Groupon Inc. GRPN reported first-quarter 2019 non-GAAP earnings of 3 cents per share, which surpassed the Zacks Consensus Estimate of break-even earnings. However, the figure was flat on a year-over-year basis.
Although revenues of $578.4 million declined 8% on a year-over-year basis (5% at FX neutral), it surpassed the Zacks Consensus Estimate of $552 million. The year-over-year decline can primarily be attributed to lower customer traffic.
The company has been trying to reduce dependence on goods deals and is shifting focus toward local services market. This is because local services market is a high margin business while goods deals bring in high revenues but smaller margins. The transition continues to hurt the company’s revenues as evident from first-quarter results.
Groupon, Inc. Revenue (Quarterly)
Groupon, Inc. Revenue (Quarterly) | Groupon, Inc. Quote
Service revenues (49.4% of total revenues) declined 5.3% year over year to $285.8 million. Product (50.6%) revenues slumped 9.9% to $292.6 million in the same period.
Region-wise, North America revenues (61.7% of total revenues) decreased 9.2% from the year-ago quarter to $357.2 million. Meanwhile, International revenues (38.3% of total revenues) decreased 5.2% (up 2.4% excluding foreign exchange effect) year over year to $221.2 million.
In the first quarter, billings from North America were $769 million, down by 10.1% year over year. Moreover, international billings decreased 7.1% (up 0.2% excluding foreign exchange effect) to $406.9 million.
North America local gross billings came in at $502.3 million, decreasing 7.5%. Local revenues of $180.4 million declined 3.8% from the year-ago quarter. Further, goods billings and revenues fell 16.6% and 15% to $174.6 million and $157.8 million, respectively.
International local gross billings were $207.4 million, decreasing 4.6% (up 2.7% excluding foreign exchange effect). Local revenues of $73.2 million declined 1.9% from the year-ago quarter (up 5.6% excluding foreign exchange effect). However, goods billings dropped 9.7% year over year to $147.6 million. Meanwhile, revenues decreased 5.4% to $139.3 million.
Groupon's online marketplaces have been categorized under three heads – Local, Goods and Travel. Consolidated revenues from Local (43.8% of total revenues), Travel (4.8%) and Goods (51.4%) declined 3.2%, 12.2% and 10.8%, respectively, from the year-ago quarter.
Gross profit from Local decreased 2.9% year over year and came in at $230.1 million, while Travel marketplaces gross profit declined 12.5% to $23.3 million. Meanwhile, the same in Goods market declined 14.1% to $52.6 million.
As of Mar 31, 2019, Groupon had approximately 17.5 million active customers internationally compared with 17.6 million at the end of the previous quarter.
As of Mar 31, 2019, the company had approximately 29.6 million active customers based in North America compared with 30.6 million at the end of the previous quarter.
The company continues to take initiatives to bolster card linked offers platform and enrich customer experience.
Gross profit during the first quarter came in at $306 million, down 6% (3% at FX neutral). Internationally, gross profit decreased 9% (91% on an FX-neutral basis) to $96.2 million. However, North America gross profit dropped 4% to $209.8 million.
Adjusted EBITDA decreased marginally 10.7% totaling $47 million.
Global units sold during the reported quarter declined 12% year over year to 37.2 million, primarily owing to lower traffic. North America units were down 18% 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. However, International units were down 2% year over year.
SG&A expenses decreased 5.4% year over year to $210.4 million in the reported quarter. The decrease can primarily be attributed to continuous efficiency efforts and lower compensation expenses.
Marketing expenses declined 6% to $93.4 million primarily due to optimizing spend in regard to high value customers and lower offline marketing expense in North America.
Operating loss from continuous operation came in at $41.2 million compared with loss of $2.8 million reported in the year-ago –quarter.
Balance Sheet & Cash Flow
Groupon exited the quarter ending Mar 31, 2019, with cash and cash equivalents of $645.6 million down from $841 million reported at the end of the previous quarter.
Net cash utilized from operations during the quarter came in at $147.5 million, compared with $323.8 million generated in the previous quarter.
The company repurchased 4.4 million shares worth $15 million during the reported quarter.
For full year 2019, Groupon expects adjusted EBITDA outlook to be roughly $270 million.
Zacks Rank & Stocks to Consider
Currently, Groupon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Synopsys, Inc. SNPS, Cadence Design Systems, Inc. CDNS and Upland Software, Inc. UPLD, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Synopsys, Cadence Designand Upland Softwarehave a long-term earnings growth rate of 10%, 12% and 20%, respectively.
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