It has been about a month since the last earnings report for Groupon (GRPN Quick QuoteGRPN - Free Report) . Shares have added about 54.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Groupon due for a pullback? 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 catalysts.

Groupon Q3 Earnings and Revenues Top Estimates

Groupon reported third-quarter 2020 non-GAAP earnings of 15 cents per share, versus the Zacks Consensus Estimate of a loss of 52 cents. The company had reported non-GAAP earnings of 27 cents in the prior-year quarter.

Revenues of $304 million beat the Zacks Consensus Estimate by 0.9%. The figure, however, declined 38.7% on a year-over-year basis (down 40.1% excluding foreign exchange effect).

Region-wise, North America revenues plunged 40.6% from the year-ago quarter’s level to $180.3 million. International revenues fell 35.6% (down 39.2% excluding foreign exchange effect) year over year to $123.7 million.

Quarter Details

Service revenues (51% of revenues) were down 42.2% year over year to $155.1 million. Product revenues (49% of revenues) deteriorated 34.5% to $149 million.

Local revenues of $135.1 million declined 43.8% from the year-ago quarter. North America Local revenues declined 43.7% and International Local revenues fell 47.2%, excluding foreign exchange effect.

Goods revenues declined 31% year over year to $161 million. North America Goods revenues declined 32.9%. International Goods revenues also deteriorated 33.2%, excluding foreign exchange effect.

Travel revenues fell 63.6% year over year to $7.89 million. North America Travel revenues plunged 65.3%. International Travel revenues declined 63.2%, excluding foreign exchange effect.

In the third quarter, gross billings were $597.1 million, down 46.6%, excluding foreign exchange effect.

North America billings were $362.3 million, down 49.4% year over year. International billings were $234.8 million, down 41.4% excluding foreign exchange effect.

North America Local and Travel gross billings declined 54.9% and 67.1%, respectively, while Goods gross billings decreased 18.5% on a year-over-year basis.

International Local and Travel gross billings declined 47.7% and 44.8%, respectively while Goods gross billings decreased 30.2% on a year-over-year basis, excluding foreign exchange effect.

Owing to the coronavirus crisis-induced negative impact on demand, global units sold during the reported quarter declined 40% year over year to 21 million.

Region wise, North America units were down 13% in Goods and 50% in Local categories. International units were down 20% in Goods and 49% in Local categories.

Customer Metrics

As of Sep 30, 2020, Groupon had approximately 13.9 million active customers internationally compared with 15.3 million at the end of the previous quarter.

Moreover, as of Sep 30, 2020, the company had approximately 20.2 million active customers based in North America compared with 22.8 million at the end of the prior quarter.

Operating Details

In the third quarter, gross profit came in at $160 million, down 42.4% (down 43.5%, excluding foreign exchange effect) year over year.

International gross profit declined 44.7% year over year, excluding foreign exchange effect, to $50.3 million. Under the International segment, Local, Travel and Goods categories reported gross profit decline of 47.9%, 65.3% and 24.8%, respectively, excluding foreign exchange effect.

Coming to North America region, gross profit plunged 42.9% to $109.7 million, primarily due to negative impact of coronavirus crisis on volume. Local, Travel and Goods categories posted gross profit declines of 43.6%, 63.9% and 30.4%, respectively.

Adjusted EBITDA came in at $30.8 million compared with adjusted EBITDA of $50 million reported in the prior-year quarter.

Selling, general and administrative (SG&A) expenses fell 37.4% year over year to $124.3 million in the reported quarter. The reduction in expenses was primarily driven by lower variable compensation and reduced payroll expenditures along with restructuring initiatives.

Groupon continues to expect $140 million in cost savings under its restructuring initiatives for 2020.

In the third quarter, marketing expenses declined 58.1% year over year to $31.4 million owing to lower offline marketing investments and accelerated traffic declines.

The company incurred operating loss of $16.2 million compared with operating income of $4.6 million in the prior-year quarter.

Balance Sheet & Cash Flow

Groupon exited the quarter ending Sep 30, 2020, with cash and cash equivalents of $779 million, up from $784.7 million, as of Jun 30, 2020.

As of Sep 30, 2020, the company had $200 million of outstanding borrowings under revolving credit facility.

In the third quarter, the company generated $4.8 million of operating cash flow compared with $87.1 million generated in the prior quarter.

Free cash outflow came was $7 million compared with $72.8 million of free cash flow reported in the previous quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -53.33% due to these changes.

VGM Scores

Currently, Groupon has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Groupon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.