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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 March 31, 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: (415432-7323

 

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 April 30, 2022, the number of shares of the registrant’s Class A common stock outstanding was 599 million and the number of shares of the registrant’s Class B common stock outstanding was 66 million.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

ii

PART I.

FINANCIAL INFORMATION

 

Item 1.

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

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 6.

Exhibits

32

Signatures

33


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, new or planned features or services, management strategies and plans, competitive position, 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; 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; ongoing and future global conflicts; 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


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except par value)

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2022

 

 

2021

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

760

 

 

$

1,009

 

Marketable securities

 

 

260

 

 

 

150

 

Funds receivable

 

 

14

 

 

 

17

 

Prepaid expenses and other current assets

 

 

45

 

 

 

48

 

Total current assets

 

 

1,079

 

 

 

1,224

 

Property and equipment, net

 

 

15

 

 

 

17

 

Right-of-use assets

 

 

14

 

 

 

18

 

Marketable securities

 

 

9

 

 

 

17

 

Other assets

 

 

4

 

 

 

7

 

Total assets

 

$

1,121

 

 

$

1,283

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

40

 

 

$

67

 

Merchants payable

 

 

150

 

 

 

185

 

Refunds liability

 

 

12

 

 

 

23

 

Accrued liabilities

 

 

150

 

 

 

174

 

Total current liabilities

 

 

352

 

 

 

449

 

Lease liabilities, non-current

 

 

14

 

 

 

16

 

Total liabilities

 

 

366

 

 

 

465

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $0.0001 par value:3,500 (3,000 Class A, 500 Class B) shares authorized as of March 31, 2022 and December 31, 2021; 664 (598 Class A, 66 Class B) and 658 (593 Class A, 65 Class B) shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

3,358

 

 

 

3,360

 

Accumulated other comprehensive income

 

 

2

 

 

 

3

 

Accumulated deficit

 

 

(2,605

)

 

 

(2,545

)

Total stockholders’ equity

 

 

755

 

 

 

818

 

Total liabilities and stockholders’ equity

 

$

1,121

 

 

$

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

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

189

 

 

$

772

 

Cost of revenue

 

 

125

 

 

 

335

 

Gross profit

 

 

64

 

 

 

437

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

45

 

 

 

470

 

Product development

 

 

66

 

 

 

51

 

General and administrative

 

 

15

 

 

 

42

 

Total operating expenses

 

 

126

 

 

 

563

 

Loss from operations

 

 

(62

)

 

 

(126

)

Other income, net:

 

 

 

 

 

 

 

 

Interest and other income, net

 

 

2

 

 

 

 

Loss before provision for income taxes

 

 

(60

)

 

 

(126

)

Provision for income taxes

 

 

 

 

 

2

 

Net loss

 

 

(60

)

 

 

(128

)

Net loss per share, basic and diluted

 

$

(0.09

)

 

$

(0.21

)

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

 

 

661

 

 

 

619

 

 

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

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(60

)

 

$

(128

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Net unrealized holding losses on derivatives and marketable securities

 

 

(1

)

 

 

(2

)

Comprehensive loss

 

$

(61

)

 

$

(130

)

 

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


3


 

CONTEXTLOGIC INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

(Unaudited)

 

 

 

 

Three Months Ended March 31, 2022

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Other Comprehensive Income

 

 

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

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(60

)

 

 

(60

)

Balances as of March 31, 2022

 

664

 

 

$

 

 

$

3,358

 

 

$

2

 

 

$

(2,605

)

 

$

755

 

 

 

 

Three Months Ended March 31, 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

 

2

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock upon settlement of restricted stock units

 

29

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Stock-based compensation

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(128

)

 

 

(128

)

Balances as of March 31, 2021

 

618

 

 

$

 

 

$

3,243

 

 

$

(1

)

 

$

(2,312

)

 

$

930

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(60

)

 

$

(128

)

Adjustments to reconcile net loss to net cash used in operating

   activities:

 

 

 

 

 

 

 

 

Noncash inventory write-downs

 

 

3

 

 

 

 

Depreciation and amortization

 

 

2

 

 

 

2

 

Noncash lease expense

 

 

2

 

 

 

4

 

Impairment of lease assets and property and equipment

 

 

4

 

 

 

 

Stock-based compensation expense

 

 

(2

)

 

 

37

 

Other

 

 

2

 

 

 

(3

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Funds receivable

 

 

3

 

 

 

18

 

Prepaid expenses, other current and noncurrent assets

 

 

(1

)

 

 

16

 

Accounts payable

 

 

(27

)

 

 

(143

)

Merchants payable

 

 

(35

)

 

 

(73

)

Accrued and refund liabilities

 

 

(33

)

 

 

(69

)

Lease liabilities

 

 

(2

)

 

 

(4

)

Other current and noncurrent liabilities

 

 

(2

)

 

 

(11

)

Net cash used in operating activities

 

 

(146

)

 

 

(354

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment and development of internal-use software

 

 

(2

)

 

 

 

Purchases of marketable securities

 

 

(153

)

 

 

(53

)

Maturities of marketable securities

 

 

50

 

 

 

67

 

Net cash (used in) provided by investing activities

 

 

(105

)

 

 

14

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payment of taxes related to RSU settlement

 

 

 

 

 

(5

)

Net cash used in financing activities

 

 

 

 

 

(5

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(251

)

 

 

(345

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

1,018

 

 

 

1,965

 

Cash, cash equivalents and restricted cash at end of period

 

$

767

 

 

$

1,620

 

Reconciliation of cash, cash equivalents, and restricted cash to the condensed consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

760

 

 

$

1,620

 

Restricted cash included within prepaid expenses and other current assets in the condensed consolidated balance sheets

 

 

7

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

767

 

 

$

1,620

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Cash paid for income taxes, net of refunds

 

$

3

 

 

$

2

 

 

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

 

5


 

 

CONTEXTLOGIC INC.

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 1. OVERVIEW, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

ContextLogic Inc. (“Wish” or the “Company”) is an ecommerce company that provides a shopping experience that is mobile-first and discovery-based, which connects merchants’ products to users based on user preferences. The Company generates revenue from marketplace and logistics services provided to merchants.

The Company was incorporated in the state of Delaware in June 2010 and is headquartered in San Francisco, California, with additional operations in Canada, China and the Netherlands.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The condensed consolidated financial statements are unaudited, but include all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s quarterly results. The consolidated balance sheet as of December 31, 2021 is derived from audited financial statements, however, it does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 14, 2022 (the “2021 Form 10-K”).

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. These estimates form the basis for judgments the Company makes about the carrying values of its assets and liabilities that are not readily available from other sources. These estimates include, but are not limited to, fair value of financial instruments, useful lives of long-lived assets, fair value of derivative instruments, incremental borrowing rate applied to lease accounting, contingent liabilities, redemption probabilities associated with Wish Cash, allowances for refunds and chargebacks and uncertain tax positions. As of March 31, 2022, the effects of the ongoing COVID-19 pandemic on the Company’s business, results of operations, and financial condition continue to evolve. As a result, many of the Company’s estimates and assumptions required increased judgment and these estimates may change materially in future periods.

Segments

The Company manages its operations and allocates resources as a single operating segment. Further, the Company manages, monitors and reports its financial results as a single reporting segment. The Company’s chief operating decision-maker is its Chief Executive Officer (“CEO”) who makes operating decisions, assesses financial performance and allocates resources based on condensed consolidated financial information. As such, the Company has determined that it operates in one reportable segment.


6


 

 

Concentrations of Risk

Credit Risk — Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, funds receivable and marketable securities. The Company’s cash and cash equivalents are held on deposit with creditworthy institutions. Although the Company’s deposits exceed federally insured limits, the Company has not experienced any losses in such accounts. The Company invests its excess cash in money market accounts, U.S. Treasury notes, U.S. Treasury bills, commercial paper, corporate bonds, and non-U.S. government securities. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash, cash equivalents and marketable securities for the amounts reflected on the condensed consolidated balance sheets. The Company’s investment policy limits investments to certain types of debt securities issued by the U.S. government, its agencies and institutions with investment-grade credit ratings and places restrictions on maturities and concentration by type and issuer.

The Company maintains certain bank accounts in China. The Company manages the counterparty risk associated with these funds through diversification with major financial institutions and monitors the concentration of this credit risk on a monthly basis. The total cash balance in these accounts represented approximately 15% of the Company’s total cash and cash equivalents as of March 31, 2022 and December 31, 2021.

The Company's derivative financial instruments expose it to credit risk to the extent that the counterparties may be unable to meet the terms of the arrangement. The Company seeks to mitigate such risk by limiting its counterparties to, and by spreading the risk across, major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored on a monthly basis. The Company is not required to pledge, nor is it entitled to receive, collateral related to its foreign exchange derivative transactions. 

The Company is exposed to credit risk in the event of a default by its Payment Service Providers (“PSPs”). The Company does not generate revenue from PSPs. Significant changes in the Company’s relationship with its PSPs could adversely affect users’ ability to process transactions on the Company’s marketplaces, thereby impacting the Company’s operating results.

The following PSPs each represented 10% or more of the Company’s funds receivable balance:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

PSP 1

 

 

64

%

 

 

62

%

PSP 2

 

 

25

%

 

 

32

%

 

Services Risk — The Company serves all of its users using third-party data center and hosting providers. The Company has disaster recovery protocols at the third-party service providers. Even with these procedures for disaster recovery in place, access to the Company’s service could be significantly interrupted, resulting in an adverse effect on its operating results and financial position. No significant interruptions of service were known to have occurred during the three months ended March 31, 2022 and 2021.

Summary of Significant Accounting Policies

There have been no changes to the Company’s significant accounting policies described in its 2021 Form 10-K, filed with the SEC on March 14, 2022, that have had a material impact on its condensed consolidated financial statements.

Accounting Pronouncements

The Company has reviewed recent accounting pronouncements and concluded they are either not applicable to the business or no material impact is expected on the condensed consolidated financial statements as a result of future adoption.

7


 

 

NOTE 2. DISAGGREGATION OF REVENUE

The Company generates revenue from marketplace and logistics services provided to its customers. Revenue is recognized as the Company transfers control of promised goods or services to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company considers both the merchant and the user to be customers. The Company evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods or services by considering if it is primarily responsible for fulfillment of the promise, has inventory risk and has latitude in establishing pricing and selecting suppliers, among other factors. Based on these factors, marketplace revenue is generally recognized on a net basis and logistics revenue is generally recognized on a gross basis. Revenue excludes any amounts collected on behalf of third parties, including indirect taxes.

Marketplace Revenue

The Company provides a mix of marketplace services to its customers. The Company provides merchants access to its marketplace where merchants display and sell their products to users. The Company also provides ProductBoost services to help merchants promote their products within the Company’s marketplace.

Marketplace revenue includes commission fees collected in connection with user purchases of the merchants’ products. The commission fees vary depending on factors such as user location, demand, product type, and dynamic pricing. The Company recognizes revenue when a user’s order is processed and the related order information has been made available to the merchant. Commission fees are recognized net of estimated refunds and chargebacks. Marketplace revenue also includes ProductBoost revenue for displaying a merchant’s selected products in preferential locations within the Company’s marketplace. The Company recognizes revenue when the merchants’ selected products are displayed. The Company refers to its marketplace revenue, excluding ProductBoost revenue, as its core marketplace revenue.

Logistics Revenue

The Company’s logistics offering for merchants is designed for direct end-to-end single order shipment from a merchant’s location to the user. Logistics services include transportation and delivery of the merchant’s products to the user. Merchants are required to prepay for logistics services on a per order basis.

The Company recognizes revenue over time as the merchant simultaneously receives and consumes the logistics services benefit as the logistics services are performed. The Company uses an output method of progress based on days in transit as it best depicts the Company’s progress toward complete satisfaction of the performance obligation.

The following table shows the disaggregated revenue for the applicable periods:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

(in millions)

 

Core marketplace revenue

 

$

90

 

 

$

477

 

ProductBoost revenue

 

 

14

 

 

 

50

 

Marketplace revenue

 

 

104

 

 

 

527

 

Logistics revenue

 

 

85

 

 

 

245

 

Revenue

 

$

189

 

 

$

772

 

 

Refer to Note 11 – Geographical Information for the disaggregated revenue by geographical location.

8


 

NOTE 3. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENT

The Company’s financial instruments consist of cash equivalents, marketable securities, funds receivable, derivative instruments, accounts payable, accrued liabilities and merchants payable. Cash equivalents’ carrying value approximates fair value at the balance sheet dates, due to the short period of time to maturity. Marketable securities and derivative instruments are recognized at fair value. Funds receivable, accounts payable, accrued liabilities and merchants payable carrying values approximate fair value due to the short time to the expected receipt or payment date.

Assets and liabilities recognized at fair value on a recurring basis in the condensed consolidated balance sheets consisting of cash equivalents, marketable securities and derivative instruments are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements are as follows:

 

 

 

March 31, 2022

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in millions)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

10

 

 

$

10

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bills

 

$

195

 

 

$

 

 

$

195

 

 

$

 

Commercial paper

 

 

21

 

 

 

 

 

 

21

 

 

 

 

Corporate bonds

 

 

41

 

 

 

 

 

 

41

 

 

 

 

Certificates of deposit

 

 

3

 

 

 

 

 

 

 

3

 

 

 

 

 

Non-U.S. government

 

 

9

 

 

 

 

 

 

9

 

 

 

 

Total marketable securities

 

$

269

 

 

$

 

 

$

269

 

 

$

 

Prepaid and other current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

$

4

 

 

$

 

 

$

4

 

 

$

 

Total financial assets

 

$

283

 

 

$

10

 

 

$

273

 

 

$

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

2

 

 

$

 

 

$

2

 

 

$

 

Total financial liabilities

 

$

2

 

 

$

 

 

$

2

 

 

$

 

9


 

 

 

 

 

December 31, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

(in millions)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

13

 

 

$

13

 

 

$

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury bills

 

$

53

 

 

$

 

 

$

53

 

 

$

 

Commercial paper

 

 

39

 

 

 

 

 

 

39

 

 

 

 

Corporate bonds

 

 

57

 

 

 

 

 

 

57

 

 

 

 

Certificates of deposit

 

 

5

 

 

 

 

 

 

5

 

 

 

 

Non-U.S. government

 

 

13

 

 

 

 

 

 

13

 

 

 

 

Total marketable securities

 

$

167

 

 

$

 

 

$

167

 

 

$

 

Prepaid and other current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative assets

 

$

4

 

 

$