GRPN

Groupon Inc (NASDAQ:GRPN) announced financial results for the quarter ended September 30, 2016.

“Our strategy continues to deliver results with double-digit growth in North America local billings and our highest quarter for customer acquisition in over three years,” said Groupon CEO Rich Williams. “We are looking forward to a strong finish to the year and further progress on our mission to make Groupon a daily habit for consumers.”

Third Quarter 2016 Summary

  • Gross Billings were $1.43 billion in the third quarter 2016, down 2% from $1.47 billion in the third quarter 2015. Gross billings were impacted by dispositions and country exits in connection with Groupon’s restructuring efforts. On a same-country basis, gross billings grew 1% year-over-year excluding the unfavorable impact of year-over-year changes in foreign exchange rates. North America gross billings increased 6%, reflecting the contribution of new active customer cohorts, while EMEA declined by 10% and Rest of World declined by 24%. Excluding the impact of changes in foreign exchange rates, EMEA declined 8% and Rest of World declined 23%. Gross billings reflect the total dollar value of customer purchases of goods and services.
  • Revenue was $720.5 million in the third quarter 2016, compared with $713.6 million in the third quarter 2015. Revenue increased 1% globally, or 2% excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter. North Americarevenue increased 4%, EMEA declined 1% and Rest of World declined 19%. Excluding the impact of changes in foreign exchange rates, EMEA was flat year-over-year and Rest of World declined 15%.
  • Gross profit was $314.1 million in the third quarter 2016, compared with $328.9 million in the third quarter 2015. Gross profit declined 4% globally. North America gross profit increased 5%, EMEA declined 18% and Rest of World declined 20%.
  • Net loss from continuing operations was $35.8 million in the third quarter 2016, compared with $24.6 million in the third quarter 2015.
  • Adjusted EBITDA, a non-GAAP performance measure, was $32.1 million in the third quarter 2016, compared with $56.3 million in the third quarter 2015, reflecting our increased investments in customer acquisition.
  • Net loss attributable to common stockholders was $38.0 million, or $0.07 per share. Non-GAAP net loss attributable to common stockholders was $8.1 million, or $0.01 per share.
  • Global units sold declined 5% year-over-year to 49 million, primarily driven by country exits and our restructuring efforts in international segments. Units in North America increased 4%, EMEA units declined 8%, and Rest of World units declined 31%. Units are defined as vouchers and products sold before cancellations and refunds.
  • Operating cash flow for the trailing twelve months ended September 30, 2016 was $78.9 million. Free cash flow, a non-GAAP liquidity measure, was negative $53.7 million in the third quarter 2016, bringing free cash flow for the trailing twelve months ended September 30, 2016 to $14.2 million, which reflects the adverse cash flow impact of restructuring charges, country exits, and the funding of our securities litigation settlement.
  • Cash and cash equivalents as of September 30, 2016 were $689.7 million, and we had no outstanding borrowings under our $250.0 millionrevolving credit facility.

Definitions and reconciliations of all non-GAAP financial measures are included below in the section titled “Non-GAAP Financial Measures” and in the accompanying tables.

Highlights

  • North America Local Billings grew 10% year-over-year. North America Local Billings accelerated to 10% year-over-year growth as we continue to see the contribution of new cohorts.
  • North America accelerated customer growth with nearly 1.2 million incremental active customers. Customer acquisition marketing yielded an incremental 1.2 million active customers in North America, as compared with the prior quarter, which is the highest acquisition in over three years. North America had 29.1 million active customers as of September 30, 2016. Active customers represent unique customer accounts that have purchased a voucher or product within the last twelve months.
  • SG&A declined $72.0 million, or $34.0 million excluding the impact of a litigation reserve recorded in the third quarter 2015, on solid execution of operational streamlining initiatives. SG&A in all markets declined year-over-year as we continue to execute on our restructuring plan and scale regional shared service centers, which we expect to not only improve our customer service but also create greater operating leverage over time.
  • Streamlined country footprint. The Company has identified its go-forward country footprint to consist of 15 countries, down from 27 in the portfolio as of the second quarter 2016. We are pursuing strategic alternatives and other options to exit the remaining countries, which we expect will continue into 2017.

Acquisition of LivingSocial

On October 24, 2016, Groupon entered into an agreement to acquire all of the outstanding shares of LivingSocial, Inc. The acquisition is expected to close by early November 2016, subject to satisfaction of customary closing conditions. The acquisition consideration is not material.

Share Repurchase

During the third quarter 2016, Groupon repurchased 5,213,778 shares of its Class A common stock for an aggregate purchase price of $24.6 million. Up to $244.7 million of Class A common stock was available for repurchase under Groupon’s share repurchase program as of September 30, 2016. The timing and amount of any share repurchases are determined based on market conditions, share price and other factors, and the program may be discontinued or suspended at any time.

Outlook

Groupon’s outlook for 2016 reflects current foreign exchange rates, as well as expected marketing investments, stabilizing trends in Shopping, the acquisition of LivingSocial, potential disruption related to country exits, and cost benefits associated with our streamlining initiatives.

Groupon is raising its revenue guidance range to between $3.075 and $3.150 billion for the full year, and narrowing its expected 2016 Adjusted EBITDA range to between $150.0 million and $165.0 million. (Original Source)

Shares of Groupon didn’t react well to the earnings release, falling nearly 10% to $4.74 in after-hours trading. GRPN has a 1-year high of $5.94 and a 1-year low of $2.15. The stock’s 50-day moving average is $5.19 and its 200-day moving average is $4.37.

On the ratings front, Groupon has been the subject of a number of recent research reports. In a report issued on October 17, Wedbush analyst Aaron Turner upgraded GRPN to Buy, with a price target of $6.50, which implies an upside of 24% from current levels. Separately, on October 4, Macquarie’s Tom White reiterated a Buy rating on the stock and has a price target of $6.00.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Aaron Turner and Tom White have a total average return of 23.1% and 5.2% respectively. Turner has a success rate of 100% and is ranked #829 out of 4197 analysts, while White has a success rate of 42% and is ranked #1290.

Overall, 2 research analysts have rated the stock with a Sell rating, 7 research analysts have assigned a Hold rating and 3 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $5.09 which is -3.2% under where the stock opened today.

Groupon, Inc. is a local commerce marketplace that connects merchants to consumers by offering goods and services at a discount. The company operates through three segments: North America, EMEA, which is comprised of Europe, Middle East and Africa, and the remainder of the Company’s international operations Rest of World. It operates its business under three categories: Local Deals, Groupon Goods and Groupon Getaways. The Local Deals category includes deals with local merchants, deals with national merchants and local events. The Groupon Goods category offers customers the ability to find deals on merchandise across multiple product lines, including electronics, sporting goods, jewelry, toys, home and apparel. The Groupon Getaways category includes travel offers, including hotels, airfare and package deals covering both domestic and international travel.