I'll start by tipping my hat to Andrew Mason. He caught social mood just right, creating a coupon/local/flashmob hybrid business model at the perfect time, and has created the fastest-growing company on a revenue basis in American history. That being said, it's operating like a Ponzi scheme that needs constant infusions of cash to stay afloat as it's hemorrhaging money.

We'll start by looking at the balance sheet, which is typically a waste of time for hypergrowth companies. However, for Groupon there are all kinds of red flags. They have $290 million in current assets ($208 million in cash) and $520 million in current liabilities -- current assets minus current liabilities puts them $230 million in the hole. This wouldn't be a problem except for the fact that they're wildly unprofitable, which we'll get to in a moment. Another concerning part of their current liabilities is that $290 million of it is "accrued merchant payables" -- in the US they take up to 60 days to repay merchants. So that $290 million is merchants who have rendered services waiting to get repaid by Groupon. Not exactly the best merchant experience. Oh, and by comparison, LinkedIn (LNKD) has current assets well in excess of current liabilities, and isn't losing money. (Also read The Groupon Rollercoaster: Investors Must Prepare for a Bumpy Ride.)

The income statement is even worse. In Q1 of last year they had net income of $8.5 million on $44.2 million in revenue, for a profit margin of nearly 20%. Not bad! At some point around that time, they decided to abandon a profitable growth strategy and went for the hypergrowth revenue strategy. For the remainder of the year they had $669 million in revenue (simply staggering), but had a net loss attributable to Groupon of $398 million. This year, Q1 results showed revenue growth continuing to soar, with revenues of $644 million, but a net loss attributable to Groupon of $102 million.

They lost $49 million in Q3, $313 million in Q4, and $102 million in Q1, with revenue leaping from $185 million to $396 million to $644 million, so it's incredibly difficult to have any idea what Q2 will look like let alone what the business will look like 6-12 months from now. That being said, the most likely reason why they're going public now is because they desperately need the cash, plain and simple.

There are all kinds of questions about the business. How can they possibly sustain this kind of revenue growth? Can they get costs under control? What about merchant and customer fatigue? How about deep-pocketed and savvy competition, either doing exactly what they're doing (LivingSocial) or coming to the table with a ton of customer data, i.e., Facebook and Google (GOOG)? The Daily Deal I got offered today was for a restaurant 30 miles away: how does that make sense either for the customer or merchant? How can you possible build a sustainable business by going from 0 to 8,000 employees in two years? Why did the COO and CTO both leave the company in late March, barely two months ago? How do you value a business that could do $3 billion in revenue this year but might not be able to keep the lights on in 12 months?

Most concerning of all, however, might be how their most recent capital raises have been handled. Their Series F and G capital raises, which occurred in April and December of 2010, raised a combined $1.08 billion. Of that $1.08 billion, $150 million went to the company for working capital purposes. The other $930 million? Paid back to founders and early backers by buying their shares from them. (For related content, see Groupon and Its Carbon Footprint.)

So a company that owes $230 million more than it has, and appears to be burning through $100 million or more a quarter, is using money raised from later investors to pay back early investors? Sounds vaguely familiar. I'm not accusing Groupon of doing anything illegal or unethical. Ponzi, Enron, and Madoff all swindled their investors by misleading them about the financial health of their enterprises. As Minyanville's Todd Harrison likes to say, "The only difference between intervention and manipulation is communication." Groupon is telling you exactly what they are in their filing forms and by their actions. Invest at your own risk.

Groupon (NASDAQ:GRPN): Q1 EPS of -$0.01 beats by $0.01.
Revenue of $731.97M (-2.4% Y/Y) beats by $13.61M.
Shares +2.9%.

Here are the important figures, per Groupon's earnings release:

• Net loss of $51.7 million, or $0.01 per share versus loss of $0.02 per share expected
• Revenues of $756 million versus revenues of $711 million expected

Groupon also says in that release that it added one million new customers in the last quarter, more than any quarter in the last two year

Groupon Buys Rival LivingSocial, Reports Another Loss

Oct. 26, 2016

Groupon Inc. agreed to buy fellow daily-deals provider LivingSocial, uniting two top names in a once hot-sector that fell out favor with both investors and shoppers.

Groupon declined to disclose the deal value but said the price wasn’t material. The transaction marks a quiet exit for LivingSocial, which was partly owned by Amazon.com Inc. and was worth more than $1 billion before its business cooled.

The acquisition will add about 1 million active customers, a relatively small number for a company that added 1.2 million North American customers on its own in the third quarter, ending the period with 29.1 million users.

Amazon invested at least $200 million in LivingSocial and once valued the online coupon service at more than $1 billion, but that slipped to $242 million at the end of 2014. LivingSocial, which is based in Washington, D.C., has gone through several rounds of layoffs in recent years. Amazon later stopped investing in the business and said a year ago that it would close down its own competing coupon unit called Amazon Local.

After going public at a $16 billion valuation, Groupon now sports a market value of $3 billion.

Groupon shares drop on Q1 revenue miss, shutters businesses in 11 more markets

Groupon — the once-dominant daily deals business that has more recently tried to shift to other kinds of local commerce — today reported first-quarter earnings that pointed to a company still in transition — or struggling to turn itself around more successfully, depending on how you look at it.

Dragged down by a 5.5 percent decline in its core market of North America, Groupon’s revenues came in at $673.6 million, with non-GAAP earnings per share at $0.01. This was a mixed result: analysts had expected sales of $724.4 million, a big miss for Groupon. EPS fared much better: average predictions were for a loss per share of -$0.01.

Those basic numbers had a pretty hard hit on the company’s share price, which was down 13 percent in pre-market trading and now down by as much as 17.5% in active trading to $3.31 per share.

It’s a big contrast to last quarter’s results, which sent the company’s stock up 24 percent.

Adjusted EBITDA, another metric that Groupon uses to measure its profitability, was up 42 percent year-on-year to $44.8 million, beating analyst consensus of $37 million.

Today, Groupon announced that it had reached its goal of cutting down its operations to 15 markets in total, exiting 11 in the last quarter alone. At its peak, the company had local Groupon operations in nearly 50 countries.

(Interestingly, some businesses that Groupon has exited appear to be faring better as independents. Ticket Monster in Korea just last week raised $115 million on a $1.4 billion valuation.)

Gross profit in the company’s remaining international business was down by 15 percent to $88.5 million as the company “experienced some execution challenges and short-term disruption from our country exits.” The company now has 16.7 million international active customers.

The question is what investors’ appetite will be for whatever comes next at Groupon. There are some signs that there is a method to its madness, so to speak. The company says that its decline in its revenues in North America, which were $473 million, was down to the company shifting its focus from Goods to Local services, a push in part bolstered by its acquisition of LivingSocial last year.

Goods not only is a smaller-margin business, but it’s been in decline, down 12 percent in revenues.

There are now 31.6 million active customers in North America, after Groupon added 500,000 this past quarter. Globally the company has 48.3 million active customers.

Groupon revenue falls, misses expectations

Published: Nov 7, 2018 7:41 a.m. ET

Groupon Inc. reported third-quarter net income of $44.6 million, or 8 cents per share, after income of $59,000, or breakeven, last year. Adjusted EPS was 4 cents. Revenue totaled $592.9 million, down from $634.5 million last year. The FactSet consensus was for EPS of 3 cents and sales of $602.0 million.

Global units sold fell 11% to 39.5 million, which the company attributed to lower traffic and its focus on long-term gross profit, "which resulted in fewer units." In North America, the decline was 17%.

Groupon Shares Slump After Q4 Earnings Miss, Flat 2019 Profit Guidance

Feb 13, 2019

Groupon Inc. shares traded sharply lower Wednesday after the online marketplace posted weaker-than-expected fourth quarter earnings, including three consecutive years of revenue declines, and forecast flat profit guidance for 2019.

Groupon said non-GAAP earnings for the three months ending in December came in at 10 cents per share, up nearly 43% from the same period last year but 3 cents shy of the Street consensus forecast. Group revenues, Groupon said, fell 8% to $799.9 million, the twelfth consecutive quarterly decline amid declining customer traffic.

Groupon said it sees operating earnings in the region of $270 million for 2019, essentially flat to the $268.8 million tally recorded last year.