Q4 2022 ContextLogic Inc Earnings Call
Good day, and thank you for standing by welcome to wishes fourth quarter and full year 2022 earnings conference call. At this time all participants are in a listen only mode. After the Speakers' remarks, there will be a question and answer session to ask a question. During this session you will need to press star one on your <unk>.
Allophone, if you wish to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Mr. Ralph Fong wishes head of Investor Relations. Please go ahead.
Yeah.
Good afternoon, everyone and welcome to your wishes fourth quarter and full year 2020 earnings Conference call are Ralph Fong director of Investor Relations and joining me today are our CEO , Joe again, and our CFO and CRB vendor.
Today's prepared remarks have been prerecorded.
So slide deck has been posted to our Investor Relations website, which is available for your reference.
Once we are finished with Joe and <unk> remarks, we will hold a live Q&A session.
The remarks made today include forward looking statements related to among other things our financial expectations business and turnaround plans consumer experience and engagement expectations regarding merchant relationships and strategic partnerships.
Potential impact of our strategic marketing and product initiatives, including AD spending in the rebrand.
And we anticipate a 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 or 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.
We disclaim any obligation to update them.
Also during the call, we will present, both GAAP and non-GAAP financial numbers and metrics.
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 host city, our Investor Relations website.
That I will now turn the call over to Richard CEO Juliet.
Thank you, Rob I would like to thank everyone for joining our fourth quarter and full year 2022 earnings call I'll, let's call I will recap some of the major highlight authenticity to share our financial update and discuss the key strategic initiative for 2023.
We will then provide a deeper dive into financial results showed a first quarter guidance and a common our operations. Finally, I will provide additional closing remark before opening up the call to your questions.
Could be 22 was a year full of challenges at.
At the macro level, we experienced a higher level of economic uncertainty that emerge in both north American and our European market in 2022, which impacted consumer buying behavior our.
Value added consumers were impacted by the steep increase in energy and food prices, which translated to a slowing of discretionary spending across the region.
Governments around the world continue to tighten the money supply and the rates interest rates through E ink rationale repression.
Global E Commerce marketplace, we are not immune to the changes in consumer spending habits, particularly among the lower income holdco that shop our marketplace.
Additionally, we experienced supply disruption attributable to COVID-19 related Lockdowns in China, I would like to take this opportunity to thank our dedicated and hard working team in China for the effort to walk through all the supply chain and the logistic challenges during the lockdown throughout 2022.
Despite the challenges we face we continue the transformation journey that we embarked on in 2021.
Diligently to improve the front end for our users and the backend for our merchants.
Our foundation for growth are built around three fundamental pillars growth improving the consumer experience.
Deepening our merchant relationships and a third achieving operational excellence.
<unk> that the entire team have continued to make tremendous progress in each of the foundational pillar in the midst of dynamic and a challenging macroeconomic environment.
Let me now review some of our major accomplishments in 2022.
We successfully launched our rebranding campaign, our new brands incorporated a new logo icon griffey in battery and the color palette and it was a company with a refresh the mission statement backing made fun discovery made easy.
Which more accurately reflects our renewed focus on helping value our native consumer discover lifting for our new products, while having fun and frictionless and a convenient way.
We ramp up our merchandising efforts for the 2022 holiday season Importantly, we ran our everyday if <unk> campaign in November where we have retrofitted the promotion.
As well as daily deals and the weekly vessels for our popular categories, such as electronics accessories, Pom coil gift and fashion.
Additionally, we launched a new deal half promotion platform that allow our merchants to showcase the best discounts and increase their product exposure across <unk> platform, while our customers are able to benefit from getting a great deal feedback from both our merchants and customers was over here really positive.
We have learned a lot and again tremendous insight from this first major merchandising event at which and we continue to invest in our merchandising capability in 2023.
We also streamlined our largest operation, resulting in better on time delivery rate as an example, our on time delivery rate was optimally eight 9% in the fourth quarter of 2022, an improvement from off similarly, 82% during the same period up until 'twenty one.
The average time to door has significantly improved in the top markets, we serve resulting in much improved that refund rate customer order consolidation right and the consumer experience.
Our customer refund rate fell 36% year over year in the fourth quarter and the customer order cancellation rate dropped 58% within the same time period as well we continue to see improvement in customer NPS throughout 2022 to sum it all up as a result of ongoing.
Efforts to improve the consumer experience, we saw encouraging buyer conversion and customer retention trends in the fourth quarter of 2022 versus a year ago.
From a user and merchant experience standpoint, we continue to in Norway, and the rollout suite of product features to further improve the user experience on the <unk> platform, including the revamped fashion experience, which fashion the shippable videos feature which clipped the merchant scoring system with standard <unk>.
<unk> the deal carp, new lockout experience increase the focus on merchandising in the collections and the redesigned homepage on the wish App, which features collection module category tap, which list is central.
We enhanced the transparency by adopting a new pricing practice for buyers and implementing new commission structure for merchant.
The new pricing practice has reduced the pricing capacity and help us build deeper engagement with our buyers and merchants.
Finally, we calibrated with a number of affiliate partners to drive incremental traffic throughout 2022, including affinity honey.
Rakuten and the Retailmenot.
In addition, we formed partnerships with multiple providers of E Commerce software fulfillment automation.
Integration and customer support solution, including E that product up and that your rollout to further enhance the merchant experience.
We also joined forces with every seat to fly product contemplate as part of our efforts to create a shopping experience that is engaging yet safe and secure for our customers.
Putting it all together, we accomplished quite a lot in 2022 before we move on to other topics I would like to thank our employees for their hard work and dedication.
I want to thank our customers merchant partners and shareholders for their continued support.
I will now share some high level financial highlights for the fourth quarter and full year 2022, we reported fourth quarter revenue of $123 million.
While it was down 57% from the fourth quarter opportunity one the rate of quarterly decline flowed with revenue in Q4, only sequentially down 2% from the third quarter of 2020 to grow revenue decline was primarily driven by reduced AD spend in the quarter. Our adjusted EBITDA in Q4 was a.
Loss of $95 million, which was at the lower half of guidance range of a loss of $19 million to $110 million.
Full year 2022 revenue totaled $571 million down.
73% from the year ago, adjusted EBITDA in <unk> was a loss of $288 million.
Compared to a loss of $199 million in 2021, we also ended the year with cash cash equivalents and marketable securities of $719 million.
This numbers indicate there is still much more work ahead to do in order to put us back on the path to profitability and growth.
Looking to 2023, while we are committed to our three foundational business pillars, we intend to instill a strong focus on unit economics to help ensure our continued solid financial foundation for wish and the price discipline cash flow optimization. So that's our marketplace can effectively maximize its current opco.
<unk>.
With that I would like to spend a couple of minutes outlining the key strategic initiatives to improve our unit economics.
Four we expect to achieve this through increasing average transaction value and the repeated purchases.
Our first strategic initiative is to drive basket building, which we believe will increase cost side and the conversion rates by improving lifting quality and the truck, reducing procurement tie and bringing down shipping cost.
<unk> offers in the first quarter include the introduction of salary shipping in the U S followed by other major markets.
Importantly, we expect February shipping to be a critical component in addressing one of the major pinpoints amongst our users on the <unk> platform.
We envision that February shipping will enable wish to be positioned as a transparent and competitively priced marketplace, where users are incentivized to build larger baskets.
Not only will improve the shopping experience for our customers. We are confident it will also result in higher order values higher conversion rates and customer retention.
Just a quick update on the launch of the freight rates shipping in the U S, which started in late January .
<unk> is now available across both Android and iOS platforms.
So far indicate that both <unk> and a number of items per buyer have increased by double digits our.
Extremely encouraged by the promising early results and I look forward to keeping you posted on our progress.
We strive to grow by a retention through repeat purchases in.
In the first half of 2023, we intend to leverage incentives and merchandising campaigns to drive repeat purchases, bringing buyers back we are unpaid channels.
Including personalized E mails notification.
And bringing right inventory for our focus categories, including home and life hobbies electronics beauty and health and the session.
In the first half of 2023, we intend to offer our customers incentives and the coupons for free shipping to encourage basket building and the repeat purchases across our key categories.
Additionally, we plan to provide more incentives for first time purchase repeat purchase and in active users as well.
Our third initiative is to inspire browse and discovery experience and with this our.
Our goal is to increase user engagement, which is measured by product display page views and click through rates for those familiar with which platform. The shopping experience is primarily built around the idea of discovery rather than search.
Most of the sales of our platform do not involve a search query and the inks that derived from personalized browsing.
In the first half of 2023 will tend to further enhance the category browsing experience to help users not only explore the wish catalog in a fun and engaging way, but also through the breadth and the depth of which is product catalog and they've got more products through shopping inspiration.
Personalization also plays a pivotal role in attracting and retaining users we intend to bring elements of personalization into every step of the customer journey from if by regional recommendations through two reasonable deals.
Fourth we plan to diversify our marketing channels to drive growth, while Pete will remain a key driver for user retention and the growth. Our goal is to increase the efficiency of our payout and a decrease the overall advertising spend withdraw his pocket based on customer segments and user lifestyle.
In parallel we're planning to invest more heavily in our unpaid channels as we believe that E mail and push notifications will be highly effective in bringing us back to wish and driving customer royalty overtime put simply our marketing activities. This year will be much more targeted both in the selection of.
And the content type in.
In summary, each of our strategic initiatives for 2023 are clear and we celebrate and focused in our efforts to improve our unit economics with that let me now turn the call over to our CFO and COO VW to discuss our financial results in more detail and it gives.
You an update on our operations.
Thank you Joe.
Now I will add more color on Q4, and full year 2022 financial performance.
Provided Q1 2023 EBIT guidance.
And expand on certain operational priority in 2023.
In the fourth quarter of 2022.
We had 20 million monthly active users and a $13 million last 12 month active buyers.
Which was a decline of 55% and a 66% respectively year over year.
The decline was mainly driven by the accumulative reduction in ad spend.
Over the past 12 months.
Our total AD spend in 2022 was approximately 20% of that 2021.
In particular.
Our digital advertising expenses in Q4 were $46 million.
Down from $66 million in Q4 of 2021.
And the $55 million from Q3 2022.
The quarter over quarter decline was due to increased real at target.
We remained focused on marketing efficiency and the unit economics.
Total revenue in Q4 were $123 million.
A decline of 57% year over year.
This decline was across core marketplace.
Boost and the logistics.
Mainly driven by reduced AD spend and the new pricing structure.
Which became fully effective in Q3 2022.
The change in the pricing structure made our listing prices more transparent and competitive.
However, it adversely impacted our Q4 marketplace revenue and EBITDA.
Resulting in an unfavorable comparison to the.
The prior year.
Q4, gross profit was $26 million.
A decline of 78% year over year.
Gross margin was 21%.
It's a 42% in Q4 2021.
Gross margin performance was mainly driven by the decline in marketplace gross profit.
Due to the price changes I shared earlier.
Total operating expenses were $143 million.
A reduction of 22% year over year.
Lower ad spend.
The reduction in outside services and the reduced employee headcount.
Accounting for a majority of the reduction of operating expenses.
Our net loss was $110 million.
Compared to a net loss of $58 million in the fourth quarter of 2021.
Our adjusted EBITDA was a loss of $95 million.
Compared to an adjusted EBITDA loss of $23 million in Q4 2021.
The Q4 2022 EBITA result.
Was at the lower end of the guided range up a loss of $90 million to $110 million.
Operating cash flow for Q4 2022.
It was negative $109 million.
Compared to a negative operating cash flow up $49 million.
In Q4 2021.
The Q4 2022 operating cash flow was primarily driven by the net loss of $110 million.
And a $23 million unfavorable changes in operating assets and liabilities.
Which was partially offset by non cash expenses up $24 million.
Free cash flow was negative $109 million.
Compared to a negative free cash flow off of $15 million in Q4 2021.
We ended Q4.
Actually healthy position.
$719 million in cash.
Cash equivalents and marketable securities.
And no long term debt.
Now turning to full year 2022 results.
Total revenues were $571 million.
A decline of 73% year over year.
Gross profit was $166 million.
Klein up 85% year over year.
Gross margin was 29% down.
Down from 53% in 2021.
Total operating expenses were $564 million.
Down 62% year over year.
Total EDA spent was $198 million.
Approximately 80% from 2021.
Our net loss was $384 million for the year.
<unk> to a net loss of $361 million in 2021.
Adjusted EBITDA was a loss up $288 million.
Compared to an EBITDA loss.
$199 million in 2021.
Operating cash flow was a negative $422 million.
Our free cash flow was a negative $424 million in 2022.
A significant improvement from negative free cash flow of $953 million in 2021.
Our 2022 financial reflected the near term impact.
Of some of the strategic decisions that we.
We made in 2021 and 2022.
Firstly, we reduced relying on performance marketing and then started rebuilding the flywheel.
Lower AD spend was the major driver of the decline in monthly active users and revenues during 2022.
However, we have seen unpaid traffic stabilize and.
And at the conversion and our retention rates improve.
Thanks to more compelling value for price.
After listing quality and App features as well as faster delivery time.
The decline in monthly active users and the last 12 months buyers.
We have also significantly slowed it down and have started to stabilize.
2022.
Secondly.
During the first half of 2022, we implemented a new pricing strategy to make prices unwished more transparent and competitive.
This change reduces the wishes marketplace revenues and profit.
The near term.
But it is critical in enhancing user retention and the merchant engagement for the long run.
Certainly.
We focused on optimizing cash flow throughout 2022.
We made the difficult decision to reduce our global workforce.
Back in February Enterprise highest unit economics over top line growth.
As a result.
Our cash burn in 2022 was reduced to 50% of that in 2021.
From a year over year comparison standpoint Q.
Q1, 2023 is expected to remain unfavorable relative to Q1 2022.
As Q1 2022 benefited from the original pricing practices.
Resulting in higher revenue and EBITDA.
We expect this particular discrepancy to normalize in the second half of 2023.
I just spent is expected to remain an important driver of our topline performance.
As we continue to focus on unit economics and have utilized more diverse marketing channels to deliver higher returns.
I would now like to provide our outlook for the first quarter of 2023.
We expect adjusted EBITA TV a loss in the range of.
70 million to $80 million.
As a reference point our estimated revenue in January 2023. The first month of Q1 are expected to be down approximately 15% when compared to our revenue in October 2022.
First month of Q4.
The decline is mostly driven by seasonality and the lower ad spend.
Let me now offer a few updates on operation.
Particularly cost efficiency logistics and merchandising.
On January 31.
We notify them, we see employees, so that we will undergo a reduction in our global workforce.
To realign our resources with 2023 operational priorities.
We anticipated that this reduction will decrease our global workforce by up to 150 position.
Representing approximately 17% of our head count.
This is a very difficult decision and one that we do not take lightly.
However, we believe they are necessary to support our ongoing business, the prioritization effort and to improve operational efficiencies.
We estimate that we will incur one time charges.
Ultimately $3 million to $4 million for seven.
We expect the majority of these charges will be incurred in Q1 and in fact, it's the implementation of a workforce reduction will be largely complete by end of Q2.
<unk> 2023.
We expected to realize run rate savings of approximately $14 million to $23 million.
Your life debated starting in Q3 2023.
As Joe shared earlier, our competitive logistic offering remains a critical element to our long term success.
We have continued to invest in our logistics business.
The fourth quarter of 2022, the average time to door in five of our major market.
<unk> by six days when compared to the same period of.
2021.
Our on time delivery rate was around 89% in the fourth quarter, an improvement from approximately 82% in the same period of last year.
Our goal is to roll out a 15 day time to door initiative in all major markets for which this year.
In addition, we have started to implement forward deployment capabilities in China.
Which is expected to further reduce our delivery time to approximately 10 days for high velocity product listed on wish.
Building upon the success of the everyday is a black Friday campaign last November we will be running multiple merchandising events across the 60 plus markets that we serve in 2023.
Through this merchandising event, we expect it to strengthen wish at home and the life brand narrative across our user base.
Bring a broad variety of quality unique lifestyle products at affordable prices.
We aim to be the first in mind, when a customer thinks about what they need from their home essentials.
Event based needs such as holidays and celebrations.
Please note that merchandising events will be launched not only our mobile app platform, but also mobile lab.
Which is becoming an important channel for our platform distribution.
I'm energized about our merchandising strategy and expect our merchandising to play an increasingly important role in driving <unk> growth user acquisition and retention.
Now I will turn over the call back to Joe for closing remarks.
Thank you Regan to close I'll leave you with a few final thoughts.
Over the last 12 months the wish team has devised and implemented some substantial changes that have improved our team's focused execution and that led to the setting of key strategic goals that will place, which in a position of greater strength in the future growth.
I would also like to reiterate our value proposition discovery and affordability.
Discovery is a completely different approach to solving search and the relevance.
In E Commerce, we take people, who have a general intent to purchase something and inspire them to build a basket of interesting items that delight them at a reasonable price.
We expect to drive user experience improvements through operational and the product efforts leverage our strengths in data and the predictive capability to deliver personalized and curated products to our users.
Additionally, we intend to strengthen our cross border capabilities by establishing strong partnership with cross border merchants and empowering them with the tools and resources to succeed in the long run we believe that our cross border trade expertise will remain crucial for our long term success.
Given the macro environment and the financial challenges increasingly faced by consumers worldwide. We are focused on providing value and a deal to our value added users through extensive and sophisticated merchandising campaigns.
We believe this will allow us to not only grow our loyal user base, but also attract and retain new customers.
The entire team at <unk> is committed to successfully executing on our turnaround plan and I'm proud of what the team has accomplished excited to see what we can do together in 2023 at this time operator could you. Please open the call for Q&A.
Certainly ladies and gentlemen, if you have a question at this time. Please press star one on your telephone one moment for our first question.
First question comes from the line of Doug Anmuth from Jpmorgan. Your question. Please.
Hey, this is westley on for Doug Thanks for taking the questions.
Two if I could.
Hoping you could just provide more color on <unk> tracking down sequentially, 15% from January .
Just kind of hoping to understand what youre seeing there and maybe impacts from the China reopening.
And then I believe sales and marketing was down sequentially, but you know you just talked about leaning back into marketing.
Reaccelerate the top line. So just kind of wanted to know what maybe led to the changes.
The strategy or your expectations there. Thanks.
Okay.
First because I believe you are on mute.
One moment, while we get our speakers on muted once again.
Speakers you are currently muted there we go.
Can you hear US now, yes, we can hear you now.
Okay great.
Thanks for the question regarding Q1.
Shared in the prepared remarks, the January decline from last October was due to two reasons. One was the seasonality and this is pretty consistent with the seasonality pattern. We have seen in the past and a second one as I shared in the prepared remarks it was the reduced.
<unk> and we continue to focus on adding efficiency and a unique unit economics.
We started that in Q4, and we continue to do so in 2023.
We are we have a revised targets and we are very focused on that.
But at the same time at the same time, we do want to drive growth.
Top of the funnel at the top line and we do that is through number one.
Our advertising more efficiently.
Through more diverse marketing channels.
Secondly, leveraging our unpaid channels more effectively.
Patients.
In other channels and then thirdly.
The merchandising capabilities that we're building in house at Gill mentioned that we start building that in last November and we continue to build the merchandising capabilities to engage with our new and existing buyers and then lastly, but not least we do expect to.
Drive topline growth.
In a more balanced approach between organic versus paid going forward as we continue to invest wound features that you're gonna App features.
Delivery services.
Listing quality and becoming more competitive with the prices.
We expect it to customers to have more you'll see the compelling value proposition and wished and a.
More pleasant shopping experiences are with which ended therefore come back on their own so long way of answering your question, we care about in economics and without continued focus 2023, and we do also care about driving growth both organically and through paid channels as well.
Did that answer all your questions.
Yes. Thanks.
Thank you Glenn.
And as a reminder, ladies and gentlemen, once again if you have a question at this time. Please press star one on your telephone. Our next question comes from the line of Laura Champine from loop capital. Your question. Please.
Thanks for taking my question I was wondering and I think this one is for Vivien, what you would need to see.
To have enough visibility to provide our revenue guidance similar to your adjusted EBITDA guidance range that you gave.
Yes, that's a great question Laura.
I think we been.
Deliberating on adding more topline guidance Susan.
Last year end.
I think I'm comfortable to say that we're very close to making that decision and we will most likely start providing top line guidance and whether its <unk> or revenue.
In the very near term.
Got it and then could you give us an update on what's happening with the women's fashion vertical.
Yeah. So we had as a fashion, we launched last year and fashion is one of the top five core categories, we have our wish.
The launch was.
Successful and we saw customer satisfaction average order.
<unk> per buyer.
Improved materially through the fashion relaunch.
But more importantly, we learned a lot through that re launch.
We improved listing quality.
Delivery time, how we engage with our buyers more effectively on a merchant.
And we have a lot of merchants now participating on the fashion relaunch and start to see.
Success through that participation, we took all the learnings and apply to other core categories that we are.
Focusing on in 2023 on top of fashion, so long way of saying.
We consider that a very successful relaunch and we continue to leverage the experiences and learnings to make other categories to successful unwished platform as well.
Just to add on.
We didn't set right. So I think it's our ongoing progress for the veterinary launch seems actually updated in Q4 Q3. So now we have over 3000 merchants in new fashion category, providing over 300000 selection in this category. So this is something actually we see ongoing.
Our progress right and as we mentioned just now so this is a very very important learning process for us so with a focus category. We emphasize this year. So this is a very important learning for us to know actually how important the structured data means to Australia and haulage, we can surface the.
<unk>.
<unk> to our consumers and by providing a better consumer experience. So theres something definitely we will see haulage and we can replicate to the other focus category to build a better vertical lies the customer shopping experience in the focused categories.
Great. Thank you and congratulations Joe on getting the permanent CEO role.
Thanks, Laura.
Q1 moment for our next question.
And our next question comes from the line of I go <unk>.
From Citi. Your question please.
Hi, This is Max on for Yigal, Thanks for taking my question.
First could you just help us understand the film in operations a bit more.
There is still almost double the.
Product or the marketplace revenue. So you can just kind of double click on what's driving that and going forward, what's the right level of fulfillment as a percent of marketplace revenue.
Yes, that's a great question. Thank you.
I think the first of all the marketplace revenues at the performance of marketplace in general.
Whats really impacted by two major strategic decisions we made.
In 2021 and <unk>.
One was the.
Accumulation of reduction on the AD spend so that we can restart the flywheel on based on the core market principally competencies that we're building we have been building things with a turnaround.
So that has a lot more directly impact marketplace revenue versus logistics and as a second.
Important change we implemented in 2022 was the pricing new pricing practice as I mentioned earlier and is that essentially.
Almost entirely.
Impact.
The impact on our marketplace revenue versus large I think in the near term.
So I would say those two decisions, where both necessary to build customer retention and our merchant trust and engagement for the long run, but if we had some adverse.
The impact for the near term on the marketplace revenue and profitability.
And I think going forward.
We expect to hit the marketplace and the logistics of performance to be much.
More aligned.
As we gradually walks through the changes and as we move into the especially the second half of 2023.
It will be a much more kind of a comparable from year over year standpoint.
But longer term, we expect that those two business to be much more aligned in terms of performance level.
And ultimately we are marketplace.
Business and.
We are very much a focus on improving the revenue <unk> and profitability of marketplace business and the logistics it remains a very critical.
Offering and is the competitive advantage of wish.
And a major driver.
For improving customer satisfaction over the past 18 months.
And also a very critical value proposition for the merchants. So we definitely wall, where we remain committed to investing in logistics business as well.
Thanks, That's really helpful and then I guess another one.
Just looking at.
Going back to marketing.
Just looking at just the kind of taking out the brand I guess.
As a percent of marketplace revenue is still.
Pretty high as a percent and as a percent of total revenue I understand youre going to look into.
<unk> pay channels for marketing going forward in 2023.
So I guess could you just help us understand maybe the overall strategies as we move through the year.
Do you expect a similar cadence of more back half spending.
And.
Yes, the overall level of marketing spend as a percent of revenue.
Now we can start to drive some organic growth from it.
Yes, absolutely happy to add more color on that.
So you are absolutely right, we used to spend a lot more on the marketing dollars and I think if I remember correctly in the past three years in 2020, it was a more than its about 67% of revenue spending in sales and marketing and then 2021. It was a 50, 453% at the last year was <unk>.
40, plus percent. So every year, we made a tremendous progress reducing our reliance on performance marketing.
And is therefore reduced the percentage of marketing spend as a percentage of total revenue.
But we still have more work to do and that's the reason why in Q4 last year, we start to really focus on unrealized right and we set a revised target.
And we only spent the marketing dollars if we generate the desired returns and we continue to focus on ROE as our marketing efficiency going into 2023.
As Joe and I, both shared earlier unit economics that will be very important.
In 2023.
And if you think about the levers to improve unit economics.
Really there are three and the first is our average transaction value.
And the second one is a repeat of purchases in the third one is the marketing efficiency at efficiency right and we are focused on all three of them to improve unit economics, but to answer. Your question. Yes, we will continue to focus on the the marketing.
I realize the return on marketing in 2023.
From a seasonality standpoint are.
We probably will see a little more in the second half just because of seasonality.
But we are not really managing tours marketing dollar budget as a percentage of revenue. We said that we focus on the real assets of return on every dollar we spend.
Yes.
Thank you just one moment for our next question and as a reminder, if you have a question at this time. Please press star one on your telephone.
Our next question comes from the line and appears to be.
One moment. Our next question from the line of Stephen Mcdermott from Bank of America. Your question. Please.
Hi, This is Steven Mcdermott on for Michael Mcgovern.
Just if we look at the.
Sorry.
Sorry go ahead.
Look at the EBIT guidance implies let's.
Let's say a negative 45% to 50% year on year decline in revenue kind of assume in the opex.
As a percentage of revenue stays roughly the same.
Obviously, there are going to be some moving parts there, but how should we think about it.
Are you taking more from the revenue side or the same pressure there or.
Will there be significant cuts in opex.
Beyond just the rest of it will kick in in Q4.
Thank you. Thank you.
Yes, that's a great question and I think we talk about the revenue.
January actual right and it was a 15% decline relative to October and that's mostly driven by seasonality and I also shared.
That's also driven by lower ad spend.
And I think the if you look at our quarter over quarter, our EBITDA guidance is actually more favorable compared to the Q4 actual EBITDA performance.
So I guess you could you know.
Kind of a major observation data, we're getting certainly getting more efficient with the call.
Cost and beyond.
The EDA spend and also the workforce reduction.
So unit economics as I mentioned is the top priority for us in 2023.
And we will continue to drive growth, but it will be through.
More like an.
Organic growth versus the pay to growth. So I think all of those factors the wall.
Help us achieve lower EBITDA loss.
In Q1.
With some pressure from revenue.
Due to the seasonality in terms of the like from quarter over quarter standpoint.
Hopefully that answer your question.
No. It does thank you very much I appreciate it.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to wishes CEO , Joe again for any further remarks.
Thanks, everyone for joining our earnings conference call and we look forward to talking to you throughout the quarter.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
And thank you all thank you all.
Okay. Thank you.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Yes.
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Okay.
Yes.
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Okay.
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Okay.
Okay.
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<unk>.
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[music].
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Yes.
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Yes.