Q4 2024 ContextLogic Inc Earnings Call

Operator: a recording and transcript will be made available online and management will make themselves available to the investor community over the coming days and weeks.

And transcript will be made available online and management will make themselves available to the investor community over the coming days and weeks before we begin I would like to note that during this call we will be referring to a slide deck that is available on contextual objects investor relations websites.

Operator: Before we begin, I would like to note that during this call, we will be referring to a slide deck that is available on ContextLogic's investor relations websites and was published earlier this afternoon. Please refer to slide two for important disclaimers and cautionary statements regarding forward-looking information. Except for historical information, the matters discussed during this call may include forward-looking statements within the meaning of the applicable U.S. securities legislation. Forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause actual financial results, performance, or achievements to be materially different from estimated future results, performance, or achievements expressed or implied by those forward-looking statements.

It was published earlier. This afternoon. Please refer to slide two for important disclaimer and cautionary statements regarding forward looking information except for historical information. The matters discussed during this call may include forward looking statements within the meaning of the applicable U S Securities legislation.

Forward looking statements involve known and unknown risks and uncertainties and other factors that may cause actual financial results performance or achievements to be materially different from that.

Estimated future results performance or achievements expressed or implied by those forward looking statements. All forward looking statements reflect each of the company's current views with respect to future events and are subject to risks and uncertainties and assumptions that have been made in drawing the conclusions.

Operator: All forward-looking statements reflect each of the company's current views with respect to future events and are subject to risks and uncertainties and assumptions that have been made in drawing the conclusions included in such forward-looking statements. All statements other than historical facts, including statements regarding the expected timing of the closing of the proposed combination and the expected benefits of the proposed combination are forward-looking statements. Actual results could differ materially and the company undertakes no obligation to update any such forward-looking statements.

Included in such forward looking statements.

All statements other than historical facts, including statements regarding the expected timing of the closing of the proposed combination and the expected benefits of the proposed combination are forward looking statements actual results could differ materially and the company undertakes no obligation to update any such forward looking.

Operator: Please also note that past performance is not a guarantee of future results.

Statements. Please also note that past performance is not a guarantee of future results.

Operator: During this call, there will be references to certain non-IFRS and non-GAAP financial measures, which should not be considered in isolation from or as a substitute for many measures prepared in accordance with international financial reporting standards or generally accepted accounting principles. As a reminder, all figures, unless otherwise noted, will be in U.S. dollars.

During this call there will be references to certain non I F. R S and non-GAAP financial measures, which should not be considered in isolation from or as a substitute for many measures prepared in accordance with international financial reporting standards or generally accepted accounting.

Principles.

Mr. Goldberg: As a reminder, all figures unless otherwise noted will be in U S. Dollars I will now turn the call over to your host for today's call Ted Coulter Chairman of context logic and reshape the shots C. E O of context logic. Mr. Goldberg you may begin.

Ted Goldthorpe: I will now turn the call over to your host for today's call, Ted Goldthorpe, Chairman of ContextLogic, and Rishi Bajaj, CEO of ContextLogic. Mr. Goldthorpe, you may begin. Thank you and good afternoon everyone. We're delighted to be here today to discuss our strategic investment in ContextLogic.

Mr. Goldberg: Thank you and good afternoon, everyone, where July to be here today to discuss our strategic investments in context Blackberry.

Ted Goldthorpe: Slide 5 of the presentation deck presents a summary of why we believe this is a transformative transaction and investment that has the potential to unlock substantial value for ContextLogic shareholders. The company's significant cash position, net operating losses, and best-in-class team are well-positioned to execute on its value maximization strategy, both organically and through acquisition. We at BC Partners are here as a long-term strategic partner to ContextLogic and are committed to bringing the full resources of BC Partners to bear for ContextLogic.

Mr. Goldberg: Slide five of the presentation deck presents a summary of why we believe this is a transformative transaction and investment that has the potential to unlock substantial value for context logic shareholders. The company's significant cash position net operating losses and best in class team are well positioned to execute on its value maximization strategy.

Mr. Goldberg: But organically and through acquisitions.

UPC partners are here as a long term strategic partner in the context of logic and are committed to bringing the full resources of BC partners to bear for context logic.

Ted Goldthorpe: Let's walk through the details of the transaction. We've agreed to invest up to $150 million of a convertible preferred equity and a partnership subsidiary of ContextLogic with an initial investment of $75 million that closed last week. and an additional investment of $75 million that is callable by the company in conjunction with an acquisition. Perform up to the full $159, funds managed by BC Partners will own approximately 41.6% of ContextLogic Holdings LLC, with a remainder owned by ContextLogic. The preferred will have an initial dividend rate of 4%, which will step up to an 8% coupon upon the consummation of equity.

Mr. Goldberg: Let's walk through the details of the transaction.

Mr. Goldberg: We've agreed to invest up to $150 million in a convertible preferred equity and our partnership subsidiary of context logic with an initial investment of $75 million that closed last week.

Mr. Goldberg: And an additional investment of $75 million, that's callable by the company in conjunction with an acquisition.

Mr. Goldberg: Pro forma for the $450 million fund managed by BC partners will own approximately 41, 6% of context logic holdings LLC with a remainder owned by context luggage.

Mr. Goldberg: The preferred will have an initial dividend rate of 4% was a step up to 8% coupon upon the consummation of the acquisition.

Ted Goldthorpe: As a sign of a long-term commitment to the business, I have joined the board as chairman, and Mark Ward, a senior member of the BC Partners credit investment team, has also joined as a director.

Mr. Goldberg: As a sign of a long term commitment to the business I joined the board as Chairman and Mark Ward Senior member of the BC partners for our investment team has also joined as a director.

Ted Goldthorpe: Now we'd like to give some background on BC Partners and the resources we bring to the partnership with Rishi and the ContextLogic team. Founded in 1986, BC Partners is a leading alternative asset manager focused on private equity, credit, and real estate with deep networks across Europe and North America. In credit, my co-founders, Henry Wong and Matthias Ederer, and I formed BC Partners Credit in 2018. And since then, we've built a platform with a diverse investing capabilities focused on providing partnership to businesses across key segments of the market and a variety of products, all designed to achieve attractive relative value.

Now, we'd like to give some background on BC partners and our resources, we bring to the partnership with <unk> in the context logic.

Founded in 1986, BC partners is a leading alternative asset manager focused on private equity credit and real estate with deep networks across Europe, and North America.

Speaker Change: And credit my co founders Henry Mr. Henry Wang <unk> at her form BC partners 2018, and since then we've built a platform with a diverse investing capabilities focused on providing partnership to businesses across key segments of the market and a variety of products all designed to achieve attractive Roe.

Ted Goldthorpe: On page 10 of the slide deck, we illustrate our founding team's shared history of investing across cycles and asset costs, first together as part of the Special Situations Group of Gold. Well, we don't know what the macro economy will do over the next few years. We are confident that this was the right team and a combined partnership with Rishi to be able to take advantage of the prevailing investment and capital allocation environment at any given time. As a firm, BC Partners brings a broad and deep acquisition sourcing capabilities, strong sector expertise, a full operating team, and an institutional platform capabilities to ContextLogic.

Mr. Goldberg: The value.

Mr. Goldberg: On page 10 of the slide deck, we illustrate our founding team's shared history of investing across cycles and asset costs first together as part of the special situations group the Gulf.

While we all know that the macro economy will do over the next few years. We are confident that this was the right team and the combined partnership appreciate to be able to take advantage of the prevailing investment and capital allocation environment at any given time.

Mr. Goldberg: As a firm BC partners brings a broad and deep acquisition sourcing capabilities strong sector expertise, our full operating team and an institutional platform capabilities to context logic when combined with the existing management talent significant tax assets and a strong capital base, we believe that new context logic is.

Ted Goldthorpe: But combined with the existing management talent, significant tax assets, and a strong capital base, we believe the new ContextLogic is well positioned to build a business of significant scale over the near to medium term.

Mr. Goldberg: Small position to build the business of significant scale over the near to medium term.

Rishi Bajaj: I will now turn over the call to Rishi to walk through the evolution of ContextLogic and the foundation from which we built. Thank you, Ted. We are obviously thrilled to receive this transformative investment from BC Partners. BC Partners performed extensive diligence on ContextLogic, including its cash operations and all its assets, as well as the opportunities that this transaction presents. As Ted described, we are excited to pursue this next phase of our transformation and can't wait to update you on our progress on future calls.

Speaker Change: I'll now turn the call of the regime to walk through the evolution of context logic and the foundation from which we built.

Speaker Change: Thank you Ted we're obviously thrilled to receive this transformative investments BC partners BC partners performed extensive diligence on content budget, including its cash operations and all its assets as well as the opportunity set this transaction presents as Ted described we are excited to pursue this next phase of our transformation and can't wait to update you on our <unk>.

Rishi Bajaj: Before providing my thoughts on the transaction, I would like to briefly highlight our operating results for the quarter ended December 31st, 2024. In Q4, we incurred $4 million of G&A expense, inclusive of transaction related expenses, which was offset by interest income of $2 million. We closed the quarter with $149 million of cash, cash equivalents and marketable securities, compared to $150 million at the end of the third quarter. In other words, despite working throughout Q4 with our advisors and counsel to secure a transformative transaction, we used very little cash. I'm extremely proud of the lean and efficient team we've assembled that was able to accomplish great things over the past year while preserving the assets of the company, especially our cash.

On future calls.

Speaker Change: Before providing my thoughts on the transaction I would like to briefly highlight our operating results for the quarter ended December 31 2024.

Speaker Change: In Q4, we incurred $4 million G&A expense inclusive of transaction related expenses, which was offset by interest income of $2 million.

Speaker Change: We closed the quarter with $149 million in cash cash equivalents in marketable securities compared to 150 million at the end of the third quarter.

Speaker Change: In other words, despite working throughout Q4, with our advisors and counsel to secure transport new transaction, we use very little cash.

Speaker Change: I am extremely proud of the lean and efficient team. We've assembled that was able to accomplish great things of the past year, while preserving the company, especially our cash.

Rishi Bajaj: I would now like to briefly summarize the journey we took to arrive here, which, as made clear by the timeline on slide 15, we embarked upon and executed with an acute sensor. When I joined the board of directors of ContextLogic Wish in November 2023, Wish was rapidly losing cash as its market share and competitive position continued to erode. I worked with the prior board to rapidly address this worsening situation and helped the board reach the conclusion that the optimal path forward was the sale of the Wish assets to Q10. Selling the assets of Wish required a shareholder vote, and I spoke to many of you while pursuing the profoundly challenging goal of achieving shareholder approval, which was necessary for ContextLogic to retain significant tax assets without experiencing a change of control.

Speaker Change: I would now like to briefly summarize the journey, we took to arrive here, which has made clear by the timeline on slide 15, we embarked upon an executed with an acute sense of urgency.

Speaker Change: When I joined the board of directors of contact logic wish in November 2023, which was rapidly losing cash and its market share and competitive position continue to erode.

Speaker Change: Worked with the prior board of rapidly address this worsening situation and helped the board reached the conclusion that the optimal path forward with the sale of <unk> assets to Q <unk>.

Speaker Change: Selling the assets of which require a shareholder vote I spoke to many of you while pursuing the profoundly challenging goal of achieving shareholder approval, which was necessary for content logic to retain significant tax assets without experiencing a change of control.

Rishi Bajaj: Upon closing the WISH transaction, the prior board appointed me as CEO, the prior board resigned, and we reconstituted the board with four new board members. ContextLogic then moved quickly to restructure itself, and with a newly refocused and energized team, we were able to achieve near-pass-will-break-even several months later. Upon reaching this critical milestone, we hired a transaction advisor and began evaluating transformation strategies with an internal goal of announcing a transaction before April 18th, 2025. We were able to reach that goal ahead of schedule, and I have affirmed my commitment to remain a CEO in order to help the company through our transformation strategy in collaboration with BC Partners.

Speaker Change: Upon closing the west transaction the prior board appointed me as CEO.

Speaker Change: Prior Board resigned and we reconstituted the board with four New Board members contents logic, then move quickly to restructure itself and when the newly refocused and energized team, we were able to achieve near cash flow breakeven several months later.

Speaker Change: On reaching this critical milestone, we hydro transaction Bizer and began evaluating transformation strategies with an internal goal of announcing a transaction before April 18th 2025.

Speaker Change: We were able to reach that goal ahead of schedule and our firm commitment to <unk> in order to help the company through our transformation strategy in collaboration with BC partners.

Rishi Bajaj: Ultimately, we are seeking to create, both organically and through acquisition, a strong, durable business with growing cash earnings per share that will not only harness our existing assets, but also grow into a business that will be valuable to shareholders in its own right. Ted and I, VC partners, the ContextLogic team, and our newly enhanced board are excited to deliver an outcome to shareholders that we believe will generate enduring value for years to come.

Speaker Change: Ultimately, we are seeking to create both organically and through acquisition a strong durable business growing cash earnings per share that will not only harnessed our existing assets, but also grow into a business that will be valuable to shareholders in its own right.

Speaker Change: <unk> BC partners, the context lodging team and our newly enhanced sport are excited delivering optum to shareholders that we believe will generate enduring value for years to come in.

Rishi Bajaj: In BC Partners, ContextLogic could not have asked for a better partner in order to help us achieve that objective.

Speaker Change: In BC partners content logic could not have asked for a better partner in order to help us achieve that objective.

Ted Goldthorpe: I'm going to turn it back to Ted. Thank you for all your talk. Yeah, thank you for all your time and attention today.

Speaker Change: I will turn it back to thank you for all your time.

Speaker Change: Yes. Thank you for all your time and attention today Ritchie, our other colleagues and I look forward connecting with any or all existing shareholder base and working together to advance our shared vision as always the context project team with Florida discussing the transaction with shareholders and the broader investment community.

Ted Goldthorpe: Rishi, our other colleagues, and I look forward to connecting with any or all existing shareholder base and working together to advance our shared vision. As always, the ContextLogic team looks forward to discussing the transaction with shareholders and the broader investment community. We're truly excited for what is to come for the new ContextLogic and its shareholders. Thank you very much.

Speaker Change: We are truly excited for what is to come for the new context logic and shareholders. Thank you very much.

Operator: Ladies and gentlemen, this does conclude today's conference call. A replay of the call will be available along with the investor presentation on the company's investor relations website. Again, thank you very much for joining us today. You may all disconnect and have a wonderful day. Goodbye.

Speaker Change: Ladies and gentlemen, this does conclude today's conference call a replay of the call will be available along with the investor presentation on the company's Investor Relations website again. Thank you very much for joining US today you may all disconnect and have a wonderful day goodbye.

Operator: 12 board meetings, we're going to install Big Data.

Speaker Change: So we're getting.

Speaker Change: I'll take that.

Speaker Change: Okay.

Speaker Change: [music].

Operator: Thank you for watching!

Speaker Change: Okay.