wish reports big drop in revenues and monthly active users in q1 2023

Wish, an e-commerce platform that became an overnight sensation during the pandemic, is experiencing a sustained drop in most of its key financial and operating metrics as reflected by the company’s latest quarterly earnings report.

During the three months ended on 31 March this year, the company reported a 48% drop in its monthly active users (MAUs), which are now standing at 14 million while the number of active buyers in the past 12 months plummeted from 28 million to 12 million.

As a result, the company’s revenues were trimmed in half, moving from $189 million produced during Q1 2022 to just $96 million in this first quarter of 2023.

The Path Forward: Flat-Rate Shipping and Better Marketing Campaigns

In its prepared remarks, the Chief Executive Officer of Wish, Joe Yan, emphasized that the poor performance occurred amid changes to the company’s pricing structure and lower advertising spending from Wish – which directly impacts customer acquisition and gross merchandise volumes (GMVs).

In the first quarter of this year, Wish (WISH) introduced a flat rate for eligible shipments within the United States to further entice its remaining customers to keep buying goods within the platform.

The program has been rolled out to more than 20 countries thus far including the United Kingdom, Canada, France, Spain, Brazil, and Mexico.

Yan highlighted some aspects of the business that have been improving such as timely deliveries, which moved from 86% to 92% on a year-on-year basis along with increases in buyer conversion and customer retention rates.

The company is now focused on delivering a better customer experience to increase its number of daily active users. To accomplish this goal, Wish will improve the quality of its push, e-mail, and SMS marketing campaigns.

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In addition, the firm will fine-tune its landing pages and offer incentives for buyers who have spent time on the app or had intentions to purchase an item – i.e. adding items to the cart.

“We began our transformation journey in 2021, and I’m happy to say that the work carried out in the first quarter of the year and throughout this past month has been another positive step in the transformation of the company”, Yan commented.

Wish Has Strong Liquid Reserves to Keep Restructuring its Business

Meanwhile, Vivian Liu, the Chief Financial Officer for Wish, emphasized that the overall decline that the firm is seeing in its user-related metrics is primarily resulting from lower marketing spending.

Wish is focusing on increasing the efficiency of its paid ads. However, down the road, the platform is engaging in several activities to improve its organic traffic to reduce digital advertising spending overall.

On the profitability, funding, and liquidity side, Wish reported net losses of $89 million during this first quarter along with negative free cash flows of $92 million. The company had liquid reserves of $627 million by the end of this period meaning that issues on this front should not come up in the short term.

The Board of Directors of the company approved a $50 million buyback program. This amount represents approximately a quarter of the market capitalization of the company and, according to CFO Liu, it “demonstrates the Board’s and management’s confidence in the future of our business and our commitment to creating long-term, sustainable value for our shareholders”.

Shares of ContextLogic – a.k.a Wish – accumulate a 48% decline thus far in 2023. The sustained drop in the share price was partially offset by a 19% jump that the stock experienced on 21 April when the buyback program was announced.

In late January this year, Wish laid off 17% of its workforce – around 150 employees – as the company aimed to reduce costs in “non-business critical areas”.

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