textLogic (WISH) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section covers unaudited financial statements, management's analysis, market risk, and internal controls Item 1. Condensed Consolidated Financial Statements (Unaudited) Unaudited Q3 2023 financials show significant declines in assets, revenue, and net income, plus a reverse stock split Condensed Consolidated Balance Sheets Total assets decreased to $492 million from $799 million, primarily due to reduced cash and marketable securities Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $303 | $506 | | Marketable securities | $142 | $213 | | Total current assets | $478 | $777 | | Total assets | $492 | $799 | | Liabilities & Equity | | | | Total current liabilities | $209 | $309 | | Total liabilities | $220 | $322 | | Total stockholders' equity | $272 | $477 | Condensed Consolidated Statements of Operations Q3 2023 revenue sharply declined by 52% to $60 million, resulting in an $80 million net loss for the quarter Statement of Operations Summary (in millions, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $60 | $125 | $234 | $448 | | Gross Profit | $14 | $34 | $50 | $140 | | Loss from Operations | ($80) | ($128) | ($256) | ($281) | | Net Loss | ($80) | ($124) | ($249) | ($274) | | Net Loss Per Share | ($3.35) | ($5.53) | ($10.55) | ($12.32) | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $266 million for nine months ended Sep 30, 2023, with investing activities providing $75 million Cash Flow Summary for Nine Months Ended Sep 30 (in millions) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($266) | ($313) | | Net cash provided by (used in) investing activities | $75 | ($85) | | Net cash used in financing activities | ($5) | ($9) | | Net decrease in cash | ($203) | ($424) | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail a 1-for-30 reverse stock split, revenue disaggregation, legal proceedings, and workforce reductions - The company executed a 1-for-30 reverse stock split of its Class A common stock, effective April 11, 2023, with all share and per-share data retroactively adjusted[29][30] Disaggregated Revenue (in millions) | Revenue Stream | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Core marketplace | $19 | $40 | $71 | $184 | | ProductBoost | $5 | $11 | $19 | $36 | | Marketplace Revenue | $24 | $51 | $90 | $220 | | Logistics Revenue | $36 | $74 | $144 | $228 | | Total Revenue | $60 | $125 | $234 | $448 | - The company is involved in putative class action lawsuits filed in May 2021 related to its IPO, alleging securities law violations, which it intends to defend vigorously[70] - The company implemented two significant workforce reductions in 2023, affecting 150 employees in January and 255 in August, incurring $12 million in severance costs for the nine months ended September 30, 2023[93][94][95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses poor financial performance, including revenue decline and reduced user metrics, while exploring strategic alternatives - The Board has initiated a process to explore strategic alternatives to maximize stockholder value, including a potential sale, merger, or even dissolution and liquidation[99][100] Key Financial and Performance Metrics | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | MAU (millions) | 11 | 24 | 13 | 25 | | LTM Active Buyers (millions) | 9 | 16 | 9 | 16 | | Adjusted EBITDA (millions) | ($54) | ($95) | ($182) | ($193) | | Free Cash Flow (millions) | ($86) | ($100) | ($269) | ($315) | - Monthly Active Users (MAUs) decreased by approximately 54% and LTM Active Buyers by 44% in Q3 2023, primarily due to reduced digital advertising expenditures[111][113] Results of Operations Q3 2023 revenue decreased 52% to $60 million, leading to an $80 million operating loss due to declines in both segments Revenue Comparison (in millions) | Revenue Stream | Q3 2023 | Q3 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Marketplace revenue | $24 | $51 | ($27) | (53)% | | Logistics revenue | $36 | $74 | ($38) | (51)% | | Total Revenue | $60 | $125 | ($65) | (52)% | - Gross margin decreased to 23% in Q3 2023 from 27% in Q3 2022, due to a higher proportion of lower-margin logistics services and pricing strategy revisions[132] - Sales and marketing expenses for Q3 2023 decreased by 56% year-over-year to $35 million, primarily due to a $42 million reduction in advertising[133] Liquidity and Capital Resources As of September 30, 2023, the company held $445 million in cash and equivalents, with an undrawn $280 million credit facility - The company's cash, cash equivalents, and marketable securities totaled $445 million as of September 30, 2023[142] - A share repurchase program of up to $50 million was authorized in April 2023, but no shares were repurchased through September 30, 2023[146][147] - The company has an undrawn $280 million senior secured revolving credit facility available through November 2025[148][149] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates, foreign currency, and inflation, with low interest rate exposure - The company's exposure to interest rate risk is minimal due to the short-term nature of its cash, cash equivalents, and marketable securities[162] - To mitigate foreign currency risk, the company uses natural hedging and may enter into short-term foreign currency derivative contracts[163] - Inflation has not had a material effect, but significant inflationary pressures could harm future business by increasing costs and reducing consumer spending[166] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to material weaknesses - The CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023, due to ongoing material weaknesses[169] - Outstanding material weaknesses relate to an ineffective control environment and ineffective IT general controls (user access, change management, and computer operations)[170][172] - Management is implementing a remediation plan including hiring qualified personnel, enhancing IT governance, and holding SOX Steering Committee meetings[173][174] PART II. OTHER INFORMATION This section provides additional information on legal proceedings, updated risk factors, and filed exhibits Item 1. Legal Proceedings The company incorporates by reference information on ongoing legal proceedings from Note 7, including IPO-related class actions - Information regarding legal proceedings is detailed in Note 7 of the financial statements, discussing ongoing securities class action and shareholder derivative lawsuits[177] Item 1A. Risk Factors New material risk factors relate to exploring strategic alternatives, which carries uncertainty and potential for dissolution - A new risk factor addresses the company's evaluation and pursuit of strategic alternatives, announced in November 2023[179][180] - Exploring strategic alternatives is uncertain, may not result in a transaction, and could disrupt business, leading to loss of key employees and stock price volatility[181][183] - The Board may decide to pursue a dissolution and liquidation, which could lead to a total loss of investment for security holders[185] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data - The exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[188]