Online coupons purveyor Groupon (GRPN) this afternoon revised its Q4 results for the three months ended in December 31st, first reported February 8th, to reflect “higher price point offers” it sent to subscribers, which “have higher refund rates.”
Groupon said the revision reduces previously reported revenue of $506 million by $14.3 million, and reduces reported EPS of 2 cents a share downward by 4 cents.
The revisions are primarily related to an increase to the Company’s refund reserve accrual to reflect a shift in the Company’s fourth quarter deal mix and higher price point offers, which have higher refund rates. The revisions have an impact on both revenue and cost of revenue.
Groupon defines its revenue as “the purchase price paid by the customer for the Groupon less an agreed upon percentage of the purchase price paid to the featured merchant partner, excluding any applicable taxes and net of estimated refunds.”
In its 10-K filing with the SEC dated today, Groupon said that it determined it has not had proper controls in place for financial reporting. The company said it was taking steps to remedy the situation:
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2011 [...] In connection with the preparation of our financial statements for the year ended December 31, 2011, we concluded there is a material weakness in the design and operating effectiveness of our internal control over financial reporting [...] We did not have adequate policies and procedures in place to ensure the timely, effective review of estimates, assumptions and related reconciliations and analyses, including those related to customer refund reserves.�As noted previously, our original estimate disclosed on February 8 of the reserve for customer refunds proved to be inadequate after we performed additional analysis.
(The relevant passage is Item 9A: Controls and Procedures.)
The errors in financial controls are not a good thing for a company that spent some chunk of 2011 prior to its IPO tussling with the Securities & Exchange Commission over issues of accounting and non-GAAP measures.
Given that Groupon’s report last month beat the $473 million projection of analysts, but fell short of 3-cent estimate of analysts, the revision would still put revenue ahead of consensus, if less so, while making the bottom-line miss worse.
Groupon said there is no change to its outlook for this year.
Groupon shares are down $1.53, or more than 8%, in late trading at $16.85 in late trading.
Fin.
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