ContextLogic Inc. Q1 2023 Earnings Call
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Okay.
Okay.
Good day, and thank you for standing by welcome.
First quarter 2023 earnings conference call at this time, all participants are in a listen only mode. After the Speakers' prepared remarks, there will be a question and answer session.
To ask a question. During this session you will need to press star one one on your telephone you will then hear your automated message advising your hands raised.
Or withdraw your question. Please press star one one again.
I would now like to turn the conference over so Ralph Fong, which director of Investor Relations. Please go ahead.
Yeah.
Good afternoon, everyone and welcome to the wishes first quarter 2023 earnings conference call.
And Ralph I'm director of Investor Relations and joining me today are our CEO , Julian and our CFO and COO.
Today's prepared remarks have been prerecorded.
There is also a slide deck that has been posted to our Investor Relations website, which is available for your reference.
Once we're finished with Joe and <unk> remarks, we will hold a live Q&A session.
The remarks made today include forward looking statements that are related to among other things.
Financial expectations business, and turnaround plans logistics and operational efficiencies, including flat rate shipping.
Initiatives to improve customer experience and engagement.
Expectations regarding virtually relationships and strategic partnerships.
The impact of our strategic marketing and product initiatives.
At spending and promotional events.
Execution timeline.
The authorized share repurchase program.
Supply strategy ESG efforts and 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 alright.
Alright assumptions prove incorrect.
Forward looking statements involve risks and uncertainties, which are described in today's earnings release, and our periodic reports filed with the SEC.
Any forward looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them.
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.
<unk> also filed with the SEC.
A replay of this call will be posted to our Investor Relations website.
With that I will now turn the call over to wishes CEO Juliet.
Thank you Rob I would like to thank everyone for joining our first quarter 2023 earnings call on this call I will share with you our Q1 financial update <unk>.
The business highlights and a key strategic focus for 2023.
<unk> will then provide a deeper dive into financial results.
The second quarter guidance.
Our operations.
Finally.
I will provide additional closing remarks before opening up the call to your questions.
In the first quarter of 2023, we generated total revenues of $96 million down 49% year over year.
The revenue decline was largely driven by the unfavorable impact from the pricing changes implemented by the end of the second quarter of 2022, combined with our lower advertising spend in the quarter.
On the bottom line, we reported adjusted EBITDA loss of $62 million in Q1, which was well ahead of our guidance range of loss of $70 million to $80 million.
This better than expected EBITDA result was attributable to the unit economics improvements made throughout the quarter, which <unk> will provide more color later on in the call.
We ended the first quarter with cash cash equivalence and marketable securities of $627 million.
We began our transformation journey in 2021, and I'm happy to say that the work carried out in the first quarter of the year and throughout this past month has been another positive step in the transformation of the company.
I will now discuss the recent business highlights.
Correct.
As part of our efforts to drive basket beauty and improve the customer experience, we introduced <unk> shipping and eligible orders in the U S. In late January followed by other major markets throughout Q1.
Since inception, we have low out privately shipping to over 20 countries.
Including the U S, Canada, Australia, the UK, Italy, Spain, France.
Germany, Czech Republic, Japan, Brazil, Mexico Eastern truck.
We believe <unk> remains a critical component in addressing one of the major pinpoints amongst our users on the which platform now.
The only has improved the shopping experience for our customers you have to incentivize them to build larger baskets.
Our internal data shows that the average transaction value increased by double digits attributable to the launch of friendly shipping.
This is encouraging for the team and we are confident friendly shipping will continue to have a positive impact on other values.
Conversion rates and our customer retention going forward.
Second the wishbone shopping events was a success for the company.
I'm very pleased that <unk>, which ran from March 13th two approaches was well received by our merchants and the buyers.
More than 7000 merchants participating.
A weeklong shopping event in lowering over 800000 product listings and a 92000 doorbuster deals in.
Importantly, we saw more than a 30% increase in <unk> and more than 50% order volume growth during the week long shopping event.
I am pleased with the strong results coming out of the event, we have seen a lot of momentum and a lot of excitement from our merchants buyers and employees alike.
Additionally, wishing was allowed us to activate and reengage with our dormant or inactive users as one of the priorities for us too is to leverage our broad merchandising offering to activate our accumulated user base.
More importantly, I am proud of our teams cross functional calibration and execution a special thank you to our employees for the dedication hard work and efforts.
Wish you must make the first in a series of major shopping events plans throughout the industry and <unk> has taught us valuable lapses.
We expect to leverage what we have learned to build on that success in Q2.
Following the wish MS event, we will be running other merchandising events across the 60 plus markets.
We serve throughout the year.
And the merchandising events will be available not only our mobile app platforms, but also mobile web which is becoming an important channel for our platform distribution at which we're excited about our merchandising strategy and expect merchandising events to result in incremental <unk> growth user acquisition.
And the retention.
Third in March we announced that our online marketplace had returned to App stores and the search engines in France. After the French regulators have lifted the lifting measure.
France is a strategically important market for which we are excited to welcome new and inactive French user back through our platform. So that UK enjoying all the enhancements we have made to the shopping experience.
Over the coming months.
We'll be dialing up our marketing activities in France to ensure our customers know we are back.
Fourth in the first quarter, we formed a strategic partnership with E. Commerce integrator base Linker E Commerce with humans service provider ship stage and E Commerce shipping solution provider ship station and is shipping easy.
As a result of partnership established between which in the face linker.
18000 European merchants can now connect with users seeking a discovery shopping experience.
From a business development perspective. This is an exciting opportunity as we look forward to adding more merchants to the marketplace and to bring them together with our wish community across the globe.
In the past year, we have made a lot of improvement to our overall tanker door and on time delivery rates and a partnership with shifts age ship station and the shipping easy allowed us to build on that success by providing even more logistically and the procurement capabilities to our merchants and the delivery and overall better.
Experience to our users.
Fifth as we continue to optimize the browsing experience, we introduced a number of enhanced personal life category navigation and the category of product.
Both Android and iOS.
The improvements we have made to the category browsing experience for the benefit of our users.
This has helped them explore the wish catalog in a fun and engaging way.
Through the breadth and the depth of the wishes product category.
Discover products through shopping inspiration.
Essentially the wished app is designed to help users discover new and exciting products.
Even when they're not searching for anything specific we want to particularly exploration and to highlight specific moment, where our recommendation can drive user engagement.
In addition, personalization our platform will go far beyond product recommendations.
We will continue to strive to tailor every aspect of the app experience to our users preferreds. This.
From which modules to show them to the sequence in which encountered them.
We will look at the interest priorities and which attributes of our products matter most to them to continuously adapt experience to their needs.
Finally, we continue to improve our operational excellence in.
In Q1, our on time delivery rate was a publicly 92% compared to approximately 86%. During the same period of 2022. We also saw our average time to door further improve in a tough market we serve.
Possibly impacting customer order consideration rate, we've found rates and the customer experience.
Our customer order cancellation rates dropped more than 50% year over year in Q1, and the customer refund rates also decline within the same time period.
Moreover, we continue to see improvement in customer NPS, and encourage empire conversion and customer retention trends in Q1 versus a year ago.
In particular higher conversion.
Customer retention improved by 18% and 10% respectively in the first quarter of 2023.
When compared to the same period last year.
Bringing it all together I am pleased with the progress we are making as we continue on our transformation journey.
Now I would like to spend a couple of minutes discussing our strategic focus.
As I mentioned last quarter, we strive to grow by a retention through repeat purchases this year, which I would like us to expand on.
Over the past 18 months.
We have improved the merchant quality in the lifting quality.
A key focus for 2023 is to keep improving the customer experience.
Which we believe plays a pivotal role in driving user growth.
As part of our growth strategy, we intend to increase our <unk> by investing in our guest experience accelerating the use of incentives for buyer conversion and further driving operational excellence with our unpaid and paid channels.
Some of key initiatives in crude.
Delivering higher quality messaging, where push notification email and SMS to drive user factory that which platform.
Refining landing pages that imparts a discovery for gas users coming in from App and email.
Reducing friction on the website or mobile Wap for gas users to enable them to discover product at two car and the transact.
Providing upsells and incentives for graph and the mobile users to motivate them to adopt the app.
Offering the incentive to encourage use of back to the app as well as launching a referral program to drive engagement with additional shoppers.
Optimizing our unpaid marketing efforts and modernizing our app to generate channel growth.
At which our team is continuously looking for ways to provide world class supply quality, making sure that we are serving our users with products that deliver great value.
Through elevated quality and a competitive price.
We are partnering closely with our merchants to showcase their best selling product within our highest performing categories, including home and garden.
Judy and health fashion and the consumer electronics.
To that end, we're introducing our supply strategy, which we believe will be a critical component to our success going forward.
Broadly speaking, we will leverage cross functional collaboration between our category management supply sourcing logistics and the merchandising teams to drive differentiated and the quality supply.
<unk> will provide additional details of our supply strategy later on in the call.
In summary, our vision is to unlock e-commerce for the underserved by giving users access to a wide selection of affordable goods and providing merchants with access to millions of users globally and.
Which is all about creating a fun easy and the personalized discovery shopping experience that provides the best value for our users looking for the delight in life.
Our last earnings call I outlined the key strategic initiatives to improve our business and I am pleased that we are making strides towards each of our initiatives specifically our conversion rate.
Retention and customer satisfaction.
Four we will be doubling down our effective team all our supply strategy to further enhance our users basket building experience and to drive repeat purchases by encouraging users to build their next basket.
That's one of the largest mobile e-commerce platform in the world.
A large part of <unk> success is really driven by innovation.
I'll wrap up and turn the call over to Vivian I would like to greet integrate our commitment to innovation.
From a user and emerging experience standpoint, which will continue to in Norway and the impact in capabilities and the product features to further improve the user experience on the <unk> platform.
Discovery is our North star, which we believe will enable us to further strengthen our competitive position in the market going forward in particular, our team will be exploring initiatives to incorporate a holistic supply strategy into our real time personalization engine leveraging videos social.
<unk> and the new AI, driven shopping experience to engage delight and drive meaningful basket building opportunities for our users.
I have been impressed with our engineering talent.
Energized about the future and the growth opportunity ahead of us.
With that let me now Tim Nicole over to our CFO and our CLO, we can do to discuss our financial results in more detail and to give you an update on our operations.
Thank you Chau now.
Now I will add more color on Q1 financial performance.
Provide a key to financial guidance and expand on the operational priority for 2023.
On the user matrix.
We had a $14 million.
The active users and a $12 million last 12 month active buyers.
In the first quarter of 2023.
Which represented a decline of 48% and 57% respectively year over year.
The decline was mainly driven by the cumulative reduction in AD spend over the past 18 months.
On a quarter over quarter basis.
Monthly active users were down 30% in the last 12 months.
Give buyers were down 8%.
Mainly driven by the fact that AD spend in Q1 was about 54% lower.
That in Q4.
As we continue to focus on unit economics.
In 2023.
It's also worth noting that due to improve the conversion rate.
The declines in buyers is less significant signs of decline users on a quarter over quarter basis.
As discussed during our prior earnings call.
Performance marketing will remain an important driver for user retention and growth.
But our goal is to increase the efficiency of paid ads.
And it become less dependent on digital advertising.
As Joe shared earlier.
As part of our efforts to drive user growth.
We are investing more organic channels.
As far as E mail and push notifications affiliates and the merchandising event.
We engage and retain our users more effectively and are more cost efficiently.
Moving on to other financial metrics.
Total revenue in Q1 were $96 million.
A decline of 49% year over year.
This decline was across core marketplace.
Product booth and the logistics.
Mainly driven by reduced AD spend under the new pricing practices.
Were fully implemented by the end of 2022.
The new pricing practices made our lithium pricing more transparent and competitive.
However, similar to what we experienced last quarter.
Diversely impacted our Q1 revenue and EBITDA.
Without eating and unfavorable comparison to the prior year.
Q1, gross profit was $20 million.
A decline of 69% year over year.
Gross margin was 21%.
Firstly, it's a 34% in Q1 2022.
Gross margin performance was mainly driven by the decline in marketplace gross profit.
Due to the price changes as outlined earlier.
That means that.
Logistics gross margin saw a significant improvement in Q1.
Driven by increased combined ratios as a result of the introduction of a flat rate shipping in multiple geographies.
Total operating expenses were $113 million.
A reduction of 10% year over year.
Lower AD spend reduction in outside services and the reduced employee headcount accounted for a majority of the reduction in operating expenses.
Excluding stock based compensation expenses.
Total operating expenses were down 32% year over year.
Our net loss was $89 million.
Imperative to a net loss of $16 million in the first quarter of 2022.
The year over year increase in net loss was largely due to lower revenue.
The increase in stock based compensation.
Our adjusted EBITDA was a loss of $62 million.
Compared to an EBITDA loss of $40 million in Q1 2022.
The year over year decline adjusted EBITDA was largely driven by lower revenues and the impact of our new pricing practices.
However.
Q1, 2023, EBIT result exceeded our guided range of a loss of <unk>.
$70 million to $80 million.
This result was primarily attributed to our strong focus on unit economics.
2023.
We have seen improvement in unit economics at a transaction level <unk>.
Since last year.
Operating cash flow and our free cash flow for Q1 2023.
It was negative $92 million.
Compared to a negative operating cash flow of.
$146 million and a negative for free cash flow of $148 million in Q1 2022.
The year over year improvement in operating cash flow was primarily driven by favorable changes in working capital.
We ended Q1 in a financially healthy position.
Whereas the $627 million in cash cash equivalents and marketable securities.
And no long term debt.
As of March 31, 2023.
We had approximately 23 million shares outstanding.
The shares outstanding at quarter end had it been retroactively adjusted for the $1 30 reverse stock split.
Acted on April April trough.
2023 to bring with visual compliance.
With the minimum bid price requirement for continued listing on NASDAQ.
As of April 26.
2023, we were back in compliance with the minimum bid requirement.
I would now like to provide a guidance for the second quarter of 2023.
Based on the feedback from the Investor investment community.
We will provide quarterly revenue guidance.
Additionally to the EBIT guidance.
Starting this quarter.
For Q2, we expect total revenue to begin the range of $91 million to $102 million.
And adjusted EBITDA to be a loss in the range of <unk>.
$16 million to $75 million.
This EBITDA performance is partially driven by expected higher AD spend in Q2 to drive buyer growth.
In Q2, we expect that the sequential decline in revenue to moderate.
Potentially.
Curve flattened out in Q2 or Q3.
On a year over year basis.
<unk> revenue is expected to decrease.
Due to lower AD spend and as a change in pricing practices as outlined before.
As we look beyond the second quarter of 2023.
We expect a stronger second half relative to the first half 2023.
Driven by continued operational improvements and the seasonality.
Please also note that starting in Q3.
Our pricing practices will be consistent with those in the second half of 2022.
As such.
Year over year comparison for our financial performance will no longer be unfavorably impacted by the pricing changes, which were fully effective by the end of Q2 2022.
As Joe discussed I will now provide a more color on our supply strategy, which aims to further enhance the quality of supply and our customer experiences and wish.
First.
Within identity, our home and life narrative will focus on the life and essential for that.
With a differentiated user experience to support each.
Second we will prioritize resources for high touch category.
Starting with fashion.
Home consumer electronics beauty and health too.
Two hyper mandates as a product quality and customer experience in those categories.
Third we will continue to enhance the supply diversity freshness and quality.
Strategic sourcing.
This includes identifying differentiated local merchandise in our key buyer market as well as cross border supply opportunity with a flagship merchant from Asia.
We will continue to diversify our merchant network through <unk>.
Geographic expansion.
Outside of China.
We're committed to expanding and strengthening our merchant basis in Europe , Southeast Asian countries and Ameritech.
Our goal is to enhance our product variety and reduce our reliance on any particular country for supply.
Fourth.
Building in reached at features and the success of Wichmann.
We intended to connect quality supplies with customers through personalized discovery and merchandising.
We believe that combining value for price and a fun shopping experience. It is key to driving higher conversion and retention.
Fifth.
Our logistics capability gives us a competitive advantage in the market and.
And it has been a significant driver of the improvement in the customer and the merchant NPS.
We expect logistics to play an instrumental role in the continued success with our supply strategy.
In the first quarter of 2023.
Average time to door in six of our major market improved by eight days when compared to the same period.
2022.
Furthermore, our on time delivery rate was around the 92% in the first quarter an improvement from approximately 86% in the same period of last year.
Our goal for the year is to grow out the 15 day time to door initiative in all major geographies for which.
Additionally, we plan on implementing forward deployment capabilities in China.
Which is expected to help reduce our delivery time to approximately 10 days for high velocity product lifted it unleashed.
Since we embarked on the turnaround the journey.
Supply quality has been a high priority for rich.
As Joe mentioned earlier.
We have achieved significant improvements in this area.
Saudi lower refund rate lower order cancellation rates and higher customer NPS.
While it is very clear that our customers enjoy the new wishes shopping experience and is that we are on the right path.
There is more to be done.
With the end to end supply strategy, which.
<unk> is committed to creating more value for customers, while enabling merchant success by promoting merchandise.
Brings a freshening good quality and a competitive prices to the platform.
Before turning the call back to Joe I'd also like to address two more topics support investors.
We're being very focused on turning around the business.
Which has also taken steps to bring a more positive impact to the communities we serve.
For example.
As part of our efforts to reduce carbon footprint.
We are consolidating more parcels.
Single shipment without compromising our time to door or on time delivery rate.
Additionally, we continue to make the last mile delivery more efficient and a more eco friendly they're local pickup option versus the home delivery.
Millions of buyers are leveraging the local pickup services to save on shipping costs.
Also helping to protect the environment.
We are committed to making continuous improvements in ESG and expand ESG related disclosures through our filings and the Investor Relations website.
Secondly in April the board authorized a $50 million company stock buyback program.
Representing over 25% of our market cap as of April 32023.
The share repurchase program demonstrates the board's and management's confidence in the future of our business and our commitment to creating long term sustainable value for our shareholders.
With that I will now turn over the call to Joe for his closing remarks.
Thank you Vivian.
He has been 18 months since we embarked on our transformation journey and as a reminder, our foundations for growth abuse around three fundamental pillars.
Improving the customer experience.
Turning our merchant relationships and shipping operational excellence.
We're very proud of what our employees have accomplished in each of those areas, but also recognize we still have a lot more to accomplish for the final success of our turnaround.
Looking ahead, we plan to provide our users with robust basket building experience from beginning to end offer a variety of exploration capabilities and to drive repeat purchase by encouraging user to Butte there next basket.
Which we believe is key to optimizing our unit economics.
We are return literally focused on executing on our growth and the supply strategies to put our business back on the path to attaining growth.
At this time operator could you. Please open the call for Q&A.
Yes.
Thank you.
Our first question comes from the line of.
Steven.
March with Bank of America.
Thank you your line is now open.
Hi, This is Steven Macdiarmid on the line for Michael Mcgovern.
On a year over year basis revenue decline or sorry.
The revenues moderated eight points sequentially and guidance implies a further 20 points a moderation at the mid point, so I guess going forward.
And especially with the pricing changes that took into effect late to Q.
What can we expect the general revenue trajectory by quarter. It could be and then I guess just on a follow up.
We saw three five.
Points of leverage on the product development line.
But we're not really anywhere else. So I guess, besides just the head count reduction.
Is there any other leverage in the model that we could expect in other lines. Thank you.
Yes. Thank you Stephen this is <unk> happy to take your questions.
First on the revenue trend as mentioned, we expect the revenue decline to moderate going forward.
Uh huh.
Partially because we will see that the price changing impact.
That had been with us for three quarters, so will gradually fade away.
Mentioned as we enter Q3 this year that particular prices unfavorable price change.
Well, well well completely go away but.
But besides that and the continuous improvements in the operations such as the conversion rate retention rate a lower cancellation.
Order cancellation rate higher E IV.
And if the investment the user growth all of those factors a wall.
Hopefully drive the.
Improvement in the trend of revenue for the remainder of the year and that's why we mentioned that the does the curve that's a trend expected to fly.
Flatten out a moderate decline.
That will moderate and as a human to flatten out later in the year. So that's on the revenue.
On the leverage you are right.
We start to see the benefits of the headcount reductions that we executed in the Q1.
And that's a major driver in the <unk>.
Employee related expenses.
And we also are.
Looking at a different strategic sites before for hiring.
We're looking at a potentially lower cost regions within the U S outside the U S.
Or backfill any new hires in fact could it be another lever going into the year to drive more cost efficiency in <unk>.
Headcount related expenses.
Yes.
Great. Thank you very much.
Youre welcome.
Thank you so much.
Our next question.
We will be coming from the line of Laura.
Champine.
With loop capital.
Maam Your line is now open.
Thank you for taking my question.
I'm wondering when you expect to earn.
Hi.
And.
What it will do.
Drive revenue growth on a year on year basis.
Yes, Thank you Laura leaving new again.
So I've mentioned, we actually expected to so part of the reason why <unk> EBITDA performance is as guidance because we do expect to increase advertising in Q2 relative to Q1.
But from a year over year standpoint that that will still be lower spend.
Spend level, because we continue to really focus on unit economics and efficiency of the advertising. However, given all of the very steady improvements we have seen conversion, we pension product features and quality.
All of that and plenty of Green shoes, and we feel it's the time to invest in growth right and that's why <unk>, our EDA spend upon quarter over quarter standpoint will be increased.
And as mentioned the performance marketing will always be a driver for top line growth.
We don't want that to be the only driver.
Our growth rate and we continue to invest means organic channels, such as email notifications affiliates and does it use the growth strategy as outlined by Joe in his prepared remarks.
The merchandising and the just the.
Again, I think improvement in the operations will be hopefully even more important driver of growth going forward, but yes, but agile will always be there for us and our goal is not to get rid of it completely is achieved.
And more through organic channels that have a more balanced approach going forward.
Thank you.
Youre welcome.
Okay.
Alright.
Thank you so much for that and as a reminder, everyone to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw a question. Please press star one again, please standby, while we compile the Q&A roster.
Okay.
Yeah.
Okay.
Our next question is coming from the line.
Nicole <unk> with UBS Your line is now.
Thank you Hi, this is Nicole calling you from Kunal module car just two questions from me first one would be if there is any color that you would call out on the buyer trends in April and also the second one in your <unk> Guide.
A portion of that could be attributable to logistics. Thank you.
Yes, so on April .
There is nothing to be an add on the eighth the actual performance of the April and we used to provide.
Some color on the month and in the quarter, because we did not provide revenue guidance in the past right now we do have our revenue guidance and if that will be the most relevant recent information I support the entire quarter. So there's nothing to add for the actual performance of the past the month of April .
And I think Uh huh.
Overall, we put our guidance out there and we I think we expect to hit that guidance.
And so that's number one number two for the Q2 guidance I think your question is how much is related to our logistical versus a marketplace. We don't guide.
By business line.
And.
I would just say you know we had wished we really provide a bond off services right and I understand we report at the different business lines about the.
Bundled services that we sell to our merchant.
Our marketplace services and logistics services and that therefore, we should we tend to look at it as a total economics as a whole.
And as the business line level of financial reporting is really just the attribution of how how we attributed the total economics.
I think it was important to call that out and as I mentioned logistically.
We will continue to be a very important part of the value proposition for both the buyers and the merchant.
And to continue to play a very important role in the turnaround of success.
And so far hasn't been very delivered a very strong performance not only strong revenue generator, but also.
Pretty strong margin.
Once again, we should look at the total performance as a bundle versus.
Uh huh.
Assuming in logistics.
And we're actually in the process of revisiting our kind.
Kind of a practice strategy for both the largest and marketplace.
In the second quarter and assumes that we make sure we are pricing our pricing proposed services a proper reflection of the fair value, we created for our merchants going forward.
Okay. Thank you.
Alright.
Thank you so much for that.
Our next question will be coming from the line.
Yes Gil erroneous.
<unk> with Citigroup.
<unk> Your line is open.
Your line is now open.
Hey, everyone. Thanks for taking my questions.
I guess just to start on the macro.
Seeing some pressure on discretionary spend.
Particularly around well.
Other income demographic. So are you seeing any of that.
Or are you seeing any impacts that you heard of some trade down impact. So have you seen any benefits from consumers trading down.
Okay.
So I think.
Yes, we are our core customers are value conscious customers. So in the tougher.
Macro environment, we do expect that pay down customers trading on price.
Which should be a tailwind for our.
Our business.
To be very transparent, we also potentially experiencing some headwinds.
Such macro environment because.
We are more.
Discretionary spend right and for our buyers and we don't sell food.
Our water and it's a very daily essential so that could it be.
The win win customer customers need to make a trade off.
We may experience some of the headwind in that in that from that perspective, So I would say net net it's probably neutral for us.
And.
Our growth strategy going forward is.
It's about focusing on riding the macroeconomic trends its more about focusing on improving the core operations.
At a wish.
Using a basic improving the quality improving the user experience to try if the retention and repeat purchases and building baskets for our buyers so that they come back more often.
We really are.
Our our I would say the key formula.
<unk> for growth and better economics going forward, but to directly answer your question on the macro level I think everything considered might be.
Neutral to maybe slightly positive.
This is Joanne just maybe at a little bit too.
And just that's right so.
As a company we started preparing the way ahead of the industry for this uncertain macro environment right. So when we started the turn it out journey 18 months ago. So financially it should we focus on reducing the cash burn and improving the cost efficiency right. So one thing to mention here is that our cash use.
In 2022 was 50% of that off of 2021 right. So operationally we're also focused on.
Building.
The strong core marketplace capability.
Which we have seen tremendous improvements right. So in the lifting quality and also app customer NPS and a better conversion of the retention central So we believe actually happened way strategy in place to respond to the changes.
In the micro environment, and we are taking a disciplined approach in financial management to make sure that we have sufficient.
Capital to complete the turnaround journey.
Okay. Thanks, Yeah, that's super helpful.
And then maybe just one on the competitive environment.
Can you just comment on the last quarter and what you've seen through April .
Competitive environment.
Got you.
And does the increased at all and as the marketing spend and QQ.
I think some new entrants come into the market and push on marketing as debt.
<unk> spend in Q2 about any.
In response to that at all.
Yes, I think first of all looking at the global E Commerce landscape right. This is.
Multi trillion market right. So market is domestic enough for many E Commerce company to have that unique play in the market in which we as a global e-commerce marketplace right. So we still keep focusing on providing our value proposition which are the.
Affordability and the discovery and the list of things gasoline allowed us can really.
The affordable and our product to the consumer globally, and also provide the customer more fun and entertaining and personalized discovery basis shopping experience on demand side. So how should we have the consumer from over 60 countries.
No.
In terms of this geography coverage so we have.
Broader coverage compared to many other players in the market and on the supply side right. We have a very diverse portfolio of merchants right from the different supply markets not only in China Asia and also we have the merchants in <unk> in Europe , which allowed us to really kind of provide a very diverse and <unk>.
<unk>.
Assortment of merchandise to the consumer from the over 60.
Countries in the world.
So the short answer here is actually we're still focusing on.
Or kind of a unique value proposition and definitely I think the competitive environment is something we need to monitor and track right and there is something as we then just mentioned so the SBA and the marketing thing as always the driver of the business that is not the only thing we will better right. So we still focus on a lot of.
Other initiatives to drive the efficiency on both on pain of paid marketing and also from what we shared in the prepared remarks right. So we're also doubling down on the gross product and to see how should we can invest more in the guest experience and also accelerating the use of the incentive rates, who kind of a convert.
Sure.
To drive the buyer conversion for a low things such combined together with the output right. So we believe that you can really help us to kind of a win in the competitive environment.
Okay, great. Thank you.
Thank you so much.
Our next question.
We will be coming from the line.
Now medical with UBS.
One moment.
Just a quick follow up to that.
I think all of that so on the free cash flow I saw that the free cash flow for the quarter was like.
$5 million.
Can you talk about how we should kind of think about the evolution of cash.
As we go through 'twenty, three and as we go through 'twenty four.
What is contemplated in your turnaround plan. Thank you.
Yeah. Thank you clean up for the question. So first of all yes. This is a Q1 cash flow cash consumption or cash flow from operating activities about $90 million to $95 million and it's just a reminder, that is a significantly improvement from a year over year standpoint to be exact about 37% year over year improvement.
In a quarter over quarter, it's also about 16% quarter on quarter improvement so the cash flow.
He is getting better right and also Joe mentioned, if you look at the entire 2022, the cash consumption compared to the entitlements. We won we only consumed about 50% right and from a year over year standpoint.
So we certainly are.
Very much focused on cash flow optimization now going forward keeping in mind the cash consumption comes from two <unk>.
Sources, one is the EBITDA gain or loss right and the level of the.
EBITDA loss.
Number one number two is sort of a change in working capital.
The tender working capital is due.
Given by the movement in the top line right. When you have positive growth in the topline or less decline in the top line that tend to generate a changing working capital that is a favorable to cash flow.
So back to your question, how do we think about those two factors play out going forward.
We have already seen a lot of improvement in the unit economics that spoke to and I mentioned and if that improves it pretty steady things last year unit economics is it getting better sense to cost efficiency. Thanks to the better average transaction value.
<unk>.
We expect to continue that trend with the unit economics, and so that should help.
Our EBITDA loss and reducing the loss level. That's number one number two as we invest in growth that will drive the positive trend in the top line right and they'll either it's a less decline flatten out or start going back up so that movement in the top line will created a changing working capital that will be favorable.
Cash flow. So if a both factors are moving in the right direction, certainly which is certainly is our goal.
We should see cash flow continued to improve for the remainder of the year.
I hope that answers your question.
Thank you sorry, I was on mute.
Youre welcome.
Alright, thank you.
Our.
Last question will be coming from the line.
Stephen Macdonald.
With bank of America.
One <unk>.
Sure.
Your line is now.
Hi, This is Stephen <unk> with Bank of America again.
Just two follow ups I guess since the revenue guidance is new what goes into guidance can we get some color. There and then you said youre going to read or you are revisiting the pricing strategy for logistics of marketplace.
Should we actually expect that to be another headwind into <unk>. This year. Thank you.
Yes, maybe first answer your second question no we do not expect that.
Revisiting.
Our pricing strategy on both sides the Tvs generate similar impact as the lots of pricing changes. We made in Q2 by the end of Q2 2022. Those are very different types of packaging changes. So to answer. Your question second question first no. We do not expect a similar impact.
For the new initiatives, where we are undertaking on the first question.
What went into the revenue guidance, which is.
Which we put out for the first time, we really started with a.
Our expected volume expected buyer counts.
Expected a transaction side, which is the ATV.
And basically we first of all my view on the volume in HCV and then.
It takes that into the model and the work our revenue forecast.
So it's nothing too.
You fancy here.
It goes back to the fundamentals of our business, where do we see our business going in the OTR conversions with pension ATV.
I may use buyer accounts, where we are today, what we are implementing in this current quarter or what we have implemented in previous quarters.
How does that impact the OTR, which landed in the U.
Our expectation on the <unk> and then work that down to revenue.
So I hope that we are looking for but that's kind of exercise that we went through to form a revenue guidance for this quarter.
Yes, I guess just more granularly.
Expectations that youre seeing based on data from the.
The most current month say April or.
Kind of a more overarching year over year trend that we're seeing.
How granular areas. Thank you.
Yeah based on the trend we have seen but it's not just a year over year.
Like a quarter over one quarter over the same quarter last year, it's a bit based on the trends that we have observed in the past few quarters right and we look at the pattern, where we're moving in terms of conversion rate retention rate ATV.
And as a buyer counts.
And how does that correlate with our investment level spend and what we plan to be in Q2 and other features we are implementing our improvements we're implementing at the timeline of that and that's how we modeled out at the top line.
Based on the trend.
The only over a year over year, but it's actually a patterns that we have observed.
Excellent that's great. Thank you.
Youre welcome.
Alright. Thank.
Thank you so much for that.
Right.
At this time.
We will actually be it a few more questions for a question and answer session as a reminder, quest.
A question you will need to press star one one on your telephone and wait for your name to be announced.
So you can draw your question. Please press star one once again, please standby, while we compile the Q&A Rob.
Okay.
Sure.
Okay.
Right.
Okay. So that.
It was our final question then.
Alright.
Yes.
Yes, I think we can <unk>.
<unk>.
Okay, well this will conclude our question and answer portion of today's call. At this time I would like to turn the conference over to <unk> CEO , Joe <unk> for closing remarks.
Thanks, everyone for joining our earnings conference call and we look forward to talking to you throughout the quarter.
Okay, Ladies and gentlemen, this does conclude today's conference call you may all disconnect and have a wonderful day.
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