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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 September 30, 2021

OR

 

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

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  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes      No  

As of October 31, 2021, the number of shares of the registrant’s Class A common stock outstanding was 577 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

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

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 ("Securities Act"), 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. Examples of such statements include but are not limited to 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,” “forecast,” “foresee,” “intends,” “likely,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “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. 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. 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 Securities and Exchange Commission as exhibits to 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 September 30,

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,072

 

 

$

1,965

 

Marketable securities

 

 

143

 

 

 

164

 

Funds receivable

 

 

27

 

 

 

83

 

Prepaid expenses and other current assets

 

 

73

 

 

 

102

 

Total current assets

 

 

1,315

 

 

 

2,314

 

Property and equipment, net

 

 

17

 

 

 

25

 

Right-of-use assets

 

 

20

 

 

 

43

 

Marketable securities

 

 

7

 

 

 

4

 

Other assets

 

 

6

 

 

 

11

 

Total assets

 

$

1,365

 

 

$

2,397

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

70

 

 

$

434

 

Merchants payable

 

 

216

 

 

 

454

 

Refunds liability

 

 

23

 

 

 

77

 

Accrued liabilities

 

 

209

 

 

 

367

 

Total current liabilities

 

 

518

 

 

 

1,332

 

Lease liabilities, non-current

 

 

18

 

 

 

38

 

Total liabilities

 

 

536

 

 

 

1,370

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value: 100 shares authorized as of September 30, 2021 and December 31, 2020; No shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value:3,500 (3,000 Class A, 500 Class B) shares authorized as of September 30, 2021 and December 31, 2020; 635 (565 Class A, 70 Class B) and 587 (478 Class A, 109 Class B) shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

3,315

 

 

 

3,210

 

Accumulated other comprehensive income

 

 

1

 

 

 

1

 

Accumulated deficit

 

 

(2,487

)

 

 

(2,184

)

Total stockholders’ equity

 

 

829

 

 

 

1,027

 

Total liabilities and stockholders’ equity

 

$

1,365

 

 

$

2,397

 

 

 

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)

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

368

 

 

$

606

 

 

$

1,796

 

 

$

1,747

 

Cost of revenue

 

 

201

 

 

 

241

 

 

 

808

 

 

 

605

 

Gross profit

 

 

167

 

 

 

365

 

 

 

988

 

 

 

1,142

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

147

 

 

 

386

 

 

 

1,013

 

 

 

1,125

 

Product development

 

 

54

 

 

 

24

 

 

 

157

 

 

 

72

 

General and administrative

 

 

29

 

 

 

33

 

 

 

121

 

 

 

65

 

Total operating expenses

 

 

230

 

 

 

443

 

 

 

1,291

 

 

 

1,262

 

Loss from operations

 

 

(63

)

 

 

(78

)

 

 

(303

)

 

 

(120

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income (expense), net

 

 

3

 

 

 

(8

)

 

 

11

 

 

 

 

Remeasurement of redeemable convertible preferred stock warrant liability

 

 

 

 

 

(12

)

 

 

 

 

 

(55

)

Loss before provision for income taxes

 

 

(60

)

 

 

(98

)

 

 

(292

)

 

 

(175

)

Provision for income taxes

 

 

4

 

 

 

1

 

 

 

11

 

 

 

1

 

Net loss

 

 

(64

)

 

 

(99

)

 

 

(303

)

 

 

(176

)

Net loss per share, basic and diluted

 

$

(0.10

)

 

$

(0.92

)

 

$

(0.49

)

 

$

(1.64

)

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

 

 

628

 

 

 

108

 

 

 

623

 

 

 

107

 

 

 

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


2


 

CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(64

)

 

$

(99

)

 

$

(303

)

 

$

(176

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized holding gains on derivatives

 

 

1

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(63

)

 

$

(99

)

 

$

(303

)

 

$

(176

)

 

 

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


3


 

CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

 

 

 

Three Months Ended September 30, 2021

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

 

 

 

 

Accumulated

 

 

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Comprehensive

Income

 

 

 

 

Deficit

 

 

 

 

Equity

 

Balances as of June 30, 2021

 

 

627

 

 

$

 

 

$

3,285

 

 

$

 

 

 

 

$

(2,423

)

 

 

 

$

862

 

Issuance of common stock upon exercise of options for cash

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon settlement of restricted stock units

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

Other comprehensive income, net

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64

)

 

 

 

 

(64

)

Balances as of September 30, 2021

 

 

635

 

 

$

 

 

$

3,315

 

 

$

1

 

 

 

 

$

(2,487

)

 

 

 

$

829

 

 

 

 

Nine Months Ended September 30, 2021

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Comprehensive

Income

 

 

Deficit

 

 

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

 

 

10

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Issuance of common stock upon settlement of restricted stock units

 

 

36

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

(5

)

Net exercises of common stock warrant

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock through ESPP

 

 

1

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

 

 

 

104

 

 

 

 

 

 

 

 

 

104

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(303

)

 

 

(303

)

Balances as of September 30, 2021

 

 

635

 

 

$

 

 

$

3,315

 

 

$

1

 

 

$

(2,487

)

 

$

829

 

 

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


4


 

CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

 

 

 

Three Months Ended September 30, 2020

 

 

 

Redeemable

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances as of June 30, 2020

 

 

422

 

 

$

1,536

 

 

 

 

107

 

 

$

 

 

$

 

 

$

(1,516

)

 

$

(1,516

)

Issuance of common stock upon exercise of options for cash

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(99

)

 

 

(99

)

Balances as of September 30, 2020

 

 

422

 

 

$

1,536

 

 

 

 

107

 

 

$

 

 

$

10

 

 

$

(1,615

)

 

$

(1,605

)

 

 

 

Nine Months Ended September 30, 2020

 

 

 

Redeemable

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances as of December 31, 2019

 

 

422

 

 

$

1,536

 

 

 

 

103

 

 

$

 

 

$

 

 

$

(1,439

)

 

$

(1,439

)

Issuance of common stock upon exercise of options for cash

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Repurchase of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(176

)

 

 

(176

)

Balances as of September 30, 2020

 

 

422

 

 

$

1,536

 

 

 

 

107

 

 

$

 

 

$

10

 

 

$

(1,615

)

 

$

(1,605

)

 

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

5


CONTEXTLOGIC INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(303

)

 

$

(176

)

Adjustments to reconcile net loss to net cash provided by (used in) operating

   activities:

 

 

 

 

 

 

 

 

Noncash inventory write downs

 

 

12

 

 

 

 

Depreciation and amortization

 

 

7

 

 

 

9

 

Noncash lease expense

 

 

10

 

 

 

7

 

Stock-based compensation expense

 

 

104

 

 

 

9

 

Remeasurement of redeemable convertible preferred stock warrant liability

 

 

 

 

 

55

 

Other

 

 

 

 

 

(1

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Funds receivable

 

 

56

 

 

 

28

 

Prepaid expenses, other current and noncurrent assets

 

 

30

 

 

 

14

 

Accounts payable

 

 

(364

)

 

 

126

 

Merchants payable

 

 

(238

)

 

 

(133

)

Accrued and refund liabilities

 

 

(181

)

 

 

85

 

Lease liabilities

 

 

(11

)

 

 

(7

)

Other current and noncurrent liabilities

 

 

(24

)

 

 

8

 

Net cash provided by (used in) operating activities

 

 

(902

)

 

 

24

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1

)

 

 

(1

)

Purchases of marketable securities

 

 

(235

)

 

 

(225

)

Sales of marketable securities

 

 

50

 

 

 

 

Maturities of marketable securities

 

 

202

 

 

 

303

 

Net cash provided by investing activities

 

 

16

 

 

 

77

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from sales of shares through employee equity incentive plans

 

 

6

 

 

 

2

 

Payment of taxes related to RSU settlement

 

 

(5

)

 

 

 

Other

 

 

(1

)

 

 

(3

)

Net cash used in financing activities

 

 

 

 

 

(1

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(886

)

 

 

100

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

1,965

 

 

 

754

 

Cash, cash equivalents and restricted cash at end of period

 

$

1,079

 

 

$