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Groupon, the struggling Chicago-based online marketplace that built its business model on short-term daily deals, may be running out of time itself.
Now under the leadership of a Czech investor, Groupon issued a “going concern” warning during a tepid first quarter earnings report this week, signaling the company could be insolvent within a year.
“We recognize that turning our business around is going to be tough and that it won’t happen overnight,” interim CEO Dusan Senkypl told investors during the earnings call Wednesday.
Groupon also disclosed it was terminating the lease at its massive River North headquarters next January — two years early.
The onetime Chicago tech unicorn, which has been downsizing and retooling amid declining revenues, had a net loss of $29 million in the first quarter and about $164 million in cash left as of March 31, according to a filing with the Securities and Exchange Commission.
Last year, Groupon used up $136 million for operating activities, meaning belt-tightening and revenue-generating measures will have to take hold soon to keep the online marketplace known for discounts on laser hair removal, kickboxing classes, doughnuts and other deals open for business.
“Continued cash outflows and operating losses indicate that we may not be able to meet our obligations over the next twelve months,” the company said in its quarterly report.
In March, Senkypl, a Czech investor and Groupon’s largest shareholder, replaced Kedar Deshpande and took over as interim CEO at Groupon. Senkypl, who built a 22% stake in the company, entered into a standstill agreement as part of his appointment, capping his stake at 25% for one year.
Groupon, which has been losing money for years, was engaged in a “transformation strategy” under Deshpande, the former CEO of Zappos, who took the helm in December 2021. The plan focused on reducing costs through downsizing, with two rounds of layoffs eliminating a total of 1,000 positions.
The company had 2,904 employees worldwide, including 799 in the U.S., at the end of 2022, according to SEC filings. Another 700 employees were laid off during the first quarter.
Senkypl outlined the eight-point transformation strategy during the earnings call, and in a letter to shareholders. The goal is to follow the path of a Groupon clone in the Czech Republic which successfully transformed from a “daily-deal discount flash site to a destination experience marketplace,” he said in the letter.
Topping the to-do list is fixing the supply-side of the marketplace by attracting and retaining local merchants with more flexible online offerings. The process of transitioning merchants away from the heavily discounted daily deals format will take at least 12 months, Senkypl said.