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Groupon (GRPN) Up 3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Groupon (GRPN - Free Report) . Shares have added about 3% in that time frame, underperforming 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 Beat Estimates, Revenues Miss

Groupon reported fourth-quarter 2021 non-GAAP earnings of 18 cents per share, which beat the Zacks Consensus Estimate of 8 cents. The company had reported non-GAAP earnings per share of 51 cents in the prior-year quarter.

Revenues of $223.2 million missed the Zacks Consensus Estimate by 2.1%. The figure declined 35% on a year-over-year basis (down 34% excluding foreign exchange effect).

Region-wise, North America revenues plunged 8.2% from the year-ago quarter’s level to $155.9 million. International revenues fell 61.2% (down 60% excluding foreign exchange effect) year over year to $67.25 million.

The company surpassed its 2021 goal to remove repeat restrictions on 80% of its North America Deal inventory. In the quarter under review, the company made substantial improvements to its self-service tools, making it easier for merchants to partner with Groupon. As a result, more than 50% of Deals launched in North America during 2021 were via self-service.

Quarterly Details

Service revenues (97.3% of revenues) were up 28.3% year over year to $217 million. Product revenues (2.7% of revenues) deteriorated to $6.1 million from $17.39 million.

Consolidated local revenues of $182.4 million surged 26.4% from the year-ago quarter’s levels. North America Local revenues increased 24.6% and International Local revenues increased 35.4%, excluding the foreign exchange effect.

Consolidated Travel revenues increased 103% year over year to $10.3 million. North America Travel revenues inched up 38.7%. International Travel revenues reached $4.8 million in the reported quarter.

On a consolidated basis, Goods revenues declined 84.3% year over year to $30.5 million. North America Goods revenues declined 74.7%. International Goods revenues declined 87.8%, excluding the foreign exchange effect.

In the fourth quarter, consolidated gross billings were $620.6 million, down 1%, excluding the foreign exchange effect.

North America gross billings were $412.8 million, up 7.3% year over year. International billings were $207.8 million, down 13.8%, excluding the foreign exchange effect.

North America Local and Travel gross billings increased 31.9% and 35.1%, respectively. Goods gross billings declined 48.4% on a year-over-year basis.

International Local and Travel gross billings rose 45.3% and 144.8%, respectively. Goods gross billings declined 59.9% on a year-over-year basis, excluding the foreign exchange effect.

Owing to the coronavirus crisis-induced negative impact on demand, consolidated units sold during the reported quarter fell 24.8% year over year to 18.8 million.

Region wise, North America units were down 20.3%, while International units were down 31% year over year

Customer Metrics

As of Dec 31, 2021, Groupon had approximately 23.3 million active customers compared with 24 million at the end of the previous quarter.

As of Dec 31, 2021, the company had approximately 14.8 million active customers based in North America and 8.5 million active international customers.

Operating Details

In the fourth quarter, gross profit came in at $194.8 million, up 8.9% (up 9.9%, excluding foreign exchange effect) year over year.

International gross profit increased 0.2% year over year and 3.2% excluding foreign exchange effect to $58.5 million. Under the International segment, excluding the foreign exchange effect, the Local category reported a gross profit increase of 35.5%. Goods category gross profit plunged 55.2% year over year.

Coming to North America region, gross profit increased 13.1% to $136.3 million. Local and Travel categories reported a gross profit increase of 24.8% and 36.7% respectively. Goods category’s gross profit fell 43.1%.

Non-GAAP adjusted EBITDA came in at $37.3 million compared with adjusted EBITDA of $40.1 million reported in the prior-year quarter.

Selling, general and administrative (SG&A) expenses fell 1.3% year over year to $126.5 million in the reported quarter. Marketing expenses surged 54.2% year over year to $58.2 million.

The company reported an operating income of $2.28 million compared with an operating income of $9.1 million in the prior-year quarter.

Balance Sheet & Cash Flow

Groupon exited the quarter ending Dec 31, 2021, with cash and cash equivalents of $498.7 million, down from $476.8 million, as of Sep 30, 2021.

In the fourth quarter, the company generated $31 million of operating cash flow compared with $74.2 million used in the prior quarter.

Free cash inflow came was $19.2 million compared with $87.6 million of free cash outflow reported in the previous quarter.

Guidance

For the first quarter 2022, Groupon expects to deliver breakeven adjusted EBITDA and $160 million to $170 million of revenue.
For the full year 2022, Groupon expects Local billings recovery to accelerate throughout the year in both North America and International. Adjusted EBITDA is expected to be more than $112 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -812.5% due to these changes.

VGM Scores

Currently, Groupon has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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.

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.


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