader, a card-scanning device that plugged into smartphones and tablets and allowed small businesses to process payments on the go. Later, Square introduced the Square Stand, an all-purpose POS system. In the past month, the company has also entered into the realm of email money transfers with the ridiculously simple to use Square Cash.

    In the time since, Square has launched in Canada and Japan. About a year ago, Square closed a round of Series D funding from Citi Ventures, Rizvi Traverse Management, and Starbucks.

    For more on today’s Twitter IPO, check here. The initial offering was $26 a share, and as of the writing of this article the price has already skyrocketed to over $46 in its first couple of hours on the market.

    Image via Square

  • Google Stock Hits All-Time High, Surpassing $1K

    Google released its quarterly earnings on Thursday, beating Wall Street expectations.

    Revenues were up 12% year-over-year, hitting nearly $15 billion. GAAP EPS were $8.75 on 339 million diluted shares outstanding, compared to $6.53 in the same quarter last year. Non-GAAP EPS were $10.74, compared to $8.87 last year.

    You can see the full earnings statement here.

    The report shot Google’s shares up to a new high, surpassing $1,000 for the first time.

    As of the time of this writing, shares are at $1,002.12 (+113.33, 12.75%).

    Google Stock

    That’s pretty impressive considering that Google stock reached an all-time high earlier this year when it surpassed $800. That was after hitting a record high of around $750 just a few months before that.

    Image: Google

  • IBM Stock Leads To Discouraging Results?

    IBM has released the 2013 Third-Quarter Earnings, and there is both good and bad news with the recent report. The good news is that the third-quarter net income increased six percent where this year’s third-quarter earnings were $4.04 billion ($3.68 per share) as opposed to last year’s earnings for the same quarter of $3.82 billion ($3.33 per share). The bad news is that the revenue did not reach the anticipated projection of $24.8 billion. In fact, the actual amounts had been off from the expectations by $1 billion with the revenue dropping 4 percent from $24.7 billion to $23.7 billion.

    While there are rises and falls expected with annual earnings, IBM is a front runner for the technology industry and there is concern that results may reflect the industry as a whole. However, it has been suggested that the lower-than-expected-revenue is the result of overseas currency changes.

    Josh Olson, who is an analyst with Edward Jones, recently spoke about the viability of the company.

    “I think that the hardware business is going to be something they need to work through and growth markets are down much more than expected,” Josh said before adding that, “we are not seeing the conversion of that backlog into meaningful revenue.”

    Regardless, IBM has remained successful due to the heavy attention given to long term contracts as well as the stable need for Internet-based services. Researchers affiliated with the massive technology company, have been known as pioneers in the field of innovation and global communication channels such as Gerd Binnig and Heinrich Rohrer who were both honored in 1986 with the Nobel prize award for physics.

    [Images Via IBM’s Facebook Page]

  • Jos. A. Bank Rejected By Men’s Wearhouse

    Men’s Wearhouse chose not to take the $2.3 billion offer presented by powerhouse Joseph A. Bank. Though shares for Men’s Wearhouse fell 12 percent during September, company representatives are determined to continue promoting the viability of the company.

    According to the Lead Director for the Board, Bill Sechrest, the proposal by Joseph A. Bank was viewed as being “opportunistic. The statement from Bill Sechrest read as follows:

    “Men’s Wearhouse believes the Jos. A. Bank unsolicited and inadequate proposal is a highly opportunistic attempt to exploit a temporary dislocation in the stock price of Men’s Wearhouse in order to deprive Men’s Wearhouse’s shareholders of the intrinsic value of their investment. Men’s Wearhouse’s recent second-quarter performance was impacted by difficult market conditions, which many other retailers faced during the quarter, including Jos. A. Bank.”

    However, not everyone seems to share the views voiced by Bill Sechrest. In fact, many are wondering why Men’s Wearhouse would let such an offer slip by without consideration. One of these individuals is Brian Sozzi, who is the Chief Equities Strategist at Belus Capital.

    Brian Sozzi shared his opinion about the potential business venture prior to Men’s Wearhouse rejecting the offer.

    “Men’s Wearhouse would be absolutely silly not to take the money and run. The company is not a growth retailer,” Sozzi said.

    A possible deal may still happen, according to Brian Sozzi, who went on to explain why he does not consider this rejection to completely be a done deal.

    “This was not some fly by night, hastily put together deal. This is something that Jos A. Bank has clearly been working on for a while and they could sweeten the deal a bit,” Sozzi said.

    Men’s Wearhouse saw shares rise twenty-five percent as a result of the offer from Joseph A. Bank. Do you think that representatives from Men’s Wearhouse made the best decision?

    The following video shows a discussion about the present condition of Men’s Wearhouse considering company shares.

    http://www.youtube.com/watch?v=mQ6MS_YlTbc

    [Image Via Wikimedia Commons]

  • Lumber Liquidators’ Stock Drops Almost 10% Amid Federal Raid

    For every action, there’s always a reaction. This week, no one can attest to such a phrase better than Lumber Liquidators. In just two days, the American specialty flooring retailer’s corporate sector has been flipped upside down.

    On Thursday, federal authorities from both the Department of Homeland Security and Immigration and Customs’ Enforcement, in corroboration with the US Fish and Wildlife and Department of Justice completed search warrants at the Lumber Liquidators’ Toano, VA headquarters. The warrants were motivated by potential violations of the Lacey Act of 1900. Amended in 2008, the Lacey Act prohibits the trade of illegal wood products. In a nutshell, the hardwood flooring retailer has been accused of selling stolen wood.

    Such violations serve a hindrance to the United States’ forest products’ industry, which rakes in billions of dollars in government revenue annually. The critical industry serves as a vast global contributor for the production of a multitude of essential products such as pulp, paper, and tissue.

    Alexander von Bismarck, Executive Director of the Environmental Investigation Agency, put things into perspective explaining the crux of the problem in correlation with Lumber Liquidators’ alleged violations:
    “We are encouraged that the US government appears to be responding to the catastrophic levels of illegal logging around the world and continues to lead the international effort to stop the trade in stolen wood. The law has already been credited with effectively transforming the marketplace, curbing associated illegal activity around the world and helping to combat climate change. Companies need to ensure the products they sell are legal.”

    On Friday, Lumber Liquidators released a statement disclosing the execution of the search warrants. As a result the company’s stock abruptly took a staggering nose-dive. By mid-day trading, the stock price had declined $10.38, which equates to a 9.2% drop, leaving shares at $102.58.

    Lumber Liquidators has not provided an admission or denial to the allegations, nor have they provided any further comments.

     

    Image via Wikimedia Commons 

  • Gold Recovery? What Does This Mean For Business?

    Gold has had a resurgence recently. This comes as good news for investors and people that follow the market closely. As of today, gold is on track for its biggest weekly gain in five weeks. Several analysts are saying that the precious metal that we once used to pay for everything may have good times ahead. The Federal Reserve also surprised the market by announcing that it would continue bond purchases, which is currently at $85 billion per month.

    CNBC mentions that John Meyer, a mining analyst at SP Angel has said these stocks are down on their luck but have rallied in recent weeks off a very low base.He told CNBC that they are hoping for better performance from gold going forward as well as a resurgence of funds going into the sector. Gold also surged 4.3 percent after the Federal Reserve announced that they would postpone the reduction of their large bond-buying program. The metal has gained nearly 3 percent this week overall and hit an all-time high at the end of the 2011. At this time, it was going for just over $1,900 per ounce, but has since stalled.

    Despite this success, The Fed announcement is unlikely to boost the price of the yellow metal high enough to give the miners a sufficient spread between production costs and the price at which they can sell gold on the open market, according to The Street. Is the metal back on track to help business yet? We may just have to wait and see.

    Since stalling out from its all-time in 2011, Gold selling accelerated in april of this year. This was due in large part to the fact that people were fearing that central banks were becoming less likely to contribute to stimulus measures. As a result, this has weakened currencies, additionally boosting gold as an inflation hedge. This week’s rally is a good opportunity to sell, while teh metal will average about $1,125 in the next year, as stated by Societe Generale SA in a statement to Bloomberg. However, Credit Suisse Group AG expects an average of $1,180.

    As with the history of the market, it is hard to know whether to invest with these types of things or not and at what time. The world of business can often be difficult to figure out, but if gold continues to rise, this will be very good for business and investors.

    http://www.youtube.com/watch?v=2aoyg97pcHg

    Image via Youtube

  • Netflix’s Original Content Is Making People Want to Stick Around

    In the past year, Netflix has released the Emmy-nominated political drama House of Cards, the Eli Roth-produced horror series Hemlock Grove, and the surprise hit of the summer, Orange Is The New Black. They’re also in the process of adding a bunch of exclusive comedy to their streaming options and are about to premiere season 2 of the less-popular but still buzzed-about Lilyhammer.

    Next year, Netflix is set to premiere a bunch of new original content as well. This includes a Marco Polo drama that they snatched from Starz, a Pablo Escobar drama called Narcos, and a new sci-fi series from the creators of The Matrix called Sense8.

    What does all of this exclusive, original content mean for Netflix? According to one analyst, it means happy customers.

    Happy customers that have no desire to unsubscribe, more specifically. RBC Capital analyst Mark Mahaney says that this massive push into original content will reduce customer turnover and lead to higher earnings. That’s why he’s bullish on Netflix’s future stock performance.

    Of course, Netflix has already come a long way from the days of highly-publicized price increases and that whole Qwikster debacle. Netflix’s stock priced has tripled in 2013 alone.

    RBC Capital is basing their statements on original content and low user turnover based, in part, on a survey where 80% of Netflix customers called original content “extremely, quite, or moderately important” when it comes to deciding whether or not to keep paying that monthly subscription fee.

    In April, shortly after House of Cards debuted, Netflix said that they saw very little “free-trial” gaming in order to binge-watch the series. In other words, people who subscribed generally stuck around. Another survey found that 86% of Netflix users said that House of Cards made them more likely to stick around and keep subscribing.

    I guess if you produce great content, and a lot of it, people are willing to pay for it.

    Image via YouTube

  • Microsoft Stock Surging on Ballmer Retirement News

    Microsoft CEO Steve Ballmer announced this morning that he will be stepping down from his position within the next 12 months. The executive has been a part of Microsoft for over 33 years, joining the company as its first business manager and only its 30th employee. Ballmer praised his executive team in a statement this morning, saying that “now is the right time” for him to step aside.

    He isn’t the only one that thinks so.

    Investors pounced on this news as the NASDAQ opened this morning. Microsoft shares opened trading at 35.16, up over 9% from Thursday’s closing price of 32.39. Though the initial surge was inevitably moderated, Microsoft share price is still up over 1.50 and appears that it will trade at around 34 for the remainder of the day, up over 5% from yesterday’s close.

    Microsoft stock had been rising since April on news of solid quarterly earnings and a change in the company’s CFO. The stock reached a high of 36.27 in mid-July. The rising trend was suddenly halted when Microsoft revealed its fourth quarter report. Despite revenues of nearly $20 billion, the company revealed that its highly-touted Surface RT tablets were a failure, and that $900 million worth of the devices were sitting around, unsold. Microsoft is now trying to get rid of the tablets while promoting the use of the Bing search engine in schools.

    (Image courtesy Martin Olsson via Wikimedia Commons)

  • Groupon Earnings Disappoint, Stock Down 28%

    Groupon reported its Q4 and fiscal year 2012 earnings on Wednesday afternoon, sending stock plummeting as results missed Wall Street estimates.

    The company posted a net loss of $81.1 million for the quarter, though revenue was up 30% at $638.3 million.

    Late last year, Groupon CEO Andrew Mason’s job came into question, and now reports are questioning how long he’ll remain in the position again. Groupon hasn’t commented on this since the new earnings release, but the Wall Street Journal reports:

    As Groupon’s stock continues to falter, Mr. Mason will likely struggle to maintain the confidence of Groupon’s board members, particularly its chairman and largest shareholder, Eric Lefkofsky, who has sparred with Mr. Mason in the past, these people have said.

    In pre-market trading Groupon is at $4.30 (-1.68‎, -28.12%‎).

    Here’s the release in its entirety:

    CHICAGO–(BUSINESS WIRE)–Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the quarter and fiscal year ended December 31, 2012.

    “Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities.”

    Gross billings, which reflect the total dollar value of customer purchases of goods and services, excluding any applicable taxes and net of estimated refunds, increased 24% year-over-year to $1.52 billion in the fourth quarter 2012, compared with $1.23 billion in the fourth quarter 2011. Excluding the $21.0 million unfavorable impact from year-over-year changes in foreign exchange rates, gross billings growth was 25% compared with fourth quarter 2011.

    Revenue increased 30% year-over-year to $638.3 million in the fourth quarter 2012, compared with $492.2 million in the fourth quarter 2011. Excluding the $7.7 million unfavorable impact from year-over-year changes in foreign exchange rates, revenue growth was 31% compared with fourth quarter 2011. Growth was driven by an increase in direct revenue, which grew 1549% year-over-year to $225.2 million in the fourth quarter 2012, compared with $13.7 million in the fourth quarter 2011.

    Operating loss was $12.9 million in the fourth quarter 2012, including stock-based compensation and acquisition-related expenses of $26.6 million, and depreciation and amortization of $16.0 million. This compares with an operating loss of $15.0 million in the fourth quarter 2011, which included stock-based compensation and acquisition-related expenses of $32.9 million, and depreciation and amortization of $9.3 million. Year-over-year changes in foreign exchange rates had a $0.1 million favorable impact on operating results.

    “Record billings growth this quarter is a clear signal that customers love Groupons,” said Andrew Mason, CEO of Groupon. “We will continue to invest in growth through 2013 as we see new opportunities to give our customers what they want.”

    Operating cash flow decreased 61% year-over-year to $65.7 million, compared with $169.1 million in the fourth quarter 2011. Free cash flow, a non-GAAP financial measure calculated as operating cash flow less capital expenditures, decreased 83% year-over-year to $25.7 million, compared with $155.1 million in the fourth quarter 2011. At the end of the quarter, Groupon had $1.2 billion in cash and cash equivalents and no long-term borrowings.

    Fourth quarter 2012 net loss attributable to common stockholders was $81.1 million, or $0.12 per share, reflecting stock-based compensation and acquisition-related expenses of $26.6 million and share count of 655.7 million. Fourth quarter 2012 results included a pre-tax non-operating loss of $50.6 million ($45.5 million after tax) related to the impairment of a cost method investment in China.

    Net loss attributable to common stockholders increased by $15.7 million year-over-year, from a loss of $65.4 million, or $0.12 per share in the fourth quarter 2011, including stock-based compensation and acquisition-related expenses of $32.9 million.

    Full Year 2012

    Gross billings increased 35% year-over-year to $5.38 billion in 2012, compared with $3.99 billion in 2011. Excluding the $183.5 million unfavorable impact from year-over-year changes in foreign exchange rates, gross billings growth was 40% compared with 2011.

    Revenue increased 45% year-over-year to $2.33 billion in 2012, compared with $1.61 billion in 2011. Excluding the $74.1 million unfavorable impact from year-over-year changes in foreign exchange rates, revenue growth was 50% compared with 2011. Growth was driven by an increase in direct revenue, which grew 2083% to $454.7 million in 2012, compared with $20.8 million in 2011.

    Operating income was $98.7 million in 2012, including stock-based compensation and acquisition-related expenses of $105.0 million, and depreciation and amortization of $55.8 million. This compares with an operating loss of $233.4 million in 2011, which included stock-based compensation and acquisition-related expenses of $89.1 million, and depreciation and amortization of $32.1 million. Year-over-year changes in foreign exchange rates had a $7.4 million unfavorable impact on operating income.

    Operating cash flow decreased 8% year-over-year to $266.8 million, compared with $290.4 million in 2011. Free cash flow decreased 31% year-over-year to $171.0 million, compared with $246.6 million in 2011.

    Full year 2012 net loss attributable to common stockholders was $67.4 million, or $0.10 per share, reflecting stock-based compensation and acquisition-related expenses of $105.0 million and share count of 650.2 million.

    Net loss attributable to common stockholders improved by $306.1 million year-over-year, from a loss of $373.5 million, or $1.03 per share in 2011, including stock-based compensation and acquisition-related expenses of $89.1 million.

    Groupon, Inc.
    Summary Consolidated and Segment Results
    (dollars in thousands, except share and per share data)
    (unaudited)
    Three Months Ended Y/Y % Year Ended Y/Y %
    December 31, Growth December 31, Growth
    2012 2011 Y/Y %
    Growth    		 FX Effect (2) excluding
    FX(2)    		 2012 2011 Y/Y %
    Growth    		 FX Effect (2) excluding
    FX(2)
    Gross Billings (1)
    North America $ 718,952 $ 475,807 51.1 % $ (2,569 ) 51.6 % $ 2,373,153 $ 1,561,927 51.9 % $ (2,780 ) 52.1 %
    International 801,500 755,061 6.2 % (18,451 ) 8.6 % 3,007,031 2,423,574 24.1 % (180,739 ) 31.5 %
    Consolidated Billings $ 1,520,452 $ 1,230,868 23.5 % $ (21,020 ) 25.2 % $ 5,380,184 $ 3,985,501 35.0 % $ (183,519 ) 39.6 %
    Revenue
    North America $ 375,351 $ 179,638 108.9 % $ (1,082 ) 109.6 % $ 1,165,700 $ 634,980 83.6 % $ (1,156 ) 83.8 %
    International 262,951 312,526 (15.9 ) % (6,629 ) (13.7 ) % 1,168,772 975,450 19.8 % (72,960 ) 27.3 %
    Consolidated revenue $ 638,302 $ 492,164 29.7 % $ (7,711 ) 31.3 % $ 2,334,472 $ 1,610,430 45.0 % $ (74,116 ) 49.6 %
    Operating (loss) income $ (12,861 ) $ (14,972 ) 14.1 % $ 135 13.2 % $ 98,701 $ (233,386 ) N/A $ (7,401 ) N/A
    Net loss attributable to common stockholders $ (81,089 ) $ (65,379 ) (24.0 ) % $ 1,102 (25.7 ) % $ (67,377 ) $ (373,494 ) 82.0 % $ (9,283 ) 84.4 %
    Net loss per share
    Basic $ (0.12 ) $ (0.12 ) $ (0.10 ) $ (1.03 )
    Diluted $ (0.12 ) $ (0.12 ) $ (0.10 ) $ (1.03 )
    Weighted average basic shares outstanding 655,678,123 528,421,712 650,214,119 362,261,324
    Weighted average diluted shares outstanding 655,678,123 528,421,712 650,214,119 362,261,324
    (1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
    (2) Represents change in financial measures that would have resulted had average exchange rates in the reporting period been the same as those in effect in the three months and year ended December 31, 2011.

    Highlights

    • Largest sequential gross billings increase in Groupon history. All categories contributed to the biggest sequential increase in platform growth on an absolute dollar basis in Groupon’s history.
    • Unit milestone. The Company surpassed the 50 million unit mark for the first time in the fourth quarter 2012. Consolidated units, defined as vouchers and products ordered before cancellations and refunds, grew 21% year-over-year.
    • Seasonal strength in Groupon Goods. After a successful holiday season, Goods has now reached an annual run rate of about $2.0 billion in global billings, just five quarters after its launch.
    • Growing merchant selection and quality. As of the end of the fourth quarter, the number of active deals in North America increased almost 300% year-over-year to nearly 37,000.
    • Continued customer acquisition efficiencies. Marketing expense per new customer improved 61% year-over-year in the fourth quarter 2012, enabling the reduction of overall marketing spend by 61% compared with the fourth quarter 2011. As of December 31, 2012, Groupon had 41.0 million active customers, an increase of 22% year-over-year, with gross customer additions partially offset by higher customer inactivations.
    • Substantial growth in mobile transaction activity. In January 2013, nearly 40% of North American transactions were completed on mobile devices, an increase of 44% compared with January 2012. This compares with about one third of transactions completed on mobile devices in October 2012.
    • Launch of merchant services in 2012. Groupon launched a number of services in 2012 to strengthen relationships with local businesses, including Breadcrumb and Payments.

    Outlook

    Revenue for the first quarter 2013 is expected to be between $560 million and $610 million, an increase of between 0% and 9% compared with first quarter 2012.

    Operating (loss) income for the first quarter 2013 is expected to be between $(10) million and $10 million, compared with $39.6 million in the first quarter 2012. This outlook includes $30 million of stock-based compensation, and assumes no acquisitions or investments, or material changes in foreign exchange rates.

    For the full year 2013, operating income is expected to increase compared with 2012.

    A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m. ET, and will be available on Groupon’s investor relations website athttp://investor.groupon.com. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

    Non-GAAP Financial Measures

    In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided the following non-GAAP financial measures in this release and the accompanying tables: foreign exchange rate neutral operating results, free cash flow and consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net. These non-GAAP financial measures are presented to aid investors in better understanding Groupon’s performance. However, these measures are not intended to be a substitute for those reported in accordance with GAAP. These measures may be different from non-GAAP financial measures used by other companies.

    Foreign exchange rate neutral operating results show our current period operating results as if foreign currency exchange rates had remained the same as those in effect in the comparable period. These measures are intended to facilitate comparisons to our historical performance. For a reconciliation of foreign exchange rate neutral operating results to our GAAP operating results, see “Reconciliation of Foreign Exchange Rate Neutral Operating Results to U.S. GAAP Operating Results” and “Supplemental Financial Information and Business Metrics” included in the tables accompanying this release.

    Free cash flow is a non-GAAP measure that comprises net cash provided by operating activities less purchases of property and equipment and capitalized software. We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe that it typically represents a more useful measure of cash flows because purchases of fixed assets, software developed for internal use and website development costs are necessary components of our ongoing operations. Free cash flow is not intended to represent the total increase or decrease in Groupon’s cash balance for the applicable period. For a reconciliation of free cash flow to cash flow from operations, see ”Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities” included in the tables accompanying this release.

    Consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net is a non-GAAP measure that comprises the consolidated total of the segment operating income (loss) of our two segments, North America and International. Stock-based compensation expense and acquisition-related expense (benefit), net are excluded from segment operating income (loss) that we report under GAAP for our segments. Stock-based compensation expense is primarily a non-cash item. Acquisition-related expense (benefit), net represents the change in the fair value of contingent consideration arrangements related to business combinations. We use consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to allocate resources and evaluate performance internally. For a reconciliation of consolidated operating income (loss) excluding stock-based compensation and acquisition-related expense (benefit), net to consolidated operating income (loss), see ”Supplemental Financial Information and Business Metrics” included in the tables accompanying this release.

    Note on Forward Looking Statements

    The statements contained in this presentation that refer to plans and expectations for the next quarter or the future are forward- looking statements that involve a number of risks and uncertainties, and actual results could differ materially from those discussed. The risks and uncertainties that could cause our results to differ materially from those included in the forward-looking statements include, but are not limited to, volatility in our revenue and operating results; risks related to our business strategy; responding to changes in the market; effectively dealing with challenges arising from our international operations; retaining existing customers and adding new customers; retaining existing merchant partners and adding new merchant partners; incurring expenses as we expand our business; competing against smaller competitors and competitors with more financial resources than us; maintaining favorable terms with our business partners; maintaining a strong brand; managing inventory and order fulfillment; integrating our technology platforms; managing refund risks; retaining our executive team; litigation; regulations, including the CARD Act and regulation of the Internet; tax liabilities; tax legislation; maintaining our information technology infrastructure; security breaches; protecting our intellectual property; handling acquisitions, joint ventures and strategic investments effectively; seasonality; payment-related risks; customer and merchant partner fraud; global economic uncertainty; compliance with rules and regulations associated with being a public company; and our ability to raise capital if necessary. We urge you to refer to the factors included under the headings ”Risk Factors” and ”Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the company’s Investor Relations web site at http://investor.groupon.com or the SEC’s web site at www.sec.gov. Groupon’s actual results could differ materially from those predicted or implied and reported results should not be considered an indication of future performance.

    You should not rely upon forward-looking statements as predictions of future events. Although Groupon believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. The forward-looking statements reflect Groupon’s expectations as of February 27, 2013. Groupon undertakes no obligation to update publicly any forward-looking statements for any reason after the date of this presentation to conform these statements to actual results or to changes in its expectations.

    Groupon encourages investors to use its investor relations website as a way of easily finding information about the company. Groupon promptly makes available on this website, free of charge, the reports that the company files or furnishes with the SEC, corporate governance information (including Groupon’s Global Code of Conduct), and select press releases and social media postings.

    Groupon, Inc.
    Condensed Consolidated Statements of Cash Flows
    (in thousands)
    (unaudited)
    Three Months Ended
    December 31,    		 Year Ended
    December 31,
    2012 2011 2012 2011
    Operating activities
    Net loss $ (80,047 ) $ (59,679 ) $ (51,031 ) $ (297,762 )
    Adjustments to reconcile net loss to net cash provided by operating activities:
    Depreciation and amortization 15,965 9,301 55,801 32,055
    Stock-based compensation 26,411 32,668 104,117 93,590
    Deferred income taxes (17,259 ) 31,601 (7,651 ) 32,203
    Excess tax benefits on stock-based compensation (2,403 ) 1,145 (27,023 ) (10,178 )
    Loss on equity method investees 1,231 6,678 9,925 26,652
    Acquisition-related expense (benefit), net 153 256 897 (4,537 )
    Gain on return of common stock – – – (4,916 )
    Gain on E-Commerce transaction – – (56,032 ) –
    Impairment of cost method investment 50,553 – 50,553 –
    Change in assets and liabilities, net of acquisitions:
    Restricted cash (2,517 ) (4,378 ) (4,372 ) (12,519 )
    Accounts receivable 12,723 (686 ) 10,534 (70,376 )
    Prepaid expenses and other current assets (45,922 ) 4,731 (70,859 ) (36,292 )
    Accounts payable 5,537 927 18,711 (20,997 )
    Accrued merchant and supplier payables 96,029 65,236 149,918 380,108
    Accrued expenses and other current liabilities (20,268 ) 80,164 47,742 189,127
    Other, net 25,531 1,113 35,604 (5,711 )
    Net cash provided by operating activities 65,717 169,077 266,834 290,447
    Net cash used in investing activities (52,753 ) (34,907 ) (194,979 ) (147,433 )
    Net cash (used in) provided by financing activities (6,495 ) 746,913 12,095 867,205
    Effect of exchange rate changes on cash and cash equivalents 1,809 (2,083 ) 2,404 (6,117 )
    Net increase in cash and cash equivalents 8,278 879,000 86,354 1,004,102
    Cash and cash equivalents, beginning of period 1,201,011 243,935 1,122,935 118,833
    Cash and cash equivalents, end of the period $ 1,209,289 $ 1,122,935 $ 1,209,289 $ 1,122,935
    Groupon, Inc.
    Consolidated Statements of Operations
    (in thousands, except share and per share data)
    (unaudited)
    Three Months Ended December 31, Year Ended December 31,
    2012 2011 2012 2011
    Revenue:
    Third party and other revenue $ 413,127 $ 478,510 $ 1,879,729 $ 1,589,604
    Direct revenue 225,175 13,654 454,743 20,826
    Total revenue 638,302 492,164 2,334,472 1,610,430
    Cost of revenue:
    Third party and other revenue 63,905 86,882 297,739 243,789
    Direct revenue 218,567 9,383 421,201 15,090
    Total cost of revenue 282,472 96,265 718,940 258,879
    Gross Profit 355,830 395,899 1,615,532 1,351,551
    Operating expenses:
    Marketing 60,913 155,299 336,854 768,472
    Selling, general and administrative 307,625 255,316 1,179,080 821,002
    Acquisition-related expense (benefit), net 153 256 897 (4,537 )
    Total operating expenses 368,691 410,871 1,516,831 1,584,937
    (Loss) income from operations (12,861 ) (14,972 ) 98,701 (233,386 )
    Interest and other (expense) income, net (48,279 ) (3,835 ) 6,166 5,973
    Loss on equity method investees (1,231 ) (6,678 ) (9,925 ) (26,652 )
    (Loss) income before provision for income taxes (62,371 ) (25,485 ) 94,942 (254,065 )
    Provision for income taxes 17,676 34,194 145,973 43,697
    Net loss (80,047 ) (59,679 ) (51,031 ) (297,762 )
    Less: Net (income) loss attributable to noncontrolling interests (936 ) (5,267 ) (3,742 ) 18,335
    Net loss attributable to Groupon, Inc. (80,983 ) (64,946 ) (54,773 ) (279,427 )
    Redemption of preferred stock in excess of carrying value – – – (34,327 )
    Adjustment of redeemable noncontrolling interests to redemption value (106 ) (433 ) (12,604 ) (59,740 )
    Net loss attributable to common stockholders $ (81,089 ) $ (65,379 ) $ (67,377 ) $ (373,494 )
    Net loss per share
    Basic $ (0.12 ) $ (0.12 ) $ (0.10 ) $ (1.03 )
    Diluted $ (0.12 ) $ (0.12 ) $ (0.10 ) $ (1.03 )
    Weighted average number of shares outstanding
    Basic 655,678,123 528,421,712 650,214,119 362,261,324
    Diluted 655,678,123 528,421,712 650,214,119 362,261,324
    Groupon, Inc.
    Consolidated Balance Sheets
    (in thousands, except share and per share data)
    (unaudited)
    December 31,
    2012 2011
    Assets
    Current assets:
    Cash and cash equivalents $ 1,209,289 $ 1,122,935
    Accounts receivable, net 96,713 108,747
    Deferred income taxes 31,211 19,243
    Prepaid expenses and other current assets 150,573 72,402
    Total current assets 1,487,786 1,323,327
    Property, equipment and software, net 121,072 51,800
    Goodwill 206,684 166,903
    Intangible assets, net 42,597 45,667
    Investments 84,209 50,604
    Deferred income taxes, non-current 29,916 46,104
    Other non-current assets 59,210 90,071
    Total Assets $ 2,031,474 $ 1,774,476
    Liabilities and Stockholders’ Equity
    Current liabilities:
    Accounts payable $ 59,865 $ 40,918
    Accrued merchant and supplier payables 671,305 520,723
    Accrued expenses 246,924 212,007
    Deferred income taxes 53,700 76,841
    Other current liabilities 136,647 144,673
    Total current liabilities 1,168,441 995,162
    Deferred income taxes, non-current 20,860 7,428
    Other non-current liabilities 100,072 70,766
    Total Liabilities 1,289,373 1,073,356
    Commitments and contingencies
    Redeemable noncontrolling interests – 1,653
    Stockholders’ Equity
    Class A common stock, par value $0.0001 per share, 2,000,000,000 shares authorized, 654,523,706 and 641,745,225 shares issued and outstanding at December 31, 2012 and 2011, respectively 65 64
    Class B common stock, par value $0.0001 per share, 10,000,000 shares authorized, 2,399,976 shares issued and outstanding at December 31, 2012 and 2011 – –
    Common stock, par value $0.0001 per share, 2,010,000,000 shares authorized, no shares issued and outstanding at December 31, 2012 and 2011 – –
    Additional paid-in capital 1,485,006 1,388,253
    Accumulated deficit (753,477 ) (698,704 )
    Accumulated other comprehensive income 12,446 12,928
    Total Groupon, Inc. Stockholders’ Equity 744,040 702,541
    Noncontrolling interests (1,939 ) (3,074 )
    Total Equity 742,101 699,467
    Total Liabilities and Equity $ 2,031,474 $ 1,774,476
    Groupon, Inc.
    Segment Information
    (in thousands)
    (unaudited)
    Three Months Ended December 31, Year Ended December 31,
    2012 2011 2012 2011
    North America
    Gross Billings (1) $ 718,952 $ 475,807 $ 2,373,153 $ 1,561,927
    Revenue $ 375,351 $ 179,638 $ 1,165,700 $ 634,980
    Segment cost of revenue and operating expenses(2)(3) 358,319 161,399 1,025,974 630,184
    Segment operating income(3) $ 17,032 $ 18,239 $ 139,726 $ 4,796
    Segment income as a percent of segment revenue 4.5 % 10.2 % 12.0 % 0.8 %
    International
    Gross Billings (1) $ 801,500 $ 755,061 $ 3,007,031 $ 2,423,574
    Revenue $ 262,951 $ 312,526 $ 1,168,772 $ 975,450
    Segment cost of revenue and operating expenses(2)(3) 266,280 312,813 1,104,783 1,124,579
    Segment operating (loss) income(3) $ (3,329 ) $ (287 ) $ 63,989 $ (149,129 )
    Segment (loss) income as a percent of segment revenue (1.3 ) % (0.1 ) % 5.5 % (15.3 ) %
    Consolidated
    Gross Billings (1) $ 1,520,452 $ 1,230,868 $ 5,380,184 $ 3,985,501
    Revenue $ 638,302 $ 492,164 $ 2,334,472 $ 1,610,430
    Segment cost of revenue and operating expenses(2) 624,599 474,212 2,130,757 1,754,763
    Segment operating income (loss) $ 13,703 $ 17,952 $ 203,715 $ (144,333 )
    Segment income (loss) as a percent of segment revenue 2.1 % 3.6 % 8.7 % (9.0 ) %
    Stock-based compensation 26,411 32,668 104,117 93,590
    Acquisition-related expense (benefit), net 153 256 897 (4,537 )
    Operating (loss) income (12,861 ) (14,972 ) 98,701 (233,386 )
    Interest and other expense (income), net 48,279 3,835 (6,166 ) (5,973 )
    Loss on equity method investees 1,231 6,678 9,925 26,652
    (Loss) income before provision for income taxes (62,371 ) (25,485 ) 94,942 (254,065 )
    Provision for income taxes 17,676 34,194 145,973 43,697
    Net loss $ (80,047 ) $ (59,679 ) $ (51,031 ) $ (297,762 )
    (1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
    (2) Represents cost of revenue and operating expenses, excluding stock-based compensation and acquisition-related expense (benefit), net.
    (3) We record intercompany cross-charges every period for services provided by the United States to our international subsidiaries. We updated our intercompany allocations for those charges during the fourth quarter of 2012, which resulted in a one-time $8.5 million decrease to International Segment operating expenses (reduction to International Segment operating loss) and a corresponding increase to North America Segment operating expenses (reduction to North America Segment operating income).
    Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities
    (in thousands)
    (unaudited)
    The following is a reconciliation of free cash flow to the most comparable U.S. GAAP measure, “Net cash provided by operating activities,” for the three months and years ended December 31, 2012 and 2011, respectively:
    Three Months Ended December 31, Year Ended December 31,
    2012 2011 2012 2011
    Net cash provided by operating activities $ 65,717 $ 169,077 $ 266,834 $ 290,447
    Purchases of property and equipment and capitalized software (40,034 ) (13,986 ) (95,836 ) (43,811 )
    Free cash flow $ 25,683 $ 155,091 $ 170,998 $ 246,636
    Net cash used in investing activities $ (52,753 ) $ (34,907 ) $ (194,979 ) $ (147,433 )
    Net cash (used in) provided by financing activities $ (6,495 ) $ 746,913 $ 12,095 $ 867,205
    Reconciliation of Foreign Exchange Rate Neutral Operating Results to Revenue and (Loss) Income from Operations
    (in thousands)
    (unaudited)
    The following is a reconciliation of foreign exchange rate neutral operating results to the most comparable U.S. GAAP measures, “Revenue” and “(Loss) Income from operations,” for the three months and year ended December 31, 2012:
    The effect on the Company’s consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the three months ended December 31, 2012 are as follows:
    Three Months Ended December 31, 2012 Three Months Ended December 31, 2012
    At Avg. Exchange At Avg. Exchange
    Q4 2011
    Rates (1)    		 Rate
    Effect (2)    		 As
    Reported    		 Q3 2012
    Rates (3)    		 Rate
    Effect (2)    		 As
    Reported
    Revenue $ 646,013 $ (7,711 ) $ 638,302 $ 634,734 $ 3,568 $ 638,302
    Loss from operations $ (12,996 ) $ 135 $ (12,861 ) $ (12,075 ) $ (786 ) $ (12,861 )
    The effect on the Company’s consolidated statements of operations from changes in exchange rates versus the U.S. Dollar for the year ended December 31, 2012 are as follows:
    Year Ended December 31, 2012 Year Ended December 31, 2012
    At Avg. Exchange At Avg. Exchange
    2011
    Rates (1)    		 Rate
    Effect (2)    		 As
    Reported    		 Q4’11 – Q3’12
    Rates (3)    		 Rate
    Effect (2)    		 As
    Reported
    Revenue $ 2,408,588 $ (74,116 ) $ 2,334,472 $ 2,344,952 $ (10,480 ) $ 2,334,472
    Income from operations $ 106,102 $ (7,401 ) $ 98,701 $ 105,467 $ (6,766 ) $ 98,701
    (1) Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three months and year ended December 31, 2011.
    (2) Represents the increase or decrease in reported amounts resulting from changes in exchange rates from those in effect in the comparable period.
    (3) Represents the outcome that would have resulted had average exchange rates in the reported period been the same as those in effect during the three and twelve months ended September 30, 2012.
    Supplemental Financial Information and Business Metrics(13)
    (in thousands, except per share and headcount data and TTM
    Gross Billings / Average Active Customer)
    (unaudited)
    Q1 2011 (8) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
    Segments
    North America Segment:
    Gross Billings (1) $ 315,152 $ 369,990 $ 400,978 $ 475,807 $ 553,557 $ 548,275 $ 552,369 $ 718,952
    Year-over-year growth 610 % 359 % 204 % 118 % 76 % 48 % 38 % 51 %
    % of Consolidated Gross Billings 47 % 40 % 35 % 39 % 41 % 43 % 45 % 47 %
    Gross Billings (1) Trailing Twelve Months (TTM) $ 745,772 $ 1,035,183 $ 1,304,128 $ 1,561,927 $ 1,800,332 $ 1,978,617 $ 2,130,008 $ 2,373,153
    Revenue:
    Third Party and Other Revenue (2) $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 230,984 $ 207,119 $ 158,545 $ 165,776
    Direct Revenue (2) – – – – 7,581 53,062 133,058 209,575
    Total Revenue $ 136,612 $ 157,205 $ 161,525 $ 179,638 $ 238,565 $ 260,181 $ 291,603 $ 375,351
    Year-over-year growth 574 % 341 % 188 % 103 % 75 % 66 % 81 % 109 %
    % of Consolidated Revenue 46 % 40 % 38 % 36 % 43 % 46 % 51 % 59 %
    Revenue TTM $ 316,752 $ 438,305 $ 543,705 $ 634,980 $ 736,933 $ 839,909 $ 969,987 $ 1,165,700
    Cost of Revenue:
    Third Party and Other Cost of Revenue (3) $ 25,050 $ 32,169 $ 31,316 $ 51,419 $ 62,580 $ 40,155 $ 15,475 $ 27,002
    Direct Cost of Revenue (3) – – – – 6,671 46,159 115,560 196,789
    Total Cost of Revenue $ 25,050 $ 32,169 $ 31,316 $ 51,419 $ 69,251 $ 86,314 $ 131,035 $ 223,791
    % of North America Total Revenue 18 % 20 % 19 % 29 % 29 % 33 % 45 % 60 %
    Gross Profit
    Third Party and Other $ 111,562 $ 125,036 $ 130,209 $ 128,219 $ 168,404 $ 166,964 $ 143,070 $ 138,774
    Direct – – – – 910 6,903 17,498 12,786
    Total $ 111,562 $ 125,036 $ 130,209 $ 128,219 $ 169,314 $ 173,867 $ 160,568 $ 151,560
    % of North America Total Revenue 82 % 80 % 81 % 71 % 71 % 67 % 55 % 40 %
    Operating (Loss) Income Excl Stock-Based Compensation (SBC), Acquisition-Related Expenses $ (21,778 ) $ (10,501 ) $ 18,836 $ 18,239 $ 40,172 $ 43,429 $ 39,093 $ 17,032
    Year-over-year growth N/A (2,678 ) % 496 % N/A N/A N/A 108 % (7 ) %
    % of Consolidated Operating (Loss) Income Excl SBC, Acq-Related 22 % 17 % 1,113 % 102 % 59 % 60 % 77 % 124 %
    Operating Margin Excl SBC, Acq-Related (% of North America Total revenue) (15.9 ) % (6.7 ) % 11.7 % 10.2 % 16.8 % 16.7 % 13.4 % 4.5 %
    Year-over-year growth (bps) (5,879 ) (562 ) 603 3,494 3,278 2,337 170 (570 )
    Operating (Loss) Income TTM Excl SBC, Acq-Related $ (40,901 ) $ (51,024 ) $ (35,348 ) $ 4,796 $ 66,746 $ 120,676 $ 140,933 $ 139,726
    Operating Margin TTM Excl SBC, Acq-Related (% of North America Total TTM revenue) (12.9 ) % (11.6 ) % (6.5 ) % 0.8 % 9.1 % 14.4 % 14.5 % 12.0 %
    Year-over-year growth (bps) (3,604 ) (2,266 ) (1,467 ) 596 2,197 2,601 2,100 1,120
    International Segment:
    Gross Billings (1) $ 353,022 $ 559,259 $ 756,232 $ 755,061 $ 801,243 $ 738,401 $ 665,887 $ 801,500
    Year-over-year growth N/A 5,057 % 1,115 % 283 % 127 % 32 % (12 ) % 6 %
    Year-over-year growth, excluding FX (4) N/A 4,587 % 1,021 % 287 % 138 % 45 % (4 ) % 9 %
    % of Consolidated Gross Billings 53 % 60 % 65 % 61 % 59 % 57 % 55 % 53 %
    Gross Billings (1) TTM $ 623,367 $ 1,171,781 $ 1,865,774 $ 2,423,574 $ 2,871,795 $ 3,050,937 $ 2,960,592 $ 3,007,031
    Revenue:
    Third Party and Other Revenue (2) $ 158,911 $ 235,377 $ 261,464 $ 298,872 $ 309,069 $ 295,866 $ 265,019 $ 247,351
    Direct Revenue (2) – – 7,172 13,654 11,649 12,288 11,930 15,600
    Total Revenue $ 158,911 $ 235,377 $ 268,636 $ 312,526 $ 320,718 $ 308,154 $ 276,949 $ 262,951
    Year-over-year growth N/A 7,709 % 947 % 273 % 102 % 31 % 3 % (16 ) %
    Year-over-year growth, excluding FX (4) N/A 7,013 % 868 % 276 % 112 % 44 % 13 % (14 ) %
    % of Consolidated Revenue 54 % 60 % 62 % 64 % 57 % 54 % 49 % 41 %
    Revenue TTM $ 271,440 $ 503,803 $ 746,785 $ 975,450 $ 1,137,257 $ 1,210,034 $ 1,218,347 $ 1,168,772
    Cost of Revenue:
    Third Party and Other Cost of Revenue (3) $ 14,715 $ 22,634 $ 31,023 $ 35,463 $ 40,049 $ 36,877 $ 38,698 $ 36,903
    Direct Cost of Revenue (3) – – 5,707 9,383 10,198 11,993 12,053 21,778
    Total Cost of Revenue $ 14,715 $ 22,634 $ 36,730 $ 44,846 $ 50,247 $ 48,870 $ 50,751 $ 58,681
    % of International Total Revenue 9 % 10 % 14 % 14 % 16 % 16 % 18 % 22 %
    Gross Profit
    Third Party and Other $ 144,196 $ 212,743 $ 230,441 $ 263,409 $ 269,020 $ 258,989 $ 226,321 $ 210,448
    Direct – – 1,465 4,271 1,451 295 (123 ) (6,178 )
    Total $ 144,196 $ 212,743 $ 231,906 $ 267,680 $ 270,471 $ 259,284 $ 226,198 $ 204,270
    % of International Total Revenue 91 % 90 % 86 % 86 % 84 % 84 % 82 % 78 %
    Operating (Loss) Income Excl SBC, Acq-Related $ (76,506 ) $ (51,808 ) $ (20,528 ) $ (287 ) $ 27,418 $ 28,505 $ 11,395 $ (3,329 )
    Year-over-year growth N/A (125 ) % 21 % 100 % N/A 155 N/A 1060 %
    % of Consolidated Operating (Loss) Income Excl SBC, Acq-Related 78 % 83 % (1,213 ) % (2 ) % 41 % 40 % 23 % (24 ) %
    Operating Margin Excl SBC, Acq-Related (% of International Total revenue) (48.1 ) % (22.0 ) % (7.6 ) % (0.1 ) % 8.5 % 9.3 % 4.1 % (1.3 ) %
    Year-over-year growth (bps) N/A 74,265 9,392 14,474 5,669 3,126 1,170 (120 )
    Operating (Loss) Income TTM Excl SBC, Acq-Related $ (247,063 ) $ (275,824 ) $ (270,298 ) $ (149,129 ) $ (45,205 ) $ 35,108 $ 67,031 $ 63,989
    Operating Margin TTM Excl SBC, Acq-Related (% of International Total TTM revenue) (91.0 ) % (54.7 ) % (36.2 ) % (15.3 ) % (4.0 ) % 2.9 % 5.5 % 5.5 %
    Year-over-year growth (bps) N/A 70,992 13,508 13,628 8,704 5,765 4,170 2,080
    Consolidated Results of Operations
    Gross Billings (1) $ 668,174 $ 929,249 $ 1,157,210 $ 1,230,868 $ 1,354,800 $ 1,286,676 $ 1,218,256 $ 1,520,452
    Year-over-year growth 1,405 % 916 % 496 % 196 % 103 % 38 % 5 % 24 %
    Year-over-year growth, excluding FX (4) 1,378 % 859 % 465 % 198 % 108 % 47 % 11 % 25 %
    Gross Billings (1) (TTM) $ 1,369,139 $ 2,206,964 $ 3,169,902 $ 3,985,501 $ 4,672,127 $ 5,029,554 $ 5,090,600 $ 5,380,184
    Year-over-year growth 1,651 % 1,227 % 804 % 435 % 241 % 128 % 61 % 35 %
    Revenue:
    Third Party and Other Revenue (2) $ 295,523 $ 392,582 $ 422,989 $ 478,510 $ 540,053 $ 502,985 $ 423,564 $ 413,127
    Direct Revenue (2) – – 7,172 13,654 19,230 65,350 144,988 225,175
    Total Consolidated Revenue $ 295,523 $ 392,582 $ 430,161 $ 492,164 $ 559,283 $ 568,335 $ 568,552 $ 638,302
    Year-over-year growth 1,358 % 915 % 426 % 186 % 89 % 45 % 32 % 30 %
    Year-over-year growth, excluding FX (4) 1,332 % 858 % 401 % 188 % 95 % 53 % 38 % 31 %
    Total Consolidated Revenue TTMYear-over-year growth, excluding FX (1) $ 588,192 $ 942,108 $ 1,290,490 $ 1,610,430 $ 1,874,190 $ 2,049,943 $ 2,188,334 $ 2,334,472
    Year-over-year growth 1,594 % 1,205 % 761 % 415 % 219 % 118 % 70 % 45 %
    Cost of Revenue:
    Third Party and Other Cost of Revenue (3) $ 39,765 $ 54,803 $ 62,339 $ 86,882 $ 102,629 $ 77,032 $ 54,173 $ 63,905
    Direct Cost of Revenue (3) – – 5,707 9,383 16,869 58,152 127,613 218,567
    Total Consolidated Cost of Revenue $ 39,765 $ 54,803 $ 68,046 $ 96,265 $ 119,498 $ 135,184 $ 181,786 $ 282,472
    % of Total Consolidated Revenue 13 % 14 % 16 % 20 % 21 % 24 % 32 % 44 %
    Gross Profit
    Third Party and Other $ 255,758 $ 337,779 $ 360,650 $ 391,628 $ 437,424 $ 425,953 $ 369,391 $ 349,222
    Direct – – 1,465 4,271 2,361 7,198 17,375 6,608
    Total $ 255,758 $ 337,779 $ 362,115 $ 395,899 $ 439,785 $ 433,151 $ 386,766 $ 355,830
    % of Total Consolidated Revenue 87 % 86 % 84 % 80 % 79 % 76 % 68 % 56 %
    Operating (Loss) Income Excl SBC, Acq-Related $ (98,284 ) $ (62,309 ) $ (1,692 ) $ 17,952 $ 67,590 $ 71,934 $ 50,488 $ 13,703
    Year-over-year growth N/A (166 ) % 93. % N/A N/A N/A N/A (24 ) %
    Operating Margin Excl SBC, Acq-Related (% of Total Consolidated revenue) (33.3 ) % (15.9 ) % (0.4 ) % 3.6 % 12.1 % 12.7 % 8.9 % 2.1 %
    Year-over-year growth (bps) (7,611 ) 4,471 2,760 8,689 4,534 2,853 930 (150 )
    Operating (Loss) Income TTM Excl SBC, Acq-Related $ (287,964 ) $ (326,848 ) $ (305,646 ) $ (144,333 ) $ 21,541 $ 155,784 $ 207,964 $ 203,715
    Operating Margin TTM Excl SBC, Acq-Related (% of Total Consolidated TTM revenue) (49.0 ) % (34.7 ) % (23.7 ) % (9.0 ) % 1.1 % 7.6 % 9.5 % 8.7 %
    Year-over-year growth (bps) (7,208 ) (1,333 ) 245 4,887 5,011 4,229 3,320 1,770
    Operating (Loss) Income $ (117,148 ) $ (101,027 ) $ (239 ) $ (14,972 ) $ 39,639 $ 46,485 $ 25,438 $ (12,861 )
    Year-over-year growth N/A (174 ) % 100 % 96. % N/A N/A N/A 14 %
    Operating Margin (% of Total Consolidated revenue) (39.6 ) % (25.7 ) % (0.1 ) % (3.0 ) % 7.1 % 8.2 % 4.5 % (2.0 ) %
    Year-over-year growth (bps) (8,192 ) 6,949 6,838 19,213 4,673 3,391 457 100
    Operating (Loss) Income TTM $ (546,064 ) $ (610,272 ) $ (554,543 ) $ (233,386 ) $ (76,599 ) $ 70,913 $ 96,590 $ 98,701
    Operating Margin TTM (% of Total Consolidated TTM revenue) (92.8 ) % (64.8 ) % (43.0 ) % (14.5 ) % (4.1 ) % 3.5 % 4.4 % 4.2 %
    Year-over-year growth (bps) (11,533 ) (2,457 ) 1,427 11,983 8,875 6,824 4,740 1,870
    Net (Loss) Income Attributable to Common Stockholders (146,480 ) (107,406 ) (54,229 ) (65,379 ) (11,695 ) 28,386 (2,979 ) (81,089 )
    Weighted Average Basic Shares Outstanding 307,849 303,415 307,605 528,422 644,097 647,150 653,224 655,678
    Weighted Average Diluted Shares Outstanding (5) 307,849 303,415 307,605 528,422 644,097 663,123 653,224 655,678
    Net (Loss) Earnings per Share
    Basic $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04 $ (0.00 ) $ (0.12 )
    Diluted $ (0.48 ) $ (0.35 ) $ (0.18 ) $ (0.12 ) $ (0.02 ) $ 0.04 $ (0.00 ) $ (0.12 )
    Supplemental Financial Information and Business Metrics(13)
    (in thousands, except per share and headcount data and TTM
    Gross Billings / Average Active Customer)
    (unaudited)
    Q1 2011 (8) Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
    Depreciation and Amortization
    North America $ 1,273 $ 1,910 $ 2,817 $ 4,515 $ 5,004 $ 6,669 $ 8,153 $ 10,754
    International 6,325 6,188 4,241 4,786 6,712 6,141 7,157 5,211
    Consolidated $ 7,598 $ 8,098 $ 7,058 $ 9,301 $ 11,716 $ 12,810 $ 15,310 $ 15,965
    The following is a quarterly reconciliation of Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense (benefit), net, to the most comparable U.S. GAAP measure, “Operating (Loss) Income.” (6)
    Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense $ (98,284 ) $ (62,309 ) $ (1,692 ) $ 17,952 $ 67,590 $ 71,934 $ 50,488 $ 13,703
    Stock-based Compensation (18,864 ) (38,718 ) (3,340 ) (32,668 ) (28,003 ) (27,084 ) (22,619 ) (26,411 )
    Acquisition-related expense (benefit), net – – 4,793 (256 ) 52 1,635 (2,431 ) (153 )
    Operating (Loss) Income $ (117,148 ) $ (101,027 ) $ (239 ) $ (14,972 ) $ 39,639 $ 46,485 $ 25,438 $ (12,861 )
    The following is a trailing twelve months reconciliation of Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense (benefit), net, to the most comparable U.S. GAAP measure, “Operating (Loss) Income.” (6)
    Operating (Loss) Income, excluding stock-based compensation and acquisition-related expense TTM $ (287,964 ) $ (326,848 ) $ (305,646 ) $ (144,333 ) $ 21,541 $ 155,784 $ 207,964 $ 203,715
    Stock-based Compensation (54,916 ) (89,674 ) (88,351 ) (93,590 ) (102,729 ) (91,095 ) (110,374 ) (104,117 )
    Acquisition-related expense (benefit), net (203,184 ) (193,750 ) (160,546 ) 4,537 4,589 6,224 (1,000 ) (897 )
    Operating (Loss) Income TTM $ (546,064 ) $ (610,272 ) $ (554,543 ) $ (233,386 ) $ (76,599 ) $ 70,913 $ 96,590 $ 98,701
    The following is a quarterly reconciliation of foreign exchange rate neutral Gross Billings growth from the comprable quarterly periods of the prior year to reported Gross billings growth from the comprable quarterly periods of the prior year.(7)
    International Gross Billings, excluding FX N/A 4,587 % 1,021 % 287 % 138 % 45 % (4 ) % 9 %
    FX Effect N/A 470 % 94 % (4 ) % (11 ) % (13 ) % (8 ) % (3 ) %
    International Gross Billings N/A 5,057 % 1,115 % 283 % 127 % 32 % (12 ) % 6 %
    Consolidated Gross Billings, excluding FX 1,378 % 859 % 465 % 198 % 108 % 47 % 11 % 25 %
    FX Effect 27 % 57 % 31 % (2 ) % (5 ) % (9 ) % (6 ) % (1 ) %
    Condolidated Gross Billings 1,405 % 916 % 496 % 196 % 103 % 38 % 5 % 24 %
    The following is a quarterly reconciliation of foreign exchange rate neutral Revenue growth from the comprable quarterly periods of the prior year to reported Revenue growth from the comprable quarterly periods of the prior year.(7)
    International Revenue, excluding FX N/A 7,013 % 868 % 276 % 112 % 44 % 13 % (14 ) %
    FX Effect N/A 696 % 79 % (3 ) % (10 ) % (13 ) % (10 ) % (2 ) %
    International Revenue N/A 7,709 % 947 % 273 % 102 % 31 % 3 % (16 ) %
    Consolidated Revenue, excluding FX 1,332 % 858 % 401 % 188 % 95 % 53 % 38 % 31 %
    FX Effect 26 % 57 % 25 % (2 ) % (6 ) % (8 ) % (6 ) % (1 ) %
    Consolidated Revenue 1,358 % 915 % 426 % 186 % 89 % 45 % 32 % 30 %
    Cash Flow
    Operating cash flow (TTM) $ 91,928 $ 128,316 $ 173,291 $ 290,447 $ 356,221 $ 392,517 $ 370,194 $ 266,834
    Purchases of property, equipment and capitalized software, net (TTM) (24,780 ) (31,949 ) (38,414 ) (43,811 ) (45,932 ) (62,401 ) (69,788 ) (95,836 )
    Free cash flow (TTM) (9) $ 67,148 $ 96,367 $ 134,877 $ 246,636 $ 310,289 $ 330,116 $ 300,406 $ 170,998
    Net cash (used in) provided by investing activities (TTM) $ (55,510 ) $ (83,226 ) $ (124,301 ) $ (147,433 ) $ (149,583 ) $ (184,552 ) $ (177,133 ) $ (194,979 )
    Net cash provided by (used in) financing activities (TTM) $ 142,549 $ 125,404 $ 130,593 $ 867,205 $ 746,824 $ 771,404 $ 765,503 $ 12,095
    Other Metrics:
    Active Customers (10)
    North America 8,213 11,039 12,823 14,084 14,876 15,121 15,983 17,215
    International 7,163 11,998 16,083 19,658 21,974 22,925 23,542 23,834
    Total Active Customers 15,376 23,037 28,906 33,742 36,850 38,046 39,525 41,049
    TTM Gross Billings / Average Active Customer (11) $ 169 $ 174 $ 189 $ 187 $ 179 $ 165 $ 149 $ 144
    Headcount
    Sales (12) 3,556 4,850 4,853 5,196 5,735 5,587 5,087 4,677
    % North America 19 % 20 % 21 % 20 % 21 % 20 % 24 % 25 %
    % International 81 % 80 % 79 % 80 % 79 % 80 % 76 % 75 %
    Other 3,551 4,775 5,565 6,275 6,813 7,233 6,779 6,717
    Total Headcount 7,107 9,625 10,418 11,471 12,548 12,820 11,866 11,394
    (1) Represents the total dollar value of customer purchases of goods and services, excluding applicable taxes and net of estimated refunds. Includes direct billings and third party and other billings.
    (2) Third party revenue is related to sales for which the company acts as a marketing agent for the merchant. This revenue is recorded on a net basis. Direct revenue is related to the sale of products for which the Company is the merchant of record. These revenues are accounted for on a gross basis, with the cost of inventory included in cost of revenue.
    (3) Cost of revenue is comprised of direct and indirect costs incurred to generate revenue. Direct cost of revenue includes the purchase price of consumer products, warehousing, shipping costs and inventory markdowns. Third party cost of revenue includes estimated refunds for which the merchant’s share is not recoverable. Other costs incurred to generate revenue are allocated to cost of third party revenue, direct revenue and other revenue in proportion to relative gross billings during the period.
    (4) Represents change in financial measures that would have resulted had average exchange rates in the reported period been the same as those in effect in the prior year period.
    (5) The weighted-average diluted shares outstanding is calculated using the weighted-average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock units and restricted shares, as calculated using the treasury stock method.
    (6) Operating income excluding stock-based compensation and acquisition-related activities is a non-GAAP financial measure. The Company reconciles this measure to the most comparable U.S. GAAP measure, ‘‘Operating Income,” for the periods presented.
    (7) Foreign Exchange Rate neutral operating results are non-GAAP financial measures. The Company reconciles these measures to the most comparable U.S. GAAP measures, ‘‘Gross Billings” and “Revenue,” for the periods presented.
    (8) Year-over-year growth is unavailable for select international growth measures as Groupon did not commence international operations until the second quarter of 2010.
    (9) Free cash flow is a non-GAAP financial measure. The Company reconciles this measure to the most comparable U.S. GAAP measure, ‘‘Net cash provided by operating activities,” for the periods presented. See “Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities.”
    (10) Reflects the total number of unique accounts who have purchased Groupons during the trailing twelve months.
    (11) Reflects the total gross billings generated in the trailing twelve months per average active customer over that period.
    (12) Includes inside and outside merchant sales representatives, as well as sales support.
    (13) The definition, methodology, and appropriateness of each of our supplemental metrics is reviewed periodically. As a result, metrics are subject to removal and/or change.


  • Zynga Announces Q4 And Year End Results, Will Bring More Games To Mobile In 2013

    After the beating Zynga took in 2012, nobody was really looking forward to its year end results. It was assumed that everything would be doom and gloom for the troubled social game developer. The good news is that revenue and DAUs/MAUs are up. Everything else is just kind of middling.

    Starting off with revenue, Zynga reported that full year 2012 revenue of $1.28 billion, which is an increase of 12 percent year-over-year. Quarter four revenue was at $311 million, which is pretty much flat year-over-year. Bookings in both full year and quarter four were down 1 percent and 15 percent respectively.

    “The biggest highlight of the quarter was seeing our team deliver a successful sequel in FarmVille2, a next generation social game that offers cutting edge 3-D experiences loved by millions of FarmVille fans,” said Mark Pincus, CEO and Founder, Zynga. “In 2013 we’re excited to bring this new class of social games to mobile phones and tablets and build a network that offers an easier, better way for people to play together.”

    On a year-over-year basis, DAUs and MAUs were up for Zynga. DAUs increased from 54 million in Q4 2011 to 56 million in Q4 2012. MAUs increased from 240 million in Q4 2011 to 298 million in Q4 2012. On a consecutive quarter basis, however, DAUs and MAUs were down 6 percent and 4 percent respectively.

    Even if its quarterly users were down, Zynga still had some of the top performing games on Web-based platforms. It also had five of top the 10 games on Facebook in December of last year. That’s just one month, however, and data from App Center showed Zynga had none of its games in the top five Facebook games of 2012.

    “Our team executed well in the fourth quarter and made important progress in building sustainable new revenue streams and further aligning our company around our best growth opportunities,” said David Ko, Chief Operations Officer, Zynga. “2013 will be a pivotal transition year and we are focused on achieving three strategic objectives: growing our franchises on mobile and web, expanding our network and maintaining profitability on an adjusted EBITDA basis. With 298 million monthly average users, including 72 million on mobile alone, Zynga already has the largest social gaming audience and remains the best positioned company to lead in building the future of social gaming.”

    Here’s a breakdown of the annual and fourth quarter results:

    2012 Annual Financial Summary

  • Revenue: Revenue was $1.28 billion in 2012, an increase of 12% on a year-over-year basis. Online game revenue was $1.14 billion, an increase of 7% on a year-over-year basis. Advertising revenue was $137 million, an increase of 84% on a year- over-year basis.
  • Bookings: Bookings were $1.15 billion in 2012, a decrease of 1% on a year-over-year basis.
  • Net loss: GAAP net loss was $209.4 million in 2012, which included $282.0 million of stock-based expense and $49.9 million of income tax expense driven by a $53.8 million charge related to accelerating the implementation of Zynga’s international structure.
  • Adjusted EBITDA: Adjusted EBITDA was $213.2 million in 2012, a decrease of 30% year-over-year, primarily due to increased cash investment in research and development, datacenters and infrastructure.
  • Non-GAAP net income: Non-GAAP net income was $58.2 million in 2012, a decrease of 68% year-over-year, primarily due to increased investment in research and development.
  • EPS: Diluted EPS was ($0.28) for the full year 2012, compared to ($1.40) for the full year 2011.
  • Non-GAAP EPS: Non-GAAP EPSwas $0.07 for the full year 2012, compared to $0.24 for the full year 2011.
  • Cash and Cash flow: As of December 31, 2012, cash, cash equivalents and marketable securities were approximately $1.65 billion, compared to $1.92 billion as of December 31, 2011. Cash flow from operations was $195.8 million for the year ended December 31, 2012, compared to $389.2 million for the year ended December 31, 2011. Free cash flow was ($114.3) million for the year ended December 31, 2012 as reported, or $119.4 million excluding the purchase of the company’s headquarters, compared to $137.3 million for the year ended December 31, 2011.

    • Fourth Quarter 2012 Financial Summary

  • Revenue: Revenue was $311.2 million for the fourth quarter of 2012, flat compared to the fourth quarter of 2011 and a decrease of 2% compared to the third quarter of 2012. Online game revenue was $274.3 million, a decrease of 3% compared to the fourth quarter of 2011 and a decrease of 4% compared to the third quarter of 2012. Advertising revenue was $36.8 million, an increase of 35% compared to the fourth quarter of 2011 and an increase of 19% compared to the third quarter of 2012.
  • Bookings: Bookings were $261.3 million for the fourth quarter of 2012, a decrease of 15% compared to the fourth quarter of 2011 and an increase of 2% compared to the third quarter of 2012.
  • Net loss: Net loss was $48.6 million for the fourth quarter of 2012 compared to a net loss of $435.0 million for the fourth quarter of 2011. Net loss for the fourth quarter of 2012 included $86.3 million of income tax expense driven by a $53.8 million charge related to accelerating the implementation of Zynga’s international structure and $14.9 million of stock- based expense compared to $530.0 million of stock-based expense included in the fourth quarter of 2011.
  • Adjusted EBITDA: Adjusted EBITDA was $45.0 million for the fourth quarter of 2012 compared to $67.8 million for the fourth quarter of 2011 and $16.2 million in the third quarter of 2012.
  • Non-GAAP net income: Non-GAAP net income was $6.9 million for the fourth quarter of 2012, down from non-GAAP net income of $37.2 million in the fourth quarter of 2011 and up from a non-GAAP net loss of $0.4 million in the third quarter of 2012.
  • EPS: Diluted EPS was ($0.06) for the fourth quarter of 2012 compared to ($1.22) for the fourth quarter of 2011 and ($0.07) for the third quarter of 2012.
  • Non-GAAP EPS: Non-GAAP EPS was $0.01 for the fourth quarter of 2012 compared to $0.05 for the fourth quarter of 2011 and $0.00 for the third quarter of 2012.
  • Cash and cash flow: As of December 31, 2012, cash, cash equivalents and marketable securities were approximately $1.65 billion, compared to $1.65 billion as of September 30, 2012. Cash flow from operations was $19.8 million for the fourth quarter of 2012, compared to $164.0 million for the fourth quarter of 2011. Free cash flow was $29.5 million for the fourth quarter of 2012 compared to $101.9 million for the fourth quarter of 2011.
  • Share Repurchase Program: As of December 31, 2012, Zynga repurchased approximately 5 million shares of common stock under its stock repurchase program. The remaining authorized amount of stock repurchases that may be made under this plan was approximately $188 million as of December 31, 2012.

    • I think we all expected this result. Zynga started off 2012 doing pretty well for itself, but it made a few bad decisions in investments early on, including the acquisition of OMGPOP for $200 million. The company was also forced to shut down a few studios, lay off over 100 employees and stop hosting numerous games, including the hotly anticipated, but ultimately ignored Mafia Wars 2.

    Zynga’s results may not have been great, but investors are somewhat pleased with its performance. The company’s stock was trading 7 percent higher at $2.74 at closing. It’s still rising in after-hours trading with the company’s share price currently at $2.88.

  • Facebook Stock Tops $30 for First Time in Months

    Doesn’t adjust your monitors, Facebook stock is on the move.

    It’s been a long climb back, but Facebook shares currently sit at over $30, up around $1.40 as of now. That’s an increase of nearly 5%.

    Of course, “back” is a relative term. To be truly “back” to IPO levels, Facebook would beed to hit their opening mark, which was $38. But I’m sure there are plenty of people that are pretty happy to see Facebook crack $30 for the first time in nearly six months.

    As you know, it’s been a rocky road for Facebook’s stock price since the May IPO. In August, after weeks of sliding, the price hit its all-time low of $17.55, less than 50% of the original price. It saw a significant bounce after the company’s Q3 earnings report, which saw $1.26 billion in revenues, a number that beat analysts’ expectations.

    Since then, it’s been rising. Not entirely steadily, as there have been some hiccups. But now it sits at over $30:

    Facebook has just sent out invites for a mysterious event scheduled for next week at their Menlo Park Campus. According to the invitations, they want us to “come and see what they’re building.”

    Facebook will report their Q4 2012 earnings on January 30th.