ContextLogic Inc.

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 listen-only mode. After the speaker's prepared remarks, there will be a question and answer session. To ask a question at that time, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. 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.

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, Zhou Yan, and our CFO and CEO, 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'll 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 expanding and promotional events. The renewed supply strategy and 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 in 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, including 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.

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 the 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 revenue of $78 million was 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 excellence, and a marketable security of $531 million. During the quarter, our top-line performance, including revenue and the DAU, was impacted by the challenging operating environment as we continued to navigate macro headwinds as well as competitive pressures in the e-commerce space. At the macro level, we continued to experience a high level of economic uncertainty, which impacted consumer spending habits. Medical conditions, which include inflation, elevated interest rates, and cost of living, continue to pressure our value-oriented consumers. This has a direct impact on discretionary spending across the markets we serve. The e-commerce 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 a challenging environment, the team executes on our strategies and made progress in our various strategy 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 the goals 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 roll 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. Free shipping is part of a broader effort to improve the shipping experience on Wish, and it 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 order above established thresholds and making all items on Wish eligible for free shipping instead of a limited number Ultimately, our vision is to remove shipping as a major point of friction for our customer from here on in. From a product discovery and exploration standpoint, in Q2, we also increased the scale of product collections in support of WISH anniversary merchandising event by branching up the volume of product groupings based on a specific category, such as home and garden, beauty and wellness, jewelry, and accessory, 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 experience regardless of the entry point. In Q2, our product team significantly reduced the 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 the trends app without needing to set up an account, the result of which has driven improvement in customer engagement and conversion. As most of our new and trend user traffic comes in with other mobile-based apps, it's critical we get the MWeb 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 our landing pages to focus on enticing customers from web to download apps, highlighting new buyer incentives, and testing a variety of new recommendations to drive exploration. At Wish, our transition to a long guest experience is nearly complete. Looking ahead, the next phase in this program for the remainder of the year includes passwordless accounts and removing friction associated with account creation and recovery. The goal is to leverage one-time password OTP and links to increase the number of successful logins. and prevent account takeovers with more secure authentication at the secondary wall. In an effort to further improve the customer experience and the drive basket building, our team intends to make the shopping cart as the 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 the 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 serve as 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 the reseller of refurbished consumer electronics products and the brand owners within the beauty, fashion, and the licensed sport collectible space. Importantly, this authorized resellers have domestic warehouse 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, Raincoast. 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 Raincoast 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 experience to our consumers. Europe should continue to be a strategically important region for Wish as our European customer base accounted for nearly half of our 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 product strategically within target categories and create a thought-buster deal to help attract customers. To put things in perspective, approximately 6,000 merchants participating in the Wish University event, enrolling over 360,000 product listings, and 15,000 doorbuster 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 right-sizing our supply pool to focus on a certain number of core listings and high-touch categories. This will involve creating distinct experience 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, etc., 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 time period of 2022. Our on-time delivery rate was 91%, largely flat when compared to the last quarter. We also saw our average time to door improved in the major markets we served, favorably impacting customer order, cancellation rate, refund rate, and customer experience. Our customer order cancellation rate declined 47% year-over-year in Q2, and the customer refund rate 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. Having said that, we have a lot of work ahead of 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 route of reduction in our global workforce. as part of a broader alignment 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 a process to go through, but it's critical that we resize our spend to match the current size and the scope of our business. We estimate that we will incur one-time charges of approximately $8.7 million for severance and personnel reduction cost. We expect the majority of these charges will be incurred in Q3 and that the implementation of workforce reduction will be largely complete by the end of fiscal year 2023. We expect to realize run rate saving 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 a 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.

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 monthly active users and 10 million last 12-month active buyers 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 targeted returns on our ad spend. The total last 12 months 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 e-commerce 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 monthly active users and the 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 the last quarter, the pricing changes impacted our Q2 revenue and EBITDA, resulting in an unfavorable comparison to the prior year. Please note that impacts from the pricing changes will be left fully starting Q3 2023. Q2 growth profit was $16 million, a decline of 62% year-over-year. Growth margin was 21% versus 31% in Q2 2022. Growth margin performance was mainly driven by the decline in marketplace growth 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 services costs, and a reduced employee headcount accounted for a majority of the reduction in operating expenses. Excluding stock-based compensation expenses, total operating expenses were down by 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 a free cash flow was negative $91 million for Q2 2023, compared to operating cash flow and a 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 amount. We ended Q2 with $531 million in cash, cash equivalent, 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 the total revenue to be in the range of $55 million to $65 million. 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 the 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 revenue 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 e-commerce 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 for the near term. negatively impacting our monthly active users, active buyer counts, and revenues. As Joe shared earlier, we have made the difficult decision to further right-size 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're 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 a great value at a competitive prices for our buyers and merchants alike. We're now on an accelerated path to reinvent Wish with an ever greater sense of urgency. Financially, we will sharply focus on return on investment, EBITDA, and the cash optimization to improve shareholder values. With that, I will now turn over the call to Joe for his closing remarks.

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 the merchant experience standpoint, but we still have a lot more work ahead. As I've 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 experience and sustainable growth. Our plan is to improve the shopping experience for our users through the app's features, improve the product quality and the delivery time, more responsive customer support, and the competitive pricing. Going forward, we intend to leverage generative AI as well as other technologies to provide differentiated shopping experience 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?

Certainly. As a reminder, if you have a question at this time, please press star 11 on your telephone. One moment for our first question. And our first question comes from the line of Konal Madukar from UBS. Your question, please.

Hi, thank you for taking the questions and thanks for the opening remarks. Quick one on, you know, you talked about macro and competitive 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, you know, 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.

Yeah, thanks for the question. This is Zhou Yan. So I think the competition is always there. So we did see quite a few players in the space, so increased investment level, especially in the past two quarters. So it also signals very strong demand in the cross-border e-commerce sector. So we as a company, we kind of keep focusing on the sustainable growth because we believe the sustainability is the key to an e-commerce company as the e-commerce It's going to be a long run, right, for everyone in this space, right? So what we have done here is so we keep focusing on actually what we can do, right? So I think first of all, I think it's about, you know, the supply quality as we said, right? So this something has been, you know, the pinpoint for our customer, you know, from the customer experience perspective. We have been doing a lot of things on, you know, improving on this. this something really can help us to grow the organic and also the retention in a longer run. And in addition to that, so I think the competition also give the force to every player in the market, including ourselves, the force to really think about how we can accelerate reinvention of the shopping experience. So that's the thing actually why our product team have been focusing a lot on improving a lot of product features, like what I shared in earnings earlier. So this is something that 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 actually this is something on the shopping experience, the innovation can help us to build, achieve the mode, the differentiation compared to the other players. So I think there's still a lot of work to do, but it's something we'll focus on in the future. And on the growth side, right, so definitely, right, so we believe, right, so with those kind of shopping experience improvement, right, and also including the supply quality improvement, right, so that can really give, you know, us a chance to stabilize the, you know, the traffic and to kind of back to the growth track again.

If I may add it to Joe's points. And 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, refurb, electronics, home essentials, and beauty and health. And those are the areas where you can build a lot of differentiated vertical experiences for user acquisition as well as user retention. As Joe also mentioned, the generative AI technology will play a very important role in creating those vertical experiences. And then the second piece of sustainable growth is user conversion through removing frictions in the user journey. And the third piece is increasing the average transaction value through the flyer reshaping and other bucket building initiatives. So I think when we think about growth, it's more than just acquiring users. converting the users into buyer and retaining the buyers more effectively and helping the buyers building bigger baskets. So all that collectively will help us build a path towards a system of growth and, you know, eventually reverting the trend in the top line.

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

Yeah, so we don't report GMV on, like, a category level, but those are very major categories already on the platform. So they are... In the general statement, they accounted for more than 50% of the total GME on the platform. What we highlighted as the four high touch categories, they're subset of the bigger home and garden category or fashion. So they are subset 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, right? So to answer your question, those four major categories are accounted for a very large portion of the GMEs. 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.

Got it. Thank you so much.

My pleasure.

Thank you. As a reminder, if you have a question at this time, please press star 11. One moment for our next question. Our next question comes from the line of Laura Champagne from Loop Capital. Your question, please.

Thanks for taking my question. It's really about the restructuring. I know that there was a significant number of staff laid off. 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.

Yeah, thanks, Laura. This is Joe. So looking ahead to the remainder of this year, 2023, we recognize the macroeconomic uncertainties and the competitive pressure will likely persist. So in response to this dynamic environment and the to position which to thrive over the longer term, right? So we are taking aggressive action, as you mentioned, to significantly lower our cost structure and improve our operational efficiency, right? So as part of these efforts, we are restructuring our full force and optimizing for top strategic priorities, right? So it 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 cut was taken into account. So back to your question, right? So this reduction did 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 the key strategic priorities, both on the product and operation side.

Got it. And then a second question. How do you expect to 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?

Yeah, thank you for the question. Our ad spend will fluctuate based on the seasonality. For instance, during the holiday season, we tend to spend a little more to capture the 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 ROAS, the return on the ad spend, and we won't spend additional dollars unless we see the threshold requirement being met. So I think 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 the proper investment at the dollars, we choose the second path. And we are, like I mentioned in the prepared remarks, and financially we're very focused on optimizing for cash flow, returns, and give it up. 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 as we continue to focus on the ROAS and the return threshold.

Yeah, and I can add a little bit of color here. So in the past few quarters, right, so we have been spending a lot of effort on optimizing, you know, the return on ad spend, especially in the existing customer segments, right? So we have seen a very quite good improvement from the existing customer segment. That actually can allow us to really kind of allocate a little bit more budget into, you know, the new user acquisition in the uh upcoming quarters right but doesn't mean that she will increase you know the marketing spare draftly but there's something just like more you know the you know the approach or you know the campaign structure change right and really help us to optimize you know the ROAS at the you know at a more uh holistic view right so I think this is the overall approach uh we are doing now right and uh Q2 definitely it's a transitional transitioning uh quarter right so we have studied some of the you know campaign approach change and we do hope right so that can really help us right to build on you know the top funnel but at the end of the day right just like what i said right organic steel is the biggest bet to uh for us so the marketing still will remain a very key uh a driver approach for us right for you know the dau the growth but uh i think organic still is the biggest bet so this something will still rely on you know the customer you know experience improvement a product feature improvement right so just like what we shared earlier right including reducing the you know the customer friction during the shopping journey right the more innovative way for exploration and discovery, and also the continuing improvement on the shipping experience. All of these things coming together can really offer a customer a much better experience. And this is something that can really help us grow on the organic side. Having said that, with all this combined effort, So actually, the marketing and the product efforts can really kind of work together to generate more kind of user-for-wish.

Got it. Thank you.

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

Hi. Sorry. 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 your marketing spend as a percentage of core marketplace revenue, that increased from about 130% in 1Q23. to 160% in 2Q23. And the aggregate marketing spend actually increased QAQ in the second quarter when revenue declined. So can you talk about how much of your marketing spend is performance-based versus brand and where the ROI equation may be breaking down? Thank you.

Thank you. Thank you for the question. So I think a couple of things. If we compare year over year, first of all, our ROAS on the performance marketing spend has been improving pretty steadily. But I understand that the dynamic you are describing, our total marketplace revenue is declining from year over year standpoint. two things to keep in mind. Number one is the fact that it removed a change in pricing practices, right? 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, you know, this year is favorable because we implemented the changes to 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 your standpoint. Now, keep in mind, going to Q3 this year, the comparison will be apples to apples because, you know, that change was completed by end of Q2 last year. Q3 onward is clean. So that's number one. Number two, I would say despite the fact that we improved ROAS ROI on the marketing and we're being really careful in terms of how we're allocating 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. It's probably more a reflection of the pricing changes from a year-over-year standpoint, as well as the intensified competition.

And for overall marketing span, performance now is still the majority of our span, but starting Q2 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 and see how actually the brand marketing can really play the role to help us to improve the top funnel conversion, to help us to build the top funnel. So this is something we do expect to see the synergy between the performance of brand marketing can really help us to kind of improve the marketing efficiency holistically.

Thank you.

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

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

Thank you ladies and gentlemen for your participation at today's conference. This does conclude the program. You may now disconnect. Good day. you Thank you. 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 listen-only mode. After the speaker's prepared remarks, there will be a question and answer session. To ask a question at that time, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. 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.

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 Yan, and our CFO and CEO, 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'll 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 expanding and promotional events. The renewed supply strategy and 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 in 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, including 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, Zhou 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 the 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 revenue of $78 million was 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 excellence, and a marketable security of $531 million. During the quarter, our top-line performance, including revenue and the DAU, was impacted by the challenging operating environment as we continued to navigate macro headwinds as well as competitive pressures in the e-commerce 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, continue to pressure our value-oriented consumers. This has a direct impact on discretionary spending across the markets we serve. The e-commerce 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 a challenging environment, the team executes on our strategies and made progress in our various strategy 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 the goals 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 roll 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. Flight rate shipping is part of a broader effort to improve the shipping experience on WISH, and it 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 order above established thresholds and making all items on WISH eligible for flight 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 Wish anniversary merchandising event by branching out the volume of product groupings based on a specific category, such as home and garden, beauty and wellness, jewelry, and accessory, 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 experience regardless of the entry point. In Q2, our product team significantly reduced the 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 the trends app without needing to set up an account. The result of which has driven improvement in customer engagement and conversion. As most of our new and trend user traffic comes in with other mobile-based apps, it's critical we get the MWeb 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 app landing pages to focus on enticing customers from web to download apps, highlighting new buyer incentives, and testing a variety of new recommendations to drive exploration, at which our transition to a long guest experience is nearly complete. Looking ahead, the next phase in this program for the remainder of the year includes passwordless accounts and the removing friction associated with account creation and recovery. The goal is to leverage one-time password OTP and the links to increase the number of successful logins. and prevent account takeovers with more secure authentication at the secondary wall. In an effort to further improve the customer experience and the drive basket building, our team intends to make the shopping cart as the 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 the 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 serve as 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 the reseller of refurbished consumer electronics products and the brand owners within the beauty, fashion, and the licensed sport collectible space. Importantly, this authorized resellers have domestic warehouse 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, Raincoast. 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 Raincoast 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 experience to our consumers. Europe should continue to be a strategically important region for Wish as our European customer base accounted for nearly half of our 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 product strategically within target categories and create a thought-buster deal to help attract customers. To put things in perspective, Approximately 6,000 merchants participating the Wish University event, enrolling over 360,000 product listings, and the 15,000 doorbuster 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 right-sizing our supply pool to focus on a certain number of core listings and high-touch categories. This will involve creating distinct experience 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, etc., 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 time period of 2022. Our on-time delivery rate was 91%, largely flat when compared to the last quarter. We also saw our average time to door improved in the major markets we served, favorably impacting customer order, cancellation rate, refund rate, and customer experience. Our customer order cancellation rate declined 47% year-over-year in Q2, and the customer refund rate 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. Having said that, we have a lot of work ahead of 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 which employees that we will undertake a new route of reduction in our global workforce. as part of a broader alignment 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 a process to go through, but it's critical that we resize our spend to match the current size and the scope of our business. We estimate that we will incur one-time charges of approximately $8.7 million for severance and personnel reduction cost. We expect the majority of these charges will be incurred in Q3 and that the implementation of workforce reduction will be largely complete by the end of fiscal year 2023. We expect to realize run rate saving 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 a 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.

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 monthly active users and 10 million last 12-month active buyers 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 targeted returns on our ad spend. The total last 12 months 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 e-commerce 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 monthly active users and the 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 the last quarter, the pricing changes impacted our Q2 revenue and EBITDA, resulting in an unfavorable comparison to the prior year. Please note that impacts from the pricing changes will be left fully starting Q3 2023. Q2 growth profit was $16 million, a decline of 62% year-over-year. Growth margin was 21% versus 31% in Q2 2022. Growth margin performance was mainly driven by the decline in marketplace growth 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 services costs, and a reduced employee headcount accounted for a majority of the reduction in operating expenses. Excluding stock-based compensation expenses, total operating expenses were down by 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 a free cash flow was negative $91 million for Q2 2023, compared to operating cash flow and a 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 amount. We ended Q2 with $531 million in cash, cash equivalent, 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 the total revenue to be in the range of $55 million to $65 million. 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 the 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 revenue 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 e-commerce 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 for the near term. negatively impacting our monthly active users, active buyer counts, and revenues. As Joe shared earlier, we have made the difficult decision to further right-size 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're 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 a great value at a competitive prices for our buyers and merchants alike. We're now on an accelerated path to reinvent Wish with an ever greater sense of urgency. Financially, we will sharply focus on return on investment, EBITDA, and the cash optimization to improve shareholder values. With that, I will now turn over the call to Joe for his closing remarks.

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 the merchant experience standpoint, but we still have a lot more work ahead. As I've 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 experience and sustainable growth. Our plan is to improve the shopping experience for our users through the app's features, improve the product quality and the delivery time, more responsive customer support, and the competitive pricing. Going forward, we intend to leverage generative AI as well as other technologies to provide differentiated shopping experience 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?

Certainly. As a reminder, if you have a question at this time, please press star 11 on your telephone. One moment for our first question. And our first question comes from the line of Konal Madukar from UBS. Your question, please.

Hi, thank you for taking the questions and thanks for the opening remarks. Quick one on, you know, you talked about macro and competitive 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, you know, 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.

Yeah, thanks for the question. This is Zhou Yan. So I think the competition is always there. So we did see quite a few players in the space, so increased investment level, especially in the past two quarters. So it also signals very strong demand in the cross-border e-commerce sector. So we as a company, we kind of keep focusing on the sustainable growth because we believe the sustainability is the key to an e-commerce company as the e-commerce It's going to be a long run, right, for everyone in this space, right? So what we have done here is we keep focusing on actually what we can do, right? So I think first of all, I think it's about, you know, the supply quality as we said, right? So this something has been, you know, the pinpoint for our customer, you know, from the customer experience perspective. We have been doing a lot of things on, you know, improving on lists. something really can help us to grow the organic and also the retention in a longer run. And in addition to that, I think the competition also gives the force to every player in the market, including ourselves, the force to really think about how we can accelerate the reinvention of the shopping experience. So that's the thing actually why our product team have been focusing a lot on improving a lot of product features, like what I shared in earnings earlier. So this is something that 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 actually this is something on the shopping experience, the innovation can help us to build, achieve the mode, the differentiation compared to the other players. So I think there's still a lot of work to do, but it's something we'll focus on in the future. And on the growth side, right, so definitely, right, so we believe, right, so with those kind of shopping experience improvement, right, and also including the supply quality improvement, right, so that can really give, you know, us a chance to stabilize the, you know, the traffic and to kind of back to the growth track again.

If I may add it to Joe's points, yeah. And 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, refurb, electronics, home essentials, and beauty and health. And those are the areas where you can build a lot of differentiated vertical experiences for user acquisition as well as user retention. As Joe also mentioned, the generative AI technology will play a very important role in creating those vertical experiences. And then the second piece of sustainable growth is user conversion through removing frictions in the user journey. And the third piece is increasing the average transaction value through the fly-way shipping and other bucket-building initiatives. So I think when we think about growth, it's more than just acquiring users. 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, you know, eventually reverting the trend in the top line.

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

Yeah, so we don't report GMV on, like, a category level, but those are very major categories already on the platform, so they are... In the general statement, they accounted for more than 50% of the total GME on the platform. What we highlighted as the four high-touch categories, they're a subset of the bigger home and garden category or fashion, so they're a subset under the bigger where we see additional growth opportunity. If we double down and manage the subcategories properly, we can drive a lot more growth, right? So to answer your question, those four major categories are accounted for a very large portion for GMEs. 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.

Thank you so much.

My pleasure.

Thank you. As a reminder, if you have a question at this time, please press star 1-1. One moment for our next question. Our next question comes from the line of Laura Champagne from Loop Capital. Your question, please.

Thanks for taking my question. It's really about the restructuring. I know that there was a significant number of staff laid off. 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.

Yeah, thanks a lot, Joe. So looking ahead to the remainder of this year, 2023, we recognize the macroeconomic uncertainties and the competitive pressure will likely persist. So in response to this dynamic environment and the to position which to thrive over the longer term, right? So we are taking aggressive action, as you mentioned, to significantly lower our cost structure and improve our operational efficiency, right? So as part of these efforts, we are restructuring our full force and optimizing for top strategic priorities, right? So it 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 cut was taken into account. So back to your question, right? So this reduction did 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 the key strategic priorities, both on the product and operation side.

Got it. And then a second question. How do you expect to 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?

Yeah, thank you for the question. Our ad spend will fluctuate based on the seasonality. For instance, during the holiday season, we tend to spend a little more to capture the 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 ROAS, the return on the added spend, and we won't spend additional dollars unless we see the threshold requirement being met. So I think 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 the proper investment on the added dollars, we choose the second path. And we are, like I mentioned in the prepared remarks, and financially we're very focused on, you know, optimizing for cash flow, returns, and give it up. So I think, you know, 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, you know, as we continue to focus on the ROAS and the return thresholds.

Yeah, and I can add a little bit of color here. So in the past few quarters, right, so we have been spending a lot of effort on optimizing, you know, the return on ad spend, especially in the existing customer segments, right? So we have seen a very quite good improvement from the existing customer segment. That actually can allow us to really kind of allocate a little bit more budget into the new user acquisition in the upcoming quarters. But that doesn't mean that you will increase the marketing spend drastically, but it's something just like more the approach or the campaign structure change and really help us to optimize ROAS at a more holistic view. I think this is the overall approach we are doing now. Q2 definitely is a transitioning quarter. We have studied some of the campaign approach change, and we do hope that can really help us to build on the top funnel. At the end of the day, just like what I said, organic steel is the biggest bet for us. So the marketing still will remain a very key driver approach for us, for the DAU, the growth, but I think organic still is the biggest bet. So this something will still rely on the customer experience improvement or product feature improvement. So just like what we shared earlier, including reducing the customer friction during the shopping journey, the more innovative way for, you know, exploration, right, and discovery, and also the continuing improvement on the shipping experience, right? All of these things coming together, right, so can really offer, you know, a customer much better experience on which, right? And this is something I think can really help us grow on the organic side. So, yeah, having said, right, so with all this combined effort, right, we do hope, right, so actually, you know, the marketing and the the product efforts can really kind of work together to generate, you know, more kind of user-for-wish.

Got it. Thank you.

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

Hi, sorry, another question popped in my mind, and that was with regard to the marketing spend. So Vivian, you talked about, you know, 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 1Q23 to 160% in 2Q23. And the aggregate marketing spend actually increased QAQ in the second quarter when revenue declined. So can you talk about how much of your marketing spend is performance-based versus brand and where the ROI equation may be breaking down? Thank you.

You want to? Thank you. Thank you for the question. So I think a couple of things. If we compare year over year, first of all, our ROAS on the performance marketing spend has been improving pretty steadily. But I understand that the dynamic you are describing, our total marketplace revenue is declining from year over year standpoint. two things to keep in mind. Number one is the fact that it removed a change of pricing practices, right? 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, you know, this year is favorable because we implemented the changes to 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 your standpoint. Now, keep in mind, going to Q3 this year, the comparison will be apples to apples because, you know, that change was completed by end of Q2 last year. Q3 onward is clean. So that's number one. Number two, I would say despite the fact that we improved ROAS 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. It's probably more a reflection of the pricing changes from a year-over-year standpoint, as well as the intensified competition.

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

Thank you.

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

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

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