Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, new or planned features or services, management strategies or timing and other expectations regarding our business). You can identify these forward-looking statements by words such as "may," "will," "would," "should," "could," "expect," "anticipate," "believe," "estimate," "intend," "plan" and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in "Item 1A: Risk Factors" of this Annual Report on Form 10-K, as well as in our consolidated financial statements, related notes, and the other information appearing elsewhere in this report and our other filings with the SEC. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. You should read the following Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the special note regarding forward-looking statements, consolidated financial statements and the related notes included in this report. A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is included under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.
Financial Results for the Year Ended December 31, 2024
As of December 31, 2024, we had an accumulated deficit of $3.3 billion. We expect losses from operations to continue for the foreseeable future as we incur costs and expenses related to identifying and completing an acquisition.
Global Considerations
We are monitoring the recent volatility in the global financial markets, including inflation and rising interest rates. These developments could continue to negatively impact global economic activity and consumer behavior, which may adversely affect our business and our results of operations.
Reductions in Workforce
In January 2023 and August 2023, we conducted workforce reductions of approximately 400 employees, representing approximately one half of our then global workforce ("2023 RIFs"). In connection with the 2023 RIFs, we incurred charges of approximately $13 million in severance and other personnel reductions costs for terminated employees. The 2023 RIFs were intended to refocus our operations to support our ongoing business prioritization efforts, better align resources, and improve operational efficiencies. Substantially all related severance payments were paid as of December 31, 2023.
Following the Asset Sale, substantially all of our employees became employees of the Buyer.
Asset Purchase Agreement with Qoo10
Our Board initiated a process to explore a range of strategic alternatives to maximize value for Company's shareholders starting in the fourth quarter of 2023.
On February 10, 2024, we entered into the Asset Purchase Agreement with Qoo10 pursuant to which we agreed to sell substantially all of our assets to Qoo10, other than (i) our NOLs and certain other tax attributes, (ii) our marketable securities and (iii) certain of our cash and cash equivalents. As consideration for the Asset Sale, Qoo10 agreed to acquire those assets and assume substantially all of our liabilities as specified in the Asset Purchase Agreement.
On April 18, 2024, the holders of a majority of the outstanding shares of our common stock voted to approve the Asset Sale. Pursuant to such vote and satisfaction of other customary closing conditions, the Asset Sale closed on April 19, 2024. Prior to the Asset Sale, we owned and operated the Wish platform. The Wish platform generated revenue for us from the marketplace and logistics services provided to merchants. As a result of the Asset Sale, the Wish platform and all related operating assets were sold to the Buyer.
The financial results presented in this Annual Report on Form 10-K reflect the Asset Sale as it was completed on April 19, 2024. Accordingly, the consolidated financial statements and the narrative description of the Company's business, assets, liabilities and risks contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations reflect the pre-Asset Sale operations up to April 19, 2024, the results of the Asset Sale, and the post-Asset Sale activities since April 19, 2024. See Part I, Item 1. "Business-Asset Sale" for further discussion of the Asset Purchase Agreement.
Key Financial Metrics
Components of Results of Operations
Since the consummation of the Asset Sale on April 19, 2024, we no longer earn operating revenue or incur related cost associated with the prior marketplace and logistics operations. We expect to incur minimal administrative costs in the course of overseeing and curating the remaining assets.
Revenue (Prior to Asset Sale)
Prior to the Asset Sale, our revenue consisted of marketplace and logistics revenue.
Marketplace revenue
We provide a mix of marketplace services to our customers. We provide merchants access to our marketplace where merchants display and sell their products to users. We also provide ProductBoost services to help merchants promote their products within our 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 geography, product category, Wish Standards' tier and item value. We recognize 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 generated by increasing exposure for a merchant's relevant products within our marketplace. We recognize ProductBoost revenue based on the number of impressions delivered, or clicks by users.
Logistics revenue
Our 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.
We recognize revenue over time as the merchant simultaneously receives and consumes the logistics services benefit as the logistics services are performed. We use 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.
Cost of Revenue and Operating Expenses (Prior to Asset Sale)
Cost of revenue
Prior to the Asset Sale, cost of revenue included colocation and data center charges, interchange and other fees for credit card processing services, fraud and chargeback prevention service charges, costs of refunds and chargebacks made to our users that we are not able to collect from our merchants, depreciation and amortization of property and equipment, shipping charges, tracking and logistics costs, warehouse fees, and employee-related costs, including salaries, benefits, and stock-based compensation expense for our infrastructure, merchant support, and logistics personnel. Cost of revenue also includes an allocation of general IT and facilities overhead expenses.
Sales and marketing
Prior to the Asset Sale, our sales and marketing expenses are primarily driven by the cost of acquiring and engaging users by targeting social media and search engine digital advertisements, outsourced user support services, sponsorships and local marketing campaigns. Other drivers consist of employee-related costs, including salaries, benefits, and
stock-based compensation, for our employees involved in marketing, user support, and business development functions. Sales and marketing spend also includes an allocation of general IT and facilities overhead expenses as well as business development expenses for attracting merchants and conducting ongoing merchant education.
Product development
Prior to the Asset Sale, our product development expenses consist primarily of employee-related costs, including salaries, benefits, and stock-based compensation for our engineers and other employees involved in product development activities. Product development costs have historically been expensed as incurred. Product development costs also include the cost of IT and outside services used by the product development team as well as an allocation of general IT and facilities overhead expenses.
Operating Expenses
General and administrative
Our general and administrative expenses consist primarily of employee-related costs, including salaries, benefits, and stock-based compensation for our executives, finance, legal, information technology, human resources, and other administrative teams. General and administrative expenses also include outside consulting, legal, tax, and accounting services, and facilities and other supporting overhead costs.
Interest and Other Income, net
Interest and other income, net consists primarily of interest income earned on our cash, cash equivalents and marketable securities, interest expense, foreign exchange gains or losses and gains or losses from our foreign currency forward contracts.
Income Tax
Prior to the Asset Sale, income taxes consist primarily of income taxes in certain foreign jurisdictions in which we conduct business.
Results of Operations
The following tables show our results of operations for the periods presented and express the relationship of certain line items as a percentage of revenue for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
|
Year Ended |
||||||||
|
2024 |
2023 |
|||||||
|
(in millions) |
||||||||
|
Revenue |
$ |
43 |
$ |
287 |
||||
|
Cost of revenue(1) |
36 |
228 |
||||||
|
Gross profit |
7 |
59 |
||||||
|
Operating expenses: |
||||||||
|
Sales and marketing(1) |
18 |
143 |
||||||
|
Product development(1) |
26 |
152 |
||||||
|
General and administrative(1) |
42 |
92 |
||||||
|
Total operating expenses |
86 |
387 |
||||||
|
Loss from operations |
(79 |
) |
(328 |
) |
||||
|
Other income, net |
||||||||
|
Interest and other income, net |
6 |
16 |
||||||
|
Gain on Asset Sale |
4 |
- |
||||||
|
Loss before provision for income taxes |
(69 |
) |
(312 |
) |
||||
|
Provision for income taxes |
6 |
5 |
||||||
|
Net loss |
$ |
(75 |
) |
$ |
(317 |
) |
||
(1) Includes stock-based compensation expense as follows:
|
Year Ended |
|||||||||
|
December 31, |
|||||||||
|
2024 |
2023 |
||||||||
|
(in millions) |
|||||||||
|
Cost of revenue |
$ |
- |
$ |
3 |
|||||
|
Sales and marketing |
1 |
4 |
|||||||
|
Product development |
6 |
36 |
|||||||
|
General and administrative |
5 |
21 |
|||||||
|
Total stock-based compensation |
$ |
12 |
$ |
64 |
|||||
The following table presents the components of our consolidated statements of operations as a percentage of revenue:
|
Year Ended |
||||||||
|
2024 |
2023 |
|||||||
|
Revenue |
100 |
% |
100 |
% |
||||
|
Cost of revenue |
84 |
% |
79 |
% |
||||
|
Gross profit |
16 |
% |
21 |
% |
||||
|
Operating expenses: |
||||||||
|
Sales and marketing |
42 |
% |
50 |
% |
||||
|
Product development |
60 |
% |
53 |
% |
||||
|
General and administrative |
98 |
% |
32 |
% |
||||
|
Total operating expenses |
200 |
% |
135 |
% |
||||
|
Loss from operations |
(184 |
)% |
(114 |
)% |
||||
|
Other income, net: |
||||||||
|
Interest and other income, net |
14 |
% |
6 |
% |
||||
|
Gain on Asset Sale |
9 |
% |
- |
|||||
|
Loss before provision for income taxes |
(161 |
)% |
(108 |
)% |
||||
|
Provision for income taxes |
14 |
% |
2 |
% |
||||
|
Net loss |
(175 |
)% |
(110 |
)% |
||||
Comparison of the Years Ended December 31, 2024 and 2023
Revenue
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Core marketplace revenue(1) |
$ |
13 |
$ |
86 |
$ |
(73 |
) |
(85 |
)% |
|||||||
|
ProductBoost revenue |
4 |
24 |
(20 |
) |
(83 |
)% |
||||||||||
|
Marketplace revenue |
17 |
110 |
(93 |
) |
(85 |
)% |
||||||||||
|
Logistics revenue |
26 |
177 |
(151 |
) |
(85 |
)% |
||||||||||
|
Revenue |
$ |
43 |
$ |
287 |
$ |
(244 |
) |
(85 |
)% |
|||||||
Revenue decreased $244 million, or 85%, to $43 million for the year ended December 31, 2024 as compared to $287 million for the year ended December 31, 2023. This decrease was attributable to the consummation of the Asset Sale in the second quarter of the year ended December 31, 2024.
Cost of Revenue and Gross Margin
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Cost of revenue |
$ |
36 |
$ |
228 |
$ |
(192 |
) |
(84 |
)% |
|||||||
|
Percentage of revenue |
84 |
% |
79 |
% |
||||||||||||
|
Gross Margin |
16 |
% |
21 |
% |
||||||||||||
Cost of revenue decreased $192 million, or 84%, to $36 million for the year ended December 31, 2024, as compared to $228 million for the year ended December 31, 2023. This decrease was attributable to the consummation of the Asset Sale in the second quarter of the year ended December 31, 2024.
Sales and Marketing
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Sales and marketing |
$ |
18 |
$ |
143 |
$ |
(125 |
) |
(87 |
)% |
|||||||
|
Percentage of revenue |
42 |
% |
50 |
% |
||||||||||||
Sales and marketing expenses decreased $125 million, or 87%, to $18 million for the year ended December 31, 2024, as compared to $143 million for the year ended December 31, 2023. This decrease was attributable to the consummation of the Asset Sale in the second quarter of the year ended December 31, 2024.
Product Development
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Product development |
$ |
26 |
$ |
152 |
$ |
(126 |
) |
(83 |
)% |
|||||||
|
Percentage of revenue |
60 |
% |
53 |
% |
||||||||||||
Product development expense decreased $126 million, or 83%, to $26 million for the year ended December 31, 2024, as compared to $152 million for the year ended December 31, 2023. This decrease was attributable to the consummation of the Asset Sale in the second quarter of the year ended December 31, 2024.
General and Administrative
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
General and administrative |
$ |
42 |
$ |
92 |
$ |
(50 |
) |
(54 |
)% |
|||||||
|
Percentage of revenue |
98 |
% |
32 |
% |
||||||||||||
General and administrative expenses decreased $50 million, or 54%, to $42 million for the year ended December 31, 2024, as compared to $92 million for the year ended December 31, 2023. This decrease was primarily attributable to the consummation of the Asset Sale in the second quarter of the year ended December 31, 2024. The decrease was partially offset by $7 million of legal and other professional services, $5 million of employee expenses, and $5 million of expenses related to the evaluation and pursuit of strategic alternatives.
Interest and Other Income, net
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Interest and other income, net |
$ |
6 |
$ |
16 |
$ |
(10 |
) |
(63 |
)% |
|||||||
|
Percentage of revenue |
14 |
% |
6 |
% |
||||||||||||
Interest and other income, net decreased $10 million, or 63%, to $6 million for the year ended December 31, 2024, as compared to $16 million for the year ended December 31, 2023. The decrease was attributable to $12 million less interest income driven by lower cash and marketable securities balances, partially offset by lower foreign exchange losses in 2024 of $1 million.
Gain on Asset Sale
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Gain on Asset Sale |
$ |
4 |
$ |
- |
$ |
4 |
- |
|||||||||
|
Percentage of revenue |
9 |
% |
0 |
% |
||||||||||||
Gain on Asset Sale increased $4 million, or 100%, to $4 million for the year ended December 31, 2024. The increase was due to a gain associated with the Asset Sale completed on April 19, 2024.
Provision for Income Taxes
|
Year Ended |
Change |
|||||||||||||||
|
2024 |
2023 |
$ |
% |
|||||||||||||
|
($ in millions) |
||||||||||||||||
|
Provision for income taxes |
$ |
6 |
$ |
5 |
$ |
1 |
20 |
% |
||||||||
|
Percentage of revenue |
14 |
% |
2 |
% |
||||||||||||
Provision for income taxes increased $1 million, or 20%, to $6 million for the year ended December 31, 2024, as compared to $5 million for the year ended December 31, 2023. The 2024 provision was primarily related to withholding taxes accrued on certain intercompany dividends in the first quarter of fiscal 2024 while the 2023 provision was related to unrecognized tax benefits and our international operations.
Liquidity and Capital Resources
As of December 31, 2024, we had cash and cash equivalents of $66 million, a majority of which were held in cash deposits and U.S. Treasury bills, and marketable securities of $83 million, which funds were held for working capital purposes. We believe that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated cash needs for at least the next 12 months, though we may require additional financing or capital resources in the future.
We incurred net operating cash outflows of $94 million and $341 million in the years ended December 31, 2024 and 2023, respectively. Our material cash requirements outside our normal operating costs include $5 million in total liabilities.
Sources of Liquidity
As a result of the Asset Sale, we received/retained approximately $162 million in cash. As of December 31, 2024, we had cash and cash equivalents of $66 million and marketable securities of $83 million (consisting of government securities). As required by the Asset Purchase Agreement, the Buyer assumed substantially all the liabilities of the Company.
Since the consummation of the Asset Sale, we: (i) earn interest income on cash and marketable securities that we continue to hold following the Asset Sale; (ii) have no other sources of revenue and related costs; and (iii) incur minimal administrative costs.
Cash Flows
|
Year Ended December 31, |
||||||||
|
2024 |
2023 |
|||||||
|
(in millions) |
||||||||
|
Cash (used in) provided by: |
||||||||
|
Operating activities |
$ |
(94 |
) |
$ |
(341 |
) |
||
|
Investing activities |
(68 |
) |
74 |
|||||
|
Financing activities |
(1 |
) |
(5 |
) |
||||
Net Cash Used in Operating Activities
Our cash flows from operations are largely dependent on the amount of revenue we generate. Net cash provided by operating activities in each period presented has been influenced by changes in funds receivable, prepaid expenses, and other current and noncurrent assets, accounts payable, merchants payable, accrued and refund liabilities, lease liabilities, and other current and noncurrent liabilities.
Net cash used in our operating activities for the year ended December 31, 2024 was $94 million. This was primarily driven by our net loss of $75 million and $25 million of unfavorable changes in our operating assets and liabilities, which was partially offset by net non-cash expenses of $6 million, consisting of $12 million in stock-based compensation expense, $4 million in net accretion on marketable securities, and a $4 million gain on Asset Sale. Unfavorable working capital movement was mainly driven by reductions in accounts payable, merchants payable and accrued and refund liabilities. Accounts payable, merchants payable, and accrued and refund liabilities decreased significantly due to the Asset Sale.
Net cash used in our operating activities for the year ended December 31, 2023 was $341 million. This was primarily driven by our net loss of $317 million and $90 million of unfavorable changes in our operating assets and liabilities, which was partially offset by non-cash expenses of $66 million, consisting of $64 million in stock-based compensation expense and $2 million of other non-cash expenses. Unfavorable working capital movement was mainly driven by reductions in accounts payable, merchants payable and accrued and refund liabilities. Accounts payable, merchants payable, and accrued and refund liabilities decreased by $106 million primarily due to lower order volumes and reduced digital advertising expenditures.
Net Cash (Used in) Provided by Investing Activities
Our primary investing activities have consisted of investing excess cash balances in marketable securities.
Net cash used in investing activities was $68 million for the year ended December 31, 2024. This was primarily due to $168 million in purchases of marketable securities and $133 million net cash disposed from the Asset Sale, partially offset by $233 million in maturities and sales of marketable securities.
Net cash provided by investing activities was $74 million for the year ended December 31, 2023. This was primarily due to $390 million of maturities in marketable securities, partially offset by $313 million in purchases of marketable securities and $3 million in capital expenditures.
Net Cash Used in Financing Activities
Net cash used in our financing activities was $1 million for the year ended December 31, 2024. This was due to $1 million in payments of taxes related to employee restricted stock unit ("RSU") settlements and cashless exercises of stock options.
Net cash used in our financing activities was $5 million for the year ended December 31, 2023. This was primarily due to $5 million in payments of taxes related to employee RSU settlements and cashless exercises of stock options.
Off Balance Sheet Arrangements
For the years ended December 31, 2024 and 2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America as set forth in the Financial Accounting Standards Board's Accounting Standards Codification ("ASC"). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe the accounting policies below involve a significant degree of assumptions and estimates, and thus have the greatest potential impact on our consolidated financial statements. For further information on all of our significant accounting policies, refer to our consolidated financial statements in Item 8 of Part II, "Financial Statements and Supplementary Data, Note 2. Summary of Significant Accounting Policies".
Revenue Recognition
Prior to the Asset Sale, the most critical judgments required in applying ASC 606, Revenue Recognition from Customers, and our revenue policy related to:
Changes in judgments with respect to these assumptions and estimates could have an impact on the timing and amount of revenue recognition.
Following the Asset Sale, we no longer have revenue as we have no marketplace and logistics operations.
Deferred Revenue
Prior to the Asset Sale, deferred revenue consisted of amounts received, primarily related to unsatisfied performance obligations of logistics services, at the end of the period. Due to the short-term duration of contracts, all of the performance obligations were satisfied in the following reporting period.
Following the Asset Sale, we no longer have deferred revenue.
Wish Cash Liability
Prior to the Asset Sale, we issued Wish Cash to end-users who opted to receive it for their refundable transactions and as a part of our various referral and incentive programs. We accrued a liability for issued Wish Cash which was reduced when Wish Cash was redeemed by our users. We recorded breakage revenue within core marketplace revenue on unredeemed Wish Cash balances based on expected customer redemption. We estimated breakage based on historical and expected trends. Actual redemptions may vary from our estimates.
Following the Asset Sale, we no longer issue any Wish Cash and we do not have any Wish Cash liability.
Operating Lease Obligations
Prior to the Asset Sale, we leased facilities and data center colocations in multiple locations under non-cancelable lease agreements through 2027. For leases with a term greater than one year, lease liabilities were recognized at the lease commencement date based on the present value of the future lease payments over the expected lease term. The discount rate the Company used to estimate the present value of future lease payments was the Company's incremental borrowing rate because the rate implicit in our leases were not readily available. The right-of-use ("ROU") asset was determined based on the lease liability initially established and adjusted for any prepaid lease payments and any lease incentives received. The expected lease term to calculate the ROU asset and related lease liability included options to extend or terminate the lease when it was reasonably certain that the Company will exercise the option.
Determining the incremental borrowing rate to calculate the present value of future lease payments involved considerable estimates and assumptions. These estimates and assumptions included, among others, future economic and market conditions, analysis of publicly traded debt of companies with similar credit risk profiles of our own, and likelihood of the Company exercising lease renewal options (if applicable). Changes in these factors and assumptions used can materially affect the amount of ROU assets and lease liabilities we recognized on our consolidated balance sheets.
Following the Asset Sale, we no longer have any operating leases or related ROU assets, current lease liabilities, or non-current lease liabilities.
Impairment of Long-Lived Assets
Prior to the Asset Sale, we reviewed long-lived assets, including intangible and ROU assets, for impairment whenever events or changes in circumstances indicated that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used was measured first by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets were considered to be impaired, an impairment loss would be recognized based on the excess of the carrying amount of the asset above the fair value of the asset.
Calculating the fair value of the asset involved significant estimates and assumptions. These estimates and assumptions included, among others, projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and the determination of appropriate market comparables. Changes in these factors and assumptions used could have materially affected the amount of impairment loss recognized in the period the asset was considered impaired.
Following the Asset Sale, we no longer have any long-lived assets.
Loss Contingencies
We are involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred and the amount or range can be reasonably estimated. We disclose material contingencies when we believe that a loss is not probable but reasonably possible. Significant judgment is required to determine both probability and the estimated amount. We review these provisions on an ongoing basis and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information.
The outcome of legal matters and litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management's expectations, our results of operations, and financial condition, including in a particular reporting period, could be materially adversely affected
Stock-Based Compensation
We measure and recognize compensation expense for all stock-based awards, including RSUs, performance-based units ("PSUs"), stock options, and purchase rights issued to employees under our employee stock purchase plan ("ESPP"),
based on the estimated fair value of the awards on the grant date. We use the Black-Scholes option pricing model to estimate the fair value of stock options and ESPP purchase rights and the Monte Carlo Simulation model to estimate the fair value of a PSU. The fair value of RSUs is based on the market closing price for our common stock as reported on the Nasdaq Global Select Market on the date of grant.
Our use of the Black-Scholes option-pricing and Monte Carlo Simulation models require the input of highly subjective assumptions, including the fair value of the underlying common stock, expected term of the option, expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield of our common stock. The assumptions used in these valuation models represent management's best estimates. These estimates involve inherent uncertainties and the application of management's judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.
Income Taxes
We are subject to income taxes in the U.S. and in many international jurisdictions. The determination of these tax liabilities requires estimation, significant judgment, and interpretation of each jurisdiction's tax statutes, regulations, and case laws. Additionally, governing tax legislation could change significantly with little or no notice. It is important for us to monitor economic, political, and other conditions in the various countries with operations as changes in a jurisdiction's conditions could impact the amount of deferred tax assets or our ability to utilize deferred tax assets in the future.
We account for income taxes using the asset and liability method, under which deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between consolidated financial statement carrying amounts and the tax basis of assets and liabilities and net operating loss and tax credit carryforwards. Valuation allowances are established when deemed necessary to reduce deferred tax assets to the amount expected to be realized.
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ContextLogic Inc. published this content on March 12, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 12, 2025 at 20:35:45.932.
