LogicBio Therapeutics Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 7 speakers on the call.

Operator

Good day, and thank you for standing by. Welcome to the Wish First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' prepared remarks, there will be a question and answer Advising your hand is raised. I would now like to turn the conference over to Ralph Fong, Wish Director of Investor Relations.

Operator

Please go ahead.

Speaker 1

Good afternoon, everyone, Welcome to Wish's Q1 2023 earnings conference call. I'm Raul Feng, Director of Investor Relations. Joining me today are our CEO, Joe Yan and our CFO and CEO, Vivien Liu. Today's prepared remarks have been pre recorded. There is also a slide deck that has been posted to our Investor Relations website, which is available for your reference.

Speaker 1

Once we are finished with Joe and Vivien's remarks, We will hold a live Q and A session. The remarks made today include forward looking statements that are related to, among other things, Our financial expectations, business and turnaround plans, logistics and operational efficiencies, including flat rate shipping, Initiatives to improve customer experience and engagement expectations regarding merchant relationships and strategic partnerships The impact of our strategic marketing and product initiatives, including ad spending and promotional events execution time line of the authorized share repurchase program supply strategy ESG efforts and anticipated return on our investments and their ability to drive future growth. Our actual results may differ materially from the results implied by these forward looking statements if certain risks materialize Our assumptions prove incorrect. Forward looking statements involve risks and uncertainties, which are described in today's earnings release and our periodic reports filed with the SEC. Any forward looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them.

Speaker 1

Also during the call, we will A reconciliation of non GAAP to GAAP results is included in today's earnings release, which you can find on our Investor Relations website and which is also filed with the SEC. A replay of this call will be posted to our Investor Relations With that, I will now turn the call over to Wish's CEO, Jo Yan.

Speaker 2

Thank you, Ralph. I would like to thank everyone for joining our Q1 2023 earnings call. On this call, I will share with you our Q1 financial updates, discuss the business highlights and the key strategic focus for 2023. Vivian will then provide a deeper dive into financial results, Share the 2nd quarter guidance and comment on our operations. Finally, I will provide additional closing remarks before opening up the call to your questions.

Speaker 2

In the Q1 of 2023, we generated total revenues of $96,000,000 down 49% year over year. The revenue decline was largely driven by the unfavorable impact from the pricing changes implemented by the end of the Q2 of 2022, combined with our lower advertising spend in the quarter. On the bottom line, We reported adjusted EBITDA loss of $62,000,000 in Q1, which was well ahead of the guidance range of loss of 70 to $80,000,000 This better than expected EBITDA result was attributable to the unit economics improvements made throughout the quarter, which Vivien will provide more color later on in the call. We ended the Q1 with cash, Cash equivalents and marketable securities of $627,000,000 We began our transformation journey in 2021, and I'm happy to say that the work carry out in the Q1 of the year And throughout this past month has been another positive step in the transformation of the company. I will now discuss the recent business highlights.

Speaker 2

1st, as part of our efforts to drive basket building and improve the customer experience, we introduced February shipping and eligible orders in the U. S. In late January, followed by other major markets throughout Q1. Since inception, we have low out freight rate shipping to over 20 countries, Including the U. S, Canada, Australia, the U.

Speaker 2

K, Italy, Spain, France, Germany, Czech Republic, Japan, Brazil, Mexico, etcetera. We believe freight rate shipping remains a critical component in addressing one of the major pain points amongst our users on the Wish platform. Not only has this improved the shopping experience for our customers. It has incentivized them to build larger baskets. Our internal data shows that the average transaction value increased by double digits attributable to the launch of freight rate shipping.

Speaker 2

This is encouraging for the team And we are confident fairway shipping will continue to have a positive impact on order values, conversion rates and the customer retention going forward. 2nd, the Weichmear's shopping event was a success for the company. I'm very pleased that WishMers, which ran from March 30 to April 5, was well received by our merchants and buyers. More than 7,000 merchants participating in the week long shopping event in lowering over 800,000 product listings and 92,000 Doorbuster deals. Importantly, we saw more than a 30% increase In GMV and more than 50% order volume growth during the week long shopping event.

Speaker 2

I'm pleased with the strong results. Coming out of the event, we have seen a lot of momentum and a lot of excitement from our merchants, buyers and employees alike. Additionally, Wish must allow us to activate and reengage with our dormant or inactive users As one of the priorities for us is to leverage our broad merchandising offering to activate our accumulated user base. More importantly, I'm proud of our team's cross functional calibration and execution. A special thank you to our employees for their dedication, hard work and efforts.

Speaker 2

Wish must make the first in a series of major shopping events playing throughout 2023 and it has taught us valuable lessons and we expect to leverage what we have learned to build on that success in Q2. Following the Wish Moose event, we will be running other merchandising events across the 60 plus markets we serve throughout the year. And the merchandising events will be available not only on mobile app platforms, but also mobile web, which is becoming an important channel for our platform distribution. At Wish, we're excited about our merchandising strategy and expect merchandising events to result in incremental GMV growth, user acquisition and retention. 3rd, in March, we announced that our online marketplace has returned to app stores and search engines in France After the French regulators have lifted the delisting measure, France is a strategically important market for Wish, And we are excited to welcome new and inactive French user back to our platform, so that you can enjoy all the enhancements we have made to the shopping experience.

Speaker 2

Over the coming months, we'll be building up our marketing activities in France to ensure our customers know we are back. 4th, in the Q1, we formed a strategic partnership with e commerce integrator BaseLinker, e commerce human service provider ShipSage and the e commerce shipping solution provider ShipStation and ShippingEasy. As a result of partnership established between Wish and the base linker, more than 18,000 European merchants can now connect with Wish users seeking a discovery shopping experience. From the business development perspective, This is an exciting opportunity as we look forward to adding more merchants to the Wish marketplace and bringing them together with our Wish community across the globe. In the past year, we have made a lot of improvements to our overall time to door and on time delivery rates And the partnership with ShipStation and ShippingEasy allowed us to build on that success by providing even more logistics and As we continue to optimize the browsing experience, we introduced a number of enhanced personalized category navigation and the category product feeds on both Android and iOS.

Speaker 2

The improvements we have made to the category browsing experience are for the benefit of our users. This has helped them explore the Wish catalog in a fun and engaging way, browse through the breadth and depth of the Wish's product catalog And discover products through shopping inspiration. Essentially, the Wish app is designed to help users discover new and exciting products, Even when we are not searching for anything specific, we want to facilitate exploration and the highlight specific moments where our recommendation can drive users engagement. In addition, personalization on our platform will go far beyond product recommendations. We will continue to strive to tailor every aspect of the app experience to our users' preferences, From which modules to show them to the sequence in which they encounter them, we will look at their interest, Priorities and which attributes of our products matter most to them to continuously adapt the experience to their needs.

Speaker 2

Finally, we continue to improve our operational excellence. In Q1, our on time delivery rate was approximately 92% compared to approximately 86% during the same period of 2022. We also saw our average time to door further improve in the top market we serve, possibly impacting customer order cancellation rates, refund rates and the customer experience. Our customer order cancellation rates dropped more than 50% year over year in Q1 And the customer refund rate also declined within the same time period. Moreover, we continue to see improvements in customer NPS and encouraging buyer conversion and customer retention trends in Q1 versus a year ago.

Speaker 2

In particular, Prior conversion and customer retention improved by 18% and 10%, respectively, in the Q1 of 2023, when compared to the same period last year. Bringing it all together, I'm pleased with the progress we are making as we continue on our transformation journey. Now, I would like to spend a couple of minutes discussing our strategic focus. As I mentioned, last quarter, we strive to grow buyer retention through repeat purchases this year, which I would like us to expand on. Over the past 18 months, we have improved the merchant quality and the listing quality.

Speaker 2

Our key focus for 2023 is to keep improving the customer experience, which we believe plays a pivotal role in driving user growth. As part of our growth strategy, we intend to increase our DAU by investing in our guest experience, Accelerating the use of incentives for buyer conversion and further driving operational excellence with our unpaid and the paid channels. Some of key initiatives include: delivering higher quality messaging via push notifications, e mails and SMS to drive user back to the Wish platform. Refining landing pages that encourage discovery for guest users coming in from apps and emails, reducing friction on the website or mobile web for guest users to enable them to discover products, add to cart and transact, Providing upsells and incentives for WAP and the mobile users to motivate them to adopt the app, Offering the incentive to encourage users back to the app as well as launching a referral program to drive engagement with additional shoppers and optimizing our unpaid marketing efforts and modernizing our ads to generate channel growth. At Wish, Our team is continuously looking for ways to provide world class supply quality, making sure that we are serving Our users with products that deliver great value through elevated quality and competitive prices.

Speaker 2

We are partnering closely with our merchants to showcase their best selling products within our highest performing categories, including Home and Garden, Beauty and Health, Fashion and Consumer Electronics. To the end, we are introducing our supply strategy, which we believe will be a critical component to our success going forward. Broadly speaking, we will leverage cross functional collaboration between our category management, Supply sourcing, logistics and the merchandising teams to drive differentiated and quality supply. Vivian will provide additional details of our supply strategy later on in the call. In summary, our vision is to unlock e commerce for the underserved by giving users access to a wide selection of affordable goods and providing merchants with access to millions of users globally And Wish is all about creating a fun, easy and personalized discovery shopping experience that provides the best value for our users Looking forward to delight in life.

Speaker 2

On our last earnings call, I outlined the key strategic initiatives to improve our business, And I'm pleased that we are making strides towards each of our initiatives, specifically our conversion rates, buyer retention and the customer satisfaction. Going forward, we will be doubling down on executing on our supply strategy to further enhance our users' basket building experience and drive repeat purchases by encouraging users to build their next basket. As one of the largest mobile e commerce platform in the world, I'd say a large part of the Wish's success is really driven by innovation. Before I ramp up and turn the call over to Vivien, I would like to reiterate our commitment to innovation. From the user and the merchant experience standpoint, which will continue to innovate and invest in capabilities and the product features to further improve the user experience on the Wish platform.

Speaker 2

Discovery is our North Star, which we believe will enable us to further strengthen our competitive position in the market going forward. In particular, our team will be exploring initiatives to incorporate a holistic supply strategy into our real time personalization engine, Leveraging videos, social components and the new AI driven shopping experience to engage, delight and drive meaningful basket building opportunities for our users. I have been impressed with our engineering talent, and I'm energized about the future and the growth opportunity ahead of us. With that, let me now turn the call over to our CFO and COO, Vivian Liu, to discuss our financial results in more detail and give you an update on our operations.

Speaker 3

Thank you, Joe. Now I will More color on Q1 financial performance, provide Q2 financial guidance and expand on the operational priorities for 2023. On the user metrics, we had a 14,000,000 Monthly active users and the 12,000,000 last 12 month active buyers in the Q1 of 2023, which represented a decline of 48% 57% respectively year over year. The decline was mainly driven by the cumulative reduction in ad spend over the past 18 months. On a quarter over quarter basis, monthly active users were down 30% and the last 12 months Active buyers were down 8%, mainly driven by the fact that ad spend in Q1 was about 54% lower than that in Q4 as we continue to focus on unit economics during 2023.

Speaker 3

It's also worth noting that due to improved conversion rates, The decline in buyers is less significant than the decline in users on a quarter over quarter basis. As discussed in our prior earnings call, performance marketing will remain an important driver for user retention and growth. But our goal is to increase the efficiency of paid ads and to become less dependent on digital advertising. As Joe shared earlier, as part of our efforts to drive user growth, we are investing in more organic channels such as emails and push notifications, affiliates and merchandising events to engage and retain our users more effectively and more cost efficiently. Moving on to other financial metrics.

Speaker 3

Total revenues in Q1 were $96,000,000 a decline of 49% year over year. This decline was across core marketplace, product boost and the logistics, mainly driven by reduced ad spend and the new pricing practices that were fully implemented by the end of Q2, 2022. The new pricing practices made our listing prices more transparent and competitive. However, Similar to what we experienced the last quarter, it adversely impacted our Q1 revenues and EBITDA, resulting in an unfavorable comparison to the prior year. Q1 gross profit was $20,000,000 A decline of 69% year over year.

Speaker 3

Gross margin was 21% versus 34% in Q1 2022. Gross margin performance was mainly driven by the decline in marketplace gross profit due to the price changes as outlined earlier. That being said, logistics gross margin saw significant improvements in Q1, driven by increased combined ratios as a result of the introduction of a flat rate shipping in multiple geographies. Total operating expenses were $113,000,000 a reduction of 10% year over year. Lower ad spend, reduction in outside services and a reduced employee headcount accounted for a majority of the reduction in operating expenses.

Speaker 3

Excluding stock based compensation expenses, total operating expenses were down 32% year over year. Our net loss was $89,000,000 compared to a net loss of $60,000,000 in the Q1 of 2022. The year over year increase in net loss was largely due to lower revenues and an increase in stock based compensation. Our adjusted EBITDA was a loss of $62,000,000 compared to an EBITDA loss of $40,000,000 in Q1 2022. The year over year decline in adjusted EBITDA was largely driven by lower revenues and the impact of our new pricing practices.

Speaker 3

However, Q1 2023 EBITDA results exceeded the guided range of a loss of $70,000,000 to $80,000,000 This result was primarily attributed to our strong focus on unit economics In 2023, we have seen improvements in unit economics at a transaction level since last year. Operating cash flow and free cash flow for Q1 2023 was negative $92,000,000 compared to a negative operating cash flow of $146,000,000 and a negative free cash flow of $148,000,000 in Q1 2022. The year over year improvement in operating cash flow was primarily driven by favorable changes in working capital. We ended Q1 in a financially healthy position with $627,000,000 in cash, Cash equivalents and marketable securities and no long term debt. As of March 31, 2023, we had approximately 23,000,000 shares outstanding.

Speaker 3

The shares outstanding at quarter end had been retroactively adjusted for the 1 for 30 reverse stock split enacted on April 12, 2023 to bring Wish into compliance With the minimum bid price requirement for continued listing on NASDAQ. As of April 26, 2023, we were back in compliance with a minimum data requirement. I would now like to provide guidance for the Q2 of 2023. Based on the feedback From the investment community, we will provide quarterly revenue guidance in addition to the EBITDA guidance Starting this quarter, for Q2, we expect total revenue to be in the range of $91,000,000 to $102,000,000 and adjusted EBITDA to be a loss in the range of $16,000,000 to $75,000,000 This EBITDA performance is partially driven by expected higher ad spend in Q2 to drive buyer growth. In Q2, we expected the sequential decline in revenue to moderate, Potentially seeing the curve flatten out in Q2 or Q3, on a year over year basis, Q2 revenue is expected to decrease due to lower ad spend and the change in pricing practices as outlined before.

Speaker 3

As we look beyond the Q2 of 2023, we expect a stronger second half relative to the first half twenty twenty three, driven by continued operational improvements and the seasonality. Please also note that starting in Q3, our pricing practices will be consistent with those in the second half of twenty twenty two. As such, the year over year comparison for our financial performance will no longer be unfavorably impacted by the pricing changes, which were fully effective by the end of Q2, 2022. As Joe discussed, I will now provide more color on our supply strategy, which aims to further enhance the quality of supply and the customer experiences on Wish. First, within Wish Identity, our home and life narrative will focus on delight and essentials for less, with the differentiated user experiences for each.

Speaker 3

2nd, we will prioritize resources for high touch categories, Starting with fashion, home, consumer electronics, beauty and health. To hyper manage the product quality and the customer experiences in those categories. 3rd, We will continue to enhance the supply diversity, freshness and quality through strategic sourcing. This includes identifying differentiated local merchandise in our key buyer markets as well as cross border supply opportunities with the flagship merchant from Asia. We will continue to diversify our merchant network Through geographic expansion outside of China, we're committed to expanding and strengthening our merchant bases in Europe, Southeast Asian Countries and Americas.

Speaker 3

Our goal is to enhance the product variety and reduce our reliance on any particular country for supply. 4th, building on enriched app features and the success of Wishmas. We intended to connect quality supplies with customers through personalized discovery and merchandising. We believe that combining value for price and the fun shopping experiences is key to driving Buyer conversion and retention. 5th, our logistics capability gives us a competitive advantage in the market and has been a significant driver of the improvement in the customer and the merchant NPS.

Speaker 3

We expect the logistics to play an instrumental role in the continued success with our supply strategy. In the Q1 of 2023, the average time to door in 6 of our major markets improved by 8 days when compared to the same period of 2022. Furthermore, Our on time delivery rate was around 92% in the Q1, an improvement from approximately 86% in the same period of last year. Our goal for the year is to roll out the 15 day time to door initiative in all major geographies for Wish. Additionally, We plan on implementing forward deployment capabilities in China, which is expected to help reduce our delivery time to approximately 10 days for high velocity products listed on Wish.

Speaker 3

Since we embarked on the turnaround journey, supply quality has been a high priority for Wish. As Joe mentioned earlier, We have achieved significant improvements in this area, resulting in lower refund rates, lower order cancellation rates and the higher customer NPS. While it's very clear that our customers enjoy the new Wish shopping experience and is that we are on the right path. There's more to be done. With the end to end supply strategy, Wish is committed to creating more value for customers, while enabling merchant success by promoting merchandise that brings freshness, good quality and competitive prices to the platform.

Speaker 3

Before turning the call back to Joe, I'd also like to address 2 more topics for investors. We are being very focused on turning around the business. Wish has also taken steps to bring more positive impacts to the communities we serve. For example, as part of our efforts to reduce Carbon footprint. We are consolidating more parcels in a single shipment without compromising our time to door or on time delivery rates.

Speaker 3

Additionally, we continue to make the last mile delivery more efficient and are more eco friendly. They are local pickup options versus home delivery. Millions of buyers are leveraging the local pickup services to save on shipping costs, also helping to protect the environment. We are committed to making continuous improvements in ESG and expand ESG related disclosures through our filings and Investor Relations website. Secondly, in April, The Board authorized a $50,000,000 company stock buyback program, representing over 25% of our Market cap as of April 30, 2023.

Speaker 3

The share repurchase program demonstrates the Board's and the management's confidence in the future of our business and our commitment to creating long term sustainable value for our shareholders. With that, I will now turn over the call to Joe for his closing remarks.

Speaker 2

Thank you, Vivian. It has been 18 months since we embarked on our transformation journey. And as a reminder, Our foundations for growth are built around 3 fundamental pillars: improving the customer experience, deepening our merchant relationships and achieving operational excellence. I'm very proud of what our employees have accomplished in each of those areas, but also recognize we still have a lot more to accomplish for the final success of our turnaround. Looking ahead, we plan to provide our users with robust basket building experience from beginning to end offer a variety of exploration capabilities and drive repeat purchase by encouraging user to build their next basket, which we believe is key to optimizing our unit economics.

Speaker 2

We are relentlessly focused on executing on our growth Operator, could you please open the call for Q and A?

Operator

Thank you. Our first question comes from the line of Steven McDermott with Bank of America. Thank you. Your line is now open.

Speaker 4

Hi, this is Steven McDermott on the line for Michael McGovern. On a year over year basis, revenues declined sorry, The revenues moderated 8 points sequentially and guidance implies a further 20 points of moderation at the midpoint. So I guess going forward And especially with the pricing changes that took into effect late 2Q, what can we expect the general revenue trajectory 3 by quarter to be. And then I guess just on a follow-up.

Speaker 5

We saw

Speaker 4

3.5 Point of leverage on the product development line, but we're not really seeing that anywhere else. So I guess besides just headcount reduction, Is there any other leverage in the model that we could expect in other lines? Thank you.

Speaker 3

Yes. Thank you, Steven. This is Vivi Liu. Happy to take your questions. 1st on the revenue trend, as mentioned, we expect the revenue decline to moderate going forward And partially because we will see that the price change impact that have been with us for 3 quarters will gradually fade away.

Speaker 3

As mentioned, as we enter Q3 this year, That particular price unfavorable price change will completely go away. But besides that, and the continuous improvement in the operations such as conversion rate, retention rate, Lower cancellation order cancellation rate, higher AIV and the investment in the user growth, All those factors will hopefully drive the improvement in the trend of revenue for the remainder of the year. And that's why we mentioned that The curve the trend expected to flatten out moderate the decline start to moderate and even to flatten out later in the year. So that's on the revenue. On the leverage, you are right.

Speaker 3

We Employee related expenses. And we also looking at a different strategic size for hiring. So we're looking at a potential lower cost regions within U. S. Outside of U.

Speaker 3

S. For backfills and the new hires. And that could be another lever going into the year to drive more cost efficiency in usually headcount related expenses.

Speaker 4

Great. Thank you very much.

Speaker 3

You're welcome.

Operator

All right. Thank you so much. Our next question will be coming from the line of Laura

Speaker 3

Thank you for taking my questions. I'm wondering when you expect to return to advertising And is that what it would take to drive revenue growth on a year on year basis? Yes. Thank you, Laura. Vivien Liu again.

Speaker 3

So as mentioned, we actually expected to So part of the reason why Q2 EBITDA performance is as guided because we do expect to increase advertising in Q2 relative to Q1. But from a year over year standpoint, that will still be lower spend level because we continue to really focus on unit economics and the efficiency of the advertising. However, given all the very steady improvements we have seen in conversion retention, product features, quality, AOV, AIV, all that and plenty of green shoes and we feel it's a time to invest in growth, right? And that's why Q2, our ad spend from quarter over quarter standpoint will be increased. And as mentioned, the performance marketing will always be a driver for top line growth.

Speaker 3

However, we don't want that to be the only driver for growth, right? And we Continue to invest in the organic channels like such as email notifications, affiliates and the growth strategy as outlined by Joe, in his prepared remarks, merchandising and the just the improvements in the operations We'll be hopefully even more important driver of growth going forward. But yes, but ads will always be there for us. And our goal is not to get rid of the ads completely. It's to achieve growth more through organic channels and have a more balanced approach going forward.

Operator

All right. Thank you so much for that. Please standby while we compile the Q and A roster. Our next question is coming from the line of Nicole Thien with UBS. Your line is now open.

Speaker 3

Thank you. Hi. This is Nicole calling you from Kunal Madhukar. Just two questions from me. The first one would be, if there's any color that you would call out on the buyer trends in April?

Speaker 3

And also the second one in your 2Q guide, what proportion of that could be attributable to logistics? Thank you. Yes. So on April, there's nothing to be at on the actual performance of April. And We used to provide some color on the month in the quarter because we did not provide a revenue guidance in the past.

Speaker 3

Right now, we do have a revenue Guidance and that will be the most relevant or recent information as for the entire quarter. So there's nothing to add for the actual Performance of the past month of April. And I think we Overall, we put a guidance out there and we I think we expect to hit that guidance. And so that's number 1. Number 2, For the Q2 guidance, I think your question is how much is related to a logistics versus the marketplace.

Speaker 3

We don't guide a sub kind of a buy business line. And I would just say, we at Wish, we really provide a bundle of services, right? And I understand we report a bit It's a bundle of services that we sell to our merchants marketplace Services and Logistics Services. And therefore, we should we tend to look at it as a total economics as a whole. And the Business line level of financial reporting is really just the attribution of how we attribute to the total economics.

Speaker 3

I think it's important to cross that out. And As I mentioned, logistically, we'll continue to be a very important part of the value proposition for both the buyers and the merchants And to continue to play a very important role in the turnaround success. And so far has been very delivered a very strong performance, Not only strong revenue generator, but also pretty strong margin. Once again, we should look at the total performance as a bundle versus Just assuming in logistics, and we're actually in the process of revisiting our Kind of the pricing strategy for both the logistics and the marketplace in the second quarter and so that we Make sure we are pricing for both services are proper reflection of the fair value we created for our merchants going forward.

Operator

Great. Thank you. All right. Thank you so much for that. Our next question will be coming from the line of Yigal Arunyan with Citigroup.

Operator

One moment while your line opens. Your line is now open.

Speaker 6

Hey, everyone. Thanks for taking my questions. I guess just to start on the macro, we've seen some pressure on discretionary spend, particularly around Lower income demographics. So are you seeing any of that? Or are you seeing any impacts?

Speaker 6

We've also heard of Some trade down impacts. So have you seen any benefits from consumers trading down?

Speaker 3

Okay. So I think, yes, we are our core customers are value conscious customers. So in the Tougher macro environment, we do expect to trade down like customers trading on price, which should be a tailwind for our business. To be very transparent, we also potentially There's some headwind in such macro environment because we are more discretionary spend, right, and for our buyers. And we don't sell food, Water and the Very Daily Essential.

Speaker 3

So that could be in the when Customers need to make a trade off. We may experience some of the headwind in that from that perspective. So I would say net net is probably neutral for us. And our growth strategy going forward is less about focusing on Right. In the macroeconomic trends, it's more about focusing on improving the core operations of at Wish Using basic improving the quality, improving the user experience to drive the retention And repeated purchases and building baskets for our buyers, so that they come back more often.

Speaker 3

So that's really I would say the key formula to for growth and better economics going forward. But to directly answer your question on the macro level, I think everything considered might be, I would say, neutral to maybe slightly positive.

Speaker 2

Yes. And this is Joanne. Just maybe add on a little bit to Wieren just said, right? So Wish, as a company, we started preparing The way ahead of the industry for this uncertain macro environment, right? So when we started the turnaround journey 18 months ago, so financially, actually, we focus on Reducing the cash burn and improving the cost efficiency, right?

Speaker 2

So one thing to mention here is our cash used in 2022 Was 50% of that of 2021, right? So operationally, we're also focused on building the strong core marketplace capability, Which we have seen tremendous improvements, right, so in the listing quality and also app customer NPS and the better conversion to retention, etcetera. So we believe that we have the right strategy in place to respond to the changes in the micro environment, and we are Taking a disciplined approach, right, in financial management to make sure that we have sufficient capital to complete the turnaround journey.

Speaker 6

Okay. Thanks. Yes, that's super helpful. And then maybe just one on the competitive environment. Just comment on the last quarter and what you've seen through April.

Speaker 6

The competitive environment Gotten has it intensity increased at all and is the marketing spend in 2Q, we've seen I think some new entrants Coming to the market and push on marketing, is that the marketing spend in 2Q, is that any response to that at all? Yes.

Speaker 2

I think, 1st of all, looking at the global e commerce landscape, right, this is the multi trillion market, right? So market is massive enough for Many e commerce companies do have their unique play in the market, right? And Wish we as a global e commerce marketplace, right? So we still Focusing on providing our value proposition, which are the affordability and the discovery, right? And the list of things definitely allowed us can really provide affordable products to the consumer globally and Provide the customer more fun, entertaining and personalized discovery based shopping experience, right?

Speaker 2

On demand side, so actually we have the consumer from over 60 countries. So in terms of this geography coverage, right, so we have broader coverage compared to Many other players, right, in the market. And on the supply side, right, we have a very diverse portfolio of merchants, right, from the different supply markets, Not only in China, Asia and also we have the merchants in U. S. And Europe, which can allow us to really kind of provide a very Diverse and competitive assortment and merchandise to the consumer from the over 60 countries in the world.

Speaker 2

So the short answer here is that it's actually we're still focusing on our kind of unique value proposition, right? And definitely, I think The competitive environment is something we need to monitor and track, right? And there's something, as Vivien just mentioned, right? So The Aspen, the marketing thing is always the driver of the business, but it's not the only thing we will bet on, right? So we still focus on a lot of Other initiatives to drive the efficiency on both on pay to pay marketing and also from the what we shared in the prepared remarks, right.

Speaker 2

So We're also doubling down on the growth product and to see how we can invest more in the guest experience and also accelerating the use of the incentive, right, to Kind of convert to drive the buyer conversion, right? Those things that you combine together with the effort, right? So we believe that you can really help us kind of win in the competitive environment.

Speaker 6

Okay, great. Awesome. Thank you.

Operator

Thank you so much. Our next question We'll be coming from the line of Kunal Madhukar with UBS. One moment While you're in line

Speaker 1

with me.

Speaker 5

Just a quick follow-up to the questions Nicole asked. So on the free cash flow, I saw that the free cash flow for the quarter was like negative 95,000,000 Can you talk about how we should kind of think about the evolution of cash as we go through 2020 And as we go through 2024, what is contemplated in your turnaround plan? Thank you.

Speaker 3

Yes. Thank you, Kuna, for the question. So first of all, yes, so the Q1 cash flow cash consumption or cash flow from operating Activity is about $90,000,000 to $95,000,000 And just a reminder, that's a significant improvement From a year over year standpoint, to be exact about 37% year over year improvement and the quarter over quarter is also about 16% quarter over quarter improvement. So the cash flow It's getting better, right. And also Joe mentioned, if you look at the entire 2022, The cash consumption compared to the entire 2021, we only consumed about 50%, right, and from a year over year standpoint.

Speaker 3

So we certainly very much focus on cash flow optimization. Now going forward, keeping in mind, the cash Consumption comes from 2 sources. 1 is the EBITDA gain or loss, right? And the level of the EBITDA It's number 1. Number 2 is the Tianjin working capital.

Speaker 3

So the Tianjin working capital is driven by the movements in the top line, right? When you have positive growth in the top line or less decline in the top line, That tend to generate a change in working capital that is a favorable to cash flow. So back to your question, how do we think about those two factors We have already seen a lot of improvements in unit economics, as both Joe and I mentioned, and that improved pretty steadily since last year. Economics is getting better, thanks to cost efficiency, thanks to the better average transaction value. So We expect to continue that trend with the unit economics and so that should help our EBITDA loss and reducing that loss level.

Speaker 3

That's number 1. Number 2, as we invest in growth, that will drive the positive trend in the top Right. And you guys left declines sliding out or start going back up. So that movement in the top line will create a change in working capital that will be favorable to cash flow. So if both factors are moving in the right direction, certainly which certainly is our goal, we should see cash flow continue to improve for the remainder of the year.

Speaker 3

I hope that answered your question.

Speaker 5

Thank you. Sorry, I was on mute.

Speaker 3

You're welcome.

Operator

All right. Thank you. Our Last question will be coming from the line of Stephen McDonnell with Bank of America again.

Speaker 4

Hi, this is Stephen Mcderm with Bank of America again. Just two follow ups. I guess since the revenue guidance is new, What goes into guidance? Can we get some color there? And then you said you're going to or you are revisiting the pricing strategy for logistics and marketplace.

Speaker 4

Could we actually expect that to be another headwind in 2H of this year? Thank you.

Speaker 3

Yes. Maybe First, answer your second question. No, we do not expect this revisiting to the pricing strategy on both sides to be Generate similar impact as the last pricing changes we made in Q2 by the end of Q2 2022. Those are very different type of pricing changes. So to answer your question second question first, no, we do not expect a similar impact for the new initiative we are undertaking.

Speaker 3

On the first question, how what went into the revenue guidance, which is which we put out for the first time. We really started with our expected volume, expected buyer counts, Expected transaction size, which is ATV. And basically, we first form a view on the volume and ATV And then take that into the model and work out our revenue forecast. So it's nothing Too fancy here, but it really goes back to the fundamentals of our business. Where do we see our business going All the OKRs, conversions, retention, ATV, MAUs, buyer counts, where we are today, What we are implementing in this current quarter or what we have implemented in previous quarters and how would that impact all OTRs, which land in our expectation on the GMV and then work that down to revenue.

Speaker 3

So I hope that's what we're looking for, but that's exercise that we went through to form revenue guidance for this quarter.

Speaker 4

Yes. I guess just more granularly, is the Expectations that you're seeing based on data from the most current month, say April or kind of A more overarching year over year trend that we're seeing. How granular is it? Thank you.

Speaker 3

Yes. It's based on the trend we have seen, but it's not just a year over year, like a quarter over 1 quarter over the same quarter last Here, it's based on the trends that we have observed in the past few quarters, right? And we look at the pattern where we're moving in terms of conversion rate, retention rate, ATV and the buyer count and how that correlates with our investment level ad spend and what we plan to do in Q2 and other features we're implementing or improvements we're implementing at the time line of that and that's how we model out the top line. So it's based on the trend, not only over year over year, but it's actually a pattern that we have observed.

Speaker 4

Excellent. That's great. Thank you.

Speaker 3

You're welcome.

Operator

All right. Thank you so much for that. All right. Okay. So that was our final question then.

Operator

All right. All right.

Speaker 1

Yes. I think we can conclude the call.

Operator

Okay. Well, this will conclude our question and answer portion of today's call. At this time, I would like to turn the conference over to Wish CEO, Joe Yan, for closing remarks.

Speaker 2

Thanks, everyone, for joining our earnings conference call, and we look forward to talking to you throughout the quarter.

Operator

Okay. Ladies and gentlemen, this does conclude today's conference call. You may all disconnect and have a wonderful day.

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Earnings Conference Call
LogicBio Therapeutics Q1 2023
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