Q2 2021 ContextLogic Inc Earnings Call

August 12, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to the wish second quarter 2021 earnings Conference call.

At this time all participants lines are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to Dennis Walsh, Rich VP and Investor Relations. Thank you. Please go ahead Sir.

Thank you Mike Good afternoon, and welcome everyone. Joining me today to discuss our results are Richardson CEO, Peter <unk> as well as our interim co CFO, Bret chest and Jennifer Oliver.

During the call we will make forward looking statements about our future plans and financial performance.

Eight minutes are subject to risks uncertainties and assumptions.

Risks materialize or assumptions prove incorrect actual results could differ materially from the results implied by these forward looking statements we.

We encourage you to consider the risk factors described in our SEC filings for additional information.

The date of this call is August 12.2021.

Forward looking statements made today are based on assumptions as of this date.

We undertake no obligation to and do not intend to update these statements as a result of new information or events.

This call is being broadcast on the Internet.

On our Investor Relations website.

Wording of the call will be available later today.

During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA and free cash flow.

Courage, you to read our quarterly shareholder letter and earnings news release, both of which can be found our investor relations website and on a form 8-K, which we filed with the SEC because they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures.

I'll now open with brief remarks, and then we will take your questions and with that I'll turn the call over to Peter.

Thank you Dennis and welcome everyone wished.

Which faced several obstacles that affected our performance in the second quarter of 2021, our results were disappointing as it came in below expectations on both the top and Bottomline due to a combination of macro and company specific headwinds.

We expected user attention to increase now that we have made reliable logistics.

However, our retention declined inside.

We know that we can do better, but first need to make changes to the way that we operate and improve our execution. While we have already begun taking action. We expect there will be several quarters before the benefits begin to materialize.

I'll focus my opening remarks today on the headwinds we face and the actions we are taking to address them, then I will close out with our outlook.

You can find a detailed review of our results in the shareholder letter that has been posted to our Investor Relations website.

Starting with our Q2 results after a strong start demand slowed as we moved through the quarter.

<unk> and a 6% year over year decline in revenue to $656 million.

Logistics revenue go up 126% year over year was more than offset by 29% year over year decline in marketplace revenue.

We are not pleased with this revenue performance, we should note that we take the very difficult comparison with the second quarter of 2020.

That period last year with strong due to increased mobile usage unless competition from physical retail as the pandemic intensified.

Our Q2 guidance that we provided cultural only a 3% year over year revenue growth at the midpoint of the range on the bottom line, we reported a second quarter of 2021 net loss of $111 million and adjusted EBIT loss of $67 million. This compares with a net loss of $11 million and adjusted EBITDA gain of $16 million in Q2.2020.

The increased losses were primarily due to lower order volume and the comp to a strong Q2.2020.

From a macro perspective, a vaccine rates increased and stay at home orders began to ease over the past few months.

Daily user activity and active buyers on our platform declined more than we anticipated. This was particularly true in the U S, France, and Italy three of our largest markets. In fact, we saw a 13% reduction in App installs and a 15% reduction in average time spent on our platform globally from the second quarter of 2020, despite lower engagement the cost of digital.

<unk>, a leading AD platform, which historically have generated a lot of demand and conversion of new and existing buyers on our apps continued to increase during Q2.

Fact, cpm's on one platform were up nearly 50% year over year.

<unk> the recent policy changes for Iowa, how cook more advertisers to shift spend to Android devices. As a reminder, the majority of wish users on Android devices. So the iOS changes were not expected to have any immediate major impact on our business. However, as more advertisers shifted their spend from Iowa to Android drove up bid for impressions.

Limited the quantity of impression supply and ultimately increased our advertising costs.

These rising digital advertising cost contributed to lower marketing efficiency. Therefore.

Therefore during the quarter.

Wishes propriety data science algorithms reduce our digital advertising spend resulting in slower new buyer growth and reduced retention our algorithms are this.

To optimize our returns on marketing investments and user conversion and real time ultimately our goal is to execute cost effective and successful digital marketing strategies to acquire new users and reengage existing users on the which platform.

The rise in digital advertising costs, coupled with declining retention and new buyer conversion requires us to make some significant changes in the way. We operate we are implementing the following initiatives that we believe will improve the user experience and increase retention.

We are focused on enhancing product quality and selection like wish it new quality score system. We are not in that we're now emphasizing products and merchants that received positive ratings and feedback from our users in July we initiated an impression with distribution process to prioritize more high quality merchants and products within the App seat.

We are augmenting our inventory with more globally recognizable brands and product categories like apparel home goods and gadgets that translate well into an online treasure Hunt experience, we have a significant amount of data that we can leverage to select attractively priced high quality products that should delight our users.

Second we strive to ensure that the wish App provides and a matching fund entertaining shopping experience for all users to do so we are developing a more engaging and personalized discovery based online shopping experience.

In addition to providing users with a unique experience eclectic product and great prices.

I wish I also provides a way to be compressed or to get inspired.

Our users have told us that they want they wished shopping experience to be even more fun and to incorporate even more social elements. We are entering their call by leaning into social commerce and entertaining features such as video with you shop. The ball Influencer content more give me application, which has a unique opportunity to create moments of fun in People's lives and also.

Introducing products that piques their interest that they may have never known existed.

He was their steel joy, while on the wish App, we believe that they will come back often we strongly believe that social shopping experiences of the future of E. Commerce, our focus on entertaining teachers dovetails perfectly with where the industry is going we believe.

But we have the brand and the user base to support leaning into this strategy.

We have already begun implementing some of these initiatives two weeks ago, we hosted our first live shopping events on Instagram live stream featured an influencer conducting a makeup tutorial using beauty products available on which we're also working with a group of Influencers to promote apparel product like Australia or social media platforms.

She is well positioned to be on the leading edge of the social commerce trends. So you can expect to see more of these innovation from us over the next few quarters.

Overseas the evolution of our product strategy, we welcomed our new chief product Officer Rune Jane to our leadership team just last week alone bring to west a deep product management experience, including incubating in leading the development of Google's discovery ads, which typically drive higher levels of engagement and direct response ads. We are fortunate to have someone of <unk>.

<unk>, leading product at which deferred.

Third we recognize the need to enhance the user experience on our apps from end to end since which was built on a culture of experimentation there had been a high number of ongoing platform tests that resulted in a slowdown or latency of the app speed.

Florida platform performance impacted the user experience, particularly for existing users who are used to it faster smoother experience to address the slowdown we conducted a thorough review of them clean up of all open test, which has already resulted in significant latency improvement in fact, we have reduced our app speed by nearly 50%. This is an impressive upgrade that.

Enhances the user experience going forward, we will aim to more effectively balance testing to advance innovation, where they need to maintain optimal platform performance for our users in.

In July we brought on a new Chief Technology Officer, Ron Cafe.

Merci wished core product suite and the creation of new technology solution.

For hung also joins us from Google, where he led the development and rollout of full stock commerce capabilities for Hong has worked with logistics and scaling merchant Onboarding at Google are particularly relevant experiences that will have positive impact on our core business.

As you may have realized the actions we are discussing today have one commonality that focus on our users we have identified opportunities for improvement and believe that successful execution on these initiatives will position wish for a strong rebound. However, we do not expect the benefits of these actions outlined to date to begin materializing into positive year over year results.

The second half of 2022.

We have already begun to significantly cut back our digital advertising spend.

And with a focus on maintaining a retention of our existing user base and the near term, we believe <unk> conversions will be minimal.

Once we see improved user engagement trends, we plan to slowly ramp up our growth advertising investment.

Reignite, our new user acquisition engine.

At this time, we will not be providing our usual quarterly revenue outlook. As we are focused squarely on execution and efficient expense management to provide some context quarter to date total revenue through July 2021 was down approximately 40% compared with the prior quarter, while marketplace revenue was down approximately 55% compared to the same period.

With the pullback in digital AD spending, we expect third quarter revenue to decline further.

We expect third quarter adjusted EBITDA loss in the range of 70 million to $65 million.

As we look ahead to the second half of 2021 and beyond we are sharply focused on execution and user retention.

We have a solid cash position to navigate this turnaround with a goal of returning to growth we plan to maintain a disciplined approach to cash management as we progress towards improving adjusted EBITDA on a sequential basis, beginning with the fourth quarter of 2021.

Before we open up the call for your questions I want to reiterate that these results are not reflective of what we believe this company can achieve we clearly have work to do to turn out performance around.

But we have identified opportunities for improvement.

And the way we operate.

So I am super optimistic about wishes future.

The initiatives outlined today will support our strategic execution as we progress towards achieving our long term vision.

Along the way we've tried to create a more engaging experience for our users and merchants.

And to generate greater value for our shareholders.

We will work hard to return to growth during 2022, and we are confident that we will emerge as a stronger business.

With that I'll.

Operator, we are ready for the first question.

As a reminder to ask a question you will need to press star one on your telephone to withdraw.

Your question press the pound key.

Keith Please standby, while we compile the Q&A roster.

Your first question comes from the line of Doug.

<unk> of Jpmorgan Your line is open.

Hi, This is Neil on for Doug.

Just a couple of questions. So first just wanted to understand if you can pass through the impact from reopening versus the higher cost of advertising.

And second would be you had talked previously that you can become profitable if you even if you stopped advertising, which we saw in first half of 2019, So how has that dynamic changed.

<unk>.

In this quarter. Thanks.

Yeah. Thanks, Thanks, Doug.

That's good.

Good question look as we've mentioned.

<unk>, several macro and company specific headwinds.

Which we're addressing with the actions.

Perpetual will impact our near term results.

About that we believe will generate.

More sustainable and consistent long term revenue growth.

So from a macro perspective, the stay at home restrictions.

The ease and as the economies begin to open consumer spend less time at home and less time on their phones, which has impact user activity on our App. This includes engagement conversion to sales and retention at the same time.

CAC or customer acquisition cost increase this quarter and retention has declined which has reduced LTV to CAC to a point, where we believe it just makes a lot more sense to focus on retention instead of investing in new buyer acquisition. So that results in lower outspend and obviously in a in a slowdown and a user buyer growth.

Retention has this decrease this quarter and our marketing is less efficient as the costs for impressions continue to rise so as mentioned in the remarks.

One eye platform.

Surprising and unexpected to see BMS cpm's have increased 50% year over year.

It's quite a dramatic rise I don't think we've seen that before on other platforms.

<unk> has even doubled year over year on a CPC basis.

We expected the retention to improve.

Logistics became a much more reliable we were successful in improving logistics as evidenced by lower customer complaints related to logistics.

And shipping reasons not being the number one reason any longer for customer service requests or complaints. However retention has continued to decline, indicating that really we need to improve other areas of our business starting with product quality.

And then once we solved its reduction and retention.

And increasing cost of acquiring new customers, we adjusted our user acquisition strategy right. So as a result of these factors Q2, Mou for down 22% year over year and active buyers will actually down 44% year over year I'm, just trying to actually continued into July and they use.

Are down 9%, even compared to June.

We do plan to reinvest in growth once we see improvements in user engagement trends.

But until then.

Think that spending on low retention buyers is not good.

Our strategy for US and then to address the second portion of your question.

And in the past.

With with where historically.

The cost of advertising, even on a CPM basis has been.

That was the case and I think notably in 2019, but with this unexpected rise in digital advertising.

That has become a much greater challenge.

Got it thank you.

Your next question comes from the line of Stephen Ju of Credit Suisse. Your line is open.

Hey, this is Tyler on for Stephen.

So Peter it seems like for now the LTV to CAC ratio is not at a place where you want to spend.

An acquisition, but.

One thing you can do to potentially increase LTV.

Is better product selection or more selection in general.

So what can you do in that regard I think you talked about.

Apparel and home goods in Europe.

In your prepared remarks.

So is that a potential recovery direction you could take.

And any more color here would be appreciated thanks.

Yeah, I think SEC Tyler yeah. So the core marketplace revenue per active buyer is actually up 21%.

Year over year.

So there are there are signs that that.

Sort of continues to improve we're seeing signs of that with the <unk> as well.

And of course, we want to add as many products as possible that will ultimately appeal and delight, our customers so expansion and to a more more branded products or even more high quality products as part of that strategy, especially in categories.

That will drive.

Are there sort of repeat purchase behavior.

Now.

We do have this pilot around logistics as a service for non wish transactions and non wished merchants.

Right. So there's already includes several online retailers.

And we have extended this test to to open it up to more retailers.

It's probably too early to share any specific details, but we're very encouraged by sort of the early signs that we've actually.

We've actually had feedback on.

From the from the participants.

So far.

And then I believe your last question was centered around sort of other leadership changes look I think ultimately we want to bring in a world class team.

Running an E Commerce company has many sort of different and distinct and unique moving parts.

With the additions that we've made in just the last four weeks or so.

With our Chief Technical Officer, and our Chief product Officer, we're making the right moves we're always looking to attract top industry talent.

But we don't necessarily have other than sort of the CFO search that we have.

That's going on.

To find a permanent CFO for which we don't really have anything else to announce at this moment.

Thanks for the color.

Your next question comes from the line of Michael Knott Sovereign of Bank of America. Your line is open.

Hey, guys. Thanks for taking my question I was just wondering if you could dig a little bit further ended the quarter to date trends that youre seeing that you outlined in the shareholder letter it looks like in my model to get to a 55% decline I would have to model core marketplace revenue down on a year over year basis, and like you said.

Earlier, it was still up 21% in the second quarter. So can you just parse a little bit further into what you are seeing like with that and also with product grew this quarter to date and then.

Could you also just dig a little bit into the kind of user engagement trends that you would need to see to once again ramp up that digital AD spend and what do you want to see from users in terms of that recovery. Thank you.

Yeah, Thanks, Michael so.

On a quarter the trends you know I think Jennifer who's on the on the on this call is probably the best person to sort of handle or be able to answer what would already to discuss today.

And I'll I'll handle the probably boost update or sort of anything around user engagement trends that we will need to ramp.

Brent back up.

On a pro initiatives in the future.

Yes, perfect. Thank you.

Your next question comes from the line of throughout the country out of Evercore ISI. Your line is open.

Hey, it's right now, but I wonder if my question needs to be answered first before I can yeah.

Okay. Please go ahead.

Alright, and thank you for your question, Mike Yeah. So in terms of quarter to date declines in our core marketplace revenue its really driven by declined buyers and users again, partially driven by macroeconomic trends that we're seeing and partially driven by our reduction in AD spend which has resulted in lower buyer and user count.

And that's just resulting in lower orders.

On the platform.

Yeah.

Just sort of you know.

A product update.

Look I don't think we have anything specific to update their Ah I think product buses is essentially a function of engagement.

And conversion rates on the platform. So I'll, probably just leave it leave it at that.

And then.

The last part of your question centered around user engagement trends I mean, it looked like ultimately.

It's driven by a conviction and LTV to CAC.

Ratios, so sort of the there's probably.

We're looking at sort of two components there one one which is much more so within our control, which is the numerator of that of that equation.

That formula, which is which is increasing LTV.

So we're seeing sort of some positive trends, although not enough to sort of overcome what we've seen with the cap increases and the other is potentially by reducing at.

Either just due to external factors or potentially diversifying our marketing initiatives into into the sort of brand new areas that are still very preliminary but that we're experimenting with.

Your next question comes from the line of Laura Champine of Loop capital. Your line is open.

Yeah. Thanks for taking my question, just kind of high level, what will you need to see before you invest more in marketing expense like what are the the the sign posts that you'll need to see in your business that tells you is the right time to step that up.

Yeah, Laura I think again, that's a great question so.

Yeah, I think it's again sort of our our conviction and to LTV over CAC.

And and the payback period.

And you know those things can take a while to actually assess.

But we believe we have a pretty good sense by by leveraging our historical data.

On being able to extrapolate even from sort of earlier signals.

We don't need a full two years.

So actually figure out what the expected LTV of a particular type of user.

You know what.

It would actually be comment I think oh.

Again sort of the numerator in that equation LTV is very much so up to us.

And the denominator.

That's really up to us if we discover ways in which we can diversify our sort of growth strategy or customer acquisition strategy in major ways.

So.

There's sort of various ways to do this we discussed.

Increasing engagement at sort of the top of the funnel right. So this would be all the types of new features and sort of fun and entertaining experiences.

The other would be to increase retention.

And that would largely be driven now that we've done sort of the logistics improvements by improving product quality.

Post purchase are improving the post purchase customer experience to drive up.

Higher retention. So we think we have all the right metrics and we have the right strategy, we just need to be in a place where you know if it's either sort of market by market.

Essentially you know category by category, maybe sort of even more generally where we feel confident about where we're headed with respect to LTV to CAC.

Got it thank you.

Thanks.

Your next question comes from the line of swept the country area of Evercore ISI. Your line is open.

Okay. Thanks, Let me try two please could you talk about revenue per buyer trends, you're seeing in the third quarter.

And then the second question is.

Could you please give more color on the CFO search so what kind of timeline are we looking at what are you looking for in a new CFO.

I mean any color around that that'd be great. Thanks.

Yes, thanks for the question Trevor.

Jennifer do we have anything to share at this point in time in terms of revenue per buyer I'm. Assuming this is core marketplace revenue or maybe revenue in general per buyer in Q3, I'm not sure. If we were sort of disclosing anything there at this point in time.

I don't think we've disclosed that at the current time.

Yeah.

Okay.

And so for the second part of your question look we continue to work with Heidrick <unk> struggles.

Prominent search firm to find a permanent CFO.

We are encouraged by our progress and believe that we will have a strong finance leader before the end of the year.

Okay. Thanks, and then Peter if I could add.

I had one more what are your so how are you you laid out your three priority in your shareholder letter you talked in your prepared remarks, but you also have other growth invest.

Investment areas of priority for example, with local and then logistics remain you know what.

Got it.

Service and logistics and its and initiative. So how are you the prior guidance your internal.

Operations in Canada.

For the next six to 12 months.

Well what is not a priority anymore.

When you compare it to the three antibody you laid out in the shareholder letter.

Yeah sure I think that's that's a great question.

So look with respect to wish local and data initiatives.

Ship to wish local for store pickup continues to grow as an overall percentage of total volume. So it's it's it's 10% or in Q2 was 10% of overall total order volume.

And that's up from from 7% in Q1.

And then in some markets like Mexico.

No its actually north of 50% now it'll use I think a 37%, Spain at 27% and I think we can actually replicate this model in other markets and are already seeing strong adoption in markets like Portugal hungry.

And in the Netherlands, So I think look we're not going to discontinue this initiatives there.

Arent that many resources put on it.

As you know, we have 60000 store partners or so.

In over 50 countries, we're being very selective selective and strategic around which store partners, we choose to engage with them and onboard into this program. So we're.

We're not cutting these initiatives off I, just think that we actually have a bigger opportunities ahead of us.

In terms of sort of.

More foundation really changing some aspects of how our consumers engage with the platform. So just from a sort of digital usage perspective.

And then on top of that really really really improving the product quality now that we've improved the logistics component.

So you know I think there's going to be potentially some shuffling of resources in order to sort of pursue those three pillars.

But you know I don't think that we're going to shut down any of these sort of very promising initiatives.

They might not sort of gets.

The amount of resources that they would've otherwise had but we think that there's still very promising and especially in the long term and there will be sort of a key driver for what we what we do in the future.

Terms of logistics.

We tried to do.

The best that we can obviously first and foremost prioritizing transactions and consumer experiences for wish.

You know we still have this pilot that's continuing where we continue to add more and more retailers that are potential.

Potentially not transacting on wish that all our retailers that are on wish but are leveraging it for transactions off of our platform and again, we're not going to be shutting any of these initiatives down we might be we might be shuffling resources and re prioritizing things because we think that there are much larger opportunities in some of these areas centered around these three pillars.

But but overall.

In the long run we still have this sort of massive opportunity.

And sort of the outlook hasnt changed potentially the timeline or how we get there has changed around a little bit, but we're super optimistic about the future.

Okay very helpful. Thank you Peter.

Again to ask a question you will need to press star one on your telephone keypad again that is star one on your telephone keypad.

Your next question comes from the line of John Blackledge of Cowen Your line is open.

Hi, This is bill on for John Thanks for taking the question we've heard from several people in the retail and E Commerce industries that shipping and fulfillment environment right now is particularly challenging.

Could you just talk about the impact you saw from those headwinds and how your logistics platform helps you navigate that environment and then I have one other question. Thanks.

Sure Yeah.

Look so I think.

It's been sort of challenging for.

Absolutely everyone.

Our advantage.

Sort of.

Several.

So several ways to actually do this better one is obviously just the.

Volume cost savings that we get just just from from partnering with with our logistics carriers logistics partners to is just much deeper integration.

Especially one in there sort of a first mile operations and cost savings there, but even more importantly, so and and what we're doing with these tighter integrations and the last mile.

And.

Also going into what we've been able to do.

With our a plus programs.

Our our sort of combination.

Efforts.

And extending into sort of what we're doing with local or we're getting even even larger cost savings.

Thank you.

There have been substantial headwinds this really really started with.

Whats been going into the pandemic, but even earlier, we respected that cost basis, but.

But we think that logistics will sort of continue to be.

A large competitive advantage with us, especially with volume and especially as we have these tighter integrations all the way to sort of last mile delivery carriers national postal services or their commercial arms.

And even into local stores, which continues to eat up a larger and larger percentage of order volume.

<unk>.

So there have been lots of headwinds there but.

But there have been various ways in which we mitigate it one is optimization tool with volume cost savings three is sort of incentivizing customers to buy more in sort of the.

The combination of efforts that we have around their only optimizations around all those three factors and then ultimately shipping items to stores and we're excited about the competitiveness that we have within our marketplace and eventually extending that.

Starting with a pilot that we're doing to transactions and merchants on our platform as well.

Great. Thank you that's Super helpful. And then were there any particular categories that you know, maybe really struggled or where it stood out as bright spots in the quarter and Andy we should.

Look forward to an <unk> and as we round through the year that should should help to drive some some level of growth.

Thank you.

Sure.

So look our largest categories typically include accessories hobbies sort of Guy just electronics home decor fashion makeup.

And sort of beauty.

Yeah.

Think sort of consistently what we've been seeing is as we sort of add higher quality products as we add more branded products.

We're seeing sort of an increase in <unk>.

For the most part now we've sort of launched this new revenue share structure that actually incentivize this higher quality products and products that ship.

Much much faster.

I think both electronics and home decor have been doing quite well.

So we're going to be leaning into those categories, but where we're always looking at adding more branded inventory and filling in the gaps in our catalog.

As long as those types of products, we feel where it will delight, our consumers and our consumers are looking for products in those categories.

Great. Thank you.

Your next question comes from the line of Nick Jones of Citi. Your line is open.

Great. Thanks can you touch on a revenue per active buyer trends and three Q versus two two in and how that feeds into kind of the trends that were in the press release.

And then as you know as we think about AD spend.

I think the rest of the year, you think of an uptick in AD rates or just efficiency breaking down.

How are you thinking about that maybe longer term or is that kind of temporary as more dollars come on line.

Or is it kind of structurally higher as Theres, a bigger focus on digital.

Yeah, Hey, Nick so thanks for the question I'll handle the sort of the your second question first and then I think against their agenda for sort of a better position to to discuss the sort.

Sort of revenue per active buyer trends Q.

Q2, Q3 this year.

So in terms of how we're thinking about the outspend over the next several quarters like look.

Of the top line impact will primarily be driven by significantly lower digital advertising spend and especially on new buyer acquisition.

As we address our issues with retention and marketing efficiency and the unit economics around that which we believe we have a very very strong and effective plan for it.

Right now LTV to CAC is just not in a place where it makes sense for us to spend at historical levels. So we have made a strategic decision to temporarily slow down, especially on a on a new new user new buyer acquisition ASP.

So we're just kind of thinking about the next several quarters look we're going to be taking a very disciplined approach.

To expand on cash management.

And again sort of the main level lever of course for our for our EBITA as our digital I've spent historically its been you know, 95% or so of sales and marketing expense for Q3, we began significantly reducing outspend, especially starting in July and.

And we expect the outspend to be lower for the second half of Q3 than the first so as a result, adjusted EBITDA is expected to be in the range of negative <unk> 70 was negative $65 million I've mentioned earlier.

And we plan to maintain Ive spent at this reduced level until we see an improvement trends in terms of.

User engagement and really sort of the numerator of the LTV to CAC equation.

Just a sort of a reminder, historically approximately 60% of our AD spend has been focused on driving our new app installs.

And that's what we've been reduced with reducing that spent significantly and we will continue to do so.

Likely for the next few quarters as we focused on on sort of engaging with our existing users are resurrecting you know quality pass users et cetera. So going forward, we expect to see sequential improvement in EBIDTA, but that's going to be sort of an outcome of lowering how it's been.

And Jonathan I don't think you have any further comments on revenue per active buyer Q3 versus Q2 et cetera.

Yeah sure. Thanks, Peter and Thanks for your question on active buyers, we did not provide revenue guidance for Q3.

However, based on Peter's opening remarks, and we shared that quarter to date revenue was down roughly 40% in July and that's primarily driven by lower by our count again.

Again, driven by lower Ad spend.

And going through the rest of the quarter, we expect that to decline further as we only started pointing back AD spend part of the way through July.

Great. Thanks for taking the questions.

We have reached the end of our call and I will turn back to Peter for any closing comments or remarks.

Thank you everyone for your questions today.

I'd just like to remind everyone. We're not satisfied with these results and the outlook.

We all know that we can do better with.

Action to improve our performance for the long term.

Especially we will focus on enhancing the user experience and increasing retention, we look forward to providing an update on our next call in November.

So thank you all.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Ladies and gentlemen, thank you for standing by and welcome to the wish second quarter 2021 earnings Conference call.

At this time all participants lines are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Ask a question during the session you will need to press star one on your telephone.

Acquired any further assistance please press star zero.

I'd now like to hand, the conference over to Dennis Walsh, Mitch VP Investor Relations. Thank you. Please go ahead Sir.

Thank you Matt Good afternoon, and welcome everyone. Joining me today to discuss our results are Mr. Steinberg CEO, Peter <unk> as well as our interim co CFO, Bret jazz and Jennifer Oliver.

During the call we will make forward looking statements about our future plans and financial performance.

These statements are subject to risks uncertainties and assumptions and the risks materialize or assumptions prove incorrect actual results could differ materially from the results implied by these forward looking statements.

We encourage you to consider the risk factors described in our SEC filings for additional information the.

The date of this call is August 12, 2021 and forward looking statements made today are based on assumptions as of this date.

We undertake no obligation to and do not intend to update these statements as a result of new information or events.

This call is being broadcast on the Internet.

On our Investor Relations website.

The call will be available later today.

During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA and free cash flow.

I'll now open with brief remarks, and then we will take your questions and with that I'll turn the call over to Peter.

Thank you Dennis and.

And welcome everyone.

Which faced several obstacles that affected our performance in the second quarter of 2021, our results were disappointing as it came in below our expectations on both the top and bottom line due to a combination of macro and company specific headwinds and <unk>.

We expect that user attention to increase now that we have made reliable logistics.

However, our retention declined instead, we know that we can do better but first need to make changes to the way that we operate and improve our execution. While we have already begun taking action. We expect there will be several quarters before the benefits begin to materialize.

I'll focus my opening remarks today on the headwinds we face and the actions we are taking to address them, then I will close out with our outlook.

You can find a detailed review of our results in the shareholder letter that has been posted to our Investor Relations website.

Starting with our Q2 results after a strong start demand slowed as we moved through the quarter.

<unk> and a 6% year over year decline in revenue to $656 million.

Logistics revenue grew 26% year over year was more than offset by a 29% year over year decline in marketplace revenue.

We are not pleased with this revenue performance, we should note that we take the very difficult comparison with the second quarter of 2020.

That period last year with stronger to increased mobile usage and less competition from physical retail and then make intensified.

Our Q2 guidance that we provided cultural only a 3% year over year revenue growth at the midpoint of the range on the bottom line, we reported a second quarter 2021, net loss of $111 million and adjusted EBITDA loss of $67 million. This compares with a net loss of $11 million and adjusted EBITDA gain of $16 million in Q2.2020.

The increased losses were primarily due to lower order volume and the comp to a strong Q2.2020.

From a macro perspective vaccine rates increased and stay at home orders began to ease over the past few months.

Daily user activity and active buyers on our platform declined more than we anticipated.

Particularly true in the U S, France, and Italy, three of our largest markets. In fact, we saw a 13% reduction in App installs and a 15% reduction in the average time spent on our platform globally from the second quarter of 2020.

Despite lower engagement the cost of digital advertising on leading AD platforms, which historically have generated a lot of demand and conversion of new and existing buyers.

Continued to increase during Q2 in fact CPM on one platform were up nearly 50% year over year.

In addition, the recent policy changes for Iowa, how cause more advertisers to shift spend to Android devices.

As a reminder, the majority of wish users on Android devices. So the iOS changes were not expected to have any immediate major impact on our business. However, as more advertisers shifted their spend from iOS to Android and drove up bid for impressions.

Limited the quantity of impression supply and ultimately increased our advertising costs.

These rising digital advertising cost contributed to lower marketing efficiency.

Therefore during the quarter.

Which is proprietary data science algorithms reduce our digital advertising spend resulting in slower new buyer growth and reduced retention our algorithm.

To optimize our returns on marketing investment and user conversion and real time ultimately our goal is to execute cost effective and successful digital marketing strategies to acquire new users and reengage existing users on the which platform.

Verizon digital advertising costs, coupled with declining retention and new buyer conversion requires us to make some significant changes in the way. We operate we are implementing the following initiatives that we believe will improve the user experience and increase retention.

We are focused on enhancing product quality and selection, but what's your new quality score system. We are now we're now emphasizing products and merchants that received positive ratings and feedback from our users in July we initiated an impression with distribution process to prioritize more high quality merchants and products within the App seat.

We are augmenting our inventory with more globally recognizable brands and product categories like apparel home goods and gadget that translate well into an online treasure Hunt experience, we have a significant amount of data that we can leverage the select attractively priced high quality products that should delight our users.

Second we strive to ensure that the wish App provides an unmatched upon entertaining shopping experience for all users to do so we are developing a more engaging and personalized discovery based online shopping experience.

In addition to providing users with a unique experience.

Products and great prices they.

I wish I also provides a way to decompress or to get inspired.

Users have told us that they want they wished shopping experience to be even more fun and to incorporate even more social elements. We are answering the call by leaning into social commerce entertaining features such as video with you shop, the bolt influencer content and mortgage application.

Which has a unique opportunity to create moments of fun in People's lives and also introducing new products that piques their interest that they may have never known existed.

Users feel joy, while on the which App, we believe that they will come back often we strongly believe that social shopping experiences of the future of E. Commerce. Our focus on entertaining features dovetails perfectly with where the industry is going we believe.

But we have the brand and the user base to support leaning into this strategy.

We have already begun implementing some of these initiatives two weeks ago, we hosted our first live shopping event on Instagram Livestream, featuring an influencer conducting a makeup tutorial using beauty products available on which we're also working with a group of Influencers to promote apparel product across various social media platforms.

She is well positioned to be on the leading edge of the social commerce trends. So you can expect to see more of these innovation from us over the next few quarters.

Overseas the evolution of our product strategy, we welcomed our new Chief product Officer Tyrone Jane to our leadership team just last week alone bring to west a deep product management experience, including incubating in leading the development of Google's discovery ads, which typically drive higher levels of engagement and direct response ads. We are fortunate to have someone of <unk>.

<unk>, leading product that wish.

We recognize the need to enhance the user experience on our apps from end to end since which was built on a culture of instrumentation. There had been a high number of ongoing platform pests that resulted in a slowdown or latency of the app speed.

The Florida platform performance impacted the user experience, particularly for existing users who are used to a faster smoother experience to address this slowdown we conducted a thorough review of them clean up of all open test, which has already resulted in significant latency improvement in fat.

We have reduced our app speed by nearly 50%. This is an impressive upgrade that dramatically enhances the user experience going forward, we will aim to more effectively balance testing to advance innovation, where they need to maintain optimal platform performance for our users and.

In July we brought on a new Chief Technology Officer, Barranca assay to oversee wished core product suite and the creation of new technology solution.

Hum.

<unk> also joined us from Google.

He led the development and rollout of full stock commerce capabilities for Hong has worked with logistics and scaling merchant Onboarding at Google are particularly relevant experiences that will have positive impact on our core business.

You may have realized the actions we are discussing today have one commonality.

Our users we have identified opportunities for improvement and believe that successful execution on these initiatives will position <unk> for a strong rebound. However, we do not expect the benefits of these actions I would like to date to begin materializing into positive year over year results until the second half of 2022.

We have already begun to significantly cut back our digital advertising spend.

And with a focus on maintaining a retention of our existing user base and the near term, we believe <unk> conversions will be minimal.

Once we see improved user engagement trends, we plan to slowly ramp up our advertising investment.

Reignite, our new user acquisition engine.

With the pullback in digital AD spending, we expect third quarter revenue to decline further.

We expect third quarter adjusted EBITA loss in the range of $70 million to 65 million.

As we look ahead to the second half of 2021 and beyond we are sharply focused on execution and user retention.

Before we open up the call for your questions I want to reiterate that these results are not reflective of what we believe this company can achieve we clearly have work to do to return our procurements around.

We have identified opportunities for improvement.

And the way we operate.

I am Super optimistic about what should future.

The initiatives outlined today will support our strategic execution as we progress towards achieving our long term vision along the way we've tried to create a more engaging experience for our users and merchants.

And to generate greater value for our shareholders.

We will work hard to return to growth during 2022, and we are confident that we will emerge as a stronger business.

With that operator, we are ready for the first question.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash Keith Please standby, while we compile the Q&A roster.

Your first question comes from the line of Doug.

<unk> of Jpmorgan Your line is open.

Oh, Hi, this is Neil on for Doug.

Just a couple of questions. So first just wanted to understand if you can parse through the impact from reopening versus the higher cost of advertising.

And second would be you had talked previously that you can become profitable if you even if you stopped advertising, which we saw in first half of 2019, So how has that dynamic changed.

<unk>.

In this quarter. Thanks.

Yeah. Thanks, Thanks, Bob.

That's good.

Good question look as we've mentioned.

I think several macro and company specific headwinds.

Which we are addressing with the actions.

That potentially will impact our near term results.

That we believe will generate.

More sustainable and consistent long term revenue growth for <unk>.

So from a macro perspective, the stay at home restrictions.

As they ease and as the economies begin to open consumers spend less time at home and less time on their phones, which has impact user activity on our apps. This includes engagement conversion and retention.

Any time.

Jack.

Acquisition cost increase this quarter and retention has declined which has reduced LTV to CAC to a point, where we believe it just makes a lot more sense to focus on retention.

That are investing in new buyer acquisition.

This resulted in lower outspend, and obviously in a in a slowdown and user and buyer growth.

Retention has this decrease this quarter and our marketing is less efficient as the costs for impressions continue to rise.

So as mentioned in our remarks.

One eye platform.

Surprising and unexpected Cpm's cpm's have increased 50% year over year, that's quite a dramatic rise I don't think we've seen that before on other platforms.

The cost has even doubled year over year on a CPC basis.

We expect that the retention to improve our logistics it became a much more reliable.

We're successful in improving logistics as evidenced by lower customer complaints related to logistics.

And that shipping reasons not being the number one reason any longer for customer service requests or complaints. However retention has continued to decline, indicating that really we need to improve other areas of our business.

With product quality.

And once we solve its reduction and retention.

An increase in cost of acquiring new customers, we adjusted our user acquisition strategy.

So as a result of these factors Q2, <unk> were down 22% year over year and active buyers will actually down 44% year over year and this trend has actually continued into July.

<unk> are down 9%, even compared to June.

So.

We do plan to reinvest in growth once we see improvements in user engagement trends.

But until then we think that spending on low retention buyers.

Not a good.

The strategy for US and then to address the second portion of your question.

And in the past.

With with where historically.

The cost of advertising even on a CPM basis has been that was the case and I think notably in 2019.

But with this unexpected rise in digital advertising a.

That has become a much greater challenge.

Got it thank you.

Your next question comes from the line of Stephen Ju of Credit Suisse. Your line is open.

Hey, this is Tyler on for Stephen.

So Peter it seems like for now the LTV to CAC ratio is not at a place where you want to spend.

Acquisition, but.

One thing you can do to potentially increase LTV.

Is better product selection or more selection in general.

So what can you do in that regard I think you talked about.

Apparel and home goods.

Your prepared remarks.

So is that a potential recovery direction you could take.

Any more color here would be appreciated thanks.

Yeah. Thanks, Thanks, Tyler you have to look far marketplace revenue per active buyer is actually up 21%.

Year over year.

So there are there are signs that that sort of continues to improve.

Being sort of excited about with the <unk> as well.

<unk>.

And of course, when you want to add as many products our ASP.

Possible, but will ultimately appeal and delight, our customers so expansion and to a more more branded products or even more high quality products as part of that strategy, especially in categories, where they will drive a.

Further sort of repeat purchase behavior.

Your next question comes from the line of Jason <unk> of Oppenheimer. Your line is open.

Alright. Thanks.

And I appreciate.

In the letter the <unk>.

You've clearly laid out that there is going to take a year.

And there's a significant recent years. So my question is should you be are there any markets that you plan to exit.

Do you think it makes sense to kind of look at the logistics business almost as a standalone business and kind of run that on its own let that try to also serve external customers and then also obviously kind of serve <unk> customers and then I guess.

You know you outlined the two management changes you've already made but.

Maybe just talk about what else you need to do to kind of go through this transition. Thanks.

Yeah. Thanks, Thanks, Jason.

In terms of you know.

Advertising any specific market.

The majority of our advertising as folks are focused on our key markets. So that includes Europe North America, we continuously review our outspend.

And determined sort of where to invest where the regions can be successful and.

We may sort of future market Theres no plans right now we find that they're not workable at the time, but I don't think we have anything to announce there at this point in time.

So we will sort of continue to assess the situation.

But.

No specific plans in mind.

Your second question with respect to logistics and what we're doing there and I think ultimately right now we're just focused on providing the best logistics solutions.

For our merchants.

And I really providing faster much more reliable logistics solutions leveraging volume cost saving.

Savings.

Figuring out whether you know sort of how to sort of optimize.

No.

But.

At this point in time, we're looking for as much adoption as possible I think it's really and we have nothing to announce there with or whether we should be.

Really spinning that out.

As sort of a separate business now.

We do have this pilot around logistics as a service for non wished transactions and non which merchant.

Right. So there's already includes several online retailers.

And we have expanded this past two to open it up to more retailers.

It's probably too early to share any specific details.

We're very encouraged by sort of the early signs that we've actually.

We've actually had feedback on.

From the from the participants.

So far.

And then I believe you.

Your last question was centered around sort of other leadership changes look I think ultimately we wanted to bring in a world class team.

Running an E Commerce company has many sort of different and distinct and unique moving parts I think with the additions that we've made in just the last four weeks or so.

With our Chief Technical Officer, and our Chief product Officer, we're making the right moves we're always looking to attract top industry talent.

But we don't necessarily have other than sort of the CFO search that we have.

That's going on.

To find a permanent CFO for which we don't really have anything else to announce at this moment.

Thanks for the color.

Your next question comes from the line of Michael Knott Sovereign of Bank of America. Your line is open.

Hey, guys. Thanks for taking my question.

I was just wondering if you could dig a little bit further ended the quarter to date trends that youre seeing that you outlined in the shareholder letter it looks like in my model to get to a 55% decline I would have to model core marketplace revenue down on a year over year basis, and like you said earlier it was still up 21% in the second quarter.

So can you just parse a little bit further into what you are seeing like with that and also with product in this quarter to date.

And then.

Could you also just dig a little bit into the kind of user engagement trends that you would need to see to once again ramp up that digital AD spend then why do you want to see from users in terms of VAT recovery. Thank you.

Yeah, Thanks, Michael so.

On a quarterly trends I think Jennifer who's on the on the on this call is probably the best person to sort of handle or be able to answer what would already to discuss today.

And I'll I'll handle the probably boost update or sort of anything around user engagement trends that we will need to do some ramp ramp back up.

Growth initiatives in the future.

Yes, perfect. Thank you.

Your next question comes from the line of Shred, the Giulia <unk> of Evercore ISI. Your line is open.

Hey, check out, but I wonder if my quest.

<unk> needs to be answered first before I jump in yeah.

Okay. Please go ahead.

Alright.

Thank you for your question Yeah. So in terms of quarter to date declines in core marketplace revenue it really driven by.

Decline buyers and users again, partially driven by macroeconomic trends that we're seeing and partially driven by our reduction in AD spend which has resulted in lower buyer and user account and that's resulting in lower orders.

On the platform.

Yes.

Just sort of.

Our product update but.

Look I don't think we have anything specific to update their I think product since it is essentially a function of engagement.

And conversion rates on the platform.

I'll, probably just leave it leave it at that.

And then the last part of your question centered around user engagement trends I mean, it looked like ultimately.

It's driven by a conviction and LTV to CAC.

<unk> ratio so.

Bobby.

We're looking at sort of two components there one one which is much more so within our control, which is the numerator of that of that equation.

That formula, which is which is increasing LTV.

So we're seeing sort of some positive trends, although not enough to sort of overcome what we've seen with the cap increases and the other is potentially by reducing app.

Either just due to external factors are potentially diversifying our marketing initiatives into into the sort of brand new areas that are still very preliminary but that we're experimenting with.

Your next question comes from the line of Laura Champine of Loop capital. Your line is open.

Yeah. Thanks for taking my question, just kind of high level, what will you need to see before you invest more in marketing expense like what are the.

The sign posts that you'll need to see in your business that tells you is the right time to step that up.

Yeah, Laura I.

I think again you know that.

It's a great question so.

Yeah, I think it's again sort of our our conviction and to LTV over CAC.

And the payback period.

And those things can take a while to actually assess.

But we believe we have a pretty good sense by leveraging our historical data.

Being able to extrapolate even from sort of earlier signals.

We don't need a full two years.

So actually figure out what the expected LTV of a particular type of user.

You know what.

It would actually be comment I think.

<unk>.

Again sort of the numerator in that equation LTV is very much so.

Up to us.

And the denominator is potentially up to us if we discover ways in which we can diversify our sort of growth strategy or customer acquisition strategy in major ways.

So.

I think theres sort of various ways to do this we discussed.

Increasing engagement at sort of at the top of the funnel right. So this would be all of the types of new features and sort of fun and entertaining experiences the.

The other would be to increase retention.

And that would largely be driven now that we've done sort of the logistics.

<unk>.

By improving product quality.

Post purchase are improving the post purchase customer experience to drive up our higher retention. So we think we have all the right metrics and we have the right strategy and we just need to be in a place where it's either sort of market by market.

Or potentially category by category, maybe sort of even more generally where we feel confident about where we're headed with respect to LTV to CAC.

Got it thank you.

Thanks.

Your next question comes from the line of shut the Giulia of Evercore ISI. Your line is open.

Okay. Thanks, Let me try two please could you talk about revenue per buyer trends, you're seeing in the third quarter.

And then the second question if I.

Could you please give more color on the CFO search so what kind of timeline are we looking at what are you looking for in the new CFO.

And any color around that that'd be great. Thanks.

Yes, thanks for the question Treppe.

Jennifer do we have anything to share at this point in time in terms of revenue per buyer I'm. Assuming this is core marketplace revenue or maybe revenue in general for buyer in Q3 I'm not sure. If we are disclosing anything there at this point in time.

I don't think we've disclosed that at the current time.

Yeah.

Okay.

And so for the second part of your question look we continue to work with Heidrick <unk> struggles.

Prominent search firm to find a permanent CFO.

We are encouraged by our progress and believe that we will have a strong finance leader before the end of the year.

Okay. Thanks, and then Peter if I could please add one more.

So how are you you laid out your three priority.

Your shareholder letter you talked in your prepared remarks, but you also have other growth.

Now he hasn't priority for example, with local and then logistics remain you know, whether it's logistics as a service or logistics, Oh and initiatives. So how are you the prior guidance your internal operations.

Operations in terms of.

For the next six to 12 months.

Well what is not a priority anymore.

When you compare it to the three.

I think Brady you laid out in the shareholder letter.

Yeah. That's a great question, so look with respect to wish local and data initiatives.

Ship to wish local for store pickup continues to grow as an overall percentage of total volume. So it's 10% or in Q2. It was 10% of overall total order volume.

And that's up from from 7% in Q1.

And then in some markets like Mexico.

It's actually north of 60% now it'll use I don't think that's 37% stands at 27% and I think we can actually replicate this model in other markets and already seeing strong adoption in markets like Portugal Hungary.

And in the Netherlands, So I think but we're not going to discontinue this initiatives there.

Arent that many resources put on it.

As you know, we have 60000 store partners or so.

In over 50 countries, we're being very selective selective and strategic around which store partners, we choose to engage with an onboard into this program. So we're.

We're not cutting these initiatives off I, just think that we actually have a bigger opportunities ahead of us.

In terms of sort of.

More foundation really changing some aspects of how our consumers engage with the platform. So just from a sort of digital usage perspective.

And then on top of that really really really improving the product quality now that we've improved the logistics component.

So I think theres going to be potentially some shuffling of resources in order to sort of pursue those three pillars.

But I don't think that we're going to shut down any of these sort of very promising initiatives.

They might not get.

The amount of resources that they would have otherwise had but we think that there is still very promising and especially in the long term, but there will be sort of a key driver for what we what we do in the future income.

Revenue of logistics.

We tried to do.

The best that we can obviously first and foremost prioritizing transactions and consumer experiences for Wes.

We still have this pilot.

That's continuing where we continue to add more and more retailers that are potentially.

Actually not transacting on wish it all our retailers that are on wish but are leveraging it for transactions off of our platform and again, we're not going to be shutting any of these initiatives down we might be we might be shuffling resources and re prioritizing thing because we think that there are much larger opportunities in some of these areas centered around these three pillars.

But.

But overall.

In the long run.

Still have this sort of massive opportunity.

And sort of the outlook hasnt changed potentially the timeline or how we get there has changed around a little bit, but we're super optimistic about the future.

Okay very helpful. Thank you Peter.

Again to ask a question you will need to press star one on your telephone keypad.

That is the star one on your telephone keypad.

Your next question comes from the line of John Blackledge of Cowen Your line is open.

Hi, This is bill on for John Thanks for taking the question.

We've heard from several people in the retail and E Commerce industries that shipping and fulfillment environment right now is particularly challenging.

Can you just talk about the impact you saw in <unk>.

Those headwinds and how your logistics platform helps you navigate that environment and then and then I have one other question.

Sure Yeah.

Look so I think.

It's been a challenging fall.

Sure absolutely everyone.

Our advantage.

Pass.

Sort of.

Several.

Several ways to actually do this better one is obviously just the volume cost savings that we get.

Just just from partnering with with our logistics carriers logistics partners to it's just much deeper integration.

Especially one in a sort of a first mile operations and cost savings there, but even more importantly, so and and what we're doing with these tighter integration and the last mile and.

Also going into what we've been able to do.

With our a plus programs.

Our our sort of combination.

Efforts.

And extending into sort of what we're doing with local where we're getting even even larger cost savings.

I think.

There have been substantial headwinds are just really really started with.

What's been going into the pandemic, but even earlier, we respected that cost basis, but.

But we think that logistics will sort of continue to be.

And even into local stores, which continues to eat up a larger and larger percentage of order volume.

So there have been lots of headwinds there.

But there have been various ways in which we mitigate it one is optimization tool with volume cost savings three sort of incentivizing customers to buy more in sort of the combination of efforts that we have around there all the optimizations around all those three factors and then ultimately shipping items at stores and we're excited about that.

Competitiveness that we have within our marketplace and eventually extending that sort of starting with a pilot that we're doing to transactions and merchants on our platform as well.

Great. Thank you that's Super helpful. And then were there any particular categories that you know, maybe really struggled or where it stood out as bright spots in the quarter and Andy we should.

Look forward to in <unk> and as we round through the year that should should help to drive some some level of growth.

Thank you.

Sure.

Yes, so look our largest categories typically include accessories hobby sort of Guy just electronics home decor fashion makeup.

And sort of a beauty.

I think sort of consistently what we've been seeing is Ah.

As we sort of add higher quality products as we add more branded products.

We're seeing sort of an increase in <unk>.

For the most part now we've sort of launch this new revenue share structure that actually incentivize this higher quality products and products that ship.

Much much faster.

I think both electronics and home decor have been doing.

Quite well.

So we're going to be leaning into those categories, but where we're always looking at adding more branded inventory and filling in the gaps in our catalog.

As long as those types of products, we feel where it will delight, our consumers and our consumers are looking for products in both categories.

Great. Thank you.

Your next question comes from the line of Nick Jones of Citi. Your line is open.

Great. Thanks can you touch on a revenue per active buyer trends and three Q versus <unk> and how that feeds into kind of the trends that were in the press release.

And then as you know as we think about AD spend.

The rest of the year or you think of it.

Uptick in AD rates or just efficiency breaking down.

How are you thinking about that maybe longer term is that kind of temporary as more dollars come on line.

Or is this kind of structurally higher as theres, a bigger focus on digital.

Yeah, Hey, Nick so.

So thanks for the question I'll handle the sort of the.

Your second question first and then I think against the agenda for sort of better position to to discuss the sort.

Revenue per active buyer trends Q.

Q2, Q3 this year.

So in terms of how we're thinking about the outspend over the next several quarters like look.

Of the top line impact will primarily be driven by significantly lower digital advertising spend and especially on new buyer acquisition.

As we address our issues with retention and marketing efficiency and the unit economics around that which we believe we have a very very strong and effective plan for it.

So just kind of thinking about the next several quarters look we're going to be taking a very disciplined approach.

Two expense and cash management.

And sort of the main level lever of course.

Sure.

Our our EBITA as our digital AD spend historically its been you know, 95% or so of sales and marketing expense for Q3, we began significantly reducing outspend, especially starting in July.

And we plan to maintain Ive spent at this reduced level until we see an improvement trends in terms of.

User engagement and really sort of the numerator of the LTV to CAC equation.

Just a sort of a reminder, historically approximately 60% of our AD spend has been focused on driving our new app installs.

And that's what we've been reduced with reducing that spent significantly and we will continue to do so.

Likely for the next few quarters as we focused on on sort of engaging with our existing users are resurrecting quality pass users et cetera. So going forward, we expect to see sequential improvement in EBIDTA.

But that's going to be sort of an outcome of lowering has been.

Jennifer I don't think you have any further comments on <unk>.

Revenue per active buyer Q3 versus Q2 et cetera.

Yeah sure. Thanks, Peter and Thanks for your question on active buyers, we did not provide revenue guidance for Q3.

However, based on Peter's opening remarks, and we shared that quarter to date revenue was down roughly 40% in July and that's primarily driven by lower by our count.

Driven by lower Ad spend.

And going through the rest of the quarter, we expect that to decline further as we only started pulling back AD spend part of the way through July.

Great. Thanks for taking the questions.

We have reached the end of our call and I will turn back to Peter for any closing comments or remarks.

Thank you everyone for your questions today, I'd, just like to remind everyone. We're not satisfied with these results and the outlook.

I'll note that we can do better we're taking action to improve our performance for the long term.

Especially with a focus on enhancing the user experience and increasing retention, we look forward to providing an update on our next call in November.

So thank you all.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Q2 2021 ContextLogic Inc Earnings Call

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