Groupon Inc. revised its fourth-quarter results on Friday after the online deal company found it needed to increase the amount of money it sets aside for refunds.
It wasn't a good sign for Groupon as this was its first quarterly report since it went public in November.
The company refunds money to any user who is unhappy with his or her deal, an important part of its business model that has made it so popular. The need to revise its reports, though, indicates it might not have the controls in place to adequately keep up with its own phenomenal growth.
Groupon said that it was selling online deals at higher prices during the period and that put it on the hook for larger refunds. The adjustment lowered the company's revenue for the period by $14.3 million and lowered its net income by $22.6 million, or 4 cents per share.
In February, the company reported a surprise loss for the quarter of $42.7 million, or 8 cents per share. It also said its revenue nearly tripled to $506.5 million.
The company's auditor Ernst & Young also flagged a weakness in Groupon's internal controls over its financial statement for the period in a regulatory document on Friday.
Groupon said it is working to identify and address the underlying causes and said it may have added expenses to solve the issue, including the cost of hiring more financial staff for the quickly growing company.
The company's shares plunged in after-hours trading on the news.
"We remain confident in the fundamentals of our business, as our performance continues to highlight the value that we provide to customers and merchants," Groupon's Chief Financial Officer Jason Child said in a statement.
The Chicago-based company affirmed its guidance for the first quarter.
Shares of Groupon plunged $1.13, more than 6 percent, in after-hours trading. Its stock rose 68 cents to close the day at $18.38.
