Revenue growth has stopped at Groupon. And, for a second straight quarter, billings from merchants declined.
The company is only profitable because it swung an ax at its marketing costs in Q3 2012 — resulting in a bunch of layoffs.
In fact, Groupon has reduced its salesforce headcount by 648 positions in the last six months, its SEC disclosures show.
In short, Groupon is finally facing the nightmare scenario long predicted by observers of its finances, who note that it only survives on the cushion of cash it got from its IPO and by delaying payments to its merchants. Groupon is still cashflow positive from its operations — but the scale of that cashflow shrunk from about $64 million in Q2 2012 to $42 million in Q3.
We noted in Q2 that parts of the company were in decline, and that decline appears to be steepening.
The good news is that Groupon is still profitable and is certainly not in any existential danger. However, the company is testing the limits of its business model and it must, in the long run, change.
Revenue growth came to a halt. CEO Andrew Mason blamed it on the international market. "Our solid performance in North America was offset by continued challenges in Europe." It's true that U.S. sales are still growing but ...
... that's irrelevant when you look at the company's overall growth rate. Growth at Groupon has stopped. It's been treading water for six straight months now.
Here's what that looks like when you compare Groupon's revenues with its operating expenses. Clearly, the company is only profitable because it's cutting, not growing.
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