New Groupon Filing: ACSOI Dumped, Revenue and Subs Up, Losses Remain
As All Things Digital reported last week, Groupon filed an amended S-1 IPO offering this morning, in which it deemphasized a controversial accounting method.
Instead of a metric called ACSOI, or adjusted consolidated segment operating income, the Chicago-based social buying company noted that gross profit was the “important indicator for our business, because it is a reflection of the value of our services to our merchants.”
But the dreaded ACSOI — which leaves out important costs of marketing — is not completely gone. In its filing, Groupon said it would use it internally, noting:
We exclude those costs because, unlike our other marketing expenses, they are an up-front investment to acquire new subscribers that we expect to end when this period of rapid expansion in our subscriber base concludes. While we track this management metric internally to gauge our performance, we encourage you to base your decision on whatever metrics make you comfortable.
In other words, for the love of Pete, please ignore ACSOI completely.
Groupon also included new financials in its filing for the quarter, with a 36 percent increase in revenue to $878 million from the previous quarter and double a year ago. But its loss was $102.7 million, compared to a loss of $35.9 million a year ago.
The company also reported that its subscribers grew from 10.4 million last year to 115.7 million now.
Costs are also lower by eight percent in the new quarter, with Groupon spending $165.2 on marketing to new subscribers, compared to $179.9 million in the previous one.
The filing with the Securities and Exchange Commission is a critical one for Groupon, whose public offering has been mired in questions about how it accounts for its financial performance.
Of particular concern: ACSOI, which is a number that does not include important costs, such as critical online marketing expenses to attract new customers to Groupon.
Such accounting is called non-GAAP (generally accepted accounting principles).
In 2010, Groupon reported that it lost $413.4 million using standard accounting practices. When it excludes some costs from its calculations using ACSOI — including online marketing expenses to attract new customers — it recorded a profit of $60.6 million in 2010.
The new results were stronger, to be sure. Such growth is important, especially given investor scrutiny of Groupon in the current economic turmoil.
As I wrote last week:
And, indeed, questions from the media, investors and, most importantly, the Securities and Exchange Commission about how Groupon accounts for its revenue and profits using ACSOI were swift and decidedly negative.
Hence, a furious debate — along with much internal tension — within Groupon about what to do. At first, in another S-1 amendment, the company backed away from using ACSOI as a “valuation metric.”
But that was apparently not enough for the SEC or anyone else, so Groupon’s top managers finally thought it best to rid itself of the term entirely.
Presumably, with a cleaner S-1, Groupon can concentrate on a whole new set of issues around its IPO, such as the tumultuous state of the markets.