Yet Another Value Podcast - Windward's Marc Chalfin and Jay Upadhyay describes the overhaul and new vision at Groupon $GRPN

Episode Date: February 13, 2025

Marc Chalfin, CIO, Founder & Portfolio Manager, and Jay Upadhyay, Senior Research Analyst, at Windward Management LP, join the podcast to share their thesis on Groupon (NASDAQ: GRPN).For more information about Windward Management LP, please visit:https://www.windwardmg.com/Chapters:[0:00] Introduction + Episode sponsor: Daloopa[1:16] What is Groupon $GRPN and why is it so interesting right now to Marc and Jay[3:24] $GRPN overhaul, why now is interesting and Windward's thesis[11:49] $GRPN set up[18:26] What is Marc and Jay seeing with $GRPN that the market is missing[24:33] Inventory and Technology[31:48] SumUp / BaseRate[37:37] Final thoughts: web traffic, understanding the tailwindsToday's sponsor: DaloopaEarnings season is hectic—there’s no way around it. But what if you could take back the time you spend on manual model updates? With Daloopa, you can.Daloopa automates your audit and update process, instantly pulling accurate, fundamental data from filings and reports directly into your models. That means no more wasting hours on repetitive tasks. Instead, you can focus on analyzing trends, refining strategies, and staying ahead of the competition.Stop letting manual work slow you down. Set up a free account today by visitingdaloopa.com/YAV and see how Daloopa can transform your workflow.

This podcast is sponsored by Delupa. Earning season is hectic. There's no way around it. But what if you could take back the time you spend on manual model updates? With Delupa, you can. Delupa automate your audit and update process, instantly pulling accurate, fundamental data from filings and reports directly into your models. That means no more wasting hours on repetitive tasks.

Instead, you can focus on analyzing trends, refining strategies, and staying ahead of the competition. Stop letting manual work slow you down. Set up a free account today by visiting Delupa.com. slash yavie and see how and see how dilupa can transform your workflow that's the lupa d a l oopa dot com slash y a v all right hello welcome to the yet another value podcast i'm your host andrew walker if you like this podcast being a lot of if you could rate subscribe review wherever you're watching watching or listening to it uh with me today i'm happy to have on the team from windward we've got mark and j mark jay how's it going hey guys thank you so much pleasure to be on

and looking forward to talking. Yeah, super excited. This is a shame that I got a lot of history with over the years. Before we get started, a quick disclaimer to remind everyone, nothing on this podcast is investing advice. Please consult a financial advisor, do your own work, all that type of stuff. Mark J, the name we are talking about today that you reached out on is Groupon.

Ticker there is GRPN. I'm sure a lot of people know Groupon, though, you know, if you haven't looked in the past, at 18 months. I think the story is a lot different than you might expect. But I'll just pause there, toss over to you guys. What is Groupon and why is it so interesting right now? Great. Thank you for that. So I'll try to keep it somewhat brief and use most of the time for Q&A. So 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-grown business, was actually, I believe, the fastest

from business north america at that time um the business uh really morphed a little bit from kind of deal of a day at that time to more of just using um its scale and the tens of millions of um customers that come to this site to be a discount mechanism for local service businesses so think of nail salons beauty parlors massage restaurants things of that nature and a very high-level way that it works is um let's just use a haircut for an example if a haircut is a hundred dollars um the barber will discount the haircut let's say 50 percent offer that at 50 bucks as a way to draw new traffic into his or her business and group on will take a very attractive big somewhere around a third um so very high margin negative working capital business um uh this is a business

that pre-COVID had extremely steady gross profit, which is one of the reasons why we like it, despite it being a melting ice cube and a perma short for a lot of people. What we like is that the gross profit dollars were running about a billion and a quarter per annum from 15 to 19 pretty steady despite the top line headwinds. So that is a little bit of a brief background on what they do. Do you want me to get into the thesis now? Would you like to ask a couple of quick questions? No, look, I guess I should just note just as an extra disclaimer for people. I mean, people can see this. It's a public filing. You guys own almost 6% of the company, 2.2 million chairs. So you guys are, you know, people talk about page one holders. You guys are top five holders here. Obviously, you've done a lot of work and stuff. So, you know, it's deep background, but you guys are quite involved here. I think if we fast forward the story today, and I can help with the fast forward. You know, new management team comes in. I think it's pale fire and they install the guy who did.

Groupon as the CEO comes in, huge overhaul. So why don't we just talk about kind of the overhaul and the vision going forward and why you guys think now is sucking interest in time? Absolutely. And look, just a quick 20 seconds on what we do and why this makes sense for us. The name of the firm is Winward. We're all about headwinds and kind of turn into tailwinds of capturing those changing winds. And all we look for is at a minimum 5 to 1 risk rewards, called 100 up 20 down as base case.

We have a 76% hit rate over six 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. So if we kind of go back a little bit to what I was saying before, one of the things that made it very interesting to us was the GP dollars were running at a bit of billion

and a quarter per year, 15, 16, 17, 18, 19. Now, there were some very serious macro headwinds that caused this business to unravel pretty quickly. So COVID happens. Clearly, as you could imagine, service businesses shut down during COVID. The business gets cut in half roughly. And then what's interesting is I'm sure a lot of people listening will remember a lot of public companies really ripped coming out of COVID on, you know, COVID recovery play where people would say, okay, it was doing this an EBITDA or this revenue, this gross profit. They made some sort of assumption on what percentage we'd get back to.

The mistake that folks made on this name, and part of the brain damage some people had, is in 21, the stock ripped a 60 pretty quickly. It was one of these, hey, the numbers haven't inflected yet, but it's a delayed recovery story. They were doing 200 million of EBITDA 19. We think that they could get back to, or not we, but the market thought that they could get back to 80% of 19's GP dollars. and they ascribed, let's call it, 150 million of Ibidah. They put an eight multiple on it, and the stock ripped to 60. Okay? What folks got wrong?

And in hindsight, it makes a lot of sense, but at the time, I think it wasn't that apparent. In many ways, coming out of COVID and stimulus and all the things that transpired, the cure was worse than a disease for Burkaw. And the reason why it was twofold. First off, you have a customer base that is massively demand-starved, hadn't gotten a haircut, hadn't gotten a massage, hadn't gone to a restaurant in 18 months, depending on you lived in some cases even more than that. Exacervating the issue even more is that in addition to being demand-starved,

they were flush with stimulus money. Yes. You have a ton of cash. You hadn't gotten a hair. cut and god knows how long and on the service side what was so perverse is that many of the service workers didn't come back and you saw this in many industries hotels restaurants travel across the board so essentially what you have is a massive base of local service businesses that are short supply long demand in the most inflationary pricing environment i've ever seen

I had one more. I completely agree with you. And to yes, and you had a lot of legacy businesses that fold, new businesses that open up. They're completely flush with demand. And by the way, this is a local business. The group on literally has to have a salesperson go and grab these people. So they have their legacy customers go away and their new customers open up. The potential new customers are like, we don't have time for this phone call. We're flooded with demand. So it's not only that everybody's over supply, they can't even get the customers online. So I thought that churn customer issue, was important. I think people missed it at the time as well with the benefit of hindsight. A hundred percent. There's other issues I'll get into in a second, but just tying that bow on that. So, you know, if you think about like a massage salon, you've got 10 masseuses and Stephanie Kim and Tiffany don't come back. Now, what happens is these these salons were booked out for weeks at a time. So just think about this. If you were the entrepreneur, you own a massage salon. You have massive demand. You're not going to discount 100 to 50 and then pay Groupon on top of that. A third. So you're getting 35 when you're probably taking your prices up to 100 and 10 or

120. So it was a very perverse situation. Now, what happened, which became a microissue to Groupon, which further kind of exacerbated their issues, is they never cut their costs. And it was a very fat-run company before, okay? They never cut their costs when this happened. They just assumed the business would come back. So what you had is another leg down on billings, because of the reason we just discussed, elevated costs,

and because it's a negative work in capital business, you have to understand all three financial statements and how they work together. You essentially have payables due to the merchant from a year ago before this happened. And as the business is declining, you owe those monies at a higher rate than what the current business is doing. So what happened to Groupon is, in addition to EBAA flipping negative,

their cash balances drain massively. So you had negative EBAA coupled with working capital hitting them by about 300 million. So you have this massive cash balance from recollection was probably four or 500 million that went to sub a hundred million quickly because of that confluence of EBAD, de-leverage and working capital. Now, why this matters is because under the prior management, they didn't move their feet and push out their debt, so they had a revolver that became current. They tripped their covenants, and then they became a going concern. Now, as you can imagine, as a going concern, that only makes the issues with your potential customers even worse,

because if you're a service business or you're an enterprise customer a la a Costco or a Jiffy Loob or a Starbucks who they are invaded with right now, you don't want to do business with a company that might go bankrupt. So that further compounded the issue. Okay. Interestingly, that's when we got interested in the name, though, and we started accumulating the stop just under $3. The reason why we got interested is we saw about,

I think it was about 12 months or 18 months prior Pail Fire filed a 13D and reached a settlement agreement with the company. Okay, they got on the board. Duchon St. Paul was the CEO. He's part of Yon Barta, got on the board. And we started to do a little bit of work on them. And, you know, the more work we did,

the more bullish we got about the opportunity. I actually reached out to Yon on LinkedIn. He had sent along some, you know, a prior deck of what they did at Slavela mat. and looking at this saying, okay, this is a team. And by the way, these guys are billionaires. That's what's so interesting about this setup. They're billionaires that have turned around multiple e-com assets in Europe, okay?

Just because they're not American people don't give them credit. They came here, they took a 22% stake at 19, and Dushan as CIO steps down of a multi-billion dollar fund, most of which is his money to be the CEO of Groupon, which at the time is a $100 million market. And by the way, at no salary and just equity upside. That to me is very interesting. And equity upside. People can read this. This is in their stock price. It's PSU's 1486, 2014, 3101 in the top price, 6882. So the stock, as we're talking, is 11 or 12. So I need to go quite a bit for him to get paid on those. So I guess that sets the stake nice. right we've said group on mismanaged i don't think a lot of people would debate that very mismanaged they

get a new management team you know i i think the thing that is interesting is over the past year you have seen these fits and starts right like we can talk about du san comes in he's the CEO the group on tech tech tech tech that has been terrible they rip everything out and they're rip and replacing and we can talk about how i think the hope and the expectation is 25 is the upside we can talk about that or i've got other questions on the business we can not into so wherever you want to go let me try to address all of them quickly and then i'll leave it open to you to dig where you want and we can go as in the weeds as you want so um look talking about this setup look these guys took 800 million of cost out so let's just start with that okay

this is a company that was doing a billion a quarter gross profit you know now they're running you know shy of 500 million and you took 800 million a cost out so you don't need to do anything Herculean to get back to 2, 300 million of Ibadat. That's the first thing. And there's a lot of tailwinds to that. Let me touch on a few of them briefly. One, we did hundreds of calls with formers, including the former

CEO, the former head of business development, salespeople, people all across from top to bottom, the organization and competitors. What was very clear, number one, is that this was such a horrifically run business that the salespeople, 80%

of the inventory put on the site, it was not inventory that people wanted, the commission dollars paid to the salespeople was higher than the gross profit from those deals, which is insane, number one. Number two, the ROI, the way they thought about ROI under the prior management is that for every dollar of marketing that they spent, how do they get back a dollar gross profit? Under the prior regime, they thought about top of funnel marketing. Let's just get people to the site and do a treasure hunt and find something on Group on. That 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 and say, guess what? Andrew has a son. They're going to Virginia. We have a deal of push gardens. Let's target them. Their ROI has changed from every dollar of marketing. The payback is seven days.

And these guys ramp their marketing from mid-20s percent of gross profit to mid-30s in June. Why June is important, and I'm going to segue back to your question, why the stock have been very volatile, and people love to hate it because of the volatility. But if we pull back and look at what's transpired here, these guys have chopped a tremendous amount of wood. They took $800 million across that, number one. They revamped their marketing. They had a tech architecture with 100 different tech stacks. Think of like a cobbled together Excel programs that were trying to talk to each other. It was so antiquated that they couldn't even launch video on their site.

They couldn't toggle between different languages. So if you're a Spanish-speaking only customer, you couldn't toggle a Spanish. That tam is huge. They talked about it very, very lightly on the Northland meeting, I think, in Q&A. So it was a horrific site, and they needed to upgrade the front end, upgrade the back end, and migrate to the cloud, something they've been doing for a while. Most people don't migrate to the cloud in public markets. This heavy lifting, it's done in the private markets. But these guys look at themselves as owner-operators, for good or bad.

They see a massive opportunity to get EBITDA well upwards of $300 million and upwards of $100 stock, and they wanted to get the thing going. So if we look at what happened, there was a lot of green shoots, number one. They grew North America local. I think it was three quarters in a row. hadn't been done in eight years. They grew active customers for the first time in eight years, two quarters in a row. But they had two different issues that transpired last year.

Number one, in March and April, they used the third party to integrate an anti-fraud software. That was a hiccup that caused in March and April of last year, the inability for many customers to be able to check out, even though they wanted to buy something in Groupon, they couldn't actively check out of the site, setting up easy comps. I'm sure we'll get to the setup in a little bit, but keep that in the back of your head. And then more importantly, starting in July, the business actually started to massively inflect in June, which is their busy things to do season, June, July, August. You saw it in traffic, you saw it in credit card data. They verified it. The business was running up probably double digits. Unfortunately, as that happened, you can see the right

of the eyes. They ramp their marketing at the same time because they're saying let's step on the pedal. Our ROI is gone to seven days. We see a huge opportunity and unfortunately when they did that, they had this thing of a web stability issue when that transpired

when they migrated to the cloud that didn't effectively enable them to communicate with Google and their other search partners that tried their traffic where they couldn't effectively attribute where the traffic was coming from, how to pay them for the traffic, and it caused a major headwind to the business

from July up until now, frankly, one of the additional headwinds that happened that were just about to get through is perversely, when they upgraded their site, their SEO relevance on Google should have gone higher because it's a much more searchable site, it's a better product, inventory is moving the right direction, but it just so happened because, because it was a new site that Google, in the short term, rated them down. So instead of being, let's say, six on average, they thought they were going to get to four. They went to seven or eight. So on a good portion of their traffic greater than a third, they're facing a headwind,

which is mitigating some of the positives that they're doing on conversion and user engagement and marketing. So it's obfuscating a lot of the positive that they've done. Let me pause you there. So, A, on the last point. People might say, oh, that's crazy. I've seen 10 internet companies, and whenever you do a full site route, like, that is not an unknown or an common explanation. I laughed earlier when you said winward, we looked at headwinds because I knew where you were going because I think they said on one of their calls, the exact headwind you were talking about, flip that was like a 1,500 basis point had one intracorder or something.

But 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. So let's just start with my favorite question. everything you said is complex, but it is also relatively known, right? Like the CEO is out, he's saying it. He was at Northland, as you said, they make things. This is a decently well-covered company. I guess my first question to you would be, hey, market is a competitive place.

And yes, everyone hates some group on, but the story's known. What do you think you're seeing that the market right now is missing that makes this an alpha opportunity? Quite a lot. So in order to make money in the markets, you have to escape to where the puck's going, not where it is. Let's just start with the conservative guide that they've given. Let's start with the valuations, right? Let's just frame it for the audience. It's a $400 million market cap roughly, depending on where the stock is.

It makes $4.50 now with the stock as of today. Pro forma for when they report Q4, they'll have no net debt, very free cash flow generative in Q4. So you're looking at a $450 million EV. You have this asset in sum up, which I won't waste that much time on, but it's a non-core asset that they acquired an early series funding back in 2013, 2014. This, we've done a lot of diligence on sum up. They own roughly just under 2%. We think their stakes worth at least $125 billion.

So if you look at the 125 from sum up, which we think gets monetized any week now, and there's actually been an article in Reuters that Colman Sachs is shopping, a sizable about $400 million euro slug of it. We think Rupon's probably part of that. if you monetize that and give them value and you look at the free cash flow they'll generate this year the stocks trading at a 200 million EBIT. Now let's get to the fun part on EBITDA and where we see massive upside. So they'll do roughly 75, 75 million of EBITDA this year. That is despite the headwinds we just discussed, the web stability issue and the anti-fraud issue. We're very

comfortable that those headwinds were about 30 million of EBITDAQ. So all else being equal, they get 100 million on a normalized basis. If you believe like we do, that they're through many of the issues and I'm going to start to see the talons and the fruits of their labor, which should massively accelerate, we think that you're basing off of 100 million at an absolute base case, assuming they don't do anything else right. So you're talking about two times EBITDA for a company with almost 50% short interest that will start to use the proceeds in cash flow to buy back stock by 2 inch. That's the setup before you get into massive EBITRA.

Okay? Where we're very interested is number one, you start to lap very easy comparisons starting in March. We think perhaps you can even start to see good numbers starting in Valentine's Day. There's been a lot of evidence that in seasonal high periods, like Halloween up 50 year over year. Christmas traffic despite the headwinds on SEO and despite some other issues was running up low teams. North America Local was running up during Black Friday to Cyber Monday, low single. There is a lot of evidence if you search for it that during the high busy season,

these guys are executing despite the wind in their face. So the point being is that we think that if you skate to the puck and start to see billings accelerate, which we think only get louder and louder starting February, March, and then into, you know, the things to do you see is in July and August when you're lapping major web stability issues, we think that there's a tremendous amount of EBITDA leverage just on the fact, fixed cost business. In fact, there's still another $15 million of cost that could be taken out from the

legacy cost architecture. Number one, number two, really the only incremental cost is marketing, which is high ROI. And three, if you bridge EBIDA, there's a couple ways to look at it. One, they get back to two-thirds of 19, which we think they could get back to 100. Let's just say you get back to two-thirds of 19's levels, you're running a 400 million of EBITDA. Two, user engagement. The average user uses it about 2.4, 2.5 times a year.

When we've studied and when they've studied other similar businesses, they believe that number should be closer to five. Each user engagement turns 100 million of incrementally bid down. Massive talents on conversion, even with the existing traffic, they believe that they could double their conversion through things like shortening the checkout experience from 12 steps to nine, alternative payments, video, many, many different things that they're using that will take existing traffic and convert that traffic at a higher rate. God forbid they could grow traffic, which they actually have shown in many periods over the last six months, that they can grow traffic during these high intensity times. This podcast is sponsored by Delupa. Earning season is hectic. There's no way around it. But what if you could take back the time you spend on manual model updates? With Delupa, you can. Delupa automate your audit

and update process, instantly pulling accurate, fundamental data from filings and reports directly into your models. That means no more wasting hours on repetitive tasks. Instead, you can focus on analyzing trends, refining strategies, and staying ahead of the competition. Stop letting manual work slow you down. Set up a free account today by visiting dilupa.com slash y-A-V and see how and see how DeLupa can transform your workflow. That's the Lupa, d-A-L-O-O-O-P-A- dot com slash Y-A-V. Mark, I don't disagree. I actually agree with a lot of what you said,

but let me ask, like, the thing that holds me back as a little bit of a stumbling block, right? So I prep for the podcast, and I'm sure everybody who is interested in an idea is going to go to Groupon, right? I go to Groupon, and I look. And when I look at the inventory, you know, I'm in New York City, which should be a really hot,

like, Center of Manhattan, should be a pretty big hotspot for Groupon, I would imagine, versus, like, I'm from suburban New Orleans. Like, that's going to be a little less than Midtown Manhattan, I would have to guess. The inventory just isn't that great. And so I guess I have two questions. Number one, in the inventory. And then two, you know, I do the search.

I prep for the podcast. I do the search this morning. I start getting a lot of Groupon advertising this afternoon, which is awesome. That's exactly what you want to see, right? But then I look at it. I was like, oh, they're advertising a lot of restaurants. I'm on a diet. Guess what?

I'm hungry. I want to see what restaurants had. Let's see. The first restaurant they hit me with was in Washington or outside of Seattle. I haven't been to Seattle in over 20 years, right? Next one, pizza place outside of Chicago. I went to Chicago three years ago. I might go over the summer. Next one, there's a German place an hour outside of Miami. I went to Miami last month, maybe. And then I got a seafood place outside of D.C. That's only a five-hour train right away. But I guess I look at that. I was like, man, like the inventory when I looked was really bare. And then when I get hit with the marketing, it doesn't seem that targeted. So my pushback, all the numbers make sense.

They do the website overall. I think I heard from either another investor or it might have been doing, who said, hey, this was like doing open heart surgery while we're public, like out in the open. You guys are seeing the open heart surgery. As you said, almost no one does visit a public company, most few profit. I believe all that. I get all that. But then I look at the inventory and I look at the market and like, hey, it looks great

in a spreadsheet. It sounds awesome. But man, this inventory looks really rough. I actually take what you're saying, 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 the right direction? Let me just finish my point. They're drinking out of a fire, but he's doing 100 different things at once, okay?

These are things, they acknowledge that their inventory is not where it needs to be. This is all moving in the right direction and will continue to get it. better. When I went to Prague, we would do John, 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 25. So the view is, I agree with you. Inventory gets better. That's going to be a major driver of the business. I'd rather that than amazing inventory. And he'd say, well, they already got great inventory and the business is here. How is it going to grow? So I agree. Just to jump in on that for a second before I have to leave. I think one thing that maybe brings us kind of full circle with the tech changes is merchants prior on the prior Groupon tech stack could not deploy their own attribution tools.

So like to get ROI reports, they'd have to interface with a physical person in Groupon now with the new consolidated back into architecture. What they've said is enterprise customers are now much more willing and able to work with them to deploy their own tools. So they recently deployed something with Starbucks. They rolled out this site minor integration within travel. so they're pulling an inventory from Expedia. So I would expect now with the back-in fix that you start to see more front-end improvements with the inventory too.

You guys, I know, and this is a name that's very popular on web scraping and web trafficking, and it's always going to be, and there is something to that. But is there a way to track enterprises, businesses, inventory deploying on here that you guys are kind of following? I'll take it an LJ.

He's more of the tech savvy guy than I am. Look, we use similar web, we use credit card data. I'm not aware of a way to necessarily track changing inventory on a micro level other than being an animal and going to the site every day and looking at it, which I do anyway. I've had some of those. And it's always a mixed experience because you're like, they got Starbucks today. And then the next day you're like, where are Starbucks going? I'm at 3 o'clock at the night going down a rabbit hole.

I'm like new travel deals that are up on the site. But look, you know, I think part of the issue with this stock is it kind of trades as a vehicle. for alternative data, and the alternative data is not good on it. Number one, I'll be a perfect example. People look at some more web traffic data, but, you know, a third of the traffic, and this is verified by the former CTO, this is not I was guessing. As much as a third of the traffic, especially in non-peak periods, comes from just people casually searching goods.

So they have a goods business and a local service business. The business is zero. It's not even dot-positive. I don't care if their goods business is down. Frankly, it's been running down 40, 50%, which they confirm. So if you do the math, if your goods business is running down 40 or 50, and that's 30 your traffic, it's a 12 point headwind on traffic. And furthermore, there's a lot of conversion benefit that they're getting that is a nice

spread against traffic. So I think that's just another way where there's a variant perception is that people are looking at basic alternative data that is not accurate. So we see a lot of opportunity in this in the short term. And I'll just quickly just name like three or four catalysts. You know, SEO is about to inflect literally in the next days or weeks. It's a 60-name process. They had to literally go through tens of thousands of landing pages and redistribute them to Google to

get Google rerun the algorithm to get the normal kind of, you know, where it shows up in search. So that's number one. Number two, you know, you have a potential modernization to sum up. Number three, you have better inventory, which is moving in the right direction. Number four, you're going to have buyback starting to kick in in the next, you know, three to six months. And number five, their guidance is a joke. They gave this guidance based on a convert offering because they felt like they had to give

a conservative guide to their debt holders. They know that they're going to do at least $100 million. Their initial guide this year was $100 million, and we're here. headed that way if they didn't have the issues, these idiot issues that they had. Now, is it possible if there's other any issues this year? Sure. That could happen. But that aside, we think

that they could crush 100 million of EBITDA and over 75 million free cash holders here. Jay, did you want to add anything on the tech or I had a couple other questions I was going to follow up with? No, I think, you know, in terms of inventory tracking, as you say, like, I like to sort by hottest deals on Groupon like

every day or two and, you know, just flip through different geographies. And to your point, it varies tremendously day-to-day, but I think to Mark's earlier point, like, given purchase frequency on the site is between like two and a half to three X, I think the critical time to really tune into the similar web data and the alt data is around busy things to do periods, like Halloween, Christmas, Black Friday, Cyber Monday, you know, Valentine's Day. Mother's Day. And so far, since the new site's been up and running, we're three-for-three on, you know, traffic during those periods. So that's why I don't necessarily think, you're

reading the daily traffic, as Mark mentioned, which is a lot of goods-driven, like window shopping type customers or customers, quote unquote, is necessarily indicative of what's going on with the underlying buildings. I don't think my wife listens to all the podcasts, and I say that she's not into finance, so I don't expect her to. But I think I can really, you know, I will say as I was going through Groupon, there was a nice spa, 50 blocks from me that had a good deal. And she's got the week after Valentine's Day off.

And I was like, boom, extra Valentine's Day, President. I know it. So I'm sure that will be music to the bull's ears that I at least have bookmarked. I'm going to get her that. Let me ask you. You mentioned sum up, which was, I remember three years ago, it was a popular, a very popular thesis. People were talking about it being worth way more than the entire enterprise value. You mentioned they're going to sell up for $125 million. I think November 20, 23, they sell 10% of their stake at a price that I think would imply about $90 million for the full thing. Yeah, yeah, yeah. Do three call. They say they're going to sell sum up and, what is it, GIF Cloud. And they said expect 90 million of proceeds from the, from the 9 million. non-core assets we're going to sell. So that includes that's right. You said a 125 million number

for sum up. So obviously they could and it sounds like have been conservative in the past, but I just want to ask because that's a big delta, $35 million on a $500 million under EV. Yeah. So where are you coming up with the $125 million number? Okay. Let's just start with their disclosure. Number one, when they disclosed this, they were going concerned. They were lawyered up. Number two, 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 sum up's EBITDA growth and what they've done. I think they've grown gross profit like north of 50%. And they're putting up pretty monstrous

EBITDA numbers. But the most important point is there was a Reuters article that talked about it being shot by Golden Sachs at a certain valuation. It was out of north of an $8 billion valuation. So look, we don't know anything we're not supposed to know clearly.

We've joined as much work as we can speaking to people that do know this space. I don't think 125 is a big number. I wouldn't be shocked. It was 150, frankly. So I think I covered most of what. If I miss something. No, I think that covered that well.

I'd love to ask base rate, right? Because I think there's two base rates that you look here. The first base rate, me as a stupid domestic investor, I look at this and say, hey, legacy consumer tech platform, turnaround history there is really poor. You know, I think TripAdvisor, how many value investors have gotten their face ripped off by TripAdvisor over the years? And, you know, they're allegedly for sale now. We'll see.

They were for sales six months ago. They were sales six years ago. QV, it's got rhymes with QVC, Yelp, all of these legacy platforms, I'm sure there's a ton I'm forgetting, have really struggled and people just keep throwing time, money into them, and they never turn around. So that would be one base rate. But the second base rate, which I think is the most interesting here, is as you mentioned, the group and the CEO who took this over, have done this before in Eastern European markets. So I'd love to just talk a little bit about both those base rates and especially their history in the Eastern European markets, because I think we almost do a disservice to it if we don't mention, hey, these guys invested a lot of money and became billionaires by running this playbook. Yeah, no, it's great. And look, you got to look at both sides. I mean,

I guess the reason why we're comfortable is, like I said, it all goes back to windward, headwards to tell wins. If they weren't under-earning as much as they were and they were towards, like if this was at 85% of 19 and it was just a question of whether it was melting ice cube, we wouldn't be there. It's because it's so sprinkled. down to a third or less of where it was. I mean, this was a quote-unquote piece of crap melting ice cube in 16, in 17, in 18, in 19, but yet they did a billion and a quarter, billion and a quarter, billion and a quarter, billion and a quarter, billion and a quarter.

So, you know, maybe it's logic, maybe it's critical thinking, maybe it's pattern recognition, but it's very clear to me based on the work that we've done that there's so much low-hanging fruit, whether it stems from better inventory, incentivizing the salespeople the right way, better marketing, ROI, SEO, having an adult in the room in Dushan versus, you know, we spoke to Kadar, Dishband, he was the former CEO, my head was spinning after I spoke to him. I had no interested owning Group on at that time. So, you know, I just think that there's so much low-hanging fruit on gifted. We didn't even talk about gifts. At SLABOMAT, they got Gifting to be half their business in Q4.

They are just launching Gifting. They're very excited about what they're seeing. Gifting alone could be 200 million of incremental gross profit. I mean, you just have so many call options. And I think that's a very integral part to our playbook, what we do. We make a bet on a fundamental inflection, but we like many, many, many ways to win. And whether it's through user engagement, whether it's through conversion, whether it's through growing traffic, whether it's through

monetizing sum up and buying back stock, whether it's through international turnaround. We even talk about that. International's super easy comparisons. International is going to start coughing positive. It really kind of already has ex-Italy. It's going to start coughing positive off of the very low base. So we just think that there's so many different ways to win betting behind a guy that's a winner that's incented. And oh, by the way, what's the downside? You talk about other comps.

How many e-com assets have you looked at that are trading sub two-times EBITDA that generate, you know, 10% free cash liens plus? It is a good point, though. I think if you were very saying, hey, that EB-Daz is going away quick and there's a heck of a lot of stock comp in there. Let me ask one last question. I know Jay has to run for a train, so we can probably one last question, then maybe sum it up and wrap it up. look last year I knew Bulls at the start of last year and they thought the open heart surgery maybe it wasn't finished but you know the surgeon had kind of put away the tools or was starting to close the chest back up right they thought it was dumb the back half of the

year disproved that for a lot of different reasons I think the Q3 results in particular where if I remember correctly Q2 results they say hey good start to the season and then one of the reasons I laughed is they said yeah it started well but when they reported Q3 as soon as it started well we had like a massive reversal and the tailwinds became headwinds. So the web stability issue. Yep, yep. I guess the question I want to ask is it's very cheap. It seems like it's turned around.

When would you know eject, right? Because one of the issues I've had is I find I buy a turnaround. I buy this and I just keep seeing all the call options, all the traffic. And it keeps missing. It keeps missing. Like is this the year? Would it be the next six months if web traffic is missing? And obviously you can change your mind and everything can change.

But is it the next six months, if it doesn't happen? It's never happening for Groupon. I'll give you my view on that about Jay Goods. I wouldn't say the next three months because I think that they're still lapping some idiot stuff, the cohort, which we didn't talk about. We can talk a little bit about it, but they essentially logged out some users when they shifted the site, so they're up against that cohort through June. I would say if we're not seeing a material re-rating July through December,

probably will. You know, I think that that's probably a fair assessment. Or there's just another mistake again, which also means you're wrong. I mean, you can't, you have to execute. You can't keep having issues in the tech.

So I think that that's a fair comment. But, you know, yeah, I think I'll leave it down. I'll like Jay, I'll say I opine on his view, but I think that's probably where I stand on it. I would say sort of end of summer, because at that point, you'll have a couple of important signposts with, you know, Mother's Day, Valentine's Day, June to sort of August is the busiest things to do period with, you know, water parks and such. And at that point, if you're still in a place where web traffic is, you know, declining high single plus and they're not growing North America local billings, either a tech issue has happened or I think the business is at a point where it's, you know, just too difficult to bring back growth despite the fact, you know, they've set up marketing, spending.

I spend by several hundred raises points. I think, you know, at that point, it's, to me, one of these probably perpetual melting ice cube stories. The only caveat I would make there is I don't know I would use June because June was growing double digits last year. So they're going to be comping the business firing all solenoose. I would be looking at like July through December. It would be my view.

I'm just looking through it. I mean, some of the stuff, and you mentioned, but some of the stuff that they had to go through here, it is crazy. Like, they mentioned, hey, you buy a Groupon and it wasn't active for 24 hours. hours or maybe it was even longer than that. You're like, that is about the worst customer experience I can think of. You know, a heavy use case from Gupron as somebody who's used in the past is, I have nothing to do this Saturday afternoon. Let me go buy something and go, like, I've got an hour for massage. Let me go get a discount of massage. You can't do it within 24 hours.

I mean, that's about, there are worst customer experiences. Like I would challenge anyone to go to Chipotle, Midtown Manhattan, try and get your to go order and it'll take you 20 minutes for some reason, but it's about as bad of a customer experience as a tech company can have. And you think about, hey, they solve that and the business is even out positive despite that issue. And that issue is just one of many, but you really can see how it could start working. Yeah, we just think that there's tremendous tailwinds. And look, I think once the business gets to 75, 80% of where it was a 19, then it becomes

a harder question, right? Is this actually a growth business, which it very well might be. But I think, you know, our degree of conviction that it's going to normalize to some realistic percentage of where it was in 19, we feel very confident about it. There's no real competitor doing what they do. I would argue that the macro headwinds, the tailwinds are as good as it gets. You know, you're going into an environment where, you know, we could be going into a recession in the next year or so. You want to be owning a business that's recession proof. This does better in that type of environment.

and it's coming out of a period where it was the worst macro backdrop you could ever imagine for them. So I think that you have to look at all the nuance of the headwinds they had in the worst macro backdrop. And it doesn't take a lot of envisionment to understand that a better macro backdrop with an adult supervising is making some very basic decisions to improve the business, at least the Ibidah should double. I see a very, very remote chance that these guys can't do 200 million of each time. Well, look, Jay, I know you have a train, so I guess I'll leave it to you guys. I think we hit most of the stuff I had. I think it's a pretty comprehensive overview.

I think a lot of people know Groupon, though. They probably need to take another look just based on your, for most people, you probably are thinking of the Groupon of 2018, not all the story changes today, but anything else you guys think we should hit or listeners should kind of walk away with? The only thing I would say is that I think that the upside here is explosive, and this is the type of stock when you can look at it. When things start to move, they move. It's not like, oh, I'll wait for, I think this is a mistake you'll make.

I'll wait for the data to turn, and then I'll buy it. Look at the chart here. The thing rips $6, $7 in a week when it starts to improve. And I think the short interest and the potential asset sale and the potential buyback and the, you skate to the puck, like I said, on what they're up against, there's very high likelihood that all these things are going to start to improve. So I would just say that if you are interested, you should be looking to kind of think forward and not wait to see the results, because I think stock's 20 real quick if we're correct in our assumptions. It's funny. You're not

the only person to have told me that I had a very similar conversation with someone back in October, when the setup looked kind of similar, except they had the unexpected issues with the Q3 results. Cool. Well, Mark, Jay, this has been super fascinating. Always love having a large shareholder of a company do a deep dive into a lot of research and a lot of stuff. Super interesting story. I know there is one other stock we've talked about in the past that we might have to have you guys back on for a second podcast at some point. But Mark Jay, Winward Capital, really appreciate it and looking forward to having you guys back on. thanks for the time we appreciate you yeah thanks for having

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