Sorry, mate! Dan Frommer, Business Insider Groupon, for the first time ever, made a real profit. It also turned in an income statement today that looks like it came from a grown-up company. On revenues of $568 million, up 45 percent, Groupon made an operating profit of $47 million and net income—following $57 million in interest income—of $32 million.

So now I owe CEO Andrew Mason an apology. Here it is: You were right, I was wrong.

Since June 2011—when it presented an entirely fictional way of making a profit—I have bashed the company's accounts. In July 2011 I called it a Ponzi scheme due to the way it fended off net losses by delaying payments to its merchants.

Groupon has always lost money until now, but it has stayed in business because it is able to harvest cash payments from customers immediately and wait a month or more before remitting the merchants' share to the cupcake makers and yoga studios who use Groupon to advertise their deals.

More recently, I noted that Groupon was coming to grips with its operating expenses. I said:

It is not clear whether Groupon is trending toward permanent profitability, or whether that trend will emerge before the company experiences its first decline in revenues, which would threaten its precarious cashflow position.

With the Q2 numbers in, I am now forced to admit that Groupon does appear to be trending toward permanent profitability. Here's the chart:

Groupon

Groupon's revenues, the red line, are still rising; and its expenses, the green line have pretty much plateaued at about $500 million per quarter.

The company achieved this largely by slashing its marketing costs, which Mason promised he would do.

Bravo, Mr. Mason. You did what you said you would, and it worked.

Danger ahead

Groupon isn't out of the woods yet, however. It actually saw a sequential decline in billings—the total amount it takes from customers before remitting the merchant's portion—from $1.35 billion in Q1 to $1.29 billion in Q2.

That means the top line of Groupon's business is actually getting smaller, which is why it was so crucial for Mason to get his operations in order. Groupon can survive a downturn in business if Mason can manage his margins; it won't, in the long run, if it simply burns cash whenever it has a down quarter.

This chart shows that revenue growth has also come to a virtual standstill:

Groupon

The days of easy growth at Groupon appear to be over. Which is probably one of the reasons why GRPN fell 14% after the results came out.



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