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Groupon (GRPN) Tops Q1 Earnings & Revenue Estimates, Ups View

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Groupon, Inc. (GRPN - Free Report) reported first-quarter 2021 non-GAAP earnings of 25 cents per share, versus the Zacks Consensus Estimate of a loss of 58 cents. The company had reported non-GAAP loss per share of $1.63 in the prior-year quarter.

Revenues of $263.8 million beat the Zacks Consensus Estimate by 15.6%. However, the figure, declined 29.5% on a year-over-year basis (down 32.2% excluding foreign exchange effect).

Region-wise, North America revenues plunged 37.4% from the year-ago quarter’s level to $147.2 million. International revenues fell 16.1% (down 23.4% excluding foreign exchange effect) year over year to $116.6 million.

Following the announcement of first quarter results, shares are up 8% in the pre-market trading on May 7. In the past year, the company’s stock has rallied 111% compared with the industry’s return of 7.1%.

Groupon, Inc. Price, Consensus and EPS Surprise

 

Groupon, Inc. Price, Consensus and EPS Surprise

Groupon, Inc. price-consensus-eps-surprise-chart | Groupon, Inc. Quote


Nonetheless, Groupon’s ongoing restructuring efforts as well as its pivot strategy look promising. As part of its pivot strategy, Groupon is expanding inventory to boost billings growth as well as improve purchase frequency and modernize marketplace.

Quarterly Details

Service revenues (65% of revenues) were down 16.6% year over year to $172.6 million. Product revenues (35% of revenues) deteriorated 45.4% to $91.2 million.

Local revenues of $148.6 million declined 22.4% from the year-ago quarter’s levels. North America Local revenues declined 12.1% and International Local revenues fell 56.4%, excluding foreign exchange effect.

On a consolidated basis, Goods revenues declined 37.3% year over year to $108.5 million. North America Goods revenues declined 81.5%. International Goods revenues deteriorated 2.8%, excluding foreign exchange effect.

Consolidated Travel revenues fell 30% year over year to $6.81 million. North America Travel revenues plunged 7.6%. International Travel revenues declined 77.8%, excluding foreign exchange effect.

In the first quarter, consolidated gross billings were $554 million that fell 33.2%, excluding foreign exchange effect.

North America gross billings were $382.5 million, down 27.4% year over year. International billings were $171.5 million, down 44.1% excluding foreign exchange effect.

North America Local, Travel and Goods gross billings declined 28.4%, 6.5% and 30.5%, respectively.

International Local, Travel and Goods gross billings declined 59.5%, 88.9% and 6.1%, 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 40.2% year over year to 17.8 million.

Region wise, North America units were down 18% in Goods and 42% in Local categories. International units were down 8% in Goods and 69% in Local categories.

Customer Metrics

As of Mar 31, 2021, Groupon had approximately 10.6 million active customers internationally compared with 12.1 million at the end of the previous quarter.

As of Mar 31, 2021, the company had approximately 15.2 million active customers based in North America compared with 17.5 million at the end of the prior quarter.

Operating Details

In the first quarter, gross profit came in at $167 million, down 17% (down 18.6%, excluding foreign exchange effect) year over year.

International gross profit declined 36% year over year and 42% excluding foreign exchange effect to $36.6 million. Under the International segment, excluding foreign exchange effect, Local, and Travel categories reported gross profit decline of 56%, and 78%, respectively, while Goods category gross profit increased 29% year over year.

Coming to North America region, gross profit plunged 9% to $130.4 million, primarily due to negative impact of the coronavirus crisis on volume. Local, and Goods categories reported gross profit decline of 9% and 17%, respectively while Travel gross profit increased 19%.

Non-GAAP adjusted EBITDA came in at $30.4 million compared with adjusted EBITDA loss of $22.5 million reported in the prior-year quarter.

Selling, general and administrative (SG&A) expenses fell 38.6% year over year to $127.1 million in the reported quarter. The reduction in expenses was primarily driven by reduced payroll expenditures due to restructuring initiatives.

In the first quarter, marketing expenses declined 44% year over year to $33.7 million owing to reduced offline marketing investments and faster traffic declines.

The company reported operating loss of $1.25 million compared with operating loss of $197.9 million in the prior-year quarter.

Balance Sheet & Cash Flow

Groupon exited the quarter ending Mar 31, 2021, with cash and cash equivalents of $676.8 million, down from $850.6 million, as of Dec 31, 2020.

In quarter under review, the company repaid $100 million of outstanding borrowings under revolving credit facility. As of Mar 31, 2021, the company has $100.0 million of outstanding borrowings under its revolving credit facility.

In March 2021, Groupon issued $200 million worth of new convertible senior notes (slated to mature in 2026). The net proceeds of 169.8 million of the net proceeds are put under restricted cash as of Mar 31, 2021.

The company added that the remaining net proceeds along with cash in hand is expected to be utilized to repurchase convertible notes (slated to mature in) April 2022 in second-quarter 2021.

In the first quarter, the company used $46.4 million of operating cash flow compared with $80.9 million generated in the prior quarter.

Free cash out flow came was $58.4 million compared with $68.9 million of free cash flow reported in the previous quarter.

Groupon stated that it was on track to achieve $225 million of annualized fixed cost savings by 2022.

Guidance

For 2021, Groupon expects revenues in the range of $950-$990 million compared with earlier guidance of $930-$980 million. Adjusted EBITDA is projected to be between $110 million and $120 million compared with earlier guidance of $100-$110 million.

Zacks Rank & Stocks to Consider

Groupon currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector worth consideration are Agilent Technologies (A - Free Report) , Pure Storage (PSTG - Free Report) and NVIDIA (NVDA - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Agilent scheduled to report quarterly results on May 25, while NVIDIA and Pure Storage are slated to announce results on May 26.

Long-term earnings growth rate of Agilent, Pure Storage and NVIDIA is pegged at 9%, 52.2% and 15.1%, respectively.

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