It was marred by questionable accounting metrics that did little to obscure
worrisome expense trends.
In the latest filing, released on Friday, the company has stopped fluffing up
the numbers.
More conservative
Revenue and operating profit are booked in a much more conservative fashion.
Even more significantly, the filing includes third-quarter results that
reflect impressive cost control.
“Control” may actually not be a strong enough word: this is something more
akin to expense liquidation.
Marketing expenses fell by a fifth, or $43m, from the second quarter; selling
and administrative expenses fell by a third, or $71m. As a result, Groupon
reported positive earnings before interest, taxes, depreciation and
amortisation in the quarter, after five consecutive quarters of huge losses.
Expenses under control
Management had promised that it would get expenses under control, and, for at
least one-quarter, it has done so.
Pundits and potential investors can now debate whether Groupon can stay on its
diet - or, more specifically, whether it can spend less without crimping
growth.
Admittedly, Groupon’s business model is new and it is hard to know how its
financial performance will evolve. Just the same, expense reductions of this
magnitude at an expanding company are practically without precedent.
Growth rate
It is worth recalling in this context that Groupon’s now-discarded adjusted
profit metric excluded marketing expenses, on the precise grounds that these
were investments in future growth rather than costs that should be counted
against current revenues.
The sustainability of the growth rate will be on investors’ minds already: in
the third quarter, the top line increased by $38m over the second quarter,
while the second and first quarters jumped by $97m and $123m, respectively.
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