ContextLogic Inc. (NASDAQ:WISH) Q4 2022 Earnings Call Transcript

ContextLogic Inc. (NASDAQ:WISH) Q4 2022 Earnings Call Transcript February 23, 2023

Operator: Good day, and thank you for standing by. Welcome to WISH’s Fourth Quarter and Full Year 2022 Earnings Call. . And now I’d like to introduce your host for today’s program Mr. Ralph Fong, WISH’s Head of Investor Relations. Please go ahead.

Ralph Fong: Good afternoon, everyone, and welcome to WISH’s Fourth Quarter and Full Year 2020 Earnings Conference Call. I’m Ralph Fong, Director of Investor Relations. And joining me today are our CEO, Joe Yan; and our CFO and COO, Vivian Liu. 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 are finished with Joe and Vivian’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 turnaround plans, consumer experience and engagement, expectations regarding merchant relationships and strategic partnerships, the potential impact of our strategic marketing and product initiatives, including ad spending and the rebrand 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 as 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 fourth quarter and full year 2022 earnings call. On this call, I will recap some of the major highlights of 2022, share our financial update and discuss the key strategic initiatives for 2023. Vivian will then provide a deeper dive into financial results, share the first quarter guidance and comment on our operations. Finally, I will provide additional closing remarks before opening up the call to your questions. 2022 was a year full of challenges. At the macro level, we experienced a higher level of economic uncertainty that emerged in both our North American and our European market in 2022, which impacted consumer buying behavior. Our value-oriented consumers were impacted by the steep increase in energy and food prices, which translated to a slowing of discretionary spending across the regions.

Governments around the world continue to tighten the money supply and raise interest rates to ease inflationary pressures. As a global e-commerce marketplace, we are not immune to the changes in consumer spending habits, particularly among the lower income house that shop on our marketplace. Additionally, we experienced supply disruptions attributable to COVID related lockdowns in China, I would like to take this opportunity to thank our dedicated and hard-working team in China for the efforts to work through all the supply chain and the logistic challenges during the lockdown throughout 2022. Despite the challenges we faced, we continue the transformation journey that we embarked on in 2021, working diligently to improve the front end for our users and the back end for our merchants.

Our foundations for growth are built around 3 fundamental pillars: First, improving the consumer experience; second, deepening our merchant relationships; and third, achieving operational excellence. I’m energized that the entire team has continued to make tremendous progress in each of the foundational pillars in the midst of dynamic and challenging macroeconomic environment. Let me now review some of our major accomplishments in 2022. We successfully launched a rebrand campaign. Our new brand incorporated a new logo, iconography, imagery and color palette, and was accompanied with a refreshed mission statement Bargains Made Fun, Discovery Made Easy, which more accurately reflects our renewed focus on helping value-oriented consumers discover listings for new products while having fun in frictionless and a convenient way We ramped up our merchandising efforts for the 2022 holiday season.

Importantly, we ran our Every Day is Black Friday campaign in November where we had merchant-funded promotions, as well as daily deals and weekly flash sales for our popular categories such as electronics, accessories, home, toys, gifts, and fashion. Additionally, we launched a new Deals Hub promotion platform that allowed our merchants to showcase their best discounts and increase their product exposure across the WISH platform, while our customers were able to benefit from getting a great deal. Feedback from both our merchants and customers was overwhelmingly positive. We have learned a lot and gained tremendous insights from this first major merchandising event at WISH and we continue to invest in our merchandising capabilities in 2023. We also streamlined our logistics operations, resulting in better on-time delivery rates.

As an example, our on-time delivery rate was approximately 89% in the fourth quarter of 2022, an improvement from approximately 82% during the same period of 2021. Our average time to door has significantly improved in the top markets we serve, resulting in much improved refund rates, customer order cancellation rates and consumer experience. Our customer refund rates fell 36% year-over-year in the fourth quarter, and customer order cancellation rates dropped 58% within the same time period as well. We continued to see improvement in customer NPS throughout 2022. To sum it all up, as the result of our ongoing effort to improve the consumer experience, we saw encouraging buyer conversion and customer retention trends in the fourth quarter of 2022 versus a year ago.

From a user and merchant experience standpoint, we continued to innovate and roll out a suite of product features to further improve the user experience on the WISH platform, including the revamped fashion experience, WISH Fashion; the shoppable videos feature, WISH Clips; the merchant scoring system, WISH Standards; improved Deals Hub; new logged-out experience; increased focus on merchandising and collections; and the redesigned homepage on the WISH app which features collection modules, category tabs, wishlists, et cetera. We enhanced transparency by adopting a new pricing practice for buyers and implementing new commission structures for merchants. The new pricing practice has reduced the pricing complexity and helped us build deeper engagement with our buyers and merchants.

Finally, we collaborated with a number of affiliate partners to drive incremental traffic throughout 2022, including Affinity, Honey, Klarna, Rakuten and RetailMeNot. In addition, we formed partnerships with multiple providers of ecommerce software, fulfillment automation, platform integration and customer support solutions including eDesk, Productsup, and Eurora to further enhance the merchant experience. We also joined forces with EverC to fight product counterfeits as part of our effort to create a shopping experience that is engaging, yet safe and secure for our customers. Putting it all together, we accomplished quite a lot in 2022. Before we move onto other topics, I would like to thank our employees for their hard work and dedication.

I also want to thank our customers, merchants, partners and shareholders for their continued support. I will now share some high-level financial highlights for the fourth quarter and full year 2022. We reported fourth quarter revenues of $123 million. While it was down 57% from the fourth quarter of 2021, the rate of quarterly declines slowed, with revenues in Q4 only sequentially down 2% from the third quarter of 2022. The revenue decline was primarily driven by reduced ad spend in the quarter. Our Adjusted EBITDA in Q4 was a loss of $95 million, which was at the lower half of guidance range of a loss of $90 million to $110 million. Full year 2022 revenue totaled $571 million, down 73% from a year ago. Adjusted EBITDA in 2022 was a loss of $288 million, compared to a loss of $199 million in 2021.

We also ended the year with cash, cash equivalents and marketable securities of $719 million. These numbers indicate there’s still much more work ahead to do in order to put us back on the path to profitability and growth. Looking to 2023, while we are committed to our three foundational business pillars, we intend to instill a strong focus on unit economics to help ensure a continued solid financial foundation for WISH and prioritize disciplined cash flow optimization so that our marketplace can effectively maximize its current opportunities. With that, I would like to spend a couple of minutes outlining the key strategic initiatives to improve our unit economics, going forward. We expect to achieve this through increasing Average Transaction Value and repeated purchases.

Our first strategic initiative is to drive basket building, which we believe will increase cart size and conversion rates by improving listing quality and trust, reducing fulfillment time, and bringing down shipping costs. Our key efforts in the first quarter include the introduction of flat rate shipping in the U.S., followed by other major markets. Importantly, we expect flat rate shipping to be a critical component in addressing one of the major pain points amongst our users on the WISH platform. We envision that flat rate shipping will enable WISH to be positioned as a transparent and competitively priced marketplace where users are incentivized to build larger baskets. Not only will this improve the shopping experience for our customers, we are confident it will also result in high order values, higher conversion rates and customer retention.

Just a quick update on the launch of flat rate shipping in the U.S. which started in late January. Flat rate shipping is now available across both the Android and iOS platforms. Data so far indicates that both GMV and the number of items per buyer have increased by double-digits. I’m extremely encouraged by the promising early results, and I look forward to keeping you posted on the progress. Second, we strive to grow buyer retention through repeat purchases. In the first half of 2023, we intend to leverage incentives and merchandising campaigns to drive repeat purchases, bring buyers back via unpaid channels including personalized emails notifications and bring in right inventory for our focus categories, including home & life, hobbies, electronics, beauty & health, and fashion.

In the first half of 2023, we intend to offer customers incentives and coupons for free shipping to encourage basket building and repeat purchases across our key categories. Additionally, we plan to provide more incentives for first-time purchases, repeat purchases, and inactive users as well. Our third initiative is to inspire browse & discovery experiences and, with this, our goal is to increase users’ engagement, which is measured by product display page views and click-through rates. For those familiar with the WISH platform, the shopping experience is primarily built around the idea of discovery rather than search. In fact, most of the sales on our platform do not involve a search query and instead derive from personalized browsing. In the first half of 2023, we plan to further enhance the category browsing experience to help users not only explore the WISH catalog in a fun and engaging way, but also browse through the breadth and depth of WISH’s product catalog and discover more products through shopping inspiration.

Personalization also plays a pivotal role in attracting and retaining users. We intend to bring elements of personalization into every step of the customer journey from inspirational recommendations through to irresistible deals. Fourth, we plan to diversify our marketing channels to drive buyer growth. While paid ads will remain a key driver for user retention and growth, our goal is to increase the efficiency of our paid ads and decrease the overall advertising spend with ROAS targets based on customer segments and user lifecycles. In parallel, we plan to invest more heavily in our unpaid channels, as we believe that emails and push notifications will be highly effective in bringing users back to WISH and driving customer loyalty over time.

Put simply, our marketing activities this year will be much more targeted both in the selection of channels and content type. In summary, each of our strategic initiatives for 2023 are clear, and we are deliberate and focused in our efforts to improve our unit economics. 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 Q4 and full-year 2022 financial performance, provide Q1 2023 EBITDA guidance, and expand on certain operational priorities in 2023. In the fourth quarter of 2022, we had 20 million monthly active users and 13 million last 12 months active buyers, which was a decline of 55% and 66% respectively, year-over-year. The decline was mainly driven by the cumulative reduction in ad spend over the past 12 months. Our total ad spend in 2022 was approximately 20% of that of 2021. In particular, our digital advertising expenses in Q4 were $46 million, down from $66 million in Q4 of 2021 and $55 million from Q3 2022. The quarter-over-quarter decline was due to increased ROAS targets as we remained focused on marketing efficiency and unit economics.

Total revenues in Q4 were $123 million, a decline of 57% year-over-year. This decline was across Core Marketplace, ProductBoost, and Logistics, mainly driven by reduced ad spend and the new pricing structure which became fully effective in Q3 2022. The change in the pricing structure made our listing prices more transparent and competitive. However, it adversely impacted our Q4 marketplace revenue and EBITDA, resulting in an unfavorable comparison to the prior year. Q4 gross profit was $26 million, a decline of 78% year-over-year. Gross margin was 21% versus 42% in Q4 2021. Gross margin performance was mainly driven by the decline in marketplace gross profits due to the price changes I shared earlier. Total operating expenses were $143 million, a reduction of 22% year-over-year.

Lower ad spend, reduction in outside services and reduced employee headcount accounted for a majority of the reduction of operating expenses. Our net loss was $110 million, compared to a net loss of $58 million in the fourth quarter of 2021. Our Adjusted EBITDA was a loss of $95 million, compared to an EBITDA loss of $23 million in Q4 2021. The Q4 2022 EBITDA result was at the lower end of the guided range of a loss of $90 million to $110 million. Operating cash flow for Q4 2022 was negative $109 million, compared to a negative operating cash flow of $49 million in Q4 2021. The Q4 2022 operating cash flow was primarily driven by our net loss of $110 million and $23 million of unfavorable changes in our operating assets and liabilities, which was partially offset by non-cash expenses of $24 million.

Free cash flow was negative $109 million, compared to a negative free cash flow of $50 million in Q4 2021. We ended Q4 in a financially healthy position with $719 million in cash, cash equivalents and marketable securities and no long-term debt. Now turning to full-year 2022 results. Total revenues were $571 million, a decline of 73% year-over-year. Gross profit was $166 million, a decline of 85% year-over-year. Gross margin was 29%, down from 53% in 2021. Total operating expenses were $564 million, down 62% year-over-year. Total ad spend was $198 million, down approximately 80% from 2021. Our net loss was $384 million for the year, compared to a net loss of $361 million in 2021. Adjusted EBITDA was a loss of $288 million, compared to an EBITDA loss of $199 million in 2021.

Operating cash flow was negative $422 million. Our Free Cash Flow was negative $424 million in 2022, a significant improvement from a negative free cash flow of $953 million in 2021. Our 2022 financials reflected the near-term impacts of some of the strategic decisions that we made in 2021 and 2022. Firstly, we reduced reliance on performance marketing and started rebuilding the flywheel. Lower ad spend was the major driver of the declines in monthly active users and revenues during 2022. However, we have seen unpaid traffic stabilize and conversion and retention rates improve, thanks to more compelling value for price, better listing quality and app features as well as faster delivery time. The decline in monthly active users and the last 12 months buyers has also significantly slowed down and started to stabilize in 2022.

Secondly, during the first half of 2022 we implemented a new pricing strategy to make prices on WISH more transparent and competitive. This change reduces WISH’s marketplace revenues and profits in the near term, but is critical in enhancing user retention and merchant engagement for the long run. Thirdly, we focused on optimizing cash flows throughout 2022. We made the difficult decisions to reduce our global workforce back in February and prioritized unit economics over top line growth. As a result, our cash burn in 2022 was reduced to 50% of that in 2021. From a year-over-year comparison standpoint, Q1 2023 is expected to remain unfavorable relative to Q1 2022, as Q1 2022 benefited from the original pricing practice, resulting in higher revenue and EBITDA.

We expect this particular discrepancy to normalize in the second half of 2023. Ad spend is expected to remain an important driver of our top line performance, as we continue to focus on unit economics and utilize more diverse marketing channels to deliver higher returns. I would now like to provide our outlook for the first quarter of 2023. We expect adjusted EBITDA to be a loss in the range of $70 million to $80 million. As a reference point, our estimated revenues in January 2023, the first month of Q1, are expected to be down approximately 15% when compared to our revenues in October 2022, the first month of Q4. This decline is mostly driven by seasonality and lower ad spends. Let me now offer a few updates on operations, particularly on cost efficiency, logistics and merchandising.

On January 31st, we notified WISH employees that we will undergo a reduction in our global workforce to realign our resources with 2023 operational priorities. We anticipate that this reduction will decrease our global workforce by up to 150 positions, representing approximately 17% of our headcount. These are very difficult decisions and ones that we do not take lightly. However, we believe they are necessary to support our ongoing business prioritization efforts and improve operational efficiencies. We estimate that we will incur one-time charges of approximately $3 million to $4 million for severance. We expect the majority of these charges will be incurred in Q1 and that the implementation of the workforce reduction will be largely complete by the end of Q2 of 2023.

We expect to realize run-rate savings of approximately $14 million to $23 million on an annualized basis starting in Q3 of 2023. As Joe shared earlier, a competitive logistics offering remains a critical element to our long-term success. We have continued to invest in our logistics business. In the fourth quarter of 2022, the average time to door in five of our major markets improved by 6 days when compared to the same period of 2021. Our on-time delivery rate was around 89% in the fourth quarter, an improvement from approximately 82% in the same period of last year. Our goal is to roll out the 15-day time to door initiative in all major markets for Wish this year. In addition, we have started to implement forward deployment capabilities in China, which is expected to further reduce our delivery time to approximately 10 days for high velocity products listed on WISH.

Building upon the success of the Every day is Black Friday campaign last November, we will be running multiple merchandising events across the 60-plus markets we serve in 2023. Through these merchandising events, we expect to strengthen WISH’s Home and Life brand narrative across our user base, offering a broad variety of quality, unique lifestyle products at affordable prices. WISH aims to be the first in mind when a customer thinks about what they need, from their home essentials to event-based needs such as holidays and celebrations. Please note that the merchandising events will be launched not only on mobile app platforms but also mobile web, which is becoming an important channel for our platform distribution. I’m energized about our merchandising strategy, and expect merchandising to play an increasingly important role in driving GMV growth, user acquisition and retention.

Now, I will turn over the call back to Joe for closing remarks.

Joe Yan: Thank you, Vivian. To close, I’ll leave you with a few final thoughts. Over the last 12 months, the WISH team has devised and implemented some substantial changes that have improved our team’s focus, sharpened execution, and led to the setting of key strategic goals that will place WISH in a position of greater strength and future growth. I would also like to reiterate our value proposition: discovery and affordability. Discovery is a completely different approach to solving search and relevance in ecommerce. We take people who have a general intent to purchase something and inspire them to build a basket of interesting items that delight them at a reasonable price. We expect to drive user experience improvement through operational and product efforts, leverage our strengths in data and predictive capabilities to deliver personalized and curated products to our users.

Additionally, we intend to strengthen our cross-border capabilities by establishing strong partnerships with cross-border merchants and empowering them with the tools and resources to succeed. In the long run, we believe that our cross-border trade expertise will remain crucial for our long-term success. Given the macro environment and financial challenges increasingly faced by consumers worldwide, we are focused on providing value and deals to our value-oriented users through extensive and sophisticated merchandising campaigns. We believe this will allow us to not only grow our loyal user base, but also attract and retain new customers. The entire team at Wish is committed to successfully executing on our turnaround plans, and I am proud of what the team has accomplished and excited to see what we can do together in 2023.

At this time, operator, could you please open the call for Q&A?

Q&A Session

Operator: . And our first question comes from the line of Douglas Anmuth from JPMorgan.

Unidentified Analyst: This Wes on for Doug. Two if I could. I was hoping you could just provide more color on 1Q tracking down sequentially 15% from January. Just kind of hoping to understand what you’re seeing there and maybe impacts from the China reopening. And then I believe sales and marketing was down sequentially, but you’ve talked about leaning back into marketing to reaccelerate the top line. So just kind of want to know what maybe led to the changes in the strategy or your expectations there?

Vivian Liu: Thank you, Doug, for the question. Regarding Q1, as shared in the prepared remarks, the January decline from last October was due to 2 reasons. One was the seasonality. And this is pretty consistent with the seasonality pattern that we have seen in the past. And the second one, as I shared in the prepared remarks was the reduced ad spend. And we continue to focus on ad efficiency and unit economics. We started that in Q4, and we continue to do so in 2023. So we are — we have a ROAS targets, and we are very focused on that. But on the same time — at the same time, we do want to drive growth in top of the funnel, the top line. And we do that through, number 1, advertising more efficiently through more diverse marketing channels and then secondly, leveraging our unpaid channels more effectively notifications and other channels.

And then thirdly, the merchandising capabilities we built in-house. As Joe mentioned, we started building that in last November, and we continue to build the merchandising capabilities to engage with our new and existing buyers. And then lastly but not least, we do expect to drive top line growth in a more balanced approach between organic versus paid going forward as we continue to invest in the features, the new app features, delivery services and listing quality and becoming more competitive in the prices, we expect the customers to have more — you’ll see the compelling value proposition on which and have more pleasant shopping experiences with which and therefore, come back on their own. So long way if I answer your question, we care about unit economics and about continuing to focus, 2023.

And we do also care about driving growth both organically and through paid channels as well.

Operator: . Our next question comes from the line of Laura Champine from Loop Capital.

Laura Champine: I was wondering, and I think this one is for Vivian, what you would need to see to have enough visibility to provide a revenue guidance similar to your adjusted EBITDA guidance range that you gave?

Vivian Liu: Yes, that’s a great question, Laura. We — I think we’ve been deliberating on adding more top line guidance since last year. And I think it’s — I’m comfortable to say that we are very close to making that decision, and we will most likely start providing top line guidance, whether it’s GMV or revenue in the very near term.

Laura Champine: Got it. And then could you give us an update on what’s happening with the women’s fashion vertical?

Vivian Liu: Yes. So we had a fashion relaunch last year, and the fashion is one of the top 5 core categories we have on WISH. And the launch was successful, and we saw customer satisfaction average order, GMV per buyer improved materially through the fashion relaunch. But more importantly, we learned a lot through that relaunch, how we improve listing quality, delivery time, how we engage with our buyers more effectively and the merchants. And we have a lot of merchants now participating on the fashion relaunch and start to see success through that participation. We took all the learnings and applied to other core categories that we are focusing on in 2023 on top of fashion. So a long way of saying, we consider that a very successful relaunch, and we continue to leverage the experience and the learnings to make other categories successful on WISH platform as well.

Joe Yan: Yes. Just to add on what we did set, right? So I think it’s an ongoing progress, right, for the fashion relaunch, since actually updated in — for Q3. So now we have over 3,000 merchants in new fashion category, providing over 300,000 selections in this category. So this is something actually we see ongoing progress, right? And as we mentioned just now, so this is a very, very important learning process for us, right? So with the focus category we emphasize this year. So this is a very important learning for us to know actually how important the structured data means to us, right, and how actually we can service the products better to our consumers and by providing a better consumer experience, right? So this is something definite will see how we can replicate to the other focused category to build a better verticalized customer shopping experience in the focus categories.

Laura Champine: Great. And congratulations, Joe, on getting the permanent CEO role.

Joe Yan: Thanks, Laura.

Operator: And our next question comes from the line of from Citi.

Unidentified Analyst: This is . First, could you just help us understand the fulfillment operations a bit more? There’s still almost double the product or the marketplace revenues, so I could just kind of double-click on what’s driving that? And going forward, what’s the right level of fulfillment as a percent of marketplace revenue?

Vivian Liu: Yes, that’s a great question. Thank you. I think the — first of all, the marketplace revenue — the performance of marketplace in general was really impacted by 2 major strategic decisions we made in 2021. And one was the cumulative reduction on the ad spend so that we can restart to fly well on based on the core marketplace competencies that we are building. We have been building things of the turnaround. So that has a lot more direct impact on marketplace revenue versus logistics. And the second important change we implemented in 2022 was the pricing — new pricing practice, as I mentioned earlier. And is that essentially kind of almost entirely impact, it’s a direct impact on marketplace revenue versus logistic in the near term.

So I would say those 2 decisions were both necessary to build customer retention and merchant trust engagement for the long run, but we had some adverse impact for the near term on the marketplace revenue and profitability. And I think going forward, we expect the marketplace and the logistics performance to be more aligned as we kind of gradually works through the changes. And as we move into the — especially second half of 2023, it will be a much more kind of comparable from a year-over-year standpoint. But longer term, we expected those 2 businesses to be much more aligned in terms of performance level. And ultimately, we are a marketplace business, and we are very much focused on improving the revenue, GMV and profitability of marketplace business.

And but logistics remains a very critical offering and that’s a competitive advantage of which. And a major driver for improving customer satisfaction over the past 18 months and also a very critical value proposition for the wish merchants. So we definitely will — we remain committed to investing in logistics business as well.

Unidentified Analyst: It’s really helpful. And then I guess another one, if I could. Just looking at — going back to marketing, just looking at just the kind of taking out the brand, I guess, as a percent of marketplace revenue is still pretty high as a percent and total revenue. I understand you’re going to look into less paid channels for marketing going forward in 2023. So I guess, could you just help us understand maybe the overall strategy as you move through the year? Do you expect a similar kind of cadence of more back half spending? And just, I guess, the overall level of marketing spend as a percent of revenue and how we can start to drive some organic growth from it?

Vivian Liu: Yes, absolutely. Happy to add more color on that. So you are absolutely right. We used to spend a lot more on the marketing dollars. And I think if I remember correctly, in the past 3 years, in 2020, it was more than — it’s about 67% of revenue spending in sales and marketing. And as in 2021 was 54%, 53% and then last year, it was a 40-plus percent. So every year, we made a tremendous progress in reducing our reliance on performance marketing and therefore, reduce the percentage of marketing spend as a percentage of the total revenue. But we still have more work to do. And that’s the reason why in Q4 last year, we started to really focus on ROAS, right. And we set a ROAS target, and we only spend the marketing dollar if we generate the desire to returns.

And we continue to focus on ROAS a marketing efficiency going into 2023. As Joe and I both shared earlier, unit economics will be very important and in 2023. And if you think about the levers to improve unit economics, really, there are 3, and the first is average transaction value. And the second one is repeated purchases. And the third one is the marketing efficiency, ad efficiency, right. And we are focusing on all 3 of them to improve economics. But to answer your question, yes, we will continue to focus on the marketing ROAS, the return on marketing in 2023. I think from seasonality standpoint, we probably will see a little bit more in the second half just because of seasonality. But we are not really managing towards marketing dollar budget as a percentage of revenue, instead we focus on the real as the return on every dollar we spend.

Operator: . Our next question comes from the line of Steven McDermott from Bank of America.

Steven McDermott: This is Steven McDermott on for Michael McGovern. Just if we look at the — sorry. Sorry. If we look at the EBITDA guidance, it implies, let’s say, a negative 45% to 50% year-on-year decline in revenue, kind of assuming that the OpEx as a percentage revenue stays roughly the same. Obviously, there are going to be significant parts there, but how should we think about it? Are you taking more from kind of the revenue side or seeing pressure there? Or will there be significant cuts in the OpEx that go beyond just the risk of all kicking in 2Q or 3Q?

Vivian Liu: Yes, that’s a great question. And I think we talk about the revenue of January actual, right, and there was a 15% decline relative to October and that’s mostly driven by seasonality. And I also shared that’s also driven by lower ad spend. And I think the — if you look at quarter-over-quarter, our EBITDA guidance is actually more favorable compared to the Q4 actual EBITDA performance. So I guess you could kind of make an observation that we are getting — certainly getting more efficient with the cost and beyond the ad spend and also the workforce reduction. So unit economics, as I mentioned, is the top priority for us in 2023. And we will continue to drive growth, but it will be through more like organic growth versus the paid growth.

So I think all of those factors will help us achieve lower EBITDA loss in Q1 with some pressure from revenue due to the seasonality in terms of like from a quarter-over-quarter standpoint. Hopefully, that answers your question.

Operator: This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to WISH’s CEO, 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.