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The company also downplays its controversial Adjusted CSOI accounting method
Since filing for its IPO, Groupon has been in the spotlight for some controversial reason or another, from its huge losses and accounting practices to its flapping gums. Today, a new SEC filing lands Groupon back in the public eye, this time for what it doesn’t say.
Following much debate over Groupon’s accounting method—what it referred to as “adjusted consolidated segment operating income”—the company has opted to drop the unusual practice, which didn’t account for the costs of customer acquisition, online marketing, or stock-based compensation. Groupon previously explained its logic by pointing out that those expenses are “not indicative of future operating expenses. In other words, the company is currently in expansion overdrive and is investing more in acquiring new subscribers right now than it will in the future.
Groupon also downplayed the overall significance of Adjusted CSOI in the new filing. In the original filing, Groupon explained:
“Adjusted CSOI is operating income of our two segments, North America and International, adjusted to add back online marketing expense, acquisition-related costs and stock-based compensation expense. Online marketing expense primarily represents the cost to acquire new subscribers and is determined by the amount of subscriber growth we wish to pursue and changes in online marketing rates. We believe that a relatively small portion of our current online marketing expense relates to existing subscribers. Acquisition-related costs are non-recurring non-cash items related to certain of our acquisitions. Stock-based compensation expense is a non-cash item. We consider Adjusted CSOI to be an important measure of the performance of our business after excluding expenses that are non-cash or otherwise not indicative of future operating expenses.”
In the new filing, Groupon says: “CSOI is the operating income of our two segments, North America and International. As reported under U.S. GAAP, we do not allocate stock-based compensation and acquisition-related expense to our segments. We use CSOI to allocate resources and evaluate performance internally.”
Obviously, what everyone really wants to know is, is Groupon still bleeding money like a sieve? The financial data suggests that the second quarter was another explosive revenue success, but the company still lost as much as it did last quarter.
Groupon took in some $878 million in the second quarter, up from $644 in the first quarter, for a total of more than $1.5 billion for the first half of the year—which means that Groupon is well on its way to making at least $3 billion in revenue in 2011. By comparison, Groupon made $713 million in revenue for the entire year of 2010—so not too shabby.
The company lost another $103 million in the second quarter—after losing $102 million in the first quarter. So while Groupon has made $1.5 billion in revenue so far, it has suffered a loss of $205 million in the first six months of 2011.
Interestingly, while it lost more money this quarter than last quarter, it actually spent less on marketing this go around. In the first quarter, Groupon spent $208 million on marketing, but in the second quarter, the company spent about $170 million.
The extra spending in Q2 likely comes from hiring some 2,500 new employees. As of Q1 2011, Groupon had a headcount of 7,107, but as of Q2, the company had 9,625 employees.
Groupon has also grown its subscriber base from 83.1 million in the first quarter to 115.7 million in the second quarter.
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