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So with that I'll turn the meeting over to Mr. Li. | neutral |
This concludes the formal part of the meeting and the meeting is adjourned. Thank you everyone. | neutral |
The meeting has now concluded thank. | neutral |
Thank you for joining and have a pleasant day. | neutral |
The House has ended this call goodbye. | neutral |
Ladies and gentlemen, thank you for standing by, and welcome to the Wish Second Quarter 2021 Earnings Conference Call. (Operator Instructions) | neutral |
I would now like to hand the conference over to Dennis Walsh, Wish VP and Investor Relations. Thank you. Please go ahead, sir. | neutral |
Thank you, May. Good afternoon, and welcome, everyone. Joining me today to discuss our results are Wish's Founder and CEO, Peter Szulczewski; as well as our interim Co-CFOs, Brett Just and Jennifer Oliver. | neutral |
During the call, we will make forward-looking statements about our future plans and financial performance. These statements are subject to risks, uncertainties and assumptions. If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. We encourage you to consider the risk factors described in our SEC filings for additional information. The date of this call is August 12, 2021, and forward-looking statements made today are based on assumptions as of this date. We undertake no obligation to and do not intend to update these statements as a result of new information or events. | neutral |
This call is being broadcast on the Internet and is accessible on our Investor Relations website. A recording of the call will be available later today. | neutral |
During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA and free cash flow. We encourage you to read our quarterly shareholder letter and earnings news release, both of which can be found on our Investor Relations website and on a Form 8-K, which we have filed with the SEC, as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures. | neutral |
We'll now open with brief remarks, and then we will take your questions. And with that, I'll turn the call over to Peter. | neutral |
Thank you, Dennis, and welcome, everyone. Wish faced several obstacles that affected our performance in the second quarter of 2021. Our results were disappointing as they came in below our expectations on both the top and bottom line due to a combination of macro and company-specific headwinds. In addition, we expected user retention to increase now that we have made reliable logistics. However, our retention declined instead. We know that we can do better, but first, we need to make changes to the way that we operate and improve our execution. While we have already begun taking action, we expect it will be several quarters before the benefits begin to materialize. | negative |
I'll focus our opening remarks today on the headwinds we face and the actions we are taking to address them. Then I will close out with our outlook. You can find a detailed review of our results in the shareholder letter that has been posted to our Investor Relations website. | neutral |
Starting with our Q2 results. After a strong start, demand slowed as we moved through the quarter, resulting in a 6% year-over-year decline in revenue to $656 million. Strong Logistics revenue growth of 126% year-over-year was more than offset by a 29% year-over-year decline in Marketplace revenue. While we are not pleased with this revenue performance, we should note that we faced a very difficult comparison with the second quarter of 2020. That period last year was strong due to increased mobile usage and less competition from physical retail as the pandemic intensified. In fact, our Q2 guidance that we provided called for only a 3% year-over-year revenue growth at the midpoint of the range. | negative |
On the bottom line, we reported a second quarter 2021 net loss of $111 million and adjusted EBITDA loss of $67 million. This compares with a net loss of $11 million and adjusted EBITDA gain of $16 million in Q2 2020. The increased losses were primarily due to lower order volume and the comp to a strong Q2 2020. | negative |
From a macro perspective, as vaccine rates increased and stay-at-home orders began to ease over the past few months, daily user activity and active buyers on our platform declined more than we anticipated. This was particularly true in the U.S., France and Italy, 3 of our largest markets. In fact, we saw a 13% reduction in app installs and a 15% reduction in average time spent on our platform globally from the second quarter of 2020. | negative |
Despite lower engagement, the cost of digital advertising on leading ad platforms, which historically have generated a lot of demand and conversion of new and existing buyers on our app, continued to increase during Q2. In fact, CPMs on one ad platform were up nearly 50% year-over-year. | positive |
In addition, the recent privacy changes for iOS has caused more advertisers to shift spend to Android devices. As a reminder, the majority of Wish users are on Android devices. So the iOS changes were not expected to have any immediate major impact on our business. However, as more advertisers shifted their spend from iOS to Android, it drove up bids for impressions, limited the quantity of impression supply and ultimately increased our advertising costs. | negative |
These rising digital advertising costs contributed to lower marketing efficiency. Therefore, during the quarter, Wish used proprietary data science algorithms to reduce our digital advertising spend, resulting in slower new buyer growth and reduced retention. Our algorithms are designed to optimize for returns on marketing investments and user conversion in real time. Ultimately, our goal is to execute cost-effective and successful digital marketing strategies to acquire new users and reengage existing users on the Wish platform. | neutral |
The rise in digital advertising costs, coupled with declining retention and new buyer conversion, requires us to make some significant changes in the way we operate. We are implementing the following initiatives that we believe will improve the user experience and increase retention. | negative |
First, we are focused on enhancing product quality and selection. With Wish's new quality score system, we are now emphasizing products and merchants that received positive ratings and feedback from our users. In July, we initiated an impression with distribution process to prioritize more high-quality merchants and products within the app feed. In addition, we are augmenting our inventory with more globally recognizable brands and product categories like apparel, home goods and gadgets that translate well into an online treasure hunt experience. We have a significant amount of data that we can leverage to select attractively priced, high-quality products that should delight our users. | positive |
Second, we strive to ensure that the Wish app provides an unmatching fun, entertaining shopping experience for all users. To do so, we are developing a more engaging and personalized discovery-based online shopping experience. In addition to providing users with a unique experience, eclectic products and great prices, the Wish app also provides a way to decompress or to get inspired. | positive |
Our users have told us that they want the Wish shopping experience to be even more fun and to incorporate even more social elements. We are answering their call by leaning into social commerce and entertaining features such as video reviews, shoppable influencer content and more gamification, which has a unique opportunity to create moments of fun in people's lives and also introduce them to products that pique their interest that they may have never known existed. If users feel joy while on the Wish app, we believe that they will come back often. | positive |
We strongly believe that social shopping experiences are the future of e-commerce. Our focus on entertaining features dovetails perfectly with where the industry is going. We believe that we have the brand and the user base to support leaning into this strategy. We have already begun implementing some of these initiatives. 2 weeks ago, we hosted our first live shopping event on Instagram. The live stream featured an influencer conducting a makeup tutorial using beauty products available on Wish. We're also working with a group of influencers to promote apparel products across various social media platforms. | neutral |
Wish is well positioned to be on the leading edge of the social commerce trend. So you can expect to see more of these innovations from us over the next few quarters. | positive |
To oversee the evolution of our product strategy, we welcomed our new Chief Product Officer, Tarun Jain, to our leadership team just last week. Tarun brings to Wish a deep product management experience, including incubating and leading the development of Google's discovery ads, which typically drive higher levels of engagement than direct response ads. We are fortunate to have someone of Tarun's caliber leading product at Wish. | positive |
And third, we recognize the need to enhance the user experience on our apps from end-to-end. Since Wish was built on a culture of experimentation, there have been a high number of ongoing platform tests that resulted in a slowdown or latency of the app speed. The forward platform performance impacted the user experience, particularly for existing users who are used to a faster, smoother experience. | positive |
To address this slowdown, we conducted a thorough review and cleanup of all open tests, which has already resulted in significant latency improvement. In fact, we have reduced our app speed by nearly 50%. This is an impressive upgrade that dramatically enhances the user experience. Going forward, we will aim to more effectively balance testing to advance innovation with the need to maintain optimal platform performance for our users. | positive |
In July, we brought on our new Chief Technology Officer, Farhang Kassaei, to oversee Wish core product suite and the creation of new technology solution. Farhang also joined us from Google, where he led the development and rollout of full stack commerce capabilities. Farhang's work with logistics and scaling merchant onboarding at Google are particularly relevant experiences that will have positive impact on our core business. | positive |
As you may have realized, the actions we are discussing today have one commonality, the focus on our users. We have identified opportunities for improvement and believe that successful execution on these initiatives will position Wish for a strong rebound. However, we do not expect the benefits of these actions outlined today to begin materializing into positive year-over-year results until the second half of 2022. | neutral |
We have already begun to significantly cut back our digital advertising spend, and we will focus on maintaining retention of our existing user base in the near term. We believe new buyer conversions will be minimal. Once we see improved user engagement trends, we plan to slowly ramp up our growth advertising investments to reignite our new user acquisition engine. | neutral |
At this time, we will not be providing our usual quarterly revenue outlook as we are focused squarely on execution and efficient expense management. To provide some context, quarter-to-date total revenue through July 2021 was down approximately 40% compared with the prior quarter, while Marketplace revenue was down approximately 55% compared to the same period. With the pullback in digital ad spending, we expect third quarter revenue to decline further. As a result, we expect third quarter adjusted EBITDA loss in the range of $70 million to $65 million. | negative |
As we look ahead to the second half of 2021 and beyond, we are sharply focused on execution and user retention. We have a solid cash position to navigate this turnaround with a goal of returning to growth. We plan to maintain a disciplined approach to cash management as we progress towards improving adjusted EBITDA on a sequential basis beginning with the fourth quarter of 2021. | neutral |
Before we open up the call for your questions, I want to reiterate that these results are not reflective of what we believe this company can achieve. We clearly have work to do to turn our performance around, but we have identified opportunities for improvement in the way we operate. | neutral |
So I am super optimistic about Wish's future. The initiatives outlined today will support our strategic execution as we progress towards achieving our long-term vision. Along the way, we'll strive to create a more engaging experience for our users and merchants and to generate greater value for our shareholders. We will work hard to return to growth during 2022, and we are confident that we will emerge as a stronger business. | positive |
With that, operator, we are ready for the first question. | neutral |
(Operator Instructions) Your first question comes from the line of Doug Anmuth of JPMorgan. | neutral |
This is Neeraj on for Doug. So just a couple of questions. So first, I just wanted to understand if you can pass through the impact from reopening versus the higher cost of advertising? And second would be you had talked previously that you can become profitable if you -- even if you stopped advertising, which we saw in first half of 2019. So how has that dynamic changed in this quarter? | negative |
Yes. Thanks. Thanks, Doug. That's a good question. Look, as we mentioned, we're facing several macro and company-specific headwinds, which we're addressing with the actions that potentially will impact our near-term results but that we believe will generate more sustainable and consistent long-term revenue growth for Wish. So from a macro perspective, the stay-at-home restrictions, as they ease and as the economies begin to open, consumers spend less time at home and less time on their phones, which has impacted user activity on our app. This includes engagement, conversion into sales and retention. | negative |
At the same time, CAC, our customer acquisition cost, increased this quarter. And retention has declined, which has reduced LTV to CAC to a point where we believe it just makes a lot more sense to focus on retention instead of investing in new buyer acquisition. So this results in lower ad spend and obviously, in a slowdown in user and buyer growth. Retention has decreased this quarter, and our marketing is less efficient as the cost for impressions continue to rise. | negative |
So as mentioned in the remarks, one ad platform. This is surprising and unexpected. The CPMs have increased 50% year-over-year. That's quite a dramatic rise. I don't think we've seen that before. On other platforms, the cost has even doubled year-over-year on a CPC basis. We expected the retention to improve as our logistics became much more reliable. We were successful in improving logistics, as evidenced by lower customer complaints related to logistics and shipping reasons not being the #1 reason any longer for customer service requests or complaints. | positive |
However, retention has continued to decline, indicating that we really need to improve other areas of our business, starting with product quality. And then once we saw this reduction in retention and increasing cost of acquiring new customers, we adjusted our user acquisition strategy, right? | negative |
So as a result of these factors, Q2 MAUs were down 22% year-over-year, and active buyers were actually down 44% year-over-year. And this trend actually continues into July as MAUs are down 9% even just compared to June. So we do plan to reinvest in growth once we see improvements in user engagement trends. But until then, we think that spending on low retention buyers is not a good strategy for us. | negative |
And then to address the second portion of your question, in the past, with where historically the cost of advertising even on a CPM basis has been, that was the case and I think notably in 2019. But with this unexpected rise in digital advertising, that has become a much greater challenge. | negative |
Your next question comes from the line of Stephen Ju of Credit Suisse. | neutral |
This is Tyler on for Stephen. So Peter, it seems like for now, the LTV to CAC ratio is not at a place where you want to spend on acquisition. But one thing you can do to potentially increase LTV is better product selection or more selection in general. So what can you do in that regard? I think you talked about apparel and home goods in your prepared remarks. So is that a potential recovery direction you could take? And any more color here would be appreciated. | negative |
Yes. Thanks, Tyler. Yes. So look, the Core Marketplace revenue per active buyer is actually up 21% year-over-year. So there are signs that, that sort of continues to improve. We're seeing sort of signs of that with the AOV as well. And of course, we want to add as many products as possible that will ultimately appeal and delight our customers. So expansion into more branded products or even more high-quality products is part of that strategy, especially in categories where they will drive further sort of repeat purchase behavior. | positive |
Your next question comes from the line of Jason Helfstein of Oppenheimer. | neutral |
Appreciate in the letter that you've clearly laid out that this is going to take a year, and there's a significant reset here. So my question is, should you be -- are there any markets that you plan to exit? Do you think it makes sense to kind of look at the Logistics business almost as a stand-alone business and kind of run that on its own, let that try to also serve external customers and then also obviously kind of serve Wish customers? And then I guess you outlined the 2 management changes you've already made, but maybe just talk about what else you need to do to kind of go through this transition. | negative |
Yes. So in terms of advertising in these specific markets, the majority of our advertising is focused on our key markets. So that includes Europe, North America. We continuously review our ad spend and determine sort of where to invest, where the regions can be successful. And we may sort of exit future markets -- there's no plans right now -- if we find that they're not workable at the time. But I don't think we have anything to announce there at this point in time. So we will sort of continue to assess the situation, but no specific plans in mind. | neutral |
Your second question with respect to Logistics and what we're doing there. I think ultimately, right now, we're just focused on providing the best logistics solutions for our merchants and really providing faster, much more reliable logistics solutions, leveraging volume cost savings, figuring out whether -- sort of how to sort of optimize the flow. But at this point in time, we're looking for as much adoption as possible. I think it's really -- we have nothing to announce there whether we should be really spinning this out as sort of a separate business. | neutral |
Now we do have this pilot around Logistics as a Service for non-Wish transactions and non-Wish merchants, right? So this already includes several online retailers. And we have expanded this test to open it up to more retailers. It's probably too early to share any specific details, but we're very encouraged by sort of the early signs that we've actually had feedback on from the participants so far. | neutral |
And then I believe your last question was centered around sort of other leadership changes. Look, I think ultimately, we want to bring in a world-class team. Running an e-commerce company has many sort of different and distinct and unique moving parts. I think with the additions that we made in just the last 4 weeks or so, with our Chief Technical Officer and our Chief Product Officer, we're making sort of the right moves. We're always looking to attract top industry talent, but we don't necessarily have -- other than sort of the CFO search that we have that's going on to find a permanent CFO for Wish, we don't really have anything else to announce at this moment. | neutral |
Your next question comes from the line of Michael McGovern of Bank of America. | neutral |
I was just wondering if you could dig a little bit further into the quarter-to-date trends that you're seeing that you outlined in the shareholder letter. It looks like in my model, to get to a 55% decline, I would have to model Core Marketplace revenue down on a year-over-year basis. And like you said earlier, it was still up 21% in the second quarter. So can you just parse a little bit further into what you're seeing like with that and also with ProductBoost quarter-to-date? | negative |
And then could you also just dig a little bit into the kind of user engagement trends that you would need to see to once again ramp up that digital ad spend? And what do you want to see from users in terms of that recovery? | neutral |
Yes. Thanks, Michael. So on the quarter-to-date trends, I think Jennifer, who's on this call, is probably the best person to sort of handle or be able to sort of answer what we're ready to discuss today. And I'll handle the ProductBoost update or sort of anything around user engagement trends that we will need to sort of ramp back up sort of growth initiatives in the future. | neutral |
Your next question comes from the line of Shweta Khajuria of Evercore ISI. | neutral |
It's Shweta, but I wonder if my question needs to be answered first before I jump in. | neutral |
All right. Thanks for your question, Mike. Yes. So in terms of quarter-to-date declines in Core Marketplace revenue, it's really driven by decline in buyers and users, again, partially driven by macroeconomic trends that we're seeing and partially driven by our reduction in ad spend, which just results in lower buyer and user count and not just resulting in lower orders on the platform. | neutral |
Yes. And just sort of a ProductBoost update, look, I don't think we have anything specific to update there. I think ProductBoost is essentially a function of engagement and conversion rates on the platform. So I'll probably just leave it at that. | neutral |
And then, Mike, the last part of your question centered around user engagement trends. I mean look, ultimately, it's driven by our conviction in LTV-to-CAC ratio. So sort of there's probably -- we're looking at sort of 2 components there. One which is much more so within our control, which is the numerator of that equation or that formula, which is increasing LTV. So we're seeing sort of some positive trends, although not enough to sort of overcome what we're seeing with the CAC increases. And the other is potentially by reducing CAC, either just due to external factors or potentially diversifying our marketing initiatives into the sort of brand new areas that are still very preliminary but that we're experimenting with. | neutral |
Your next question comes from the line of Laura Champine of Loop Capital. | neutral |
Just kind of high level, what will you need to see before you invest more in marketing expense? Like what are the signposts that you'll need to see in your business that tell you is the right time to step that up? | negative |
Yes. Laura, I think, again, that's a great question. So yes, I think it's, again, sort of our conviction and -- to LTV over CAC and the payback period. And those things can take a while to actually assess, but we believe we have a pretty good sense by leveraging our historical data on being able to extrapolate even from sort of earlier signals. So we don't need a full 2 years to actually figure out what the expected LTV of a particular type of user would actually become. | neutral |
And I think, again, sort of the numerator in that equation of LTV is very much so up to us. And the denominator is potentially up to us if we discover ways in which we can diversify our sort of growth strategy or customer acquisition strategy in major ways. | neutral |
So I think there's sort of various ways to do this. We discussed increasing engagement at sort of the top of the funnel, right? So this would be all the types of new features and sort of fun and entertaining experiences. The other would be to increase retention, and that would largely be driven now that we've done sort of the logistics improvement by improving product quality, sort of the post purchase -- improving the post-purchase customer experience to drive up higher retention. | neutral |
So we think we have all the right metrics and we have the right strategy. We just need to be in a place where it's either sort of market by market or potentially category by category or maybe sort of even more generally where we feel confident about where we're headed with respect to LTV to CAC. | neutral |
Your next question comes from the line of Shweta Khajuria of Evercore ISI. | neutral |
Okay. Let me try 2, please. Could you talk about revenue per buyer trends you're seeing in the third quarter? And then the second question is, could you please give more color on the CFO search? So what kind of time line are we looking at? What are you looking for in the new CFO? And any color around that, that would be great. | negative |
Yes. Thanks for the question, Shweta. Jennifer, do we have anything to share at this point in time in terms of revenue per buyer? I'm assuming this is Core Marketplace revenue or maybe revenue in general per buyer in Q3. I'm not sure if we were sort of disclosing anything there at this point in time. | neutral |
I don't think we've disclosed this at the current time. | neutral |
Okay. And so for the second part of your question, look, we continue to work with Heidrick & Struggles, a prominent search firm, to find a permanent CFO. We are encouraged by our progress and believe that we will have a strong finance leader before the end of the year. | positive |
Okay. And then, Peter, if I could please add one more. What are your -- so how -- you laid out your 3 priorities in your shareholder letter and you talked in your prepared remarks. But you also have other growth investment areas and priorities, for example, Wish Local. And then Logistics remains, whether it's Logistics as a Service or Logistics in its own initiative. So how -- are you reprioritizing your internal operations in terms of for the next 6 to 12 months? Are you -- what is not a priority anymore when you compare it to these 3 priorities you laid out in the shareholder letter? | neutral |
Yes, Shweta. That's a great question. So look, with respect to Wish Local and that initiative, orders shipped to Wish Local for store pickup continues to grow as an overall percentage of total volume. So it's 10% -- or in Q2 it was 10% of overall total order volume, and that's up from 7% in Q1. And then in some markets like Mexico, it's actually north of 50% now. Italy is, I think, at 37%. Spain is at 27%. And I think we can actually replicate this model in other markets and already seeing strong adoption in markets like Portugal, Hungary, and the Netherlands. | positive |
So I think we're not going to discontinue these initiatives. There aren't that many resources put on it as is. We have 60,000 store partners or so in over 50 countries. We're being very selective and strategic around which store partners we choose to engage with and onboard into this program. | negative |
So we're not cutting these initiatives off. I just think that we actually have bigger opportunities ahead of us in terms of sort of more foundationally changing some aspects of how our consumers engage with the platform, so just from a sort of digital usage perspective, and then on top of that, really, really, really improving the product quality now that we've improved the Logistics component. | neutral |
So I think there's going to be potentially some shuffling of resources in order to sort of pursue those 3 pillars. But I don't think that we're going to shut down any of these sort of very promising initiatives. They might not sort of get the amount of resources that they would have otherwise had, but we think that they're still very promising. And especially in the long term, that will be sort of a key driver for what we do in the future. | neutral |
In terms of Logistics, again, we try to do the best that we can, obviously, first and foremost, prioritizing transactions and consumer experiences for Wish. But we still have this pilot that's continuing -- where we continue to add more and more retailers that are potentially not transacting on Wish at all or retailers that are on Wish but are leveraging it for transactions off our platform. | neutral |
And again, we're not going to be shutting any of these initiatives down. We might be shuffling resources and reprioritizing things because we think that there are much larger opportunities in some of these areas centered around these 3 pillars. But overall, in the long run, we still have this sort of massive opportunity. And sort of the outlook hasn't changed. Potentially the time line or how we get there has changed around a little bit. But we're super optimistic about the future. | positive |
(Operator Instructions) Your next question comes from the line of John Blackledge of Cowen. | neutral |
This is Bill on for John. We've heard from several people in the retail and e-commerce industries that shipping and fulfillment environment right now is particularly challenging. Could you just talk about the impact you saw from those headwinds and how your Logistics platform helps you navigate that environment? And then I have one other question. | negative |
Sure. Yes. Look, so I think it's been sort of challenging for absolutely everyone. I think our advantage has sort of several ways to actually do this better. One is obviously just the volume cost savings that we get just from partnering with our logistics carriers, logistics partners. Two is just much deeper integration, especially one in the sort of first mile operations and cost savings there, but even more importantly so, in what we're doing with these tighter integrations in the last mile and also going into what we've been able to do with our A+ programs, our sort of combination efforts and extending into sort of what we're doing with Wish Local, where we're getting even larger cost savings. | positive |
So I think there have been substantial headwinds. This really, really started with what's been going on with the pandemic. But even earlier, we respected the cost basis. But we think that Logistics will sort of continue to be a large competitive advantage with us, especially with volume and especially as we have these tighter integrations all the way to sort of last-mile delivery carriers, national postal services or their commercial arms and even into local stores, which continues to eat up a larger and larger percentage of order volume. | negative |
So there have been lots of headwinds there, but there have been various ways in which we mitigated. One is optimization. Two is volume cost savings. Three is sort of incentivizing customers to buy more and sort of the combination efforts that we have around there, all the optimizations around all those 3 factors and then ultimately shipping items to stores. And we're excited about the competitiveness that we have within our marketplace and eventually extending that, sort of starting with the pilot that we're doing to transactions and merchants off platform as well. | positive |
Great. That's super helpful. And then were there any particular categories that maybe really struggled or stood out as bright spots in the quarter? And any we should look forward to in 3Q and as we run into the year that should help to drive some level of growth? | negative |
Sure. Yes. So look, our largest categories typically include accessory, hobbies, sort of gadgets, electronics, home decor or fashion, makeup and sort of beauty. I think sort of consistent with what we've been seeing is as we sort of add higher-quality products, as we add more branded products, we're seeing sort of an increase in AOV for the most part. Now we've sort of launched this new revenue share structure that actually incentivizes higher-quality products and products that shipped much, much faster. | positive |
I think both electronics and home decor have been doing quite well. So we're going to be leaning into those categories, but we're always looking at adding more branded inventory and filling in the gaps in our catalog as long as those types of products, we feel, will delight our consumers and the consumers are looking for products in those categories. | positive |
Your next question comes from the line of Nick Jones of Citi. | neutral |
Can you touch on revenue per active buyer trends in 3Q versus 2Q and how that feeds into kind of the trends that were in the press release? And then as we think about ad spend, I think, for the rest of the year, are you thinking of an uptick in ad rates and just efficiency breaking down? And how are you thinking about that maybe longer term? Is that kind of temporary as more dollars come online? Or is this kind of structurally higher as there's a bigger focus on digital? | neutral |
Yes. Nick, so thanks for the question. I'll handle sort of your second question first. And then I think, again, sort of Jennifer is sort of better positioned to discuss the sort of revenue per active buyer trends Q2, Q3 this year. So in terms of how we're thinking about the ad spend over the next several quarters, like look, much of the top line impact will primarily be driven by significantly lower digital advertising spend and especially on new buyer acquisition as we address sort of our issues with retention and marketing efficiency and the unit economics around that, which we believe we have a very, very strong and effective plan for. | positive |
Right now, LTV to CAC is just not in the place where it makes sense for us to spend at historical levels. So we have made a strategic decision to temporarily slow down, especially on new user and new buyer acquisition. So kind of thinking about the next several quarters, look, we're going to be taking a very disciplined approach to expand on cash management. And again, sort of the main lever, of course, for our EBITDA is our digital ad spend. Historically, it's been 95% or so of sales and marketing expense. For Q3, we began significantly reducing ad spend, especially starting in July. And we expect the ad spend to be lower for the second half of Q3 than the first. | neutral |
So as a result, adjusted EBITDA is expected to be in the range of negative $70 million to negative $65 million, as mentioned earlier. And we plan to maintain ad spend at this reduced level until we see an improvement trend in terms of user engagement and really sort of the numerator of the LTV to CAC equation. | negative |
Just a sort of a reminder, historically, approximately 60% of our digital ad spend has been focused on driving new app installs. And that's what have been reduced. We're reducing that spend significantly, and we will continue to do so likely for the next few quarters as we focus on sort of engaging with our existing users, resurrecting quality past users, et cetera. So going forward, we expect to see sequential improvement in EBITDA, but that's going to be sort of an outcome of lowering ad spend. | negative |
And Jennifer, I don't know if you have any further comments on revenue per active buyer, Q3 versus Q2, et cetera. | neutral |
Yes. Sure. Thanks, Peter, and thanks, Nick, for your question. On active buyers, we did not provide revenue guidance for Q3. However, based on Peter's opening remarks, we shared that quarter-to-date revenue was down roughly 40% in July. And that's primarily driven by lower buyer count, again, driven by lower ad spend. And going through the rest of the quarter, we expect that to decline further as we only started pulling back ad spend part of the way through July. | negative |
We've reached the end of our call, and I will turn back to Peter for any closing comments or remarks. | neutral |
Thank you, everyone, for your questions today. I'd just like to remind everyone, we're not satisfied with these results and the outlook. We all know that we can do better. We're taking action to improve our performance for the long term, especially with a focus on enhancing the user experience and increasing retention. We look forward to providing an update on our next call in November. So thank you all. | negative |
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. | neutral |