Sometimes companies that are not profitable try to convince you that they are. They will try to tell you that they just had a one-time large expense, or they have invested heavily in their infrastructure and aren't seeing the returns yet, or customers are slow to pay but will pay eventually. They will take their computed "earnings" (another word for profit) and adjust them for various factors. When you see the word 'adjusted' in front of 'earnings', it's a good time to be suspicious. These adjustments invariably depend on optimistic assumptions. In the dotcom era (God bless it), companies were always explaining away their poor income, by saying things like 'we are counting eyeballs (users) not revenue right now'. Today, Groupon is asking investors to look at Adjusted Consolidated Operating Income (ACOI). That's a mouthful. What is it? It's income before subtracting the marketing expenses to acquire new users, which is about 33% of all expenses. Huh? It could make sense if these are significant expenses incurred today to acquire subscribers (the companies who offer the coupons) who will continue to use Groupon's services for the future. If you are optimistic that the subscribers will continue to offer those coupons, then go ahead and believe in the ACOI. Me, I like cash.
Of course, some of the companies in the dotcom era that spent tons of money to acquire new customers did eventually end up owning their markets, like Amazon. The hard part is separating them from the pets.com fiascoes.
Someone termed these manipulations as Earnings Before the Bad Stuff. I call it the triumph of hope over experience.
