A month has gone by since the last earnings report for Groupon (GRPN). Shares have lost about 6.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Groupon due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Groupon Earnings and Revenues Miss Estimates in Q3
Groupon reported third-quarter 2019 non-GAAP earnings of 1 cent per share, missing the Zacks Consensus Estimate by a penny. The figure also declined from 4 cents reported in the year-ago quarter.
Revenues of $495.6 million lagged the Zacks Consensus Estimate of $525 million and declined 16% on a year-over-year basis (15% at FX neutral). The year-over-year decline can primarily be attributed to lower customer and traffic.
Service revenues declined 7.3% year over year to $268.1 million. Product revenues slumped 25.1% to $227.5 million.
Region-wise, North America revenues decreased 15.9% from the year-ago quarter to $303.6 million. Meanwhile, International revenues decreased 17.1% (down 13.4% excluding foreign exchange effect) year over year to $192 million.
In the third quarter, billings from North America were $715.4 million, down 10.9% year over year. Moreover, international billings declined 8.6% (down 4.5% excluding foreign exchange effect) to $377.9 million.
North America local gross billings came in at $511.2 million, slumping 4.3% from the prior-year comparable period. Local revenues of $175.1 million declined 2.7% from the year-ago quarter. Further, goods billings and revenues fell 27.8% and 30% to $133.1 million and $114.8 million, respectively.
International local gross billings were $204.8 million, decreasing 2.3% (up 2% excluding foreign exchange effect) from the year-ago quarter. Local revenues of $65.4 million declined 13.8% from the year-ago quarter (down 10% excluding foreign exchange effect). However, goods billings dropped 18.2% year over year to $129.1 million. Meanwhile, revenues decreased 19% to $118.6 million.
Groupon's online marketplaces have been categorized under three heads – Local, Goods and Travel. Consolidated revenues from Local, Travel and Goods declined 6%, 18.5% and 24.8%, respectively, from the year-ago quarter.
Gross profit from Local decreased 6.4% year over year and came in at $216.2 million, while Travel marketplaces gross profit declined 19.6% to $18 million. Meanwhile, the same in Goods market fell 16.8% to $43.7 million.
As of Sep 30, 2019, Groupon had approximately 17.5 million active customers internationally compared with 17.6 million at the end of the previous quarter.
As of Sep 30, 2019, the company had approximately 27.7 million active customers based in North America compared with 28.6 million at the end of the prior quarter.
The company is focused on initiatives to bolster card linked offers platform in order to enrich customer experience.
Gross profit during the third quarter came in at $277.9 million, down 9% (down 8% at FX neutral) year over year. Internationally, gross profit decreased 16% (down 12% on an FX-neutral basis) to $85.9 million, thanks to lower customers in Europe. Moreover, North America gross profit dropped 6% to $192.1 million, primarily owing to lower customers and lower traffic.
Adjusted EBITDA decreased 11.3% to $50 million.
Global units sold during the reported quarter declined 9% year over year to 35.8 million, primarily owing to lower traffic. North America units were down 14% year over year, primarily on account of the divestiture of certain OrderUp assets, continued investments in scaling Groupon+ and maximization of long-term gross profit. Further, International units were down 1% year over year.
SG&A expenses increased 24.4% year over year to $198.3 million in the reported quarter.
Marketing expenses declined 19% to $75 million primarily owing to optimizing spend with regard to high value customers and lower offline marketing expense in North America.
Operating loss from continuing operation came in at $14.7 million against net income from continuing operation of $47.2 million reported in the year-ago-quarter.
Balance Sheet & Cash Flow
Groupon exited the quarter ending Sep 30, 2019, with cash and cash equivalents of $567.3 million down from $596.8 million reported at the end of the previous quarter.
Net cash provided from operations during the quarter came in at $18.6 million.
The company repurchased shares worth around $15 million during the reported quarter.
For full year 2019, Groupon anticipates adjusted EBITDA outlook to be roughly $270 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
Currently, Groupon has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Groupon has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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