Groupon (ticker: GRPN) has recently reported its third-quarter financial results, which have left investors disappointed. The online deals provider's fourth-quarter guidance also fell short of Wall Street's expectations, further impacting the company's stock price.

Declining Stock Performance

Following the release of the financial results, Groupon's stock experienced a significant decline of 36% on Friday, closing at $8.72 per share. This sharp drop reflects the concern among investors regarding the future prospects of the business.

Rights Offering and Shareholder Support

Selling Non-Core Assets

Groupon is actively exploring opportunities to divest non-core assets and improve its financial position. The company has already sold $9 million of its stake in the fintech company SumUp and an additional $10 million under the same terms. Groupon believes there is potential for another $100 million in non-core asset sales, including its remaining SumUp stake, GiftCloud (a corporate gifts business), and certain intellectual property.

Transformation Challenges and Financing Plan

Recognizing the challenges faced in transforming the business, interim CEO Dušan Šenkypl, a principal at Pale Fire, assured shareholders that progress is being made. With a focus on creating an efficient cost structure, coupled with the proposed financing plan, Šenkypl expressed confidence in providing clarity to all stakeholders. This includes customers, merchants, employees, suppliers, and capital market participants, regarding Groupon's liquidity and its ability to support the ongoing transformation plan. The management's goal is to remove any doubts about Groupon's ability to operate as a going concern.

Resignation of Co-Founder

In a separate development, co-founder Eric Lefkofsky has resigned from Groupon's board with immediate effect.

Groupon's recent financial results and future outlook have cast a shadow of uncertainty over the company. However, the management remains committed to navigating these challenges and creating a stronger foundation for the future.

Groupon's Revenue Declines in Third Quarter

Groupon, the popular online marketplace, reported a decline in revenue for the third quarter. The company's revenue was $126.5 million, down 12% from the previous year. This figure was slightly below the consensus estimate of $126.7 million tracked by FactSet.

Decrease in North American and International Sales

Groupon experienced a decline in both North American and international sales. North American revenue was down 12% due to a decrease in engagement on the platform, resulting in lower unit sales. International sales were also off by 14%. The number of North American customers fell by 15% to 10.5 million, while international customers decreased by 17% to 6.6 million.

Improved Profit and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Despite the decline in revenue, Groupon managed to exceed consensus estimates for adjusted profit. The company reported earnings of 12 cents per share, one cent above expectations. Moreover, adjusted EBITDA showed considerable improvement, reaching $18.2 million compared to a loss of $8.6 million in the same period last year. However, under generally accepted accounting principles, the company posted a loss of $41.4 million, or $1.31 per share.

Shifting Focus to Topline Growth

Groupon has been actively working towards achieving an efficient cost structure and has made significant progress in that regard. With the fast transformation nearing completion, the company is now shifting its mindset from cost cutting to prioritizing topline growth.

Fourth Quarter Outlook

For the fourth quarter, Groupon expects a revenue range of $127.5 million to $137.5 million, representing a decline of 7% to 14%. Adjusted EBITDA for this period is projected to range from $18 million to $25 million. These figures fall below Wall Street's expectations of $138.2 million in revenue.

Outlook for 2024

Looking ahead to 2024, Groupon anticipates flat to 5% lower revenue compared to the previous year. Adjusted EBITDA for 2024 is estimated to be between $80 million and $100 million. The midpoint of the fourth-quarter guidance suggests a revenue of $510 million for the full year of 2023, whereas the midpoint of the 2024 guidance implies revenue of $497 million for the following year. This projection falls below the consensus estimate of $524 million.

The company anticipates a year-over-year decline in revenue for the first half of next year, followed by growth in the second half.

Repositioning Groupon for Success

Groupon acknowledges that it has not experienced the same benefits as other marketplaces and retailers during major gifting seasons. To address this, the company's CEO, Senkypl, recognizes the importance of repositioning Groupon to play a larger role in the gifting industry. This strategic growth opportunity is a priority for Groupon, and resources will be allocated towards this project. The company expects this initiative to generate stronger performance during the Q4 holiday season than in previous years.