Former Agenda LLC co-owner Seth Haber is tasked with turning around the bankrupt web retailer.
The changes reduce the daily deal operator's fourth quarter revenue.
Groupon Inc.’s fourth quarter, in which it previously stated it had a $42.7 million net loss, was less fruitful than previously thought, the daily deal operator noted today in a restatement of its fourth-quarter earnings.
The move came after the company’s auditors, Ernst & Young LLP, found that the company had a material weakness in its internal controls, which means the internal controls Groupon has in place to prevent financial statement irregularities are ineffective.
The restatement reduced the company’s Q4 revenue by $14.3 million, its net income by $22.6 million and its operating income by $30.0 million. The financial results for prior periods were not affected. The daily deal operator says the changes didn’t affect its cash flow.
The revision is the result of the company’s shift to sell deals with higher prices, Groupon says. Those offers have higher refund rates, which mean Groupon requires larger reserves than it has for its typical daily deals.
Despite the revision, Groupon says it is confident its business will continue to grow. "We remain confident in the fundamentals of our business, as our performance continues to highlight the value that we provide to customers and merchants," says Jason Child, Groupon chief financial officer.
Today’s annoucement is the latest misstep for the daily deal operator. The U.K. regulatory agency the Office of Fair Trading earlier this month found that some of the offers from Groupon’s U.K. subsidiary MyCityDeal Ltd. were misleading and breached consumer protection regulations. And, in the run-up to the company’s initial public offering, Groupon faced scrutiny over its large marketing expenses, unusual accounting practices, as well as its reported revenue that has led it to amend documents filed with the Securities & Exchange Commission several times.
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