ContextLogic Inc. Stock

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's call announcing the acquisition of gChem, Gaylord Chemical Company, by ContextLogic. [Operator Instructions]

However, a transcript will be made available online, and management will make themselves available to the investor community over the coming days and weeks. Before we begin, I would like to note that during this call, we'll be referring to a slide deck that is available on ContextLogic's Investor Relations website at www.contextlogic.com. Please note that today's call contains forward-looking statements regarding future events and future performance of ContextLogic, gChem and the combined company, which are subject to risks and uncertainties.

These forward-looking statements are based upon information available today, and actual results could differ materially from those contemplated by these forward-looking statements. Today's call also includes reference to non-GAAP financial measures that are not prepared in accordance with GAAP, including free cash flow and projected long-term free cash flow growth and that may be different from non-GAAP financial measures used by other companies. The non-GAAP financial measures presented should not be considered as an alternative to the financial measures required by GAAP and should not be considered measures of liquidity.

Please refer to Slides 2 and 3 for important disclaimers and cautionary statements regarding forward-looking information and the use of non-GAAP financial measures. The information in today's call does not constitute or form part of, and should not be construed as, an offer or invitation to purchase, vote, approve, subscribe for, underwrite or otherwise acquire any securities of ContextLogic or any other person nor should it or any part of it form the basis of or be relied on in connection with any contract to purchase or subscribe for any securities of ContextLogic or any other person or in connection with any other contract or commitment whatsoever nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale will be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Today's call will proceed in three parts, as shown on Slide 4. First, a brief refresher on ContextLogic's strategy; second, an overview of gChem; and third, a walk-through of the transaction itself.

I will now turn the call over to the host for today's call, Raja Bobbili, Chairman of ContextLogic; Frank Roederer, CEO of gChem; and Mark Ward, President of ContextLogic.

Thank you, and good morning, everyone. 8 months ago, when we announced our acquisition of U.S. Salt, we laid out our ambition for ContextLogic to build a collection of niche, competitively advantaged, long-duration businesses, each run by exceptional managers and owned with a long time horizon. That is what we meant by a string of pearls. Each operating company should be able to stand on its own and each management team should have the authority and accountability to run its business.

Autonomy only works when incentives are aligned, so we hardwire them. Operators only win when owners do. ContextLogic's role is to supply capital, judgment, governance and occasionally a great deal of patience, not layers of costs or instructions from people farthest from the customer. The goal is not to collect a large number of average businesses. It is to selectively add one special business after another and to give each the space to operate, to grow and to compound. And we intend to run the enterprise with a degree of shareholder alignment that is rare in the public markets.

Every design choice, from governance and incentives to capital allocation and cost structure, is made with one objective, compounding long-term value per share. The larger opportunity lies in what happens when those pieces begin to reinforce one another. Wonderful businesses grow organically and generate cash. That cash is then reinvested intelligently within the existing companies and into the next exceptional business. A lean structure preserves more of the economics, aligned incentives keep owners and operators pulling in the same direction and our tax assets allow more of every dollar earned to be reinvested.

Assembled patiently over many years, we believe this is a genuinely valuable franchise in the public markets. Thoughtful serial acquirers around the world have demonstrated the power of that formula. Strong businesses generate cash and disciplined owners redeploy it intelligently. In many of the best examples, a family or committed long-term shareholder provides patient stewardship, allowing the company to think in decades, resist the short-term pressures of Wall Street and avoid letting debates over conglomerate discounts or sum-of-the-parts valuations drive strategy.

Over time, the businesses compound the capital allocation compounds, and the reputation of the platform itself becomes an advantage in attracting the next great business and the next great management team. That is a picture we're working towards. We're still at the very beginning, and we will have to earn it one acquisition and 1 year at a time. We closed the U.S. Salt transaction in February.

Today, we're announcing the second pearl, gChem. Before we talk about gChem, let me offer a quick refresher on what we look for. First, we look for niche markets, large enough to support durable growth, but specialized enough to reward incumbents with focus and expertise. A smaller addressable market is a feature, not a bug in our model. Often, it is an important part of the moat. Second, obvious competitive advantages, not theoretical advantages, not potential advantages, real durable competitive advantages you can point to and understand. Third, we look for long-duration assets, businesses that have a clear reason to exist and to earn good returns for many years to come.

We know that in our time horizon, it's inevitable that there will be ups and downs. We're asking whether we would be happy to own a business through many different environments. And our financial model hasn't changed either. Our North Star remains free cash flow per share. We target 5% to 10% organic growth, another 5% to 10% from acquisitions, less 1% to 2% of incentive dilution, dilution that is only triggered when our management teams deliver.

Netted out, we're targeting 9% to 18% free cash flow per share growth on a sustained basis. Hopefully, we can do better. We will not land neatly inside that range every year, and we do not intend to manage the company to a quarterly formula. But it is a framework against which we will evaluate ourselves. We do not want acquisitions that make the company larger while making each share less valuable. I'll add one thing. The measure of this model is not whether it sounds good on a slide, it's whether each successive transaction actually grows free cash flow per share. Keep that test in mind as Mark walks you through the numbers later in the call.

This transaction moves the needle decisively. With that, let me introduce gChem. gChem is a specialty chemicals business founded in 1962. It pioneered the commercial production of dimethyl sulfoxide, or DMSO, a specialty solvent and more than 60 years later, it remains at the pinnacle of that space. gChem is one of three companies in the world that produce DMSO at scale and the only one in the Western Hemisphere. If U.S. Salt was a gem that looks ordinary on the outside and extraordinary once you understand it, gChem is cut from the same cloth. It's a business most people have never heard of in a space most people have never thought about, and that is precisely the point.

The space is tiny by any industrial standard, but big enough for gChem to grow in for a long time. The products are typically a small share of a customer's cost, but critical to the final product. And they're often qualified and specified into customers' products or operations through lengthy regulatory and technical processes that have taken decades to build and master. The result is what we look for everywhere, durable earnings, decades-long customer relationships, competitive differentiation, high returns on capital and clear reasons to sustain those returns for a long time. And it comes with the management team that fits our model perfectly.

Frank Roederer joined as CEO in 2019 and under Frank's leadership, profit has tripled through product innovation, improved mix, value-based pricing and operational execution. Frank has signed a new 5-year employment agreement with us, along with the rest of his team, structured to incentivize sustained organic growth and profit. He's also making a meaningful investment into ContextLogic. Frank is exactly the kind of owner-operator this platform is built for. We could not be more pleased to welcome gChem as our second operating business.

And with that, let me hand the call to Frank, who will tell you more about his company.

Thank you, Raja, and good morning, everyone. I'm Frank Roederer, CEO of gChem, and I'm honored to introduce you to our company. gChem was founded in 1962 and was the first company to commercialize DMSO.

Today, we are a vertically integrated producer of specialty chemicals. DMSO and its pharmaceutical-grade extension PROCIPIENT, along with dimethyl sulfide and nitrogen tetroxide, the two key inputs produced on a fully integrated basis on site. Those products are produced within our highly automated Tuscaloosa manufacturing complex. Our products serve a diversified set of end markets, including pharmaceuticals, agroscience, semiconductors, performance chemicals and aerospace.

The Americas and Europe represent the large majority of our revenue. And many of our products are qualified or specified and designed for our customers' formulations and manufacturing processes. The important point is not that gChem is large. It is that the company occupies a very specialized position in markets where quality, purity, documentation, technical support and reliable supply matter far more than simple tonnage. We're a small, nimble, innovation-focused business with a strong financial profile.

Let me briefly introduce the team. I joined as CEO in 2019 after executive roles at A. Schulman, SABIC, Dow and W.R. Grace. And I'm supported by an unusually strong team for a company our size. It's commercially minded, technically deep and highly experienced in small and specialized industries. We have also built a culture in which our scientists, manufacturing teams, regulatory experts and salespeople work directly with customers to solve problems. As a true specialty chemicals company, technology and innovation sit at the heart of our business.

Approximately 1 in 5 employees work on the technology and innovation team led by Dr. Artie McKim, who has been with the company for more than 25 years. Artie holds a PhD in synthetic organic chemistry and has been central to the customer-driven product development that has expanded the DMSO market over time. Guillaume Schmitt leads Europe and Asia. He is a deep DMSO specialist, holds numerous patents and brings decades of technical and commercial expertise.

Chris Masters leads sales in the Americas and has nearly two decades of experience in chemicals and strategic accounts. Jennifer Priola joined as CFO in 2023 and brings substantial chemical industry finance experience. John Davidson leads manufacturing and supply chain and brings more than 27 years of global operating experience in the life science space, where we generate the majority of our income. All members of our senior leadership team have signed new 5-year employment agreements with ContextLogic. And I'm personally making a significant investment in ContextLogic.

We're excited to join an owner that gives us the freedom to keep innovating and building this special business for the long run. Now what's DMSO and why does it matter? DMSO is a specialty solvent. At its simplest, the solvent is a liquid that allows other substances to dissolve, mix, react, be carried or be cleaned away. DMSO is unusual because it combines several properties that are rarely found together. It dissolves an unusually wide range of substances, and it mixes freely with water and most organic compounds. At the same time, it has an outstanding toxicity and biodegradability profile relative to many other solvents in its class.

For chemists, DMSO is a highly polar aprotic solvent. For everyone else, the practical point is simpler. When an ordinary solvent cannot provide the required combination of solvency, purity, safety and consistency, DMSO often can. Because of those properties, DMSO does work where ordinary solvents fail. In pharmaceuticals, it dissolves and delivers active drug ingredients and preserves living cells in cell and gene therapy. In semiconductors, it strips and cleans silicon wafers.

In agriculture, it carries active ingredients in crop protection formulations. In most of these applications, DMSO is a small share of the customers' cost, but critical to the final product. Four things make this space distinctive. First, DMSO gets specified in our customers' product and manufacturing processes, qualifying a new supplier takes time and getting it wrong is costly. Many of our customer relationships are decades long. Second, regulation is encouraging a gradual move away from toxic legacy solvents such as NMP and DMF toward safer alternatives.

The chart on the right shows DMSO's favorable position on both toxicity and sustainability. Third, demand is growing from secular drivers, including cell and gene therapy, semiconductor investment, including capacity that's associated with AI and the broader shift towards greener chemistry. And fourth, the DMSO industry includes a small number of global producers.

Now put simply, DMSO serves a very specialized and demanding slice of the solvent market where customers value quality, consistency and reliability over other factors. This slide shows where our products are used. The applications differ, but the purchasing logic is remarkably consistent. Our product is critical to the quality, yield, safety or regulatory status of the finished product. In pharmaceutical drug delivery, our PROCIPIENT-grade DMSO is used as an excipient, an active ingredient in selected products and as a cryoprotectant that helps preserve living cells during freezing and thawing.

These applications require pharmaceutical-grade material manufactured under rigorous quality systems. PROCIPIENT is supported by the only active Type 2 Drug Master File for DMSO with the FDA. That allows customers to reference gChem's confidential manufacturing and quality information in their FDA Drug Master File submissions. It is PROCIPIENT that is referenced, regular DMSO cannot be used in drug delivery. In pharmaceutical synthesis, DMSO acts as the reaction medium in which complex molecules, including peptides, are made.

It generally does not remain in the finished medicine, but ultra-high purity, batch traceability, documentation and reliable supply are essential because small impurities can reduce yield or cause expensive batches to fail. In semiconductors, DMSO is used to strip photoresist and clean silicon wafers during and after the fabrication process. In this market, impurities measured in parts per billion can affect the yield of a very expensive wafer. So consistency and contamination control matter much more than the solvent bill.

In Agroscience, DMSO is used as a carrier or stabilizing solvent in crop nutrition and crop protection formulations. It combines strong solvency with a favorable safety profile and helps active ingredients remain stable and perform as intended.

In Performance Chemicals, DMSO, DMS and NTO are used in carbon fiber, polymers, performance textiles, paint stripping and the long tail of industrial application where customers value quality, technical service and dependable supply. In aerospace and defense, NTO is used as an oxidizer for upper stage rocket propulsion and steering, satellites, lunar landing vehicles and deep space exploration.

This is a small part of our revenue today, but it is an area where our secure domestic supply and exacting quality standards create an attractive opportunity. Across all these end markets, our strategy is to keep moving the portfolio forward towards applications where our technical capability and quality systems matter most. Our competitive differentiation is not the result of one patent or one customer contract. It reflects numerous competitive strengths.

First, DMSO production is highly specialized. Making DMSO means first making DMS, then NTO, then DMSO -- three distinct on-site processes. In effect, we run three chemical plants stacked on top of each other. We're the only on-purpose producer of DMS and NTO in North America. Our hydrogen sulfide feedstock comes under a long contract with a co-located refinery at our own plant in Tuscaloosa. That closed-loop configuration secures supply, supports consistent quality and avoids moving hazardous intermediate over long distances. The manufacturing know-how required to produce pharmaceutical and semiconductor grades has been developed over decades through investment and innovation and is tightly guarded.

Second, the feedstocks require careful handling and transport. H2S is toxic and flammable. DMS is volatile and highly flammable. NTO is toxic and corrosive. Producing them on one integrated site is a meaningful advantage. Finished DMSO travels more easily, but it freezes at approximately 64 degrees Fahrenheit, and it requires careful handling. Suppliers serving Western customers from Asia navigate additional logistics considerations, including longer lead times, more inventory, freight and tariff costs, contamination risk and more opportunity for disruption. Furthermore, our sustainability profile is unmatched.

Third, DMSO is hard to replace. In many applications, it is a single-digit percentage of the customers' cost, but it's essential to the finished product. Customers, therefore, buy on purity, supply reliability, technical support, regulatory compliance and consistency. Qualification can take years, and much of our DMSO revenue is covered by multiyear agreements. Put those pieces together, and you can see why gChem has built a durable position through operational excellence, technical expertise, regulatory qualification, vertical integration and long-standing customer relationships built on shared innovation over many decades.

Let me make this concrete with two case studies. PROCIPIENT is our pharmaceutical-grade DMSO, manufactured to USP and European Pharmacopoeia standards under ICH Q7 Good Manufacturing Processes at our FDA-inspected facility. This regulatory position is especially important. PROCIPIENT is supported by the only active Type 2 Drug Master File for DMSO with the U.S. Food and Drug Administration, together with comparable filings in Europe and Canada. The Drug Master File is worth pausing on because it demonstrates the tie-in with our customers' regulatory filings.

When a drug maker wins FDA approval for a drug formulated with PROCIPIENT, they can simply get a letter of access from us, which simplifies their regulatory process and references PROCIPIENT's Drug Master File in their submission. Changing suppliers isn't just a procurement decision. It involves a regulatory process. The customer may need to qualify a new supplier, amend its regulatory filings, repeat stability work and in some cases, conduct additional clinical studies product by product and jurisdiction by jurisdiction.

Today, PROCIPIENT is designed into more than 50 FDA-approved drug products. Everything you see on the right side of this slide, from CAR-T cancer treatments to gene therapy for sickle cell anemia, each one is a regulatory and a technical relationship with gChem. That installed base is a durable asset, but it also creates a continuing obligation. We must earn our position every day through quality, documentation, regulatory compliance and supply reliability. Pharmaceutical synthesis is a different use case.

Here, DMSO is the reaction medium in which the drug is manufactured. It dissolves the starting materials so they can react efficiently. And it is generally removed before the finished medicine reaches the patient. Even though DMSO is not in the final drug, quality still matters enormously. In a multistep synthesis, trace impurities can compound into lower yield or failed batches.

Customers, therefore, require tight impurity control, batch-level traceability, regulatory-ready documentation and dependable supply. This is also a technical sale. Our scientists work directly with customer scientists on storage, handling, ingredient selection, troubleshooting, validation and the documentation required for regulatory audits and process validation. The case study on this slide involves a major global pharmaceutical company.

Our DMSO is used in the synthesis of every injectable GLP-1 therapy produced by that customer. We have supported that relationship for many years, and the newly signed global supply agreement could bring substantial additional volume across its manufacturing network as GLP-1 capacity expands. This slide shows the result of the strategy we have pursued since 2019. Reported profits have tripled since 2019. The important point is the way that the growth was achieved. We did not simply sell more tons.

In fact, we deliberately exited lower volume -- lower value commodity grade volume, including opportunistic spot business that did not benefit from durable customer protections. We redirected capacity toward the most demanding applications, launched new grades and new end users, expanded our pharmaceutical franchise and priced the product for the innovation and value we deliver.

The business became more specialized, not less. Now growth will not be perfectly linear, and there will be years in which end market demand or customer timing creates variability. But the engine -- better applications, value-based pricing, product and service quality and disciplined use of our capacity -- is one we believe can continue for many years to come. Looking forward, our growth playbook has four levers.

First, demand growth. We serve end markets with durable long-term tailwinds, peptide production for Type 2 diabetes and weight-loss drugs, cell and gene therapy, semiconductor spend, and we benefit directly as customers migrate away from toxic legacy solvents, a shift reinforced by tightening regulation.

Second, enhancing value. We will continue to price for the value we provide in a space where customers prioritize quality, reliability, product innovation and regulatory support. The majority of our DMSO revenue sits under multiyear contracts with built-in pricing escalators.

Third, new markets and new products. We're scaling up an aerospace-grade NTO for public and private satellite and space propulsion applications. And we're expanding our pharma franchise with PROCIPIENT Sterile, targeting cell and gene therapy, where more than 30 distinct customer engagements are underway.

And fourth, operational efficiency. Significant recent capital investments have unlocked capacity and incremental volume comes through at high operating margins with likely no material growth capital required for at least the next 5 years. We believe these levers comfortably support ContextLogic's model of 5% to 10% annual organic profit growth. And as I've emphasized, however, that growth will not be linear.

Now every business has risks, and we take ours seriously. The first is that we operate one integrated manufacturing site. The Tuscaloosa facility has achieved approximately 96% to 99% uptime in recent years, supported by automation, preventive maintenance, significant capital investment and a strong history of third-party inspection. Its inland location is also favorable. Still, a single-site business must plan carefully for continuity and our integration with a co-located refinery is both an advantage and the dependency that we actively manage today and plan to mitigate in the future.

The second risk is pricing. In the high-value segment where primarily -- where we primarily operate, pricing reflects the qualification requirements and the importance customers place on quality, supply reliability and technical support. The industrial DMSO space, particularly in Asia, can be more volatile when supply and demand move out of balance. We participate in that space only selectively and opportunistically.

The third risk is competition. The global DMSO space includes three scaled producers, and there are smaller entrants, especially in Asia. Our competitors are capable companies. We cannot assume that our position is permanent simply because it has been durable. We must continue to lead on quality, technical service, domestic supply, innovation and regulatory support.

We also face the normal risks of a specialized chemical manufacturer, safety, environmental and regulatory compliance, dependence on key team members and protection of technical know-how. Those are core operating responsibilities, not just footnotes. We believe gChem is well positioned because the company has spent more than 60 years building the systems, relationships and capabilities that address these risks. We are proud of our business, and we're excited that ContextLogic's permanent ownership model will allow us to continue investing, innovating and growing with a long-term horizon.

With that, I will turn it over to Mark Ward.

Thank you, Frank, and good morning, everyone. I also want to extend my warm welcome to Frank and the team. We're excited to have you at ContextLogic. I will walk through the transaction, the financial impact on ContextLogic, how we intend to report our operating businesses going forward and the mechanics of the proposed rights offering. ContextLogic is acquiring gChem for a purchase price of $850 million, subject to customary adjustments.

The consideration is 100% cash, except for the portion related to management rollover. Total sources are $900 million, expected to consist of a $650 million backstop -- fully backstopped rights offering and $250 million of new debt. On the usage side, approximately $424 million funds the purchase of equity, approximately $426 million repays gChem's existing net debt, $35 million provides cash to the balance sheet and approximately $15 million covers estimated transaction and financing fees.

We have committed financing led by Blackstone Credit and Insurance, a $250 million term loan and $25 million revolving credit facility. The term loan is priced at SOFR plus 450 basis points at opening with significant covenant flexibility and capacity to support growth. The terms are broadly in line with our U.S. Salt credit agreement, and we are comfortable with the leverage given gChem's strong cash generation and modest capital requirements. We are targeting a closing in the fourth quarter of 2026, subject to customary regulatory approvals and other standard closing conditions.

Now to the measure we care most about, free cash flow per unit. For the full year 2027, the first full year with both U.S. Salt and gChem, we expect the combined business to generate approximately $95 million to $105 million of free cash flow against approximately 174 million units outstanding at Holdings LLC on a pro forma basis. This transaction represents a meaningful step-up in free cash flow per unit, which is exactly the test Raja described at the start of the call.

Consistent with our practice, we do not plan to issue ongoing guidance. When we announce a large transaction, however, we intend to help investors understand the earnings power of the combined business, and that is the spirit in which we are providing this disclosure. We do not intend to update it for ordinary quarterly variations, and we encourage investors to evaluate the business over a multiyear horizon.

gChem is an important validation of the model we are building. It shows that exceptional businesses and management teams see ContextLogic as an attractive long-term home and advances our central objective, growing free cash flow per unit without diluting the quality of our portfolio. Now that we are adding a second operating business, let me address disclosure going forward. At the segment level, we will report U.S. Salt and gChem on a GAAP basis.

At the consolidated ContextLogic level, we will report full GAAP financial statements and supplement them where useful with clearly defined non-GAAP measures such as adjusted EBITDA, free cash flow and adjusted free cash flow, together with appropriate definitions and reconciliations. Speaking of disclosures, we filed an 8-K this morning setting out the principal terms of the transaction. That filing also includes a preliminary look at U.S. Salt's second quarter revenue and gross profit, along with one additional item of disclosure relating to U.S. Salt.

We will report full second quarter results next week, but we felt it was important to give a complete picture now for shareholders who may be weighing this transaction and whether to participate in the proposed rights offering. Let me explain how we expect the rights offering will work.

For that, I'd point you to Slide 24 in the appendix, which shows our current capital structure. As a reminder, equity is held at two levels: ContextLogic Holdings, Inc., the public company, and ContextLogic Holdings LLC beneath it. There are approximately 46 million shares outstanding at the public company today. We intend to conduct a $650 million rights offering at the public company, subject to a registration statement being declared effective by the SEC, and eligible shareholders will receive the first opportunity to participate.

We expect to distribute rights to holders of record in proportion to their ownership of the approximately 46 million outstanding public company shares. In simple terms, if you own 1% of the outstanding public company shares on the record date, you will receive the right to subscribe for 1% of the shares offered subject to the final terms of the offering. Simple as that.

Abrams Capital owns 40% of the public company, ContextLogic Holdings, Inc., and it has stated that it intends to exercise its pro rata share of the rights offering in full. The rights offering is fully backstopped by a consortium led by Abrams Capital and BC Partners at $9 per unit. And that group includes our Board member, Paul Levy. Any amount that is not subscribed to the public company will be issued at the LLC level at the same price. I want to underscore one point. The backstop parties will receive no fee for their commitments.

The public shareholders have the first opportunity to participate pro rata and the backstop parties will fund whatever remains. The backstop is behind the shareholders, not in front of them. This is what we mean by being a shareholder-oriented company. Existing shareholders receive a full opportunity to participate while the backstop parties provide certainty to the seller that the transaction can be funded without a backstop fee.

On the record date subscription ratio and other terms will be described in a registration statement and prospectus to be filed with the SEC, and we encourage shareholders to read those documents carefully when they become available. The information contained herein does not constitute or form part of and should not be construed as an offer or invitation to purchase any securities of the company. Such an offering will only be made pursuant to a registration statement once such registration statement has been declared effective or pursuant to an exemption from the Securities Act.

One last item, the listing. We have said that pursuing a listing on the national securities exchange was a priority. We are actively pursuing that listing and have submitted an application to that effect. We are hopeful that a listing can be completed in early 2027, subject to satisfying applicable listing requirements and exchange approval.

With that, I will turn the call back to the operator.

Ladies and gentlemen, this concludes today's conference call. A transcript of the call, together with the investor presentation, will be available on the company's Investor Relations website at www.contextlogic.com. Thank you very much for joining us today. You may now disconnect.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's call announcing the acquisition of US Salt by ContextLogic and the formation of a new business ownership platform backed by Abrams Capital and BC Partners.

[Operator Instructions] There'll not be a question-and-answer session at the conclusion of today's call. However, a recording and a transcript will be made available online, and management will make themselves available to the investor community over the coming days and weeks.

Before we begin, I'd like to note that during this call, we will be referring to a slide deck that is available on ContextLogic's Investor Relations website at ir.contextlogic.com.

Please note that today's call contains forward-looking statements regarding future events and future performance of ContextLogic, US Salt and the combined company. These forward-looking statements are based upon information available today, and actual results could differ materially from those contemplated by these forward-looking statements. Please refer to Slides 2 and 3 for important disclaimers and cautionary statements regarding forward-looking statements.

I will now turn the call over to the host for today's call, Ted Goldthorpe, current Chairman of ContextLogic; and Mark Ward, President of ContextLogic; Raja Bobbili, incoming Chairman of ContextLogic; and David Sugarman, CEO of U.S. Salt.

Thank you. Good morning. Thank you for joining us. We're excited to walk you through what we're building at ContextLogic and provide a comprehensive overview of our anchor acquisition, an exceptional business called US Salt.

First, I'll provide an overview of ContextLogic's origins and how it ended up in a unique combination of short-term balance sheet liquidity and billions of dollars in available tax attributes to pursue compelling acquisitions.

Second, we'll introduce the first major building block of the company's strategy, the acquisition of US Salt. And third, we'll walk through the transaction details, the ownership structure and the numbers that shape what ContextLogic will look like once this deal closes, which we expect will be in the first half of 2026, subject to customary approvals and closing conditions.

The story starts with a company that many of you probably remember, Wish.com. At its IPO in 2020, during a peak pandemic e-commerce enthusiasm, Wish was valued at more than $14 billion, but the business model just wasn't sustainable. The company burned through billions of dollars of cash and over time, the underlying economics caught up with it.

Eventually, the legacy Board and management team made the tough but correct decision to sell the business. However, they successfully undertook efforts to preserve roughly $2.9 billion of net operating losses plus other tax attributes. When we, at BC Partners, first got involved in March of 2025, we saw a blank canvas, a chance to build a strategic acquisition-driven compounder with cash and tax attributes from the ground up.

BC Partners committed to purchasing up to $150 million of convertible preferred units. The investment and commitment by BC Partners was led through a private fund advised by BC Partners Credit. Our goal, in partnership with the company, was to review, identify and evaluate strategic opportunities for the benefit of ContextLogic and its stockholders.

Very shortly afterwards, we met with Abrams Capital, led by renowned investor, David Abrams, along with his partner, Raja Bobbili, who you'll hear from very shortly. Since then, our 2 firms have worked side-by-side to structure ContextLogic based on first principles, asking ourselves time and again, how would a company run by owners for owners be designed and be constructive?

What we're sharing today is exactly that, the architecture of our business ownership platform designed to produce sustainable long-term cash flow per share growth. The fundamental principles behind it, aligned incentives, decentralized operations and governance that keeps owners close to the operators are core building blocks, and we're proud to walk through them today.

There are 2 design principles that sit at the center of our business strategy. First, every operating business that ContextLogic acquires will be run in a decentralized manner. Decisions should and will be made as close to the business as possible by business -- by people who actually run it. Corporate exists as a support function, not a command center. Its job is to help the operators not micromanage them.

Secondly, we will only work with top-tier management teams and ensure their incentives are truly aligned with shareholders. This is critical to us. To identify target businesses, we look for 3 clear criteria. First, niche markets. We like markets that are big enough to grow in, but small enough to avoid competitive spotlight. As a general principle, strong businesses in small markets tend to be pretty good businesses.

Second, competitive advantages, what we call obvious competitive advantages, not theoretical or potential future advantages, actual durable competitive strengths and positioning that you can point to and understand.

And third, long-duration assets, businesses that we expect to have a clear reason to exist 20 or 30 years from now. We're building a long-term business ownership platform, not something we hope to flip in a couple of years.

Just as important is what we won't pursue. We're not pursuing big TAMs just because the market size looks impressive on a slide. We're not paying for multiple expansion in the hope that the market rerates the stock. We're not trying to ride earnings momentum or future profitability narratives. We're also not interested in good enough management teams or high growth at any price or loose synergy stories or grabbing whatever happens to be the AI trend at the moment.

We're focused on durable, understandable businesses with real advantages. Our primary goal is to deploy capital into businesses that fit squarely in our strike zone, niche, competitively advantaged, long-duration businesses run by great teams. But when we see unique high-value opportunities outside of that core, such as share buybacks, a special situation, a distressed opportunity or a structured investment, we have the expertise to capitalize.

One of the advantages of having strong cash flow generating base combined with our tax attributes is we expect to have the cash to deploy opportunistically for the benefit of shareholders. Just as we decentralize operations, we also decentralized government -- governance, sorry.

Each operating business will be overseen by its own business oversight committee of the ContextLogic Board, made up of a small group of 2 to 4 Directors. Each committee will work with management to oversee the business under it. The idea is to have governance structure that's small, focused, accountable and ownership-minded.

Capital allocation decisions sit with a separate investment committee of the Board. At the corporate level, we made a very deliberate choice. We are not appointing a corporate CEO at ContextLogic with an acknowledgment that the real CEOs, the people with true authority and accountability, are our leaders running each operating business. Corporate exists to support them, not to sit above them.

What we will have is a very lean but constructive corporate team, a President and a CFO who focus on reporting, Investor Relations and M&A, fully addressing all of the company responsibilities as a public company. My colleague, Mark, has agreed to serve as President, and he will receive no salary from ContextLogic.

More broadly, the majority of our Board at closing will consist of representatives from Abrams and BC Partners, and none of us will receive $1 of Director compensation from ContextLogic. We will complement the Board with our independent and highly experienced Directors. The interest of the Board will be fully aligned with our public shareholders. To reiterate, the guiding principle is simple, ContextLogic will be governed by owners and for owners.

Now let's talk about how we align leaders in an operating business for shareholders. There are 3 components that are tightly linked to value creation: one, base salary, straightforward fixed pay. Number two, annual bonus based on year-over-year profit growth. If organic profit growth is below 5%, the bonus is 0.

Long-term incentive based on profit growth over a 5-year period, not capped and expected to be paid in equity. If a team delivers strong, sustained profit growth, they do very well. If they don't, they don't. For managers, this is really the best of both worlds, private equity level incentives without the forced exit that pushes so many good companies to sell before their time.

ContextLogic will attract operators who want true pay-for-performance and the freedom to build against the backdrop of a long-term horizon and the backing of public capital markets. A big part of our thinking has been shaped by a group of Swedish serial acquirers, companies like Addtech, Lifco and Indutrade and others that you see on this slide.

Over the last 2 decades, these businesses have created extraordinary shareholder value by doing a few things very well: disciplined capital allocation, radical decentralization, tightly aligned incentives. They are proof that you can create a lot of value by adding one good business after another, attracting talented operators, aligning their incentives with shareholders and giving them real autonomy and doing this with consistency and discipline. That process is exactly what compounds into highly compelling results.

Let me close my section with a financial model we've been holding ourselves accountable to. Our true North Star is free cash flow per share. To be clear, by free cash flow, we mean operating cash flow less all capital expenditures. We want to own businesses that can generate -- that can grow free cash flow organically at 5% to 10% per year sustainably over a long period of time.

On top of that, we expect to target acquisitions that add another 5% to 10% growth each year. And importantly, we believe we can do this without needing to issue additional equity. The incentive plan creates 1% to 2% dilution a year, but it's triggered only when the team delivers. It's dilution tied to financial performance, not dilution handed out for free.

So when you net it all out, our target is to compound free cash flow per share growth at 9% to 18% annually. Yes, that's a wide range, but our goal is straightforward to show year after year that this is a repeatable model for the long-term, tax optimized compounding at ContextLogic.

With that, I want to turn it over to Raja Bobbili from Abrams Capital. Abrams is expected to hold a combined equity stake of a little over under 40% on an aggregate basis between ContextLogic and our holding subsidiary, making them our largest equity holder. We are thrilled that as part of this transaction, Raja will join the Board and serve as our Chair. In fact, Raja introduced US Salt to ContextLogic and has been a true thought partner in designing this platform. I couldn't be more excited to work with him and with David Abrams, who also joined the Board.

Thank you, Ted, and good morning, everyone. I'm really glad to be here today and talk about why we are doing this.

Abrams Capital was founded in 1999. We invest with a long time horizon, usually in a fairly concentrated way across both public and private companies. And over the years, we've seen the very best of both worlds. So when we had a chance to get involved here right at the ground floor with a true blank canvas, as Ted put it, to build something new, we rolled up our sleeves and got to work.

We saw an opportunity to combine the most attractive parts of private ownership with the most attractive parts of being a public company and to design something from scratch that could be genuinely exceptional.

On the private side, what we love is the long-term orientation, the direct alignment between owners and operators, a mindset of pay for performance and an ability to move quickly without the bureaucracy and agency issues that public companies sometimes accumulate. In simple terms, there's an ownership mindset that runs through great private businesses.

On the public side, you have the advantages of liquidity, a currency to attract and retain great management teams, transparency and accountability and the ability to build something with permanent capital, a company that isn't tied to the lifespan of a single fund or a single financial sponsor. That means you can be a long-term home for owners who are looking to transition and for management teams who want to build without a clock ticking towards an exit.

The vision for ContextLogic is to bring these trends together. Every design choice, governance, incentives, structure has been thought through from first principles to create something unique in the public markets.

The other reason we're excited to be here is US Salt. We invested in this company about 4 years ago, and we're the largest investor. David will tell you more about the business, but I'll say this: It's a gem that looks ordinary at the outset, but it is extraordinary once you understand it. You see it in the 40% to 45% adjusted EBITDA margins, you see it in the high returns on capital, you see it in the decades of pricing growth and you see it in the real structural barriers to entry.

We were fortunate to recruit David Sugarman as CEO 2.5 years ago, and he and his team have done a tremendous job. We couldn't be more pleased with the business or with the leadership running it. In fact, as an investor in US Salt, our biggest concern, really our major concern, was that the dynamics with our equity partners might force a premature sale, feeding its enormous future potential to the next buyer.

So we're thrilled to have the opportunity to grow substantially all of our current investment and even more than that to put additional capital to work through buying out other sellers and helping backstop the rights offering.

With that, I want to turn the call over to David Sugarman.

Thanks, Raja, and good morning, everyone. I'm David Sugarman, CEO of US Salt. I'm excited to walk you through the business and explain why we think it's such a special company.

US Salt has been around since 1893. We're one of the very few vertically integrated producers of high-purity evaporated salt in the United States, meaning we control everything from the brine wells to production to packaging. We serve recession-resilient end markets such as food, pharmaceuticals and water conditioning. These are stable everyday uses, not discretionary categories.

We've grown consistently for a long time. For LTM ended September 30, we have over 40% adjusted EBITDA margins and still see significant room to grow with estimated remaining reserves and resources of more than 100 years in our brine field.

Let me quickly introduce the leadership team. Our CFO, Jason Blaseg, has more than 20 years of experience in packaging and food manufacturing. Before joining us, he helped lead a $1 billion division at Novolex and played a key role in several successful acquisitions and integrations.

Our VP of Strategy, Travis McNamara, joined in 2022 after spending time at LEK and Morgan Stanley. He leads commercial strategy, pricing and long-term initiatives.

As for me, I joined as CEO in 2023 after spending 25 years building and scaling food businesses often alongside financial sponsors. What drew me to ContextLogic was exactly what Raja described, the chance to operate with a true private company mindset inside a public platform that doesn't need to sell or flip businesses to create value. It gives my team and me the ability to build with a long-term horizon, and we're already hard at work looking at both organic and inorganic opportunities.

I'm also rolling a significant investment into ContextLogic, and it will be my single largest personal holding. The incentive structure is simple, objective and works only when shareholders win. After 25 years in this industry, this is one of the most compelling and energizing opportunities I've had.

Since 2015, revenue has grown at 8% annualized. More importantly, our adjusted EBITDA has grown organically at more than 14% since 2023, and our adjusted EBITDA margins consistently sit near 40%. Free cash flow conversion remains extremely strong because there is not a -- this is not a CapEx-heavy business, once the core infrastructure is in place.

In short, long-term stable growth, consistently high margins and excellent cash generation. Salt is a deceptively simple product, but the industry structure really matters. There are 3 main forms of salt: rock, solar and evaporated. We operate in the highest value, highest purity segment, evaporated salt. This has over 99% purity, low seasonality and premium pricing many multiples of where rock and salt can sell.

Within evaporated salt, we focus on the highest value niches. We sell a significant amount of 26-ounce private label round can salt, and we sell high-purity pharmaceutical-grade salt, which carries some of the highest prices in the industry because the standards are so strict and the qualification process is long and demanding. Salt may sound like a commodity, but evaporated salt is absolutely not a commodity market. The barriers to entry are meaningful.

First, reserve scarcity. Only a few basins in the United States have the right combination of depth, purity and access to energy and water. As far as we know, no new evaporated salt facility has been built in over 2 decades.

Second, geography matters. Salt has a low value-to-weight ratio, so shipping long distances erodes margins quickly. Domestic producers close to major demand corridors have a structural cost advantage. We are ideally positioned in upstate New York with access to population corridors.

Third, CapEx and permitting. Building a new evaporated salt facility would require massive capital and years of permitting and regulatory approvals if it's even possible to do near major population centers.

Fourth, regulatory and customer qualification. Pharmaceutical and food customers require expensive testing, audits and documentation. It can take years to qualify a new supplier. These barriers aren't theoretical, they're real, they're structural. And keep in mind that this is a niche market. The economics are attractive for incumbents, but the total size is typically too small to justify the CapEx, permitting and qualification hurdles for a new entrant. Put simply, if you're not already in this market, it's not attractive to enter it.

This chart shows 2 things: steady growth in pricing over 25 years and nearly flat domestic evaporated salt supply. Because salt is concentrated and doesn't change much and because demand is stable, pricing has been rational for decades. Across all evaporated salt categories, bulk, pellets package, you see steady upward pricing. It's effectively an inflation-protected business and our customers understand that pricing moves with input costs, and we price for the value we deliver.

Here, you can see our volume progression and average selling price, ASP, over time. Volume has grown steadily at about 1% annually over the long term and closer to 5% more recently as we introduce new products and increased penetration in certain channels. But the story is -- the bigger story is ASP, which has increased consistently through a combination of pricing, mix shift and new product introductions.

We have had one-off events like the generator outage, but we believe we have addressed those risks with backup capacity and redundant power systems to prevent recurrence. Our organic growth playbook is straightforward.

First, mix shift. We sell salt for $150 per tonne and salt for as much as $1,000 per tonne. Every day, we continue mix shifting up towards higher-value categories like farmer grade and specialty salts.

Second, we price the product for the value we deliver, as evidenced in our quality, on-time delivery, reliability and service.

Third, new products and new markets. We are expanding into foodservice, club channels, Canada and new formats like commercial sea salt and box salt.

And finally, operating efficiency. We've made significant CapEx investments since 2021, more than $37 million, which we are starting to unlock capacity, improve uptime and enhance margins. Our long-term goal is to deliver 5% to 10% annual organic profit growth, and we believe the combination of mix, new markets and operational efficiency gives us a clear path to achieve that.

Every business has risks, and we take ours seriously. We're a single-site operation, so we've invested heavily in redundant power generation, backup systems and safety stock in regional warehouses. Pricing is always a risk, but our products serve essential non-substitutional use cases and typically make up a very small percentage of a customer's total cost.

Pricing has remained rational across the industry for years. And while new entrants are always possible, the competitive advantages of our experience and location I described earlier, geology, permitting, CapEx and qualification, make it difficult for anyone to replicate what we do. We've built this business to be resilient, and we've invested ahead of risk to protect the company.

Let me close with why US Salt is such a compelling anchor investment for ContextLogic. We check all 3 of the acquisition criteria Ted laid out earlier, niche. We operate in the highest value segment of the salt market with stable demand and rational pricing.

Competitively advantaged. Our experience and location are an asset; from geology to regulatory approvals to specialized equipment.

Long-duration asset. This is a 130-year-old business with approximately 100-plus years of reserves remaining in a diversified set of end markets. This is exactly the kind of business you want as a foundation of a long-term compounding platform: stable, high margin, cash generative and very hard to replicate. I'm incredibly proud of what our team has built, and we're excited to start this next chapter as part of ContextLogic.

I'm going to turn the call over to Mark Ward.

Thanks, David, and good morning, everyone. I'm Mark Ward, and I'm the President of ContextLogic. I'm excited to join this platform working alongside Ted and Raja. My role is to spearhead day-to-day oversight and ContextLogic strategy, overseeing the core responsibilities that come with being a public company. That includes financial reporting, SEC compliance and the many operational and regulatory requirements that a public company must execute well and consistently while supporting our businesses as needed.

Let me walk you through the transaction structure and the post-closing company. This slide lays out the sources and uses for the transaction. Let me point out just a few things.

First, a significant portion of the purchase price is being funded through meaningful equity rollover from Abrams Capital as well as for members of the US Salt management team. That alignment matters and incentivizes.

Second, the company will be about 3.4x gross levered at closing, which we feel comfortable with given the fundamentals of the business. And for now, our intention is to keep leverage at or below that level.

Third, we will be commencing a $115 million rights offering fully backstopped at $8 per share by a fund advised by BC Partners Credit and Abrams Capital.

A quick note on structure. Shares will be held at 2 levels: ContextLogic Holdings, LLC; and ContextLogic Holdings, Inc., the public company. This dual entity approach is designed to facilitate access to additional capital, allowing the public vehicle to invest alongside BC Partners and Abrams Capital in an opportunity of this size while maximizing shareholder value through maintaining structural flexibility.

On an aggregate basis, including the controlled subsidiary, Abrams Capital will own about 39%, our current public equity holders about 38%, BC Partners about 21% and other rolling shareholders and management will own roughly 2%. Importantly, as part of the transaction, BC Partners had agreed to further align interest with Abrams and the public shareholders by foregoing the PIK feature in its original investment.

As a matter of practice, we don't plan to issue formal guidance, but we also understand that shareholders need a starting point. So we're providing a single reference point for 2026 shown on this slide. Although the transaction won't close until the first half of 2026, this reflects our estimate of a full year of 2026.

On a full year basis, after all capital expenditures, including growth CapEx, we expect free cash flow of $31 million to $38 million. Think of this as the starting point for the free cash flow algorithm that Ted walked through earlier.

This slide illustrates the governance structure that we've been discussing. The Board will operate through committees that are small, focused and accountable. These are not check-the-box committees. For example, to oversee US Salt, we'll have a business oversight committee that is directly accountable to the rest of the Board for oversight and governance of that business.

To start, it will just be Raja and me working closely with David. We'll approve budgets, weigh in on key hires, review performance and make compensation decisions. Separately, we have the investment committee that will make all material capital allocation decisions across the platform. This will have Ted, David Abrams, Raja and myself.

It is worth underscoring the 4 of us represent the largest owners of the business. To reiterate, the whole structure is designed to keep governance focused and ownership-minded. Beyond the 4 of us, the Board will consist of 7 Directors with 3 independents. Raja will serve as Chair of the Board and Ted will serve as Chair of the newly formed Investment Committee.

To recap the leadership at the ContextLogic level, Ted, Raja and I will be working closely together. And at US Salt, that team consists of David, Jason and Travis. This tight relationship between owner-affiliated directors and our operating executives is exactly the model we intend to maintain as we add more businesses over time. Even as we grow, our intent is to keep decision-making fast, tight and clear.

Finally, a few words on investor communication. We will actively work to relist the company's shares on a National Securities Exchange. That is an immediate priority. Our goal is to communicate clearly and honestly with shareholders. We plan to provide quarterly updates, and we look forward to engaging with shareholders during the course of the year. We also intend to host an Annual Investor Day where the focus will be on our operating management teams, not on us. They are the ones building the businesses.

As a general matter, we do not plan to issue ongoing guidance other than the 2026 reference point we've provided today. But we welcome shareholder inquiries and some combination of Ted, Raja and myself will try to make ourselves available.

With that, I will conclude the call. Thank you again for joining us today.

Ladies and gentlemen, this does conclude today's conference call. A replay of the call will be available along with the investor presentation on the company's Investor Relations website at ir.contextlogics.com. Again, thank you very much for joining us today. You may disconnect, and have a wonderful day. Goodbye.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to ContextLogic's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. And there will not be a question and answer session at the conclusion of today's call. However, a recording and transcript will be made available online, and management will make themselves available to the investor community over the coming weeks.

Except for historical information, the matters discussed during this call may include forward-looking statements within the meaning of the applicable U.S. Securities Litigation. Forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause actual financial results, performance and achievements to be materially different from estimated future results, performance or achievements expressed or implied by those forward-looking statements.

All forward-looking statements reflect each of the company's current views with respect to future events and are subject to risks and uncertainties, and assumptions have been made in drawing the conclusions included in such forward-looking statements. All statements other than historical facts are forward-looking statements. Actual results could differ materially, and the company is under no obligation to update such forward-looking statements. Please also note that past performance is not a guarantee of future results.

During this call, there will be reference to certain non-IFRS and non-GAAP financial measures, which should not be considered in isolation from or as a substitute of measures prepared in accordance with International Financial Reporting Standards or generally accepted accounting principles. As a reminder, all figures, unless otherwise noted, will be in U.S. dollars. I will now turn the call over to your host for today's call, Rishi Bajaj, CEO of ContextLogic; Michael Scarola, CFO; and Janak Goyani, Vice President of Investments. Mr. Bajaj, you may begin.

Good afternoon, everyone. In the third quarter, we completed our previously announced and approved plan of reorganization, which further protects the considerable tax assets of the company. We continue to maintain operational efficiency in the third quarter and remain well positioned to execute our acquisition strategy that we have articulated in prior earnings calls. I will now turn the call over to Michael Scarola, our CFO, to discuss the financial highlights for the quarter.

Thank you, Rishi. I will now briefly highlight our operating results for the quarter ended September 30, 2025. In Q3 2025, we incurred $3 million of G&A expenses, which includes $1 million of expenses related to the evaluation and pursuit of potential transactions. We earned $2 million in interest income and generated a modest operating profit, excluding noncash and transaction-related expenses, which reflects the positive impact of our streamlining initiatives implemented last quarter.

We closed this quarter with $218 million in cash, cash equivalents and marketable securities, a decrease of $1 million from the prior quarter. I will now turn the call over to Janak Goyani, our Vice President of Investments, to discuss the acquisition process.

Thank you, Mike. During the quarter, we further broadened our pipeline of acquisition targets, collaborating closely with our advisers to thoroughly evaluate each opportunity in an expeditious manner. We are energized by the growing array of prospects and the exceptional caliber of businesses we are engaging with. I will now turn the call over to Rishi for closing remarks.

Thank you. As we head into the final quarter of 2025, we remain optimistic about the strategic opportunities available to ContextLogic that have been enhanced by our strong relationship with VC partners. We continue to work extremely diligently on our acquisition strategy and look forward to sharing a more detailed update with our shareholders in the coming quarters. We thank you for your continued support in ContextLogic.

Ladies and gentlemen, this does conclude today's conference call. Again, thank you very much for joining us today. You may now disconnect and have a wonderful day. Goodbye.