10-Q 1 wish-20220630.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ______

Commission File Number: 001-39775

 

ContextLogic Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-2930953

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

One Sansome Street 33rd Floor

San Francisco, CA

94104

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (415) 432-7323

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value

 

WISH

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of July 31, 2022, the number of shares of the registrant’s Class A common stock outstanding was 609 million and the number of shares of the registrant’s Class B common stock outstanding was 61 million.

 

 


Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

ii

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Comprehensive Loss

3

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 6.

Exhibits

74

Signatures

75

 

i


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"), which statements involve substantial risks and uncertainties. Forward-looking statements include all statements that are not historical facts such as information concerning our possible or assumed future results of operations and expenses, user experience, including new or planned features or services, management strategies and plans, competitive position, merchant programs, partnership expectations, business environment and potential growth strategies and opportunities. In some cases, forward-looking statements can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “foresees,” “forecasts,” “intends,” “goals,” “may,” “might,” “outlook,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “targets,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Those risks include those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, as well as in our condensed consolidated financial statements, related notes, and the other information appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (“SEC”). The inclusion of forward-looking information should not be regarded as a representation by us, our management or any other person that the future plans, estimates, or expectations contemplated by us will be achieved. Given these uncertainties, you should not place undue reliance on any forward-looking statements in this Quarterly Report on Form 10-Q.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject, including, but not limited to, statements regarding future financial performance; implementation and execution of business strategies, including turnaround and restructuring plans; our future liquidity, operating expenditures, and financial condition; the potential impact of our marketing and product initiatives, including ad spending; new executive hires and transitions; new merchant programs and related outcomes; the impact of coronavirus disease 2019 (“COVID-19”) on our business; our future market position and competitive changes in the marketplace; technological advances; expected consumer behavior; the outcome of ongoing litigation; the effect of new or revised tax laws and accounting pronouncements; and other characterizations of future events or circumstances. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the SEC as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

ii


RISK FACTORS SUMMARY

Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky. This summary does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of risks and uncertainties set forth in the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q:

Our efforts to acquire new users and engage existing users may not be successful or may be more costly than we expect, which could prevent us from maintaining or increasing our revenue.
If we are unable to promote, maintain, and protect our brand and reputation and offer a compelling user experience, our ability to attract new users and engage with our existing base of users will be impaired.
The transition to a new Chief Executive Officer (“CEO”) may impact our ability to execute on our business strategy in a timely manner.
If we lose the services of members of our senior management team we may not be able to execute our business strategy.
We rely on the Apple App Store and the Google Play Store to offer and promote our app. If we are unable to maintain a good relationship with such platform providers, if their terms and conditions change to our detriment, if we violate, or if a platform provider believes that we have violated, the terms and conditions of its platform, our business will suffer.
Our brand, reputation, and business may be harmed if merchants on our platform use unethical or illegal business practices, including the sale of counterfeit or fraudulent products or if our policies and practices with respect to such sales are perceived or found to be inadequate, and we may be impacted by the unlawful activity of merchants on our platform.
Our company is evolving and we are in the process of executing on new business strategies and restructuring efforts; if we fail to successfully execute on these, our business, financial condition, and operating results could be harmed.
We may not successfully execute or achieve the expected benefits of our restructuring and turnaround initiatives, which could adversely affect our business
The market in which we operate is rapidly evolving and we face intense competition; if we do not compete effectively, our results of operations and financial condition could be harmed.
The ongoing COVID-19 pandemic may adversely affect our business and results of operations.
Economic tension between the United States and China, or between other countries, may intensify and the United States, China, or other countries may adopt drastic measures in the future that impact our business.
Merchants on our platform may experience additional disruptions to their supply and restrictions on their ability to deliver products to our users in a timely manner, which could harm our business.
Our business and our merchants and users may be subject to sales and other taxes and these taxes may negatively impact our revenue and growth.
Any significant disruption in service on our platform or in our computer systems, some of which are currently hosted by third-party providers, for any reason, including cyber threats, could damage our reputation and result in a loss of users, which would harm our business and results of operations.
We may be involved in litigation matters or other legal proceedings or regulatory investigations that are expensive, time consuming, and may result in restrictions in our business operations.
We identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

iii


PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

(unaudited)

 

 

 

As of June 30,

 

 

As of December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

693

 

 

$

1,009

 

Marketable securities

 

 

254

 

 

 

150

 

Funds receivable

 

 

12

 

 

 

17

 

Prepaid expenses and other current assets

 

 

41

 

 

 

48

 

Total current assets

 

 

1,000

 

 

 

1,224

 

Property and equipment, net

 

 

13

 

 

 

17

 

Right-of-use assets

 

 

11

 

 

 

18

 

Marketable securities

 

 

 

 

 

17

 

Other assets

 

 

4

 

 

 

7

 

Total assets

 

$

1,028

 

 

$

1,283

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

54

 

 

$

67

 

Merchants payable

 

 

133

 

 

 

185

 

Refunds liability

 

 

9

 

 

 

23

 

Accrued liabilities

 

 

137

 

 

 

174

 

Total current liabilities

 

 

333

 

 

 

449

 

Lease liabilities, non-current

 

 

13

 

 

 

16

 

Total liabilities

 

 

346

 

 

 

465

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value: 100 shares authorized as of June 30, 2022 and December 31, 2021; No shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value: 3,500 (3,000 Class A, 500 Class B) shares authorized as of June 30, 2022 and December 31, 2021; 670 (609 Class A, 61 Class B) and 658 (593 Class A, 65 Class B) shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

3,383

 

 

 

3,360

 

Accumulated other comprehensive (loss) income

 

 

(6

)

 

 

3

 

Accumulated deficit

 

 

(2,695

)

 

 

(2,545

)

Total stockholders’ equity

 

 

682

 

 

 

818

 

Total liabilities and stockholders’ equity

 

$

1,028

 

 

$

1,283

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

134

 

 

$

656

 

 

$

323

 

 

$

1,428

 

Cost of revenue

 

 

92

 

 

 

272

 

 

 

217

 

 

 

607

 

Gross profit

 

 

42

 

 

 

384

 

 

 

106

 

 

 

821

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

56

 

 

 

396

 

 

 

101

 

 

 

866

 

Product development

 

 

46

 

 

 

52

 

 

 

112

 

 

 

103

 

General and administrative

 

 

31

 

 

 

50

 

 

 

46

 

 

 

92

 

Total operating expenses

 

 

133

 

 

 

498

 

 

 

259

 

 

 

1,061

 

Loss from operations

 

 

(91

)

 

 

(114

)

 

 

(153

)

 

 

(240

)

Other income, net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income, net

 

 

2

 

 

 

8

 

 

 

4

 

 

 

8

 

Loss before provision for income taxes

 

 

(89

)

 

 

(106

)

 

 

(149

)

 

 

(232

)

Provision for income taxes

 

 

1

 

 

 

5

 

 

 

1

 

 

 

7

 

Net loss

 

 

(90

)

 

 

(111

)

 

 

(150

)

 

 

(239

)

Net loss per share, basic and diluted

 

$

(0.13

)

 

$

(0.18

)

 

$

(0.23

)

 

$

(0.38

)

Weighted-average shares used in computing net loss per share, basic and diluted

 

 

667

 

 

 

624

 

 

 

664

 

 

 

621

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

(unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(90

)

 

$

(111

)

 

$

(150

)

 

$

(239

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized holding losses on derivatives and marketable securities, net of tax

 

 

(4

)

 

 

 

 

 

(5

)

 

 

 

Foreign currency translation adjustment

 

 

(4

)

 

 

1

 

 

 

(4

)

 

 

(1

)

Comprehensive loss

 

$

(98

)

 

$

(110

)

 

$

(159

)

 

$

(240

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

(unaudited)

 

 

Three Months Ended June 30, 2022

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Other
Comprehensive
Income (Loss)

 

 

Accumulated Deficit

 

 

Total Stockholders' Equity

 

Balances as of March 31, 2022

 

664

 

 

$

 

 

$

3,358

 

 

$

2

 

 

$

(2,605

)

 

$

755

 

Issuance of common stock upon settlement of restricted stock units

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld related to net share settlement

 

(3

)

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Issuance of common stock through ESPP

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

29

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

(8

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(90

)

 

 

(90

)

Balances as of June 30, 2022

 

670

 

 

$

 

 

$

3,383

 

 

$

(6

)

 

$

(2,695

)

 

$

682

 

 

 

Six Months Ended June 30, 2022

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Other
Comprehensive
Income (Loss)

 

 

Accumulated Deficit

 

 

Total Stockholders' Equity

 

Balances as of December 31, 2021

 

658

 

 

$

 

 

$

3,360

 

 

$

3

 

 

$

(2,545

)

 

$

818

 

Issuance of common stock upon exercise of options for cash

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon settlement of restricted stock units

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares withheld related to net share settlement

 

(3

)

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Issuance of common stock through ESPP

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

27

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

(9

)

 

 

 

 

 

(9

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(150

)

 

 

(150

)

Balances as of June 30, 2022

 

670

 

 

$

 

 

$

3,383

 

 

$

(6

)

 

$

(2,695

)

 

$

682

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

(unaudited)

 

 

Three Months Ended June 30, 2021

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Other
Comprehensive
(Loss) Income

 

 

Accumulated Deficit

 

 

Total Stockholders' Equity

 

Balances as of March 31, 2021

 

618

 

 

$

 

 

$

3,243

 

 

$

(1

)

 

$

(2,312

)

 

$

930

 

Issuance of common stock upon exercise of options for cash

 

3

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Issuance of common stock upon settlement of restricted stock units

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net exercises of common stock warrant

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock through ESPP

 

1

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Other comprehensive gain, net

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(111

)

 

 

(111

)

Balances as of June 30, 2021

 

627

 

 

$

 

 

$

3,285

 

 

$

 

 

$

(2,423

)

 

$

862

 

 

 

Six Months Ended June 30, 2021

 

 

Common Stock

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Other
Comprehensive
Income (Loss)

 

 

Accumulated Deficit

 

 

Total Stockholders' Equity

 

Balances as of December 31, 2020

 

587

 

 

$

 

 

$

3,210

 

 

$

1

 

 

$

(2,184

)

 

$

1,027

 

Issuance of common stock upon exercise of options for cash

 

5

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Issuance of common stock upon settlement of restricted stock units

 

33

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Net exercises of common stock warrant

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock through ESPP

 

1

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

74

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(239

)

 

 

(239

)

Balances as of June 30, 2021

 

627

 

 

$

 

 

$

3,285

 

 

$

 

 

$

(2,423

)

 

$

862

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(150

)