Groupon Reports Strong Q3 Results But Stock Sinks On Profit Booking
Groupon‘s (NASDAQ:GRPN) stock sunk over 20% on Thursday, even after it reported better than expected third quarter earnings, with both revenue and adjusted profits beating market expectations. The company’s stock declined on two likely reasons: 1) Profit booking on account of a near-70% year-to-date rise of the company’s stock price; and 2) Speculation around the material impact of Groupon’s acquisition of its competitor LivingSocial.
In terms of financial results, Groupon reported 1% year-over-year (y-o-y) growth in revenue to $721 million, against market estimates of about $711 million, driven by solid growth in North America. Its adjusted loss was 1 cent per share against consensus estimates of a loss of 2 cents per share. In terms of geographies, the company’s gross billings, revenues and profits declined in international markets, owing to its strategy to focus on the North American market and move away from certain low-margin goods businesses.
The company has already shut operations in 21 countries in the last 18 months, bringing down its international presence from 47 countries in January 2015 to 26 countries by the end of September 2016. Going forward, Groupon aims to bring this down to 15 countries primarily in North America and Europe to further streamline its operations. The table below provides an overview of the results. 
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North America Revenues
North America, which has been the primary area of focus for the company, reported revenues of about $483 million for the quarter, an increase of 4% on a y-o-y basis. Gross billings for the region improved by 6% over the prior year quarter to $921 million while gross profits increased 5% y-o-y to $202 million. The renewed focus on North America led to an addition of 1.2 million customers during the quarter, which was the company’s best performance in over three years.
Outlook for the Year
Driven by its strong performance in North America, Groupon again revised its full year revenue guidance from $3-3.1 billion to $3.075-3.15 billion. The company had earlier revised its revenue guidance from $2.75-3.05 billion to $3-3.1 billion in the second quarter. The company also slightly revised its expected adjusted EBITDA figures from $140-165 million to $150-165 million for full year 2016.
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