Windward 的 Marc Chalfin 与 Jay Upadhyay 详述 Groupon $GRPN 的全面改造与新愿景

Marc, Jay, how’s it going?

Hey, guys. Thank you so much. It’s a pleasure to be on, and I’m looking forward to talking.

The name we’re talking about today is Groupon, ticker GRPN. I’m sure a lot of people know Groupon, though if you haven’t looked at it in the past 18 months, I think the story is a lot different than you might expect. I’ll pause there and toss it over to you guys: What is Groupon, and why is it so interesting right now?

Great, thank you. I’ll try to keep it somewhat brief and use most of the time for Q&A. Very simply, Groupon is a lead-generation tool for local-service businesses. It was born out of the global financial crisis and was a very fast-growing business. I believe it was the fastest-growing business in North America at that time.

The business morphed a little bit from a deal-of-the-day business at that time to more of a discount mechanism for local-service businesses, using its scale and the tens of millions of customers who come to the site. Think of nail salons, beauty parlors, massage businesses, restaurants, and things of that nature.

The high-level way that it works is this: Let’s use a haircut as an example. If a haircut is $100, the barber will discount the haircut, let’s say by 50%, and offer it at $50 as a way to draw new traffic into his or her business. Groupon will take a very attractive vig, somewhere around a third.

It’s a very high-margin, negative-working-capital business. Pre-COVID, it had extremely steady gross profit, which is one of the reasons why we like it, despite it being a melting ice cube and a permanent short for a lot of people. The gross-profit dollars were running at about $1.25 billion per year from 2015 to 2019, pretty steadily, despite the top-line headwinds.

That’s a little bit of brief background on what they do. Do you want me to get into the thesis now, or would you like to ask a couple of quick questions?

No, look, I guess I should note, as an extra disclaimer for people, that this is a public filing: You guys own almost 6% of the company, or 2.2 million shares. People talk about page-one holders, and you guys are top-five holders here. Obviously, you’ve done a lot of work, and you’re quite involved.

If we fast-forward to the story today, a new management team comes in—I think it’s Pale Fire Capital—and they install the guy who did Groupon as the CEO. There’s a huge overhaul. Why don’t we talk about the overhaul and the vision going forward, and why you guys think now is such an opportunity?

Absolutely. Just a quick 20 seconds on what we do and why this makes sense for us: The name of the firm is Windward. We’re all about headwinds, turning them into tailwinds, capturing changing winds. All we look for is a minimum 5-to-1 risk-reward—call it 100% upside and 20% downside as a base case. We have a 76% hit rate over 6 years doing this.

This is probably the most asymmetric and convex idea I’ve ever seen in my almost 25 years in the hedge-fund business. Going back to what I was saying before, one of the things that made this very interesting to us was that the gross-profit dollars were running at about $1.25 billion per year in 2015, 2016, 2017, 2018, and 2019.

There were some very serious macro headwinds that caused this business to unravel pretty quickly. COVID happened, and, clearly, service businesses shut down during COVID. The business was cut in half, roughly.

What’s interesting is that I’m sure a lot of people listening will remember that a lot of public companies really ripped coming out of COVID as COVID-recovery plays. People would say, “Okay, it was doing this in EBITDA, or this revenue or gross profit, and they would make some assumption about what percentage it would get back to.”

The mistake that people made on this name—and part of the brain damage some people had—is that in 2021, the stock ripped to $60 pretty quickly. It was one of these situations where people said, “The numbers haven’t inflected yet, but it’s a delayed-recovery story.” They were doing $200 million of EBITDA in 2019. The market thought they could get back to 80% of 2019’s gross-profit dollars, ascribed $150 million of EBITDA, put an 8 multiple on it, and the stock ripped to $60.

What people got wrong—and in hindsight it makes a lot of sense, but at the time I don’t think it was that apparent—is that, in many ways, coming out of COVID and stimulus, the cure was worse than the disease for Groupon. The reason was twofold.

First, you had a customer base that was massively demand-starved. People hadn’t gotten a haircut, hadn’t gotten a massage, and hadn’t gone to a restaurant in 18 months, depending on where they lived. Exacerbating the issue even more, in addition to being demand-starved, they were flushed with stimulus money.

You had a ton of cash, and people hadn’t gotten a haircut in God knows how long. On the service side, what was so perverse was that many service workers didn’t come back. You saw this in many industries—hotels, restaurants, travel, across the board.

Essentially, you had a massive base of local-service businesses that were short supply and long demand in the most inflationary pricing environment I’ve ever seen.

Can I add one more? I completely agree. You had a lot of legacy businesses that folded and new businesses that opened up. They were completely flush with demand.

By the way, this is a local business. Groupon literally has to have a salesperson go and grab these businesses, so they had their legacy customers going away and new customers opening up. The potential new customers were saying, “We don’t have time for this phone call. We’re flooded with demand.”

I thought that churn-and-customer issue was important. I think people missed it at the time as well, with the benefit of hindsight.

One hundred percent. There were other issues. Just tying that bow on it, if you think about a massage salon, you’ve got 10 masseuses, and Stephanie, Kim, and Tiffany don’t come back. What happens is that these salons are booked out for weeks at a time.

Just think about this: If you were the entrepreneur who owned a massage salon and had massive demand, you weren’t going to discount a $100 service to $50 and then pay Groupon a third on top of that. You were getting $35 when you could probably charge up to $110 or $120. It was a very perverse situation.

What happened, which became a micro issue for Groupon and further exacerbated its problems, was that it never cut its costs. It was a very fat-run company before COVID. When this happened, it never cut costs; it just assumed the business would come back.

What you had was another leg down in billings because of the reason we just discussed, elevated costs, and the fact that it’s a negative-working-capital business. You have to understand all 3 financial statements and how they work together.

Essentially, Groupon had payables due to merchants from a year before this happened. As the business declined, it owed those amounts at a higher rate than the current business was generating. In addition to EBITDA flipping negative, working capital hit them by about $300 million, and its cash balances drained massively.

Its cash balance, as I recall, was probably $400 million or $500 million. That went to below $100 million quickly because of the confluence of negative EBITDA, deleveraging, and working capital.

This matters because, under the prior management, they didn’t move their feet and push out their debt. They had a revolver that became current, tripped their covenants, and then became a going concern.

As you can imagine, being a going concern only makes the issues with potential customers worse. If you’re a service business or an enterprise customer—à la Costco, Jiffy Lube, or Starbucks, with whom they’re in beta right now—you don’t want to do business with a company that might go bankrupt. That further compounded the issue.

Interestingly, that’s when we got interested in the name. We started accumulating the stock just under $3. About 12 or 18 months prior, Pale Fire Capital had filed the 13D and reached a settlement agreement with the company. Dusan Senkypl, the CEO, got on the board, and his partner, Jan Barta, got on the board as well.

We started to do a little bit of work on them, and the more work we did, the more bullish we got about the opportunity. I reached out to Jan on LinkedIn, and he sent along a prior deck about what they did at Slevomat. I looked at it and thought, “This is a team.”

By the way, these guys are billionaires. That’s what’s so interesting about this setup. They’re billionaires who have turned around multiple e-commerce assets in Europe. Just because they’re not American, people don’t give them credit.

They came here and took a 22% stake at $1.90. Dusan, as CIO, stepped down from a multibillion-dollar fund—most of which was his money—to become the CEO of Groupon, which at the time was a $100 million market-cap company. He took no salary, just equity upside.

To me, that’s very interesting. People can read the equity upside in the stock-price incentives: PSUs at $14.86, $20.14, $31.01, and a top price of $82. The stock, as we’re talking, is at $11 or $12, so it needs to go up quite a bit for him to get paid on those.

I guess that sets the stage nicely. We’ve said Groupon was mismanaged, and I don’t think a lot of people would debate that. It was very mismanaged. They get a new management team, and Dusan comes in as the CEO.

The Groupon technology stack has been terrible. They talk about tech debt, and they rip everything out and replace it. We can talk about how I think the hope and expectation is that 2025 is the upside. We can talk about that, or I’ve got other questions on the business. We can opt into whatever you want.

Let me try to address all of them quickly, and then I’ll leave it open for you to dig wherever you want. We can go as deep into the weeds as you want.

These guys took $800 million of costs out. Let’s start with that. This was a company doing $1.25 billion of gross profit. Now they’re running shy of $500 million, and they took $800 million of costs out. You don’t need to do anything Herculean to get back to $200 million or $300 million of EBITDA.

There are a lot of tailwinds to that. We did hundreds of calls with former employees, including the former CTO, the former head of business development, salespeople, and people across the organization from top to bottom, as well as competitors.

What was very clear, first, was that this was such a horrifically run business that 80% of the inventory the salespeople put on the site was not inventory people wanted. The commission dollars paid to salespeople were higher than the gross profit from those deals, which is insane.

Second, the way they thought about ROI under the prior management was that for every dollar of marketing they spent, they needed to get back a dollar of gross profit. Under that regime, they thought about top-of-funnel marketing: “Let’s just get people to the site and have them do a treasure hunt and find something on Groupon.” The return for every dollar came back in 18 months.

Under the new management team, they’ve completely changed their marketing algorithm. They do it from a bottoms-up, analytical perspective. They say, “Andrew has a son, and they’re going to Virginia. We have a deal at Busch Gardens. Let’s target them.”

Their ROI has changed from a payback of 18 months for every dollar of marketing to 7 days. They ramped their marketing from the mid-20s percentage of gross profit to the mid-30s in June.

June is important, and I’m going to segue back to your question. The stock has been very volatile, and people love to hate it because of that volatility. But if we pull back and look at what has transpired, these guys have chopped a tremendous amount of wood.

They took $800 million of costs out. They revamped their marketing. They had a tech architecture with 100 different tech stacks—think of a cobbled-together set of Excel programs trying to talk to each other. It was so antiquated that they couldn’t even launch video on the site, and they couldn’t toggle between different languages. If you were a Spanish-speaking-only customer, you couldn’t toggle to Spanish. That TAM is huge.

They talked about it very lightly at the Northland meeting. It was a horrific site, and they needed to upgrade the front end, upgrade the back end, and migrate to the cloud. It’s something they’ve been doing for a while.

Most people don’t migrate to the cloud in public markets. It’s heavy lifting and is usually done in private markets. These guys look at themselves as owner-operators, for good or bad. They see a massive opportunity to get EBITDA well above $300 million and the stock well above $100, and they wanted to get the thing going.

If we look at what happened, there were a lot of green shoots. First, they grew North America Local for 3 quarters in a row. That hadn’t been done in 8 years. They grew active customers for the first time in 8 years, for 2 quarters in a row.

But they had 2 different issues that transpired last year. First, in March and April, they used a third party to integrate anti-fraud software. That was a hiccup that caused many customers to be unable to check out, even though they wanted to buy something on Groupon. They couldn’t actively check out of the site.

That set up easy comparisons. Keep that in the back of your head.

More importantly, starting in July, the business had actually begun to massively inflect in June, which is its busy things-to-do season—June, July, and August. You saw it in traffic and in credit-card data. They verified it. The business was probably running up double digits.

Unfortunately, as that happened, they could see the whites of their eyes. They ramped their marketing at the same time because they were saying, “Let’s step on the pedal. Our ROI has gone to 7 days, and we see a huge opportunity.”

Unfortunately, when they did that, they had a web-stability issue. When they migrated to the cloud, they weren’t able to effectively communicate with Google and their other search partners that drive their traffic. They couldn’t effectively attribute where the traffic was coming from or determine how to pay for the traffic.

That caused a major headwind to the business from July until now, frankly. An additional headwind that we’re just about to get through is that, perversely, when they upgraded their site, their SEO relevance on Google should have gone higher because it’s a much more searchable site, the product is better, and inventory is moving in the right direction.

But because it was a new site, Google rated them down in the short term. Instead of being, let’s say, number 6 on average—they thought they were going to get to number 4—they went to number 7 or 8.

On a good portion of their traffic, greater than a third, they’re facing a headwind that’s mitigating some of the positives they’re seeing in conversion, user engagement, and marketing. It’s obscuring a lot of the positive work they’ve done.

I don’t disagree. I’ve seen it at 10 Internet companies. Whenever you do a full site redesign like that, it’s not an unknown or uncommon explanation.

I laughed earlier when you said Windward is about looking at headwinds, because I knew where you were going. I think they said on one of their calls that the exact headwinds you were talking about flipped into a 1,500-basis-point headwind in a quarter, or something.

Let me pause here. I’ve got a lot of questions I want to ask, but I try to ask this question at the top. Everything you said is complex, but it’s also relatively well known. The CEO is out there saying it, and he was at Northland, as you said. This is a decently well-covered company.

My first question would be: The market is a competitive place, and yes, everyone hates on Groupon, but the story is known. What do you think you’re seeing that the market is missing right now that makes this an alpha opportunity?

To make money in the markets, you have to escape to where the puck is going, not where it is. Let’s start with the conservative guide they’ve given, and let’s start with the valuation.

It’s a $400 million market cap, roughly, depending on where the stock is. I think it’s maybe $450 million now. Pro forma for when they report Q4, they’ll have no net debt and will be very free-cash-flow generative in Q4.

You have this asset in SumUp, which I won’t spend that much time on. It’s a non-core asset they acquired in an early-stage funding round back in 2013 or 2014. We’ve done a lot of work on SumUp. They own just under 2%, and we think their stake is worth at least $125 million.

If you look at the $125 million from SumUp, which we think gets monetized any week now, and there’s actually been a Reuters article that Goldman Sachs is shopping a sizable slug of it worth about €400 million, which we think Groupon is probably part of, and the free cash flow they’ll generate this year, the stock is trading at a very low EBITDA multiple. That’s the setup before you get into massive EBITDA upside.

They’ll do roughly $70 million to $75 million of EBITDA this year. That’s despite the headwinds we just discussed—the web-stability issue and the anti-fraud issue. We’re very comfortable that those headwinds represent about $30 million of EBITDA. All else being equal, they did $100 million on a normalized basis.

If you believe, as we do, that they’re through many of these issues and will start to see the tailwinds and the fruits of their labor, we think you’re basing off $100 million of EBITDA at an absolute base case, assuming they don’t do anything else.

You’re talking about roughly 2 times EBITDA for a company with almost 50% short interest that will start to use the proceeds and cash flow to buy back stock. That’s the setup before you get into massive EBITDA upside.

Where we’re very interested is that you start to lap very easy comparisons starting in March. We think you could even start to see good numbers around Valentine’s Day. There’s been a lot of evidence that, in seasonal high periods like Halloween, traffic was up 50% year over year.

Christmas traffic, despite the headwinds on SEO and other issues, was running up low teens. North America Local was running up low single digits from Black Friday through Cyber Monday.

There’s a lot of evidence, if you search for it, that during the busy season these guys are executing despite the wind in their face. The point is that we think, if you skate to the puck and start to see billings accelerate—which we think will get louder and louder starting in February and March, and then into the things-to-do season in July and August, when they’re lapping major web-stability issues—there’s a tremendous amount of EBITDA leverage simply because it’s a fixed-cost business.

There’s still another $50 million of costs that could be taken out from the legacy cost architecture. Their only real incremental cost is marketing, and that has a high ROI.

There are a couple of ways to look at EBITDA. One is that they get back to 2023 and 2019 levels, which we think they can. Let’s just say they get back to two-thirds of 2019’s levels. You’re running $400 million of EBITDA.

Second, on user engagement, the average user uses the site about 2.4 or 2.5 times a year. When we’ve studied similar businesses, and when they’ve studied them, they believe that number should be closer to 5. Each additional user-engagement turn is $100 million of incremental gross profit.

They believe they can double their conversion through things like shortening the checkout experience from 12 steps to 9, adding alternative payments, adding video, and many other things. Those initiatives will take existing traffic and convert it at a higher rate.

God forbid they could grow traffic, which they’ve actually shown in many periods over the last 6 months that they can do during these high-intensity times.

I don’t disagree, but the thing that holds me back a little bit is inventory. I prepped for the podcast, and I’m sure everybody who’s interested in the idea is going to Groupon.

I go to Groupon, and I look at the inventory. I’m in New York City, which should be a really hot spot—Central Manhattan should be a pretty big hotspot for Groupon, I would imagine. I’m from suburban New Orleans, so that’s going to have less inventory than Midtown Manhattan, I would guess.

The inventory just isn’t that great. I have 2 questions. First, what do you think about the inventory? Second, I did the search this morning, and I started getting a lot of Groupon advertising this afternoon, which is exactly what you want to see.

But then I looked at it and thought, “They’re advertising a lot of restaurants. I’m on a diet, and now I’m hungry.” The first restaurant they hit me with was in Washington or outside Seattle. I haven’t been to Seattle in over 20 years.

The next one was a pizza place outside Chicago. I went to Chicago 3 years ago, and I might go over the summer. Then there was a German place an hour outside Miami. I went to Miami last month. Then there was a seafood place outside D.C., which is only a 5-hour train ride away.

The inventory seemed really bare, and when I was hit with the marketing, it didn’t seem very targeted. My pushback would be that all the numbers make sense. I agree with a lot of what you said. The website overall is improving. I heard from either another investor, or it might have been Dusan, that this was like doing open-heart surgery while the company was public. You’re seeing the open-heart surgery in real time.

I believe all of that, but then I look at the inventory and the marketing, and I’m saying, “It looks great in a spreadsheet, and it sounds awesome, but the inventory looks really rough.”

I actually take what you’re saying and look at it from the opposite lens. If they’re able to do what they’re doing with this inventory, what are they going to do when they get the inventory and all the other things you talked about moving in the right direction?

They’re drinking out of a fire hose and doing 100 different things at once. They acknowledge that their inventory is not where it needs to be. This is all moving in the right direction, and it will continue to get better.

When I went to Prague to meet with Dusan, he said, “Our inventory is not even 80% of where I want it to be.” It will start to get there over the course of 2025. I agree with you that better inventory will be a major driver of the business. I’d rather have that than amazing inventory and be told, “They already have great inventory, so how is the business going to grow?”

I think one thing that brings this full circle with the technology changes is that, on the prior Groupon tech stack, merchants could not deploy their own attribution tools. To get ROI reports, they had to interface with an actual person at Groupon.

With the new consolidated back-end architecture, Enterprise customers are now much more willing and able to work with Groupon to deploy their own tools. They recently deployed something with Starbucks, and they rolled out a SiteMinder integration in travel, so they’re pulling inventory from Expedia.

I would expect that, now that the back-end fix is in place, you start to see more front-end improvements with inventory as well.

I know this is a name that’s very popular in web scraping and web traffic, and there’s something to that. Is there a way to track enterprise and business inventory being deployed on Groupon that you guys are following?

I’ll take it, although Jay is more tech-savvy than I am. We use Similarweb and credit-card data. I’m not aware of a way to track changing inventory on a micro level other than being an animal and going to the site every day, which I do anyway.

Some of those experiences are mixed. You’re excited because they have Starbucks one day, and then the next day you’re asking, “Where did Starbucks go?” At 3 o’clock in the morning, you can go down a rabbit hole and look at the travel deals that are up on the site.

The issue with this stock is that it trades as a vehicle for alternative data, and the alternative data isn’t good on it. I’ll give you a perfect example. People look at Similarweb traffic data, but as much as a third of the traffic—especially in non-peak periods, as verified by the former CTO—is driven by people casually searching for goods.

They have a goods business and a local-service business. The goods business has zero EBITDA; it’s not even EBITDA-positive. I don’t care if the goods business is down. Frankly, it’s been running down 40% or 50%, which they confirm.

If your goods business is running down 40% or 50% and that represents your traffic, it’s a 12-point headwind on traffic. Furthermore, they’re getting a lot of conversion benefit that creates a nice spread against the traffic.

That’s another way where there’s variant perception. People are looking at basic alternative data that isn’t accurate, so we see a lot of opportunity in the short term.

I’ll name 4 or 5 catalysts. First, SEO is about to inflect, literally in the next few days or weeks. It’s a 60-day process. They had to go through tens of thousands of landing pages and redistribute them to Google to get Google to rerun its algorithm and restore their normal search position.

Second, you have a potential monetization of SumUp. Third, you have better inventory, which is moving in the right direction. Fourth, you’re going to have buybacks starting to kick in over the next 3 to 6 months.

Fifth, their guidance is a joke. They gave this guidance based on a convertible offering because they felt they had to give conservative guidance to their debt holders. They know they’re going to do at least $100 million of EBITDA.

Their initial guide this year was $100 million, and we were headed that way. If they hadn’t had the idio issues they have now, they would have been there. Is it possible there are other EBITDA issues this year? Sure, that can happen. But aside from that, we think they could crush $100 million of EBITDA and generate more than $75 million of free cash flow this year.

You mentioned SumUp. I remember that, 3 years ago, it was a very popular thesis. People were talking about it being worth more than the entire enterprise value.

You mentioned that they’re going to sell it for $15 million. In November 2023, they sold 10% of their stake at a price that implied about $90 million for the full thing. On the Q3 call, they said they were going to sell SumUp and Giftcloud, and that investors should expect $90 million of proceeds from the non-core assets. That includes Giftcloud, right?

That’s right.

You said $125 million for SumUp. Obviously, they could have been conservative in the past, but where are you coming up with the $125 million number?

Let’s start with their disclosure. When they disclosed this, they were a going concern and were lawyered up. At that time, those assets were under a lot of pressure. If you look back at the payments assets, especially in Europe, they were trading at much lower valuations than they are now.

You also have to skate forward on SumUp’s EBITDA growth and what they’ve done. I think they’ve grown gross profit by more than 50%, and they’re putting up pretty monstrous EBITDA numbers.

The most important point is that there was a Reuters article that talked about SumUp being shopped by Goldman Sachs at a valuation north of $8 billion. We don’t know anything we’re not supposed to know, clearly. We’ve done as much work as we can speaking to people who know the space.

I don’t think $125 million is a big number. I’d be shocked if it were $150 million, frankly.

I think that covers it. I’d love to ask about base rates, because I think there are 2 base rates to consider here.

The first is that, as a relatively unsophisticated domestic investor, I look at legacy consumer-tech platform turnarounds, and the history is really poor. TripAdvisor is a company where a lot of value investors have gotten their faces ripped off over the years. It’s allegedly for sale now. We’ll see. It was for sale 6 months ago, and it was for sale 6 years ago.

QV, which rhymes with QVC, Yelp, and all of these legacy platforms have really struggled. People keep throwing time and money into them, and they never turn around.

The second base rate, which I think is more interesting here, is the Groupon CEO and team who have done this before in Eastern European markets. I’d love to talk a little about both of those base rates, especially the Eastern European markets, because I think we do the story a disservice if we don’t mention that these guys invested a lot of money and became billionaires by running this playbook.

You have to look at both sides. I guess the reason we’re comfortable is that it all goes back to Windward: headwinds to tailwinds. If they weren’t under-earning as much as they are—and if this were at 85% of 2019 levels and it was just a question of whether it was a melting ice cube—we wouldn’t be there.

It’s because it’s so spring-coiled down to a third or less of where it was. This was a piece-of-crap melting ice cube in 2016, 2017, 2018, and 2019, but it did $1.25 billion of gross profit in each of those years.

Maybe it’s logic, maybe it’s critical thinking, and maybe it’s pattern recognition, but it’s very clear to me, based on the work we’ve done, that there’s so much low-hanging fruit. It could come from better inventory, incentivizing salespeople the right way, better marketing ROI, better SEO, and having an adult in the room in Dusan versus Kedar Deshpande, the former CEO. My head was spinning after I spoke to Kedar, and I had no interest in owning Groupon at that time.

I also haven’t talked about gifting. At Slevomat, they got gifting to be half their business in Q4. They’re just launching gifting now, and they’re very excited about what they’re seeing. Gifting alone could be $200 million of incremental gross profit.

You have so many call options. That’s an integral part of our playbook. We make a bet on a fundamental inflection, but we like having many ways to win.

Whether it’s through user engagement, conversion, growing traffic, monetizing SumUp and buying back stock, or an international turnaround, there are many paths. International has very easy comparisons and is going to start comping positively. It has already started comping positively, excluding Italy, and it will start comping positively off a very low base.

We think there are so many different ways to win by betting behind a guy who’s a winner, is incentivized, and has no salary. What’s the downside? How many e-commerce assets have you looked at that trade below 2 times EBITDA and generate a 10% free-cash-flow yield or more?

Let me ask one last question. I knew bulls at the start of last year who thought the open-heart surgery might not have been finished, but that the surgeon had put away the tools and was starting to close the chest back up. They thought it was done by the back half of the year.

The back half of the year disproved that for a lot of different reasons. In Q2, they said they had a good start to the season. Then, when they reported Q3, they said that as soon as the season started well, they had a massive reversal, and the tailwinds became headwinds because of the website stability issue.

I guess the question I want to ask is: It’s very cheap, and it seems like it has turned around. When would you know to eject? One of the issues I’ve had is that I find a turnaround, buy it, and keep seeing all the call options and all the traffic indicators, but it keeps missing and missing and missing.

Is this the year? Would it be the next 6 months? If web traffic is missing, is it never going to happen for Groupon? Obviously, you can change your mind and everything can change, but when would you say the thesis is broken?

I’ll give you my view. I wouldn’t say the next 3 months, because they’re still lapping some idio stuff. The cohort—which we haven’t talked about—was affected when they logged out some users as they shifted the site, so they’re up against that cohort through June.

I would say that if we’re not seeing a material rerating from July through December, we’re probably wrong. This is just another mistake, which also means we’re wrong. You can’t keep having issues in the technology.

I would say the end of summer. By that point, you’ll have a couple of important signposts, including Valentine’s Day and Mother’s Day. June through August is the busiest things-to-do period, with water parks and similar activities.

At that point, if web traffic is still declining at a high-single-digit rate or worse and they’re not growing North America local billings, either another technology issue has happened or the business is at a point where it’s too difficult to bring back growth, despite the fact that they’ve stepped up marketing spend by 700 basis points.

I think at that point it becomes one of these perpetual melting-ice-cube stories.

The only correction I’d make is that I wouldn’t use June, because June was growing double digits last year. They’ll be comping against a business that was firing on all cylinders. I’d be looking at July through December.

I was just looking through our notes. Some of the things you mentioned are crazy. They said that when you bought a Groupon, it wasn’t active for 24 hours, or maybe it was even longer than that. That’s about the worst customer experience I can think of.

The use case for Groupon is that I have nothing to do this Saturday afternoon, so I’ll go buy something. If I have an hour for a massage, I’ll go get a discounted massage. If I can’t use the Groupon within 24 hours, that’s about as bad a customer experience as a tech company can have.

We just think there are tremendous tailwinds. Once the business gets to 75% or 80% of where it was in 2019, it becomes a harder question: Is this actually a growth business? It very well might be, but we feel very confident that it will normalize to some realistic percentage of where it was in 2019.

There’s no real competitor doing what they do. I would argue that the macro headwinds-to-tailwinds shift is as good as it gets. We could be going into a recession in the next year or so, and you want to own a business that’s recession-proof. This does better in that type of environment.

It’s coming out of a period that was the worst macro backdrop you could ever imagine for Groupon. It doesn’t take a lot of imagination to understand that a better macro backdrop, with an adult supervising the business and making some very basic decisions to improve it, should at least double EBITDA.

I see a very, very remote chance that these guys can’t do $200 million of EBITDA.

I think we hit almost all of the things I had. It’s a pretty comprehensive overview. A lot of people know Groupon, but they probably need to take another look. Most people are probably thinking of the Groupon of 2018, not the Groupon whose story has changed this much.

The only other thing I’ll say is that I know Jay has a train to catch, so I’ll leave it to you guys. Is there anything else you think we should hit, or that listeners should walk away with?

The only thing I would say is that the upside here is explosive. This is the type of stock where, when things start to move, they move. It’s not a situation where you can say, “I’ll wait for the data to turn and then I’ll buy it.”

Look at the chart. The thing rips $67 in a week when it starts to improve. If we’re correct in our assumptions, the stock could be at $20 very quickly.