Amazon’s 10-k Filing Includes a 2011 Loss of $558 Million for LivingSocial

Expansion is expensive

It was only a matter of time before one of the main players in the daily dealing industry proved that Groupon wasn’t the only company capable of loosing a ton of money. Amazon reported its 10-k numbers on Wednesday and included in those numbers were the 2011 financials for the number two daily dealer, LivingSocial.

Amazon.com reported the numbers because it owns 31 percent of LivingSocial. This is really the first glimpse into less than three year still privately held company. As it turns out, and has certainly been proven by Groupon, it is expensive to expand. Here is a condensed statement of operations for LivingSocial in 2011:

• Revenue: $245 million
• Operating expense: $686 million
• Other expense: $117 million
• Net Loss: $558 million

Amazon, which originally invested $175 million in LivingSocial in 2010, says the book value of its 31 percent interest in the company was $208 million as of Dec. 31. That was up from a $192 million book value as of Sept. 30, when Amazon put its stake at 32 percent.

Yes but

Yes, it’s true the net losses were huge but the company grew from 600 to almost 5000 over the course of the year. Yes, it’s also true that revenues stated were $245 million but that number doesn’t include company’s full international results for the year, which were boosted in part by a series of overseas acquisitions. LivingSocial notes that a majority of the marketing expenses were concentrated at the beginning of 2011 as the company sought to increase market share. They, like Groupon, have pared down their marketing expenses as the year progressed.

Here’s the Living Social balance sheet as of Dec. 31, as shown in the Amazon filing.

• Current assets: $156 million
• Noncurrent assets: $285 million
• Current liabilities: $225 million
• Noncurrent liabilities: $21 million
• Mandatorily redeemable stock: $199 million

Amazon was among the investors in a year end finance round with LivingSocial. Investment banker JP Morgan and Lightspeed Ventures were also involved allowing the daily dealing company to hold off on an IPO, at least for the time being.

Mark your calendars for February 8^th – Groupon will be reporting its first quarterly report since going public.

 Source: The Washington Post