What To Expect From Groupon’s Second Quarter Earnings

GRPN: Groupon logo

Groupon (NASDAQ:GRPN) is scheduled to report its second quarter earnings on August 3. The company has reported mixed results over the last several quarters since it has undergone some major restructuring. Groupon exited some key markets, due to which its operations have scaled back from almost 50 countries a few years ago to only around 15 countries now. In terms of financial reporting, the company has clubbed its EMEA and Rest of World segments into a combined International segment. As a result, Groupon has seen declines in net revenues in the same period. In the most recent quarter, Groupon’s net revenues were down 7% on a y-o-y basis to $627 million. On a positive note, the company took these steps in an attempt to boost profits, and it has largely been a success thus far. 

For the June quarter, we forecast North America revenues to be around 8% lower on a y-o-y basis to $415 million. On the other hand, we forecast International revenues to increase 12% on a y-o-y basis to $235 million. 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. Additionally, we expect margins to improve slightly through the year. For the June quarter, we forecast a 1 percentage point improvement in EBITDA margin to around 9%. We have summarized our second quarter expectations on our interactive Groupon earnings preview dashboard.  You can change expected segment revenue and margin figures for Groupon to gauge how it will impact expected EPS for the quarter.

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