textLogic (WISH) - 2022 Q4 - Annual Report

Part I Business The company operates a global, mobile-first e-commerce platform undergoing a strategic turnaround to improve efficiency - Wish is one of the largest global e-commerce platforms, connecting over 24 million Monthly Active Users (MAUs) in over 60 countries to approximately 170,000 active global merchants as of year-end 2022[18][24] - The platform is designed for discovery-based shopping, with over 90% of user activity on the mobile app and approximately 70% of sales not involving a search query[19][27] - The company is executing a turnaround strategy, including a 15% workforce reduction in 2022 and a further 17% reduction announced in January 2023[57][113] - A majority of merchants are based in China, but Wish is expanding its global merchant base and operates the Wish Local pickup program[20][21] Competition The company faces intense competition from large global e-commerce platforms and traditional offline discount retailers - The company competes with both large global e-commerce platforms and traditional discount retailers[42] - Competition is based on affordability, user experience, product selection, and shipping terms for users[41][108][110] Human Capital The company had 886 employees at year-end 2022 and announced a 17% workforce reduction in January 2023 - As of December 31, 2022, the company had 886 full-time employees worldwide, with 490 located in the U.S[57] - A workforce reduction of up to 150 employees (17% of the global workforce) was announced in January 2023 to refocus operations and improve efficiency[57] - The employee base was 57% male and 42% female, and the Board of Directors was 60% male and 40% female as of year-end 2022[59] Risk Factors The company faces substantial risks in user retention, financial stability, internal controls, and regulatory compliance - The company's success depends on its ability to attract and engage users cost-effectively, with reduced ad spend negatively impacting user metrics[76][77] - Material weaknesses in internal control over financial reporting have been identified, which could lead to material misstatements[147][148][563] - The company faces significant legal and regulatory risk in France, where an injunction has led to the delisting of the Wish app, impacting revenue[173][175] - The company has a history of net losses, incurring $384 million in 2022, and had an accumulated deficit of approximately $2.9 billion[111][302] - The company received a Nasdaq notice for failing to meet the $1.00 minimum bid price requirement, posing a risk of delisting[247][251] Unresolved Staff Comments The company reports no unresolved staff comments Properties The company leases its San Francisco headquarters and is actively reducing its real estate footprint as part of restructuring - Corporate headquarters is in San Francisco, CA, with approximately 69,000 sq. ft. under leases expiring in 2025[284] - The company is actively seeking to reduce its real estate footprint as part of its restructuring efforts[285] Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 7 in the Financial Statements - Details on legal proceedings are located in Note 7 of the financial statements[286] Mine Safety Disclosures The company has no mine safety disclosures Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A common stock trades on Nasdaq under "WISH" and it does not anticipate paying dividends - Class A common stock trades on the Nasdaq Global Select Market under the symbol "WISH"[290] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[292] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal year 2022 saw a significant revenue and user decline, prompting major restructuring efforts to improve efficiency Key Financial and Performance Metrics (2020-2022) | | Year Ended December 31, | | | |---|---|---|---| | | 2022 | 2021 | 2020 | | MAU (in millions) | 24 | 74 | 107 | | LTM Active Buyers (in millions) | 13 | 38 | 64 | | Adjusted EBITDA ($ in millions) | $(288) | $(199) | $(217) | | Free Cash Flow ($ in millions) | $(424) | $(953) | $(2) | - MAUs and LTM Active Buyers decreased by approximately 68% and 66% YoY, respectively, in 2022, primarily due to reduced digital advertising[314][316] - The company is undergoing significant restructuring, including a 15% headcount reduction in 2022 and a planned 17% reduction in 2023[306][308] Results of Operations Total revenue fell 73% in 2022 due to lower order volumes, while gross margin contracted significantly to 29% Revenue Comparison (2022 vs 2021) | Revenue Type | 2022 ($M) | 2021 ($M) | Change ($M) | Change (%) | |---|---|---|---|---| | Core marketplace revenue | $220 | $1,177 | $(957) | (81)% | | ProductBoost revenue | $46 | $165 | $(119) | (72)% | | Marketplace revenue | $266 | $1,342 | $(1,076) | (80)% | | Logistics revenue | $305 | $743 | $(438) | (59)% | | Total Revenue | $571 | $2,085 | $(1,514) | (73)% | - Sales and marketing expenses decreased by $848 million (77%) in 2022, primarily due to reduced digital advertising expenditures[351] - Gross margin decreased from 53% in 2021 to 29% in 2022, driven by a higher mix of lower-margin logistics revenue and pricing changes[350] Liquidity and Capital Resources The company ended 2022 with $719 million in cash and believes this is sufficient for the next 12 months - The company had cash, cash equivalents, and marketable securities of $719 million as of December 31, 2022[358] Cash Flow Summary (2020-2022) | Cash Flow Activity | 2022 ($M) | 2021 ($M) | 2020 ($M) | |---|---|---|---| | Operating activities | $(422) | $(951) | $0 | | Investing activities | $(47) | $(3) | $165 | | Financing activities | $(22) | $7 | $1,046 | - The company has access to a $280 million revolving credit facility, which remained undrawn as of December 31, 2022[361][505] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency and interest rate risks, managed through hedging and short-term investments - The company uses foreign currency forward contracts to hedge exposures, mainly related to merchants payable denominated in non-functional currencies[390] - A hypothetical 10% appreciation or depreciation of the U.S. dollar against other currencies is not expected to have a material effect[392] - Inflation is not considered to have had a material effect, but rising inflation could affect consumer discretionary spending[393] Financial Statements and Supplementary Data Audited financial statements show a significant revenue decline, a net loss of $384 million, and total assets of $799 million Consolidated Statement of Operations Highlights (in millions) | | 2022 | 2021 | 2020 | |---|---|---|---| | Revenue | $571 | $2,085 | $2,541 | | Gross Profit | $166 | $1,108 | $1,594 | | Loss from Operations | $(398) | $(367) | $(631) | | Net Loss | $(384) | $(361) | $(745) | | Net Loss per Share | $(0.57) | $(0.57) | $(5.87) | Consolidated Balance Sheet Highlights (in millions) | | Dec 31, 2022 | Dec 31, 2021 | |---|---|---| | Total Current Assets | $777 | $1,224 | | Cash and cash equivalents | $506 | $1,009 | | Total Assets | $799 | $1,283 | | Total Current Liabilities | $309 | $449 | | Total Liabilities | $322 | $465| | Total Stockholders' Equity | $477 | $818 | - The company's dual-class stock structure was eliminated on August 9, 2022, when all Class B shares converted to Class A shares[512][513] - As of December 31, 2022, the company had federal net operating loss (NOL) carryforwards of approximately $2.6 billion[542] Controls and Procedures Management concluded that disclosure controls were not effective due to two material weaknesses in internal control - Management concluded that disclosure controls and procedures were not effective as of December 31, 2022[561] - A material weakness was identified due to an ineffective control environment, including insufficient management oversight and competent personnel[563] - A second material weakness was identified in IT general controls (ITGCs), specifically regarding user access and change management[563] - A remediation plan is underway, involving hiring new personnel, enhancing training, and improving IT governance and controls[565][566] Part III Directors, Executive Officers and Corporate Governance Required information will be incorporated by reference from the 2023 Proxy Statement Executive Compensation Required information will be incorporated by reference from the 2023 Proxy Statement Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Required information will be incorporated by reference from the 2023 Proxy Statement Certain Relationships and Related Transactions, and Director Independence Required information will be incorporated by reference from the 2023 Proxy Statement Principal Accounting Fees and Services Required information will be incorporated by reference from the 2023 Proxy Statement Part IV Exhibits, Financial Statement Schedules This section lists the financial statements and exhibits filed with the Form 10-K Form 10-K Summary None