What happened

Shares of Groupon (NASDAQ:GRPN) plunged by as much as 14% this morning after the company released third-quarter earnings. The stock has since recovered and closed down less than 1%.

So what

Revenue in the third quarter came in at $304 million, which was shy of the consensus estimate of $310.2 million. That resulted in adjusted net income of $4.5 million, or $0.15 per share, which was significantly better than the $0.55 per share in adjusted net losses that Wall Street was modeling for. The e-commerce technology company continues to make progress on its previously announced efforts to transition parts of its business to a third-party marketplace model.

"Groupon" painted on a wall at the company's headquarters

Image source: Groupon.

"The entire Groupon organization is focused on returning the company to growth and in the third quarter, we made notable progress," interim CEO Aaron Cooper said in a statement. "We increased inventory by 50 percent in our test markets and launched several product features, all aimed at increasing Groupon's ability to drive engagement with merchants and consumers."

Now what

Groupon has been working on a multi-phase restructuring plan since March in order to cut costs. That initiative is expected to generate an estimated $140 million in cost savings in 2020 and another $200 million in 2021. After that, the company says that the plan will create $225 million in annualized fixed cost savings.

The shift to a third-party marketplace model in North America will impact revenue in the fourth quarter, since the company will only recognize its net commission. Groupon warned that market conditions may deteriorate in the fourth quarter due to rising COVID-19 cases.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.