HEY, GROUPON HATERS, analyse THIS: Groupon Breaks Even In Q3

Andrew MasonThe Rodney Dangerfield of CEOs.

For the past six months, just about every pundit in the world has piled on Groupon, denouncing it as a crappy, fraudulent Ponzi scheme that will ultimately collapse in a heap.At the heart of this collective dismissal has been the conviction that Groupon will “never make money.”

Well, those self-assured pundits will be a bit quieter this morning.

Groupon just reported its Q3 results.

Here are some highlights:

“Gross billings” growth (formerly Groupon’s “revenue”) was very strong, rising 24% sequentially to nearly $1.2 billion for the quarter.

“Revenue” growth was also solid, albeit distinctly slower than gross billings as a result of revenue mix (Groupon has launched several new, lower-margin products that took “shelf-space” away from the higher margin core local products).  Revenue grew 9% sequentially to $430 million.

“Cumulative Customers” continued to grow rapidly, hitting 29.5 million, despite marketing spending dropping significantly.

“Marketing” spending dropped significantly sequentially, as Groupon cut back on its biggest expense — the one that everyone assured everyone else made it a “Ponzi” scheme.

“Free cash flow” increased to $60 million for the quarter, as Groupon continued to collect cash well in advance of having to pay its merchant partners.

And here’s the kicker:

Groupon basically broke even.

That’s right:

The company’s operating loss shrank from $101 million last quarter to $239,000 this quarter.

This suggests the company will soon be nicely profitable.

(The bottom line did benefit from some one-time gains, but the operating profits are also getting closer to break-even, especially when you exclude stock-based compensation. Excluding stock-based comp, adjusted operating losses were $2 million versus $60 million in Q2.)

So, analyse that, Groupon sceptics! Still think the company is going bust?

(We’ll have more analysis and full charts later this morning.)


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