What To Expect From Groupon’s First Quarter Earnings

by Trefis Team
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Groupon (NASDAQ:GRPN) is scheduled to report its Q1 2018 earnings on May 9. The last several quarters have been eventful for the company, which has undergone some major restructuring. Groupon’s management took a bold decision to exit some key markets in recent quarters. Groupon was operating in almost 50 countries a few years ago, a figure which is now down to 15. In terms of financial reporting, the company has clubbed its EMEA and Rest of World segments into a combined International segment. The company took these steps in an attempt to boost profits, and it has largely been a success thus far. The company gave modest guidance for the full year, in its most recent earnings call.

For the March quarter, we forecast both North America and International revenues to be lower on a y-o-y basis. On the other hand, we expect margins to improve slightly through the year. For the March quarter, we forecast a 40 basis point improvement in EBITDA margin to around 7%. We have summarized our Q1 expectations on our interactive analysis platform.  You can change expected segment revenue and margin figures for Groupon to gauge how it will impact expected EPS for the quarter.

It is interesting to note that the third-party business has performed well in North America, while direct sales have been the key growth driver in international markets. Accordingly, margins improved in North America and compressed in international markets, as the third-party business has higher margins. With presumably lower order discounts and relatively lower customer acquisition costs in markets in which it intends to stay, Groupon looks to be on course to improving its long-term profitability. However, the company has moved away from many international markets, thereby reducing its potential addressable market size.

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