It has been about a month since the last earnings report for Groupon (
GRPN Quick Quote GRPN - Free Report) . Shares have added about 28.7% 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 drivers.
Groupon Q4 Earnings & Revenues Top Estimates, Down Y/Y Groupon reported fourth-quarter 2020 non-GAAP earnings of 51 cents per share, versus the Zacks Consensus Estimate of a loss of 18 cents. The company had reported non-GAAP earnings of $1.44 in the prior-year quarter. Revenues of $343.1 million beat the Zacks Consensus Estimate by 21.7%. However, the figure, declined 44% on a year-over-year basis (down 46% excluding foreign exchange effect). Region-wise, North America revenues plunged 54.5% from the year-ago quarter’s level to $169.8 million. International revenues fell 27.5% (down 32.4% excluding foreign exchange effect) year over year to $173.2 million. Quarterly Details
Service revenues (49% of revenues) were down 42.6% year over year to $169.2 million. Product revenues (51% of revenues) deteriorated 45.2% to $173.9 million.
Local revenues of $144.3 million declined 46% from the year-ago quarter’s levels. North America Local revenues declined 42% and International Local revenues fell 58%, excluding foreign exchange effect. On a consolidated basis, Goods revenues declined 40.7% year over year to $193.7 million. North America Goods revenues declined 67.8%. International Goods revenues also deteriorated 15.5%, excluding foreign exchange effect. Consolidated Travel revenues fell 72.5% year over year to $5.07 million. North America Travel revenues plunged 56.9%. International Travel revenues declined 88.6%, excluding foreign exchange effect. In the fourth quarter, consolidated gross billings were $632.8 million, down 49.5%, excluding foreign exchange effect. North America gross billings were $384.7 million, down 49.8% year over year. International billings were $248.1 million, down 49% excluding foreign exchange effect. North America Local, Travel and Goods gross billings declined 50.8%, 69.4% and 42%, respectively. International Local, Travel and Goods gross billings declined 64.6%, 85.3% and 15.1%, respectively, on a year-over-year basis, excluding foreign exchange effect. Owing to the coronavirus crisis-induced negative impact on demand, consolidated units sold during the reported quarter declined 41% year over year to 25 million. Region wise, North America units were down 36% in Goods and 46% in Local categories. International units were down 8% in Goods and 64% in Local categories. Customer Metrics
As of Dec 31, 2020, Groupon had approximately 12.1 million active customers internationally compared with 13.9 million at the end of the previous quarter.
Moreover, as of Dec 31, 2020, the company had approximately 17.5 million active customers based in North America compared with 20.2 million at the end of the prior quarter. Operating Details
In the fourth quarter, gross profit came in at $178.8 million, down 42.3% (down 43.5%, excluding foreign exchange effect) year over year.
International gross profit declined 43.2% year over year and 46.7% excluding foreign exchange effect to $58.3 million. Under the International segment, Local, and Travel categories reported gross profit decline of 57.8%, and 90.1%, respectively. Goods category improved 11.6%, excluding foreign exchange effect. Coming to North America region, gross profit plunged 42% to $120.5 million, primarily due to negative impact of coronavirus crisis on volume. Local, Travel and Goods categories posted gross profit declines of 43.4%, 54.2% and 30.7%, respectively. Non-GAAP adjusted EBITDA came in at $40.1 million compared with adjusted EBITDA of $83.8 million reported in the prior-year quarter. Selling, general and administrative (SG&A) expenses fell 31.7% year over year to $128.2 million in the reported quarter. The reduction in expenses was primarily driven by lower variable compensation and reduced payroll expenditures along with restructuring initiatives. In the fourth quarter, marketing expenses declined 54% year over year to $37.8 million owing to reduced offline marketing investments and faster traffic declines. The company reported operating income of $9.06 million compared with operating income of $40.1 million in the prior-year quarter. Balance Sheet & Cash Flow
Groupon exited the quarter ending Dec 31, 2020, with cash and cash equivalents of $850.6 million, up from $779 million, as of Sep 30, 2020.
As of Dec 31, 2020, the company had $200 million of outstanding borrowings under revolving credit facility. In the fourth quarter, the company generated $80.9 million of operating cash flow compared with $4.8 million generated in the prior quarter. Free cash flow came was $68.9 million compared with $7 million of free cash outflow reported in the previous quarter. 2020 Performance
Groupon reported revenues of $1.416 billion in 2020, down 36% over 2019 tally.
Non-GAAP loss per share was $1.86 per share compared with earnings of $2.57 per share reported for 2019.
Groupon’s gross profit in 2020 was down 43% to $677.3 million in 2020. The company reported operating loss of $277.1 million in 2020 compared with operating income of $39.8 million in 2019. Adjusted EBITDA stood at $49.7 million compared with $227.2 million reported in the previous year. In 2020, Groupon utilized cash flow from operations of $63.6 million compared with cash flow generated from operating activities of $71.3 million in the previous year. Consolidated units sold during the reported year declined 34% year over year to 99.2 million. Groupon achieved $140 million in fixed cost savings under its restructuring initiatives for 2020. The company expects to achieve $225 million of annualized fixed cost savings by 2022. Guidance
For 2021, Groupon expects revenues in the range of $930-$980 million. Adjusted EBITDA is projected to be between $100 million and $110 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted 7.56% due to these changes.
At this time, Groupon has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision looks promising. Notably, Groupon has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.