ContextLogic Inc. (NASDAQ:WISH) Q2 2023 Earnings Call Transcript

ContextLogic Inc. (NASDAQ:WISH) Q2 2023 Earnings Call Transcript August 3, 2023

Operator: Good day and thank you for standing by. Welcome to WISH’s Second 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. [Operator Instructions]. As a reminder today’s program is being recorded. I would now like to turn the conference over to Mr. Ralph Fong, Wish’s Director of Investor Relations. Please go ahead, sir.

Ralph Fong: Good afternoon, everyone, and welcome to Wish’s second quarter 2023 earnings conference call. I’m Ralph Fong, Director of Investor Relations. And joining me today are our CEO, Joe Yang; and our CFO and CEO, Vivian Lu. Today’s prepared remarks have been prerecorded. There is also a slide that has been posted to our Investor Relations website, which is available for your reference. Once we are finished with Joe and Vivien’s remarks, we will hold a live Q&A session. The remarks made today include forward-looking statements that are related to, among other things, our financial expectations, business and restructuring plans, including the impact of our reduction in force, logistics and operational efficiencies, including flat rate shipping and related initiatives.

Initiatives to improve customer experience and engagement, expectations regarding merchant relationships and strategic partnerships, the impact of our strategic, marketing and product initiatives, including ad spending and promotional events, the renewed supply strategy and the anticipated 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, 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 and which is 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 Wish’s CEO, Joe Yan.

Joe Yan: Thank you, Ralph. I would like to thank everyone for joining our second quarter 2023 earnings call. On this call, I will share with you our Q2 financial updates, discuss the business highlights and key strategic focus for 2023. Vivian will then provide a deeper dive into financial results, share the third quarter guidance, and comment on our operations. Finally, I will provide additional closing remarks before opening up the call to your questions. In the second quarter of 2023, total revenues of $78 million were down 42% year-over-year and below our guidance range of $91 to $102 million. On the bottom line, we reported Adjusted EBITDA loss of $66 million in Q2, which was within the guidance range of a loss of $60 million to $75 million.

We ended the second quarter with cash, cash equivalents and marketable securities of $531 million. During the quarter, our top line performance including revenue and DAU was impacted by the challenging operating environment as we continued to navigate macro headwinds as well as competitive pressures in the ecommerce space. At the macro level, we continued to experience a high level of economic uncertainty, which impacted consumer spending habits. Macro conditions, which include inflation, elevated interest rates and cost of living, continued to pressure our value-oriented consumers. This had a direct impact on discretionary spending across the markets we serve. The ecommerce market is large and growing and yet highly competitive and rapidly evolving, which is characterized by rapid changes in technology and consumer sentiment.

We acknowledge that competition in our industry has intensified, and we expect this trend to continue. That being said, we are focused on the things we believe we can control, going forward. Despite a dynamic and challenging environment, the team executed on our strategies and made progress in our various strategic initiatives. I’ll begin by reviewing some of the progress we have made on our three foundational pillars that we continue to believe are the most important to the long-term financial health and growth of Wish. Our first pillar is improving the customer experience. As part of our efforts to drive basket building and further improve the customer experience, we rolled out flat rate shipping on all eligible orders in each of our major geographies in the first half of 2023.

In Q2, we took it up a notch and expanded the flat rate shipping initiative by offering free shipping on all eligible orders over $10 during the Wish Anniversary merchandising event that ran from June 24th to July 7th. Flat rate shipping is part of a broader effort to improve the shipping experience on Wish and remains a key component in addressing one of the major pain points amongst our users. We expect to further expand it in the second half of 2023. Some ideas we plan on experimenting with include offering free shipping for orders above established thresholds and making all items on Wish eligible for flat rate shipping, instead of a limited number. Ultimately, our vision is to remove shipping as a major point of friction for our customers from here on in.

From a product discovery and exploration standpoint, in Q2 we also increased the scale of product collections in support of the Wish Anniversary merchandising event by ratcheting up the volumes of product groupings based on a specific category such as home and garden, beauty and wellness, jewelry and accessories, et cetera. And showing those products in featured modules that lead to unique collection pages. Going forward, we intend to leverage generative AI to create product collections at scale to drive engagement and meaningful basket-building opportunities for our customers, which I am excited about. Another aspect of improving the customer experience is our quest to provide seamless guest experiences, regardless of the entry point. In Q2, our product team significantly reduced friction on the mobile web by launching a guest checkout experience across a number of major geographies.

The new experience enables new users to discover products, add items to the cart and transact, without needing to set up an account – the result of which has driven improvements in customer engagement and conversion. As most of our new and churned user traffic comes in via other mobile-based apps, it’s critical we get the m-web guest experience right in order to harness that traffic. Mobile web is becoming an important channel for our platform distribution in addition to our iOS and Android apps. Speaking of user traffic, ads are the first experience new and returning buyers have with Wish, and we intend to focus on making that experience engaging, retentive, and frictionless in the second half of 2023, as part of our growth strategy. We plan to optimize ad landing pages to focus on enticing customers from m-web to download the app, highlighting new buyer incentives, and testing a variety of new recommendations to drive exploration.

At Wish, our transition to allow guest experiences is nearly complete. Looking ahead, the next phase in this program for the remainder of the year includes password less accounts and removing friction associated with account creation and recovery. The goal is to leverage onetime passwords OTP and links to increase the number of successful log-ins and prevent account takeovers with more secure authentication at the secondary wall. In an effort to further improve the customer experience and drive basket-building, our team intends to make the shopping cart a living part of the users’ Wish experience by launching the “live cart” in the second half of the year. The live cart allows users to prominently see the status of their cart throughout their entire shopping journey.

In other words, the live cart will help users to understand what’s in their cart at any given time without having to go to a different place within the app. Moreover, the live cart will surface timely coupons, encouraging customers to add more relevant items to their carts or baskets before checking out, providing a more personalized shopping experience to customers. This brings me to our second pillar, which is deepening our merchant relationships. Within the U.S., we have successfully onboarded a number of new merchants in recent months. Of particular note is a reseller of refurbished consumer electronics products and brand owners within the beauty, fashion, and licensed sports collectibles space. Importantly, these authorized resellers have domestic warehouses in the U.S., enabling faster shipping times for North American Wish customers.

Additionally, we announced a strategic partnership with one of South Korea’s leading logistics providers, Rincos. The partnership is designed to streamline the process for Korean merchants seeking to ship goods overseas through the Wish platform. We look forward to joining forces with Rincos to deliver a better shipping experience for our merchants and our customers and to grow our merchant base in the region. As a marketplace platform, we recognize that our merchants play an integral part of providing a great customer experience. We are committed to further strengthening our relationships with those merchants who provide outstanding experiences to our consumers. Europe should continue to be a strategically important region for Wish as our European customer base accounted for nearly half of the core marketplace revenue in Q2.

Consequently, we plan to host our first European Merchants Summit in September this year. The two-week-long Wish Anniversary merchandising event was another successful event for Wish and was well received by our merchants and buyers. It allowed our merchants to position their products strategically within targeted categories and create door buster deals to help attract customers. To put things in perspective, approximately 6,000 merchants participated in the Wish Anniversary event, enrolling over 360,000 product listings and 15,000 door buster deals. Importantly, we saw a double-digit increase in GMV during the event. On our last earnings call, we introduced our renewed supply strategy which aims to further deepen our merchant network to provide customers with fresh, fun, quality products at competitive prices.

As a 3P marketplace, the breadth and depth of our product range is a key differentiator, as is our ability to enable both domestic and cross border trade. For the second half of the year, we plan to implement a renewed supply strategy by rightsizing our supply pool to focus on a certain number of core listings and high-touch categories. This will involve creating distinct experiences for each of our highest-touch categories such as Health and Beauty, Women’s Fashion, Refurbished Electronics, and Home Essentials. We’ll have separate landing pages, theme-based collections, marketing messages, et cetera. All designed to be better aligned with our users’ “Home and Life” needs. I will now discuss our third pillar of achieving operational excellence.

In Q2, the average Time-To-Door in six of our major markets improved by six days when compared to the same period of 2022. Our on-time delivery rate was 91%, largely flat when compared to last quarter. We also saw our average Time to Door improve in the major markets we serve, favorably impacting customer order cancellation rates, refund rates and customer experience. Our customer order cancellation rates declined ~47% year-over-year in Q2, and customer refund rates dropped by ~30% within the same time period. Additionally, we saw a ~28% year-over-year improvement in customer NPS alongside encouraging buyer conversion and customer retention trends in Q2. In particular, buyer conversion and customer retention improved by 13% and 3%, respectively in the second quarter of 2023, when compared to the same period last year.

Copyright: nicoletaionescu / 123RF Stock Photo

Having said that, we have a lot of work ahead to further improve our business operationally, and our first steps are to rationalize corporate overhead and operating expenses. As part of these efforts, we will be implementing a restructuring plan. Earlier this week, we notified Wish employees that we will undertake a new round of reduction in our global workforce as part of a broader realignment of our resources. We anticipate that this reduction will decrease our global workforce by approximately 255 positions, representing about 34% of our headcount. This is an incredibly difficult decision to make and process to go through, but it is critical that we rightsize our spend to match the current size and scope of our business. We estimate that we will incur one-time charges of approximately $8.7 million for severance and personnel reduction costs.

We expect the majority of these charges will be incurred in Q3 and that the implementation of the workforce reduction will be largely complete by the end of fiscal year 2023. We expect to realize run-rate savings of approximately $43 million to $46 million on an annualized basis, starting in the fourth quarter of 2023. We intend on making WISH a much leaner and more efficient business with the goal of becoming a profitable company longer-term. With that, let me now turn the call over to our CFO and COO, Vivian Liu, to discuss our financial results in more detail and give you an update on our operations.

Vivian Liu: Thank you, Joe. Now I will add more color on Q2 financial performance and provide Q3 financial guidance. On the user metrics, we had 12 million MAUs1 and 10 million LTM active buyers2 in the second quarter of 2023, which represented a decline of 48% and 50% respectively, year-over-year. The decline was partially driven by the cumulative reduction in ad spend over the past several quarters as we continued to focus on achieving target returns on our ad spend. The total LTM ad spend decreased by 30% versus the same period of the prior year. In addition, as Joe shared earlier, we started to see increased competition in the ecommerce industry as some of the market participants focused on driving new user acquisition and retention by offering deep discounts and incentives.

We believe that such competition further contributed to the decline in our MAUs and buyer count in Q2 2023. Total revenues in Q2 were $78 million, a decline of 42% year-over-year. This decline was across core marketplace, product boost, and Logistics, primarily driven by reduced ad spend and the pricing changes that were fully implemented by the end of Q2 2022. Similar to what we experienced last quarter, the pricing changes impacted our Q2 revenue and EBITDA, resulting in an unfavorable comparison to the prior year. Please note that the impacts from the pricing changes will be lapped fully starting Q3 2023. Q2 gross profit was $16 million, a decline of 62% year-over-year. Gross margin was 21% vs 31% in Q2 2022. Gross margin performance was mainly driven by the decline in marketplace gross profits due to the pricing changes as discussed earlier, as well as the lower margin logistics business contributing a higher percentage of the total revenues.

Total operating expenses were $99 million, a reduction of 26% year-over-year. Lower ad spend, lower customer support service costs, and reduced employee headcount accounted for a majority of the reduction in operating expenses. Excluding stock-based compensation expenses, total operating expenses were down 19% year-over-year. Our net loss was $80 million, compared to a net loss of $90 million in the second quarter of 2022. On a year-over-year basis, the decrease in gross profit was offset by the decline in operating expenses, resulting in a decrease in net loss in Q2 2023. Our Adjusted EBITDA was a loss of $66 million, compared to an EBITDA loss of $58 million in Q2 2022. The year-over-year decline in adjusted EBITDA was primarily driven by lower revenues and the impact of our pricing changes which made Q2 2023 unfavorable from a year-over-year comparison standpoint.

Q2 2023 EBITDA result was within the guided range of a loss of $60 million to $75 million. Operating cash flow was negative $88 million and free cash flow was negative $91 million for Q2 2023, compared to operating cash flow and free cash flow of negative $67 million in Q2 2022. The year-over-year increase in net cash used in operating activities was primarily driven by unfavorable changes in working capital as the balance of total payables declined corresponding to lower transaction volume and amounts. We ended Q2 with $531 million in cash, cash equivalents and marketable securities and no long-term debt. I would now like to provide guidance for the third quarter of 2023. For Q3, we expect total revenue to be in the range of $55 million to $65 million and adjusted EBITDA loss to be in the range of $55 million to $65 million.

Revenues are expected to remain under pressure primarily driven by reduced monthly active users and buyer count on a quarter-over-quarter and year-over-year basis. EBITDA is expected to improve quarter-over-quarter largely due to better cost efficiency associated with lower employee expenses. From a year-over-year standpoint, EBITDA is expected to improve significantly as the projected decline in revenues is more than offset by cost savings across COGS and operating expenses. To sum up, the competitive landscape is changing rapidly in the cross-border ecommerce space, and we are experiencing unprecedented headwinds from intensified competition in the industry. As a result, we expect user acquisition and retention to remain pressured in the near term, negatively impacting our monthly active users, active buyer count and revenues.

As Joe shared earlier, we have made the difficult decision to further rightsize our cost structure. In addition to the annualized savings of approximately $43 million to $46 million as a result of this round of workforce reduction, we are working to achieve additional annualized savings of approximately $20 million in non-employee related cost items. The enhanced cost efficiency should enable us to improve cash flow and invest in our critical initiatives for the future. We will continue to double down on the three pillars – customer experiences, merchant engagement and operational excellence – to deliver differentiated shopping experiences and great value at competitive prices for our buyers and merchants alike. We are now on an accelerated path to re-invent Wish with an ever-greater sense of urgency.

Financially, we will sharply focus on return on investments, EBITDA and cash optimization to improve shareholder values. With that, I will now turn over the call to Joe for his closing remarks.

Joe Yan: Thank you, Vivian. To close, I’ll leave you with a few final thoughts. We are cautiously optimistic within Wish about all the initiatives we have in place from a user and merchant experience standpoint, but we still have a lot more work ahead. As I discussed in the beginning of the call, we face intense competition amidst a challenging macroeconomic climate. As a result, for the remainder of 2023, the entire team at Wish will collectively sharpen our focus on our key initiatives that we expect will drive improvements in customer experiences and sustainable growth. Our plan is to improve the shopping experience for our users through the app features, improved product quality and delivery time, more responsive customer support and competitive pricing.

Going forward, we intend to leverage generative AI as well as other technologies to provide differentiated shopping experiences to engage, delight, and drive basket-building opportunities for our users. Meanwhile, we are dedicated to the three foundational pillars, and we are focused on the goal of returning shareholder value over the long term. At this time, operator, could you please open the call for Q&A?

See also 10 Best ReBank Dgional ividend Stocks to Buy and 11 Best Human Resources Stocks To Buy Today .

Q&A Session

Operator: [Operator Instructions] And our first question comes from the line of Kunal Madhukar from UBS. Your question please.

Kunal Madhukar : Hi, thank you for taking the questions and thanks for the opening remarks. Quick one on, can you talked about macro and comparative challenges out there, macro is you know whatever macro is. But as far as the competitive challenges are concerned, what are you doing there to kind of improve and maybe change stuff? And are you seeing any change? What I’m trying to figure out is, is there a chance that revenue can actually grow from current levels? Thank you.

Joe Yan: Yes, thanks for the question. This is Joe Yan. So, I think the competition is always there. So, we see quite a few players in the space, right, so increase the investment level, especially in the past two quarters. So it also signals very strong demand, right, in the cross border ecommerce sector. So which we as a company, so we kind of keep focusing on the sustainable growth. Because we believe that sustainability is the key to an ecommerce company as the ecommerce, it’s going be a long run for everyone in this space. So what we have done here is, so we keep focusing on as to what we can do. So I think, first of all, I think it’s about the supply quality as we said. So there’s something has been the pin point for our customer, if you’re from a customer experience perspective, we have been doing a lot of things on improving on lists.

There’s something really can help us right to grow the organic, and also the retention in a longer run. And in addition to that, so I think the competition will also get the force to every player in the market, including ourselves, drive the force to really think about how we can accelerate, reinvention of the shopping experience. So last thing, actually, why our product team have been focusing a lot, so on improving a lot of product features. So, likewise I share in earnings earlier. So there’s something stuffing can really help us to differentiate ourselves in the market in this competitive market. So, still a lot of work to do. And we think that actually, something on the shopping experience, the innovation can help us right to be achieved the moat, the differentiation, compare to the other players.

So, yes, so, I think there’s still a lot of work to do, but there’s something we’ll focus on in the future. And on the growth side, so definitely we believe, so with those kinds of shopping experience improvement, and also including the supply quality improvement, that can really give us a chance to stabilize the traffic, and to kind of back to the growth track again,

Vivian Liu: If I may add to Joe’s points. We may not be able to outspend our competitors in terms of marketing dollars, but what we can do to drive sustainable growth as Joe shared in the prepared remarks, number one, user acquisition through the high touch category, fashion, refurbished electronics, home essentials, and beauty and health. And those are the areas of where we are, you can build a lot of differentiated vertical experiences for user acquisition, as well as user retention. As Joe also mentioned a generative AI technology will play a very important role in creating those vertical experiences. And as a second piece of sustainable growth is user conversion, through removing frictions in the user journeys. And the third piece is increasing the average transaction value through the flat rate shipping and other productivity initiatives.

So I think when we think about growth, it’s more than just acquiring users is about converting the users into buyer and retaining the buyers more effectively, and helping the buyers and building bigger baskets. So all that collectively will help us build a path towards a system of growth and eventually reverting the trend in the top line.

Kunal Madhukar: Great. Thanks, Joe. And thanks, Vivian. Quick follow up if I could. One of the things you mentioned Vivian was — and you discussed it in the in the opening remarks also is the highest search categories health and beauty, fashion, refurb and home essentials. What percentage of your GMV comes from these four categories?

Vivian Liu: Yes, so we don’t report GMV like a category level but those are very major categories already on the platform. So they are in the general state, they accounted for more than 50% of the total GMV on the platform. What we highlighted as the four high touch category, their subset of the bigger home and garden category or fashion. So there are subsets under the bigger categories where we see additional growth opportunity if we double down and manage the subcategories properly, we can drive a lot more growth. To answer your question those four major categories are accounted for a very large portion for GMV. What we selected are the subcategories under the four bigger categories to drive additional growth. Again, women’s fashion, refurbished electronics home essential and beauty and health.

Kunal Madhukar: Got it. Thank you so much.

Vivian Liu: My pleasure.

Operator: [Operator Instructions] Our next question comes from line. Laura Champine from Loop Capital. Your question, please.

Laura Champine : Thanks for taking my question. It’s really about the restructuring. I know that the — there was a significant number of staff laid off of I think it’s 34% of the total. But are there certain areas where that was concentrated certain functions? And are there certain things that you did not touch maybe just a little more visibility into what you did there?

Joe Yan: Yes, thanks a lot. This is Joe. So looking ahead to the remainder of this year 2023, we’ve recognize the macroeconomic uncertainties and the competitive pressure will likely persist. So in response to this dynamic environment and to position Wish to thrive over the longer term, so we are taking aggressive action, as you mentioned, to significantly lower our cost structure and improve our operational efficiency. So as part of this efforts, we are restructuring our workforce and optimizing for top strategic priorities. So can make us more laser focused on executing the top priority things within the company. So we are able to maintain the major investment that we have with what we have planned for this year, and the lowest card will taken into account.

So that’s your question, right? So this reduction didn’t across a deep cut across different areas of the company. And there are a number of factors that were included in the decision making process. However, our priority was really making sure that we have the full funding for what we consider are the key strategic priorities both on the product and operations side.

Laura Champine: Got it. And then a second question, how do you expect a trend your own advertising expense, which I know is dwarfed right now by some competitors? But how do you expect it? Do you expect to increase? Or does it not make sense to grow ad spend at this time?

Vivian Liu: Yes, thank you for the question. Our ad spend will fluctuate based on the seasonality for users. During the holiday season, we tend to spend a little more to capture the purchase power from the customers. But generally speaking, we will be more focused, we will take a very disciplined approach with our ad spend, meaning we set a threshold for the rule, so the return on ad spend. And we won’t spend additional dollars until — unless we see the thresholds requirement being met. So I think the between spending a lot of dollars trying to compete head to head with deeper pockets and just for user acquisition, versus spending wisely and in a disciplined manner to make sure we get a proper investment on the added dollars, we choose the second part.

And we are like, like I mentioned in the prepared remarks, and financially, we’re very focused on optimizing for cash flow returns and EBITDA. So I think it’s probably fair to say compared to last year, the year before, ad spend will continue to stay at a very disciplined level. And as we continue to focus on the rule and the return threshold.

Joe Yan: Yes, and I can add a little bit color here, so in the past few quarters, so we have been spending a lot of effort on optimizing the return on ad spend, especially in the existing customer segments. So we have seeing a very quiet good improvement from the existing customer segments that actually can allow us so really kind of allocate little bit more on budget into the new user acquisition in the upcoming quarters. But doesn’t mean that you will increase the marketing spend softly. But there’s nothing just like more the approach, the campaign structure change, and really help us to optimize ROIs at a more holistic view. So, I think this is the overall approach we are doing now. And Q2 definitely, it’s a transitioning quarter, so we have studied some of the campaign approach change, and we do hope so that can really help us right to build on the top funnel.

But at the end of the day, just like what I said right, organic is still being the biggest bet for us. So the marketing still will remain a very key driver approach for us for us, the DAU, the growth back. I think organic is still is the biggest bet. So that’s something we’ll still we’re relying on the customer experience improvement or product feature improvement. So just like what we shared earlier, right, including reducing the customer friction during the shopping journey, right, the more innovative way for exploration and discovery, and also the continuing improvement on the improvement on the shipping experience. Note, all of these things coming together, so can really offer a customer much better experience on Wish. And this is something I think can really help us grow on the organic side.

So yes, having said that, so with all these combined effort, we do hope rise in the marketing and product efforts can really kind of work together to generate more kind of user for Wish.

Laura Champine: Got it. Thank you.

Operator: Thank you. One moment for our final question for today. And our final question for today comes from the line of Kunal Madhukar from UBS. Your question, please.

Kunal Madhukar: Hi. All right. Another question popped in my mind. And that was with regard to the marketing spend. So Vivian you talked about having a high ROI threshold on the marketing spend, and when I look at like your marketing spend as a percentage of core marketplace revenue, that increased from about 130%, in 1Q ‘23, to 160% in 2Q ‘23. The aggregate marketing spends actually increase Q-over-Q in the second quarter when revenue declined. So Can you talk about, you know, how much of your marketing spend is performance based versus brand? And where the ROI equation may be breaking down? Thank you.

Vivian Liu: Thank you for the question. So, I think a couple of things, if we compare year-over-year, first of all, our ROIs on the performance marketing spend, has been improving pretty steadily. But I understand that the dynamic you’re describing our total marketplace revenue is declining from year-over-year standpoint. So, two things to keep in mind. Number one is the fact that we removed — change of pricing practices. And from last year to this year — sorry, we implemented the new pricing changes by end of Q2 last year, which means when you compare this Q2 to the last Q2, it was this year is admirable, because we implemented the changes that you remove premium on certain item prices, which directly impact our marketplace revenue and a margin.

So that’s a very big portion, why the marketplace revenue, declined from year-over-year standpoint. Now, keep in mind, going into Q3 this year, the comparison will be apples-to-apples. So because that change wasn’t completed at the end of Q2 last year, and Q3 onward is clean. So that’s number one. Number two, I think the — I will say despite the fact that we improve ROIs, ROI on the marketing, and we’re being really careful in terms of how we allocate in the budget dollar. As Joe mentioned, we focus on the existing buyers when we see upside in the ROAs we move additional dollar into new user acquisition. So we have done all the right things in terms of optimizing the returns on the marketing, however the external competition and the market general macro has been a much bigger factor in driving down the total revenue, particularly on the marketplace side.

So I think that’s not a reflection of the efficiency of our marketing spend is probably more reflection of the pricing changes from year-over-year standpoint as well as we intensify the competition.

Joe Yan: Therefore, overall marketing spend, performance now is still the majority of our spend. But starting Q2, right and coming to Q3 gradually, so now actually, we start some of the new brand marketing campaign. So the idea here is we want to have some of the always on evergreen brand marketing campaign in some of the diversified channels right, and see how the brand marketing can really play the role to help us to improve the tough funnel conversion, to help us to build top funnel. So this is something we do expect to see the synergy in between the performance of brand marketing can really help us to kind of improve the marketing efficiency holistically.

Operator: Thank you. This does conclude the question and answer session of today’s program. I’d like to hand the program back to Joe Yan for any further remarks.

Joe Yan: Thanks, everyone, for joining our earnings conference call and we look forward to talking to you throughout the quarter.

Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.