w-202406300001616707false12/312024Q2http://fasb.org/us-gaap/2024#OtherLiabilitiesCurrenthttp://fasb.org/us-gaap/2024#OtherLiabilitiesCurrentP5DP10D0.0085910.00239720.00673490.01575970.02183410.0137931486486xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxbrli:purew:employeew:day00016167072024-01-012024-06-300001616707us-gaap:CommonClassAMember2024-07-250001616707us-gaap:CommonClassBMember2024-07-2500016167072024-06-3000016167072023-12-310001616707us-gaap:CommonClassAMember2024-06-300001616707us-gaap:CommonClassAMember2023-12-310001616707us-gaap:CommonClassBMember2023-12-310001616707us-gaap:CommonClassBMember2024-06-3000016167072024-04-012024-06-3000016167072023-04-012023-06-3000016167072023-01-012023-06-300001616707us-gaap:CommonStockMember2023-03-310001616707us-gaap:AdditionalPaidInCapitalMember2023-03-310001616707us-gaap:RetainedEarningsMember2023-03-310001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-3100016167072023-03-310001616707us-gaap:RetainedEarningsMember2023-04-012023-06-300001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001616707us-gaap:CommonStockMember2023-04-012023-06-300001616707us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001616707us-gaap:CommonStockMember2023-06-300001616707us-gaap:AdditionalPaidInCapitalMember2023-06-300001616707us-gaap:RetainedEarningsMember2023-06-300001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-3000016167072023-06-300001616707us-gaap:CommonStockMember2024-03-310001616707us-gaap:AdditionalPaidInCapitalMember2024-03-310001616707us-gaap:RetainedEarningsMember2024-03-310001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-3100016167072024-03-310001616707us-gaap:RetainedEarningsMember2024-04-012024-06-300001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001616707us-gaap:CommonStockMember2024-04-012024-06-300001616707us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001616707us-gaap:CommonStockMember2024-06-300001616707us-gaap:AdditionalPaidInCapitalMember2024-06-300001616707us-gaap:RetainedEarningsMember2024-06-300001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001616707us-gaap:CommonStockMember2022-12-310001616707us-gaap:AdditionalPaidInCapitalMember2022-12-310001616707us-gaap:RetainedEarningsMember2022-12-310001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-3100016167072022-12-310001616707us-gaap:RetainedEarningsMember2023-01-012023-06-300001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-06-300001616707us-gaap:CommonStockMember2023-01-012023-06-300001616707us-gaap:AdditionalPaidInCapitalMember2023-01-012023-06-300001616707us-gaap:CommonStockMember2023-12-310001616707us-gaap:AdditionalPaidInCapitalMember2023-12-310001616707us-gaap:RetainedEarningsMember2023-12-310001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001616707us-gaap:RetainedEarningsMember2024-01-012024-06-300001616707us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-06-300001616707us-gaap:CommonStockMember2024-01-012024-06-300001616707us-gaap:AdditionalPaidInCapitalMember2024-01-012024-06-3000016167072024-01-012024-01-310001616707us-gaap:FairValueInputsLevel1Memberus-gaap:CashMember2024-06-300001616707us-gaap:CashMember2024-06-300001616707us-gaap:CashEquivalentsMemberus-gaap:FairValueInputsLevel1Member2024-06-300001616707us-gaap:CashEquivalentsMember2024-06-300001616707us-gaap:FairValueInputsLevel1Member2024-06-300001616707w:InvestmentSecuritiesMemberus-gaap:FairValueInputsLevel1Member2024-06-300001616707w:InvestmentSecuritiesMemberus-gaap:FairValueInputsLevel2Member2024-06-300001616707w:InvestmentSecuritiesMemberus-gaap:FairValueInputsLevel3Member2024-06-300001616707w:InvestmentSecuritiesMember2024-06-300001616707us-gaap:FairValueInputsLevel1Memberus-gaap:CertificatesOfDepositMember2024-06-300001616707us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2024-06-300001616707us-gaap:FairValueInputsLevel3Memberus-gaap:CertificatesOfDepositMember2024-06-300001616707us-gaap:CertificatesOfDepositMember2024-06-300001616707us-gaap:FairValueInputsLevel2Member2024-06-300001616707us-gaap:FairValueInputsLevel3Member2024-06-300001616707us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel1Member2024-06-300001616707us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2024-06-300001616707us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel3Member2024-06-300001616707us-gaap:CertificatesOfDepositMember2024-06-300001616707us-gaap:FairValueInputsLevel1Memberus-gaap:CashMember2023-12-310001616707us-gaap:CashMember2023-12-310001616707us-gaap:CashEquivalentsMemberus-gaap:FairValueInputsLevel1Member2023-12-310001616707us-gaap:CashEquivalentsMember2023-12-310001616707us-gaap:FairValueInputsLevel1Member2023-12-310001616707w:InvestmentSecuritiesMemberus-gaap:FairValueInputsLevel1Member2023-12-310001616707w:InvestmentSecuritiesMemberus-gaap:FairValueInputsLevel2Member2023-12-310001616707w:InvestmentSecuritiesMemberus-gaap:FairValueInputsLevel3Member2023-12-310001616707w:InvestmentSecuritiesMember2023-12-310001616707us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel1Member2023-12-310001616707us-gaap:FairValueInputsLevel2Memberus-gaap:CertificatesOfDepositMember2023-12-310001616707us-gaap:CertificatesOfDepositMemberus-gaap:FairValueInputsLevel3Member2023-12-310001616707us-gaap:CertificatesOfDepositMember2023-12-310001616707us-gaap:FairValueInputsLevel2Member2023-12-310001616707us-gaap:FairValueInputsLevel3Member2023-12-310001616707us-gaap:RevolvingCreditFacilityMember2024-06-300001616707us-gaap:RevolvingCreditFacilityMember2023-12-310001616707w:SeniorNoteDue2024Memberus-gaap:ConvertibleDebtMember2024-06-300001616707w:SeniorNoteDue2024Memberus-gaap:ConvertibleDebtMember2023-12-310001616707w:SeniorNoteDue2025Memberus-gaap:ConvertibleDebtMember2024-06-300001616707w:SeniorNoteDue2025Memberus-gaap:ConvertibleDebtMember2023-12-310001616707w:SeniorNoteDue2026Memberus-gaap:ConvertibleDebtMember2024-06-300001616707w:SeniorNoteDue2026Memberus-gaap:ConvertibleDebtMember2023-12-310001616707w:SeniorNoteDue2027Memberus-gaap:ConvertibleDebtMember2024-06-300001616707w:SeniorNoteDue2027Memberus-gaap:ConvertibleDebtMember2023-12-310001616707w:SeniorNoteDue2028Memberus-gaap:ConvertibleDebtMember2024-06-300001616707w:SeniorNoteDue2028Memberus-gaap:ConvertibleDebtMember2023-12-310001616707w:AccretingSeniorNoteDue2025NettingMemberus-gaap:ConvertibleDebtMember2024-06-300001616707w:AccretingSeniorNoteDue2025NettingMemberus-gaap:ConvertibleDebtMember2023-12-310001616707w:SeniorSecuredRevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-06-300001616707w:SeniorSecuredRevolvingCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2024-06-300001616707w:AccretingSeniorNoteDue2025NettingMember2024-06-300001616707us-gaap:ConvertibleDebtMemberw:NonAccretingNotesMember2024-01-012024-06-300001616707w:AccretingSeniorNoteDue2025NettingMemberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707us-gaap:ConvertibleDebtMember2024-04-012024-06-300001616707us-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707us-gaap:ConvertibleDebtMember2023-04-012023-06-300001616707us-gaap:ConvertibleDebtMember2023-01-012023-06-300001616707w:SeniorNoteDue2028Memberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:SeniorNoteDue2026Memberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:SeniorNoteDue2024Memberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:SeniorNoteDue2025Memberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:SeniorNoteDue2027Memberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:ConvertibleSeniorNote2025CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-06-300001616707w:ConvertibleSeniorNote2025CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:ConvertibleSeniorNote2026CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-06-300001616707w:ConvertibleSeniorNote2026CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:ConvertibleSeniorNote2027CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-06-300001616707w:ConvertibleSeniorNote2027CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:ConvertibleSeniorNote2028CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-06-300001616707w:ConvertibleSeniorNote2028CappedCallsMemberus-gaap:CommonClassAMemberus-gaap:ConvertibleDebtMember2024-01-012024-06-300001616707w:CBSAReviewMember2024-06-300001616707w:CBSAReviewMemberus-gaap:CostOfSalesMember2024-04-012024-06-300001616707w:CBSAReviewMemberus-gaap:CostOfSalesMember2024-01-012024-06-300001616707w:CBSAReviewMemberw:SellingOperationsTechnologyGeneralAndAdministrativeExpensesMember2024-04-012024-06-300001616707w:CBSAReviewMemberw:SellingOperationsTechnologyGeneralAndAdministrativeExpensesMember2024-01-012024-06-300001616707w:A2020RepurchaseProgramMemberus-gaap:CommonClassAMember2024-01-012024-06-300001616707w:A2020RepurchaseProgramMemberus-gaap:CommonClassAMember2023-04-012023-06-300001616707w:A2020RepurchaseProgramMemberus-gaap:CommonClassAMember2023-01-012023-06-300001616707w:A2020RepurchaseProgramMemberus-gaap:CommonClassAMember2024-04-012024-06-300001616707w:A2023IncentiveAwardPlanMember2023-04-300001616707w:A2023IncentiveAwardPlanMember2024-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2023-12-310001616707us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2024-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-06-300001616707us-gaap:CostOfSalesMember2024-04-012024-06-300001616707us-gaap:CostOfSalesMember2023-04-012023-06-300001616707us-gaap:CostOfSalesMember2024-01-012024-06-300001616707us-gaap:CostOfSalesMember2023-01-012023-06-300001616707w:CustomerServiceAndMerchantFeesMember2024-04-012024-06-300001616707w:CustomerServiceAndMerchantFeesMember2023-04-012023-06-300001616707w:CustomerServiceAndMerchantFeesMember2024-01-012024-06-300001616707w:CustomerServiceAndMerchantFeesMember2023-01-012023-06-300001616707w:SellingOperationsTechnologyGeneralAndAdministrativeMember2024-04-012024-06-300001616707w:SellingOperationsTechnologyGeneralAndAdministrativeMember2023-04-012023-06-300001616707w:SellingOperationsTechnologyGeneralAndAdministrativeMember2024-01-012024-06-300001616707w:SellingOperationsTechnologyGeneralAndAdministrativeMember2023-01-012023-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2024-04-012024-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2023-04-012023-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-06-300001616707us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-06-300001616707us-gaap:ConvertibleDebtSecuritiesMember2024-04-012024-06-300001616707us-gaap:ConvertibleDebtSecuritiesMember2023-04-012023-06-300001616707us-gaap:ConvertibleDebtSecuritiesMember2024-01-012024-06-300001616707us-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-06-300001616707w:USSegmentMember2024-04-012024-06-300001616707w:USSegmentMember2023-04-012023-06-300001616707w:USSegmentMember2024-01-012024-06-300001616707w:USSegmentMember2023-01-012023-06-300001616707w:InternationalSegmentMember2024-04-012024-06-300001616707w:InternationalSegmentMember2023-04-012023-06-300001616707w:InternationalSegmentMember2024-01-012024-06-300001616707w:InternationalSegmentMember2023-01-012023-06-300001616707us-gaap:ConstructionInProgressMember2023-04-012023-06-300001616707us-gaap:ConstructionInProgressMember2023-01-012023-06-300001616707w:SeniorNoteDue2024Memberus-gaap:ConvertibleDebtMember2023-04-012023-06-300001616707w:SeniorNoteDue2024Memberus-gaap:ConvertibleDebtMember2023-01-012023-06-300001616707w:SeniorNoteDue2025Memberus-gaap:ConvertibleDebtMember2023-04-012023-06-300001616707w:SeniorNoteDue2025Memberus-gaap:ConvertibleDebtMember2023-01-012023-06-300001616707w:SteveConineMember2024-04-012024-06-300001616707w:SteveConineMember2024-06-300001616707w:NirajShahMember2024-04-012024-06-300001616707w:NirajShahMember2024-06-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36666
Wayfair Inc.
(Exact name of registrant as specified in its charter) | | | | | | | | | | | |
Delaware | | | 36-4791999 |
(State or other jurisdiction of incorporation or organization) | | | (I.R.S. Employer Identification Number) |
4 Copley Place | Boston, | MA | 02116 |
(Address of principal executive offices) | | | (Zip Code) |
(617) 532-6100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Class A Common Stock, $0.001 par value | W | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act: | | | | | | | | | | | |
Large Accelerated Filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
| | | | | | | | |
Class | | Outstanding at July 25, 2024 |
Class A Common Stock, $0.001 par value per share | | 97,773,308 |
Class B Common Stock, $0.001 par value per share | | 25,691,295 |
WAYFAIR INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended June 30, 2024
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WAYFAIR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | | |
| | June 30, | | December 31, |
| | 2024 | | 2023 |
| | (Unaudited) | | |
| | (in millions, except share and per share data) |
Assets: | | | | |
Current assets | | | | |
Cash and cash equivalents | | $ | 1,304 | | | $ | 1,322 | |
Short-term investments | | 39 | | | 29 | |
Accounts receivable, net | | 161 | | | 140 | |
Inventories | | 78 | | | 75 | |
Prepaid expenses and other current assets | | 240 | | | 289 | |
Total current assets | | 1,822 | | | 1,855 | |
Operating lease right-of-use assets | | 880 | | | 820 | |
Property and equipment, net | | 680 | | | 748 | |
| | | | |
Other non-current assets | | 54 | | | 51 | |
Total assets | | $ | 3,436 | | | $ | 3,474 | |
Liabilities and Stockholders' Deficit: | | | | |
Current liabilities | | | | |
Accounts payable | | $ | 1,168 | | | $ | 1,234 | |
Other current liabilities | | 1,039 | | | 949 | |
Total current liabilities | | 2,207 | | | 2,183 | |
Long-term debt | | 3,059 | | | 3,092 | |
Operating lease liabilities, net of current | | 893 | | | 862 | |
Other non-current liabilities | | 37 | | | 44 | |
Total liabilities | | 6,196 | | | 6,181 | |
Commitments and contingencies (Note 5) | | | | |
Stockholders’ deficit: | | | | |
Convertible preferred stock, $0.001 par value per share: 10,000,000 shares authorized and none issued at June 30, 2024 and December 31, 2023 | | — | | | — | |
Class A common stock, par value $0.001 per share, 500,000,000 shares authorized, 96,351,994 and 92,457,562 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively | | — | | | — | |
Class B common stock, par value $0.001 per share, 164,000,000 shares authorized, 25,691,295 shares issued and outstanding at June 30, 2024 and December 31, 2023 | | — | | | — | |
Additional paid-in capital | | 1,552 | | | 1,316 | |
Accumulated deficit | | (4,308) | | | (4,018) | |
Accumulated other comprehensive loss | | (4) | | | (5) | |
Total stockholders' deficit | | (2,760) | | | (2,707) | |
Total liabilities and stockholders' deficit | | $ | 3,436 | | | $ | 3,474 | |
See notes to unaudited condensed consolidated financial statements.
WAYFAIR INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions, except per share data) |
Net revenue | | $ | 3,117 | | | $ | 3,171 | | | $ | 5,846 | | | $ | 5,945 | | | |
Cost of goods sold | | 2,176 | | | 2,186 | | | 4,086 | | | 4,139 | | | |
Gross profit | | 941 | | | 985 | | | 1,760 | | | 1,806 | | | |
Operating expenses: | | | | | | | | | | |
Customer service and merchant fees | | 121 | | | 144 | | | 238 | | | 283 | | | |
Advertising | | 365 | | | 352 | | | 689 | | | 679 | | | |
Selling, operations, technology, general and administrative | | 489 | | | 630 | | | 1,023 | | | 1,254 | | | |
Impairment and other related net charges | | 1 | | | 1 | | | 1 | | | 14 | | | |
Restructuring charges | | — | | | — | | | 79 | | | 65 | | | |
Total operating expenses | | 976 | | | 1,127 | | | 2,030 | | | 2,295 | | | |
Loss from operations | | (35) | | | (142) | | | (270) | | | (489) | | | |
Interest expense, net | | (4) | | | (5) | | | (10) | | | (10) | | | |
Other (expense) income, net | | (1) | | | 3 | | | (5) | | | 2 | | | |
Gain on debt extinguishment | | — | | | 100 | | | — | | | 100 | | | |
Loss before income taxes | | (40) | | | (44) | | | (285) | | | (397) | | | |
Provision for income taxes, net | | 2 | | | 2 | | | 5 | | | 4 | | | |
Net loss | | $ | (42) | | | $ | (46) | | | $ | (290) | | | $ | (401) | | | |
Loss per share: | | | | | | | | | | |
Basic | | $ | (0.34) | | | $ | (0.41) | | | $ | (2.39) | | | $ | (3.60) | | | |
Diluted | | $ | (0.34) | | | $ | (0.41) | | | $ | (2.39) | | | $ | (3.60) | | | |
Weighted-average number of shares of common stock outstanding used in computing per share amounts: | | | | | | | | | | |
Basic | | 122 | | | 112 | | | 121 | | | 111 | | | |
Diluted | | 122 | | | 112 | | | 121 | | | 111 | | | |
See notes to unaudited condensed consolidated financial statements.
WAYFAIR INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions) |
Net loss | | $ | (42) | | | $ | (46) | | | $ | (290) | | | $ | (401) | | | |
Other comprehensive income (loss): | | | | | | | | | | |
Foreign currency translation adjustments | | 1 | | | (1) | | | 1 | | | 1 | | | |
Net unrealized gain on available-for-sale investments | | — | | | — | | | — | | | 1 | | | |
Comprehensive loss | | $ | (41) | | | $ | (47) | | | $ | (289) | | | $ | (399) | | | |
See notes to unaudited condensed consolidated financial statements.
WAYFAIR INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| | Class A and Class B Common Stock | | | | | | | | |
| | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders' Deficit |
| | | | | | | | | | | | |
| | (in millions) |
Balance at March 31, 2023 | | 111 | | | $ | — | | | $ | 894 | | | $ | (3,635) | | | $ | (4) | | | $ | (2,745) | |
Net loss | | — | | | — | | | — | | | (46) | | | — | | | (46) | |
Other comprehensive loss | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Issuance of common stock upon vesting of RSUs | | 2 | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation | | — | | | — | | | 181 | | | — | | | — | | | 181 | |
| | | | | | | | | | | | |
Premiums paid for capped calls | | — | | | — | | | (87) | | | — | | | — | | | (87) | |
Balance at June 30, 2023 | | 113 | | | $ | — | | | $ | 988 | | | $ | (3,681) | | | $ | (5) | | | $ | (2,698) | |
| | | | | | | | | | | | |
Balance at March 31, 2024 | | 120 | | | $ | — | | | $ | 1,446 | | | $ | (4,266) | | | $ | (5) | | | $ | (2,825) | |
Net loss | | — | | | — | | | — | | | (42) | | | — | | | (42) | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Issuance of common stock upon vesting of RSUs | | 2 | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation | | — | | | — | | | 103 | | | — | | | — | | | 103 | |
Unwind of capped calls | | — | | | — | | | 3 | | | — | | | — | | | 3 | |
Balance at June 30, 2024 | | 122 | | | $ | — | | | $ | 1,552 | | | $ | (4,308) | | | $ | (4) | | | $ | (2,760) | |
See notes to unaudited condensed consolidated financial statements.
WAYFAIR INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended |
| | Class A and Class B Common Stock | | | | | | | | |
| | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Total Stockholders' Deficit |
| | | | | | | | | | | | |
| | (in millions) |
Balance at December 31, 2022 | | 109 | | | $ | — | | | $ | 737 | | | $ | (3,280) | | | $ | (7) | | | $ | (2,550) | |
Net loss | | — | | | — | | | — | | | (401) | | | — | | | (401) | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 2 | | | 2 | |
Issuance of common stock upon vesting of RSUs | | 4 | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation | | — | | | — | | | 338 | | | — | | | — | | | 338 | |
Premiums paid for capped calls | | — | | | — | | | (87) | | | — | | | — | | | (87) | |
Balance at June 30, 2023 | | 113 | | | $ | — | | | $ | 988 | | | $ | (3,681) | | | $ | (5) | | | $ | (2,698) | |
| | | | | | | | | | | | |
Balance at December 31, 2023 | | 118 | | | $ | — | | | $ | 1,316 | | | $ | (4,018) | | | $ | (5) | | | $ | (2,707) | |
Net loss | | — | | | — | | | — | | | (290) | | | — | | | (290) | |
Other comprehensive income | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Issuance of common stock upon vesting of RSUs | | 4 | | | — | | | — | | | — | | | — | | | — | |
Equity-based compensation | | — | | | — | | | 233 | | | — | | | — | | | 233 | |
Unwind of capped calls | | — | | | — | | | 3 | | | — | | | — | | | 3 | |
Balance at June 30, 2024 | | 122 | | | $ | — | | | $ | 1,552 | | | $ | (4,308) | | | $ | (4) | | | $ | (2,760) | |
See notes to unaudited condensed consolidated financial statements.
WAYFAIR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2024 | | 2023 | | |
| | | | | | |
| | (in millions) |
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (290) | | | $ | (401) | | | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | 203 | | | 206 | | | |
Equity-based compensation expense | | 214 | | | 308 | | | |
Amortization of discount and issuance costs on convertible notes | | 5 | | | 3 | | | |
Impairment and other related net charges | | 1 | | | 14 | | | |
Gain on debt extinguishment | | — | | | (100) | | | |
Other non-cash adjustments | | (8) | | | (3) | | | |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable, net | | (37) | | | 144 | | | |
Inventories | | (4) | | | 13 | | | |
Prepaid expenses and other assets | | 11 | | | (8) | | | |
Accounts payable and other liabilities | | 11 | | | (106) | | | |
Net cash provided by operating activities | | 106 | | | 70 | | | |
| | | | | | |
Cash flows (for) from investing activities: | | | | | | |
Purchase of short- and long-term investments | | (38) | | | — | | | |
Sale and maturities of short- and long-term investments | | 27 | | | 225 | | | |
Purchase of property and equipment | | (36) | | | (71) | | | |
Site and software development costs | | (80) | | | (105) | | | |
| | | | | | |
Net cash (used in) provided by investing activities | | (127) | | | 49 | | | |
| | | | | | |
Cash flows from financing activities: | | | | | | |
| | | | | | |
Proceeds from issuance of convertible notes, net of issuance costs | | — | | | 678 | | | |
Premiums paid for capped call confirmations | | — | | | (87) | | | |
| | | | | | |
Payments to extinguish convertible debt | | — | | | (514) | | | |
Other financing activities, net | | 3 | | | — | | | |
Net cash provided by financing activities | | 3 | | | 77 | | | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | — | | | 3 | | | |
Net (decrease) increase in cash, cash equivalents and restricted cash | | (18) | | | 199 | | | |
| | | | | | |
Cash, cash equivalents and restricted cash | | | | | | |
Beginning of period | | $ | 1,326 | | | $ | 1,050 | | | |
End of period | | $ | 1,308 | | | $ | 1,249 | | | |
See notes to unaudited condensed consolidated financial statements
WAYFAIR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, |
| | 2024 | | 2023 | | |
| | | | | | |
| | (in millions) |
Supplemental cash flow information: | | | | | | |
Cash paid for interest on long-term debt | | $ | 31 | | | $ | 22 | | | |
| | | | | | |
Purchase of property and equipment included in accounts payable and other liabilities | | $ | 15 | | | $ | 1 | | | |
| | | | | | |
Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets | | | | | | |
Cash and cash equivalents | | $ | 1,304 | | | $ | 1,249 | | | |
Restricted cash included within prepaid expenses and other current assets | | 4 | | | — | | | |
Total cash, cash equivalents and restricted cash | | $ | 1,308 | | | $ | 1,249 | | | |
See notes to unaudited condensed consolidated financial statements
Wayfair Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q are those of Wayfair Inc. and its wholly-owned subsidiaries. Unless the context indicates otherwise, “Wayfair,” “the Company" or similar terms refer to Wayfair Inc. and its subsidiaries. In the Company’s opinion, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the United States (“U.S.”) Securities and Exchange Commission ("SEC") regarding interim financial reporting and reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Furthermore, interim results are not necessarily indicative of the results for the full year ended December 31, 2024 or future periods.
The Company has identified significant accounting policies that are critical to understanding its business and results of operations. Wayfair believes that there have been no significant changes during the three and six months ended June 30, 2024 to the items disclosed in Note 1, Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Recently Issued Accounting Pronouncements
Segment Reporting
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendment should be applied retrospectively to all prior periods presented in the financial statements. Wayfair is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to update reportable income tax disclosure requirements, primarily through enhanced disclosures on the rate reconciliation table and other disclosures, including total income taxes paid by jurisdiction. The amendment is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendment should be applied prospectively, with retrospective adoption permitted. Wayfair is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statement disclosures.
2. Supplemental Financial Statement Disclosures
Accounts Receivable, Net
As of June 30, 2024, accounts receivable was $161 million, net of allowance for credit losses of $27 million. As of December 31, 2023, accounts receivable was $140 million, net of allowance for credit losses of $22 million. The changes in the allowance for credit losses were not material for the three and six months ended June 30, 2024. Management believes credit risk is mitigated for the three and six months ended June 30, 2024, as approximately 99.2% and 99.3%, respectively, of the net revenue recognized was collected in advance of recognition.
Contract Liabilities
Contractual liabilities, included in other current liabilities, were $232 million at June 30, 2024 and $204 million at December 31, 2023. During the six months ended June 30, 2024, Wayfair recognized $134 million of net revenue that was included within other current liabilities as of December 31, 2023.
Net revenue from contracts with customers is disaggregated by geographic region because this manner of disaggregation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors. Refer to Note 10, Segment and Geographic Information, for additional information.
Restructuring Charges
In January 2024, Wayfair announced a workforce realignment plan, including a workforce reduction involving approximately 1,650 employees. As a result, during the six months ended June 30, 2024, Wayfair incurred $79 million of charges recorded within restructuring charges on the condensed consolidated statements of operations. The charges consisted primarily of one-time employee severance and benefit costs. Wayfair does not expect to incur any further material charges related to this workforce reduction.
3. Cash, Cash Equivalents and Restricted Cash, Investments and Fair Value Measurements
Investments
As of June 30, 2024 and December 31, 2023, Wayfair’s marketable securities, which primarily consisted of corporate bonds and other government obligations that are priced at fair value, were classified as available-for-sale investments. During the three and six months ended June 30, 2024 and 2023, Wayfair did not have any realized gains or losses. Interest income includes interest earned from cash and cash equivalents and marketable securities. During the three and six months ended June 30, 2024, Wayfair recorded $14 million and $26 million of interest income, respectively, and during the three and six months ended June 30, 2023, $11 million and $18 million of interest income, respectively.
During the three and six months ended June 30, 2024 and 2023, Wayfair did not recognize any credit losses related to its available-for-sale debt securities. As of June 30, 2024 and December 31, 2023, Wayfair did not have an allowance for credit losses recorded related to its available-for-sale debt securities.
The following table presents details of Wayfair’s investment securities as of June 30, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
| | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| | | | | | | | |
| | (in millions) |
Short-term: | | | | | | | | |
Investment securities | | $ | 9 | | | $ | — | | | $ | — | | | $ | 9 | |
| | | | | | | | |
| | | | | | | | |
Total | | $ | 9 | | | $ | — | | | $ | — | | | $ | 9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| | | | | | | | |
| | (in millions) |
Short-term: | | | | | | | | |
Investment securities | | $ | 29 | | | $ | — | | | $ | — | | | $ | 29 | |
| | | | | | | | |
| | | | | | | | |
Total | | $ | 29 | | | $ | — | | | $ | — | | | $ | 29 | |
Fair Value Measurements
Wayfair's financial assets and liabilities are measured at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The three levels of inputs used to measure fair value are as follows:
▪Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities
▪Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability
▪Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability
This hierarchy requires Wayfair to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Wayfair classifies cash equivalents and certificate of deposits within Level 1 because these are valued using quoted market prices. The fair value of Level 1 financial assets is based on quoted market prices of the identical underlying security. Wayfair classifies short-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active. Wayfair does not have assets that are classified as Level 3.
The following tables set forth the fair value of Wayfair's financial assets measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | | |
| | (in millions) |
Cash and cash equivalents: | | | | | | | | |
Cash | | $ | 421 | | | $ | — | | | $ | — | | | $ | 421 | |
Cash equivalents | | 883 | | | — | | | — | | | 883 | |
Total cash and cash equivalents | | 1,304 | | | — | | | — | | | 1,304 | |
Short-term investments: | | | | | | | | |
Investment securities | | — | | | 9 | | | — | | | 9 | |
Certificate of deposit | | 30 | | | — | | | — | | | 30 | |
Total short-term investments | | 30 | | | 9 | | — | | | 39 |
Prepaid expenses and other current assets: | | | | | | | | |
Certificate of deposit (1) | | 4 | | | — | | | — | | | 4 | |
| | | | | | | | |
| | | | | | | | |
Total | | $ | 1,338 | | | $ | 9 | | | $ | — | | | $ | 1,347 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2023 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | | | | |
| | (in millions) |
Cash and cash equivalents: | | | | | | | | |
Cash | | $ | 407 | | | $ | — | | | $ | — | | | $ | 407 | |
Cash equivalents | | 915 | | | — | | | — | | | 915 | |
Total cash and cash equivalents | | 1,322 | | | — | | | — | | | 1,322 | |
Short-term investments: | | | | | | | | |
Investment securities | | — | | | 29 | | | — | | | 29 | |
Prepaid expenses and other current assets: | | | | | | | | |
Certificate of deposit (1) | | 4 | | | — | | | — | | | 4 | |
| | | | | | | | |
| | | | | | | | |
Total | | $ | 1,326 | | | $ | 29 | | | $ | — | | | $ | 1,355 | |
(1) The certificate of deposit is classified as restricted cash that is primarily restricted to funds held in collateral.
4. Debt and Other Financing
The following table presents the outstanding principal amount and carrying value of debt and other financing:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2024 | | December 31, 2023 |
Debt Instrument | | Principal Amount | | Unamortized Debt Discount | | Net Carrying Amount | | Principal Amount | | Unamortized Debt Discount | | Net Carrying Amount |
| | | | | | | | | | | | |
| | (in millions) |
Revolving Credit Facility | | | | | | $ | — | | | | | | | $ | — | |
2024 Notes | | $ | 117 | | | $ | — | | | 117 | | | $ | 117 | | | $ | — | | | 117 | |
2025 Notes | | 754 | | | (2) | | | 752 | | | 754 | | | (3) | | | 751 | |
2026 Notes | | 949 | | | (4) | | | 945 | | | 949 | | | (5) | | | 944 | |
2027 Notes | | 690 | | | (8) | | | 682 | | | 690 | | | (10) | | | 680 | |
2028 Notes | | 690 | | | (10) | | | 680 | | | 690 | | | (11) | | | 679 | |
2025 Accreting Notes | | 38 | | | — | | | 38 | | | 38 | | | — | | | 38 | |
Total Debt | | | | | | $ | 3,214 | | | | | | | $ | 3,209 | |
Short-term debt (1) | | | | | | 155 | | | | | | | 117 | |
Long-term debt | | | | | | $ | 3,059 | | | | | | | $ | 3,092 | |
(1) Short-term debt consists of $117 million for the 2024 Notes and $38 million for the 2025 Accreting Notes, as of June 30, 2024, and $117 million for the 2024 Notes as of December 31, 2023. Short-term debt is presented within other current liabilities in the condensed consolidated balance sheets.
Revolving Credit Facility
Wayfair has a five-year senior secured revolving credit facility (the “Revolver”), which matures on March 24, 2026, and provides for non-amortizing revolving loans in an aggregate amount of $600 million. Under the Revolver, Wayfair may, from time to time, request letters of credit, which reduce the availability of credit under the Revolver. Wayfair had $69 million in outstanding letters of credit as of June 30, 2024, primarily as security for lease agreements. As of June 30, 2024, there were no revolving loans outstanding under the Revolver.
Convertible Non-Accreting Notes
The following table summarizes certain terms related to the Company’s current outstanding non-accreting convertible notes (collectively, the “Non-Accreting Notes” and together with the 2025 Accreting Notes, the “Notes”):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Convertible Non-Accreting Notes | | Maturity Date | | Annual Coupon Rate | | Annual Effective Interest Rate | | Payment Dates for Semi-Annual Interest Payments in Arrears |
2024 Notes | | November 1, 2024 | | 1.125% | | 1.5% | | May 1 and November 1 |
2025 Notes | | October 1, 2025 | | 0.625% | | 0.9% | | April 1 and October 1 |
2026 Notes | | August 15, 2026 | | 1.000% | | 1.2% | | February 15 and August 15 |
2027 Notes | | September 15, 2027 | | 3.250% | | 3.6% | | March 15 and September 15 |
2028 Notes | | November 15, 2028 | | 3.500% | | 3.8% | | May 15 and November 15 |
Convertible Accreting Notes
No cash interest is payable on the 2025 Accreting Notes. Instead, the 2025 Accreting Notes accrue interest at a rate of 2.50% per annum, which accretes to the principal amount on April 1 and October 1 of each year. The 2025 Accreting Notes will mature on April 1, 2025, unless earlier purchased, redeemed or converted. The annual effective interest rate of the 2025 Accreting Notes is 2.7%.
Conversion and Redemption Terms of the Notes
Wayfair's Notes will mature at their maturity date unless earlier purchased, redeemed or converted. The Notes’ initial conversion terms are summarized below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Convertible Notes | | Maturity Date | | Free Convertibility Date | | Initial Conversion Rate per $1,000 Principal | | Initial Conversion Price | | Redemption Date |
| | | | | | | | | | |
2024 Notes | | November 1, 2024 | | August 1, 2024 | | 8.5910 | | $116.40 | | May 8, 2022 |
2025 Notes | | October 1, 2025 | | July 1, 2025 | | 2.3972 | | $417.15 | | October 4, 2022 |
2026 Notes | | August 15, 2026 | | May 15, 2026 | | 6.7349 | | $148.48 | | August 20, 2023 |
2027 Notes | | September 15, 2027 | | June 15, 2027 | | 15.7597 | | $63.45 | | September 20, 2025 |
2028 Notes | | November 15, 2028 | | August 15, 2028 | | 21.8341 | | $45.80 | | May 20, 2026 |
2025 Accreting Notes | | April 1, 2025 | | - | | 13.7931 | | $72.50 | | May 9, 2023 |
The conversion rate is subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of Wayfair’s Class A common stock, but will not be adjusted for accrued and unpaid interest.
Wayfair will settle any conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or a combination thereof, with the form of consideration determined at Wayfair’s election. The holders of the Non-Accreting Notes may convert all or a portion of such Notes prior to certain specified dates (each, a “Free Convertibility Date”) under the following circumstances (in each case, as applicable to each series of Non-Accreting Notes):
•during any calendar quarter (and only during such calendar quarter), if the last reported sale price of Wayfair’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•during the five-business day period after any ten consecutive trading day period (the “measurement period") in which the trading price (as defined in the applicable indenture) per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Wayfair’s Class A common stock and the conversion rate on each such trading day;
•if Wayfair calls the notes for redemption, at any time prior to 5:00 p.m. (New York City time) (“the close of business”) on the second scheduled trading day immediately preceding the redemption date; and
•upon the occurrence of specified corporate events (as set forth in the applicable indenture).
On or after the applicable Free Convertibility Date until the close of business on the second scheduled trading day immediately preceding the applicable maturity date, holders of the Non-Accreting Notes may convert their Non-Accreting Notes at any time.
The conditional conversion features of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes were not triggered during the calendar quarter ended June 30, 2024, therefore, the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes are not convertible during the calendar quarter ended September 30, 2024 pursuant to the applicable last reported sales price conditions.
The holders of the 2025 Accreting Notes may convert all or a portion of their 2025 Accreting Notes at any time prior to the close of business on the second business day immediately preceding the maturity date. Wayfair will settle any conversion of 2025 Accreting Notes with a number of shares of Wayfair’s Class A common stock per $1,000 original principal amount of 2025 Accreting Notes equal to the accreted principal amount of such original principal amount of 2025 Accreting Notes divided by the conversion price.
Upon the occurrence of a fundamental change (as defined in the applicable indenture), holders of the applicable series of Notes may require Wayfair to repurchase all or a portion of such Notes for cash at a price equal to 100% of the principal amount (or accreted principal amount) of such Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date (such interest to be included in the accreted principal amount for the 2025 Accreting Notes). Holders of the Non-Accreting Notes who convert their respective Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the applicable indenture) may be entitled to a premium in the form of an increase in the
conversion rate of the respective Notes. Holders of the 2025 Accreting Notes who convert in connection with a make-whole fundamental change (as defined in the applicable indenture) may be entitled to a premium in the form of an increase in the conversion rate.
Wayfair may not redeem the Notes prior to certain dates (the “Redemption Date”). On or after the applicable Redemption Date, Wayfair may redeem for cash all or part of the applicable series of Notes if the last reported sale price of Wayfair’s Class A common stock equals or exceeds 130% (Non-Accreting Notes) or 276% (2025 Accreting Notes) of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which Wayfair provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which Wayfair provides notice of the redemption. The redemption price will be either 100% of the principal amount (or accreted principal amount) of the notes to be redeemed, plus accrued and unpaid interest, if any, or the if-converted value if the holder elects to convert their Notes upon receiving notice of redemption.
Conversions of Notes
During the three and six months ended June 30, 2024, there were no conversions of the Notes.
Interest Expense
During the three months ended June 30, 2024, Wayfair recognized contractual interest expense and debt discount amortization of $16 million and $2 million, respectively, and during the six months ended June 30, 2024, contractual interest expense and debt discount amortization of $31 million and $5 million, respectively.
During the three months ended June 30, 2023, Wayfair recognized contractual interest expense and debt discount amortization of $14 million and $2 million, respectively, and during the six months ended June 30, 2023, contractual interest expense and debt discount amortization of $25 million and $3 million, respectively.
Fair Value of Notes
As of June 30, 2024, the estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2025 Accreting Notes was $115 million, $705 million, $855 million, $793 million, $1.0 billion and $28 million, respectively. The estimated fair value of the Non-Accreting Notes was determined through consideration of quoted market prices. The estimated fair value of the 2025 Accreting Notes was determined through an option pricing model using Level 3 inputs including volatility and credit spread. The fair values of the Non-Accreting Notes and the 2025 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, Cash, Cash Equivalents and Restricted Cash, Investments and Fair Value Measurements. As of June 30, 2024, the if-converted value of the 2028 Notes exceeded the principal value by $104 million, respectively. As of June 30, 2024, the if-converted value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2025 Accreting Notes did not exceed the principal value.
Capped Calls
The 2025 Capped Calls, 2026 Capped Calls, 2027 Capped Calls and 2028 Capped Calls (collectively, the “Capped Calls”) are expected generally to reduce the potential dilution and/or offset the cash payments Wayfair is required to make in excess of the principal amount of the Non-Accreting Notes upon conversion of the Non-Accreting Notes if the market price per share of Wayfair’s Class A common stock is greater than the strike price of the applicable Capped Call (which corresponds to the initial conversion price of the applicable Non-Accreting Notes and is subject to certain adjustments under the terms of the applicable Capped Call), with such reduction and/or offset subject to a cap based on the cap price of the applicable Capped Calls (the “Initial Cap Price”). The Capped Calls can, at Wayfair’s option, remain outstanding until their maturity date, even if all or a portion of the Non-Accreting Notes are converted, repurchased or redeemed prior to such date.
Each of the Capped Calls has an initial cap price per share of Wayfair’s Class A common stock, which represented a premium over the last reported sale price (or, with respect to the 2025 Capped Calls, the volume-weighted average price) of Wayfair’s Class A common stock on the date the corresponding Non-Accreting Notes were priced (the “Cap Price Premium”), and is subject to certain adjustments under the terms of the corresponding agreements. Collectively, the Capped Calls cover, initially, the number of shares of Wayfair’s Class A common stock underlying the Non-Accreting Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Non-Accreting Notes.
The initial terms for the Capped Calls are presented below: | | | | | | | | | | | | | | | | | | | | |
Capped Calls | | Maturity Date | | Initial Cap Price | | Cap Price Premium |
2025 Capped Calls | | October 1, 2025 | | $787.08 | | 150% |
2026 Capped Calls | | August 15, 2026 | | $280.15 | | 150% |
2027 Capped Calls | | September 15, 2027 | | $97.62 | | 100% |
2028 Capped Calls | | November 15, 2028 | | $73.28 | | 100% |
The Capped Calls are separate transactions from the Non-Accreting Notes, are not subject to the terms of the Non-Accreting Notes and will not affect any holder’s rights under the Non-Accreting Notes. Similarly, holders of the Non-Accreting Notes do not have any rights with respect to the Capped Calls. The Capped Calls do not meet the criteria for separate accounting as a derivative as they are indexed to Wayfair's stock and meet the requirements to be classified in equity. The premiums paid for the Capped Calls were included as a net reduction to additional paid-in capital within stockholders’ deficit when they were entered.
2024 Capped Calls Unwind
During the three and six months ended June 30, 2024, Wayfair completed an unwind of the 2024 Capped Calls. The proceeds received from the unwind were included as an increase to additional paid-in-capital within stockholders’ deficit.
5. Commitments and Contingencies
Legal Matters
From time to time, Wayfair is involved in litigation matters and other legal claims that arise during the ordinary course of business. The Company records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. Litigation and legal claims are inherently unpredictable and claims cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s results of operations or financial condition, and regardless of the outcome, these matters can be costly and time consuming, as it can divert management's attention from important business matters and initiatives, negatively impacting Wayfair's overall operations. In addition, Wayfair may also find itself at greater risk to outside party claims as it increases its operations in jurisdictions where the laws with respect to the potential liability of online retailers are uncertain, unfavorable, or unclear.
However, Wayfair does not currently believe that the outcome of any legal matters will have a material adverse effect on Wayfair’s results of operations or financial condition.
Canada Border Services Agency
The Canada Border Services Agency (“CBSA”) is examining Wayfair’s payment of duties under the Special Measures Import Act (the “CBSA review”) for goods imported into Canada for the years ended December 31, 2023 and 2022 and part of the year ended December 31, 2021. The estimated potential liability for the CBSA review, net of any amounts that may be recouped through the appeals process, is approximately $29 million, inclusive of duties and interest.
Related to the CBSA review, during the three and six months ended June 30, 2024, Wayfair incurred approximately $3 million and $9 million, respectively, to cost of goods sold and $1 million and $2 million, respectively, to selling, operations, technology, general and administrative within the condensed consolidated statement of operations. During the three and six months ended June 30, 2024, Wayfair made payments of approximately $6 million and $10 million, respectively, of duties and $1 million and $2 million, respectively, of interest charges based on assessments received related to the year ended December 31, 2022 and part of the year ended December 31, 2021. Wayfair is required to pay all assessed amounts in order to exercise its appeal rights. Wayfair believes there are substantial factual and legal grounds to appeal and partially recuperate these amounts and is exploring other options to mitigate exposure.
As of June 30, 2024, approximately $7 million was recorded within other current liabilities in the condensed consolidated balance sheets.
Because loss contingencies are inherently unpredictable, this assessment is subjective and requires judgments about future events. As a result, it is at least reasonably possible that this estimate may change in the near term and the effect of the potential change could be material.
6. Stockholders’ Deficit
Common Stock
Since Wayfair's initial public offering through June 30, 2024, 56,347,119 shares of Class B common stock were converted to the same number of shares of Class A common stock.
Stock Repurchase Programs
During the three and six months ended June 30, 2024 and 2023, Wayfair did not repurchase any shares of Class A common stock under its stock repurchase programs.
7. Equity-Based Compensation
In April 2023, Wayfair’s stockholders approved the 2023 Incentive Award Plan (the “2023 Plan”) to replace Wayfair’s 2014 Incentive Award Plan, as amended (the “2014 Plan” and, together with the 2023 Plan, the “Incentive Plans”). The Incentive Plans were adopted by the board of directors (the “Board”) to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent. The Incentive Plans are administered by the Board for awards to non-employee directors and by the compensation committee of the Board for other participants and provide for the issuance of equity-based awards including stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance awards and stock payments.
Under the 2023 Plan, 20,525,663 shares of Class A common stock initially were available for future award grants. As of June 30, 2024, 13,103,651 shares of Class A common stock remained available for future grant under the 2023 Plan.
The following table presents activity relating to RSUs for the six months ended June 30, 2024: | | | | | | | | | | | | | | |
| | Shares | | Weighted-Average Grant Date Fair Value |
Unvested at December 31, 2023 | | 5,186,886 | | | $ | 93.68 | |
RSUs granted | | 2,601,479 | | | $ | 59.23 | |
RSUs vested | | (3,894,432) | | | $ | 76.66 | |
RSUs forfeited/canceled | | (896,271) | | | $ | 103.58 | |
Unvested at June 30, 2024 | | 2,997,662 | | | $ | 82.91 | |
As of June 30, 2024, unrecognized equity-based compensation expense related to RSUs expected to vest over time is $152 million with a weighted-average remaining vesting term of 0.5 years.
The following table summarizes activity for the six months ended June 30, 2024 and 2023: | | | | | | | | | | | | | | | | | | | | |
| | | | Six Months Ended June 30, |
| | | | | | 2024 | | 2023 | | |
Weighted average grant date fair value of RSUs | | | | | | $ | 59.23 | | | $ | 37.47 | | | |
Total fair value of vested RSUs (in millions) | | | | | | $ | 299 | | | $ | 289 | | | |
Intrinsic value of RSUs vested (in millions) | | | | | | $ | 232 | | | $ | 166 | | | |
As of June 30, 2024, the aggregate intrinsic value of unvested RSUs was $158 million.
Equity-based compensation was classified as follows in the condensed consolidated statements of operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions) |
Cost of goods sold | | $ | 3 | | | $ | 2 | | | $ | 5 | | | $ | 5 | | | |
Customer service and merchant fees | | 5 | | | 8 | | | 10 | | | 16 | | | |
Selling, operations, technology, general and administrative | | 87 | | | 154 | | | 199 | | | 287 | | | |
Total equity-based compensation expense | | $ | 95 | | | $ | 164 | | | $ | 214 | | | $ | 308 | | | |
Equity-based compensation costs capitalized as software costs were $8 million and $19 million for the three and six months ended June 30, 2024, respectively, and $17 million and $30 million for the three and six months ended June 30, 2023, respectively.
8. Income Taxes
The provision for income taxes, net recorded during the three and six months ended June 30, 2024 is primarily related to income tax benefits for tax losses earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes, as well as related changes in increases in the Company’s valuation allowance on deferred tax assets, as well as some U.S. state minimum and foreign taxes. Wayfair had no material unrecognized tax benefits as of June 30, 2024 and December 31, 2023.
The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon in principle by over 140 countries. Many non- U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar 2 model rules beginning in 2024 or announced their plans to enact legislation in future years. The currently enacted Pillar 2 model rules did not have a material impact on our provision for income taxes for the three and six months ended June 30, 2024.
9. Loss per Share
Wayfair follows the two-class method when computing earnings or loss per share for its two issued classes of common stock - Class A and Class B. Basic earnings or loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings or loss per share is computed using the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, common stock equivalents outstanding during the period and stock issuable upon conversion of the convertible debt instruments. Wayfair's common stock equivalents consist of shares issuable upon the release of restricted stock units. The dilutive effect of these common stock equivalents is reflected in diluted earnings or loss per share by application of the treasury stock method. The dilutive effect of shares issuable upon conversion of the convertible debt instruments is included in the calculation of diluted earnings or loss per share under the if-converted method.
For periods in which Wayfair has reported net losses, diluted loss per share is the same as basic loss per share, as the effects of common stock equivalents outstanding and shares issuable upon conversion of convertible debt instruments are antidilutive and, therefore, excluded from the calculation of diluted loss per share.
Wayfair allocates undistributed earnings between the classes on a one-to-one basis when computing earnings or loss per share. As a result, basic and diluted earnings or loss per Class A and Class B shares are equivalent.
The following table presents the calculation of basic and diluted loss per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions, except per share data) |
Numerator: | | | | | | | | | | |
Numerator for basic and diluted loss per share - net loss | | $ | (42) | | | $ | (46) | | | $ | (290) | | | $ | (401) | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Denominator: | | | | | | | | | | |
Denominator for basic and diluted loss per share - weighted-average number of shares of common stock outstanding | | 122 | | | 112 | | | 121 | | | 111 | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Loss per share | | | | | | | | | | |
Basic | | $ | (0.34) | | | $ | (0.41) | | | $ | (2.39) | | | $ | (3.60) | | | |
Diluted | | $ | (0.34) | | | $ | (0.41) | | | $ | (2.39) | | | $ | (3.60) | | | |
The potential common shares from anti-dilutive securities excluded from the weighted-average shares of common stock used to calculate diluted loss per share were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| (in millions) |
| | | | | | | | | | |
| | | | | | | | | | |
Unvested restricted stock units | | 3 | | | 8 | | | 3 | | | 8 | | | |
Shares related to convertible debt instruments | | 36 | | | 36 | | | 36 | | | 36 | | | |
Total | | 39 | | | 44 | | | 39 | | | 44 | | | |
Wayfair may settle conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or any combination thereof at its election. Wayfair will settle conversions of the 2025 Accreting Notes in shares of Wayfair’s Class A common stock. The Capped Calls are generally expected to reduce the potential dilution of Wayfair's Class A common stock upon any conversion of the Notes and/or offset the cash payments Wayfair is required to make in excess of the principal amount of the Notes upon conversion of the Notes to the extent the market price per share of Wayfair’s Class A common stock is greater than the strike price of the Capped Calls (which corresponds to the initial conversion prices of the Non-Accreting Notes, subject to certain adjustments under the terms of the Capped Calls), with such reduction and/or offset capped at the Initial Cap Price.
For more information on the structure of the Notes and the Capped Calls, see Note 4, Debt and Other Financing.
10. Segment and Geographic Information
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated on a regular basis by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. Wayfair’s CODM is its Chief Executive Officer.
Wayfair's operating and reportable segments are the U.S. and International. These segments reflect the way the CODM allocates resources and evaluates financial performance, which is based upon each segment's Adjusted EBITDA. Adjusted EBITDA is defined as net income or loss before depreciation and amortization, equity-based compensation and related taxes, interest income or expense, net, other income or expense, net, provision or benefit for income taxes, net, non-recurring items, and other items not indicative of ongoing operating performance. These charges are excluded from the evaluation of segment performance because it facilitates reportable segment performance comparisons on a period-to-period basis as these costs may vary independent of business performance. The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Wayfair allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative expenses based on the usage and relative contribution provided to the segments. It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, impairment and other related net charges and restructuring charges, as
well as interest income or expense, net, other income or expense, net, gain or loss on debt extinguishment and provision or benefit for income taxes, net. There are no net revenue transactions between Wayfair's reportable segments.
U.S.
The U.S. segment primarily consists of amounts earned through product sales through Wayfair's family of sites in the U.S.
International
The International segment primarily consists of amounts earned through product sales through Wayfair's international sites.
Net revenue from external customers for each group of similar products and services are not reported to the CODM. Separate identification of this information for purposes of segment disclosure is impractical, as it is not readily available and the cost to develop it would be excessive. No individual country outside the U.S. provided greater than 10% of consolidated net revenue.
The following tables present net revenue and Adjusted EBITDA attributable to Wayfair’s reportable segments for the periods presented: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions) |
U.S. net revenue | | $ | 2,730 | | | $ | 2,785 | | | $ | 5,121 | | | $ | 5,200 | | | |
International net revenue | | 387 | | | 386 | | | 725 | | | 745 | | | |
Total net revenue | | $ | 3,117 | | | $ | 3,171 | | | $ | 5,846 | | | $ | 5,945 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions) |
Adjusted EBITDA: | | | | | | | | | | |
U.S. | | $ | 199 | | | $ | 161 | | | $ | 320 | | | $ | 190 | | | |
International | | (36) | | | (33) | | | (82) | | | (76) | | | |
Total reportable segments Adjusted EBITDA | | 163 | | | 128 | | | 238 | | | 114 | | | |
Less: reconciling items (1) | | (205) | | (174) | | (528) | | (515) | | |
Net loss | | $ | (42) | | | $ | (46) | | | $ | (290) | | | $ | (401) | | | |
(1)The following adjustments are made to reconcile total reportable segments Adjusted EBITDA to consolidated net loss:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, | Six Months Ended June 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | | |
| | | (in millions) |
Depreciation and amortization | | $ | 99 | | | $ | 102 | | | $ | 203 | | | $ | 206 | | | |
Equity-based compensation and related taxes | | 98 | | | 167 | | | 225 | | | 318 | | | |
Interest expense, net | | 4 | | | 5 | | | 10 | | | 10 | | | |
Other expense, net | | 1 | | | (3) | | | 5 | | | (2) | | | |
Provision for income taxes, net | | 2 | | | 2 | | | 5 | | | 4 | | | |
Other: | | | | | | | | | | |
Impairment and other related net charges (a) | | 1 | | | 1 | | | 1 | | | 14 | | |
Restructuring charges (b) | | — | | | — | | | 79 | | | 65 | | | |
Gain on debt extinguishment (c) | | — | | | (100) | | | — | | | (100) | | | |
Total reconciling items | | $ | 205 | | | $ | 174 | | | $ | 528 | | | $ | 515 | | | |
| | | | | | | | | | | |
(a) | During the three and six months ended June 30, 2024, Wayfair recorded charges of $1 million related to changes in sublease market conditions for an identified U.S. office location. During the six months ended June 30, 2023, Wayfair recorded charges of $5 million related to consolidation of certain customer service centers in identified U.S. locations. During the three and six months ended June 30, 2023, Wayfair recorded charges of $1 million and $9 million, respectively, related to construction in progress assets at identified U.S. locations. |
(b) | During the six months ended June 30, 2024, Wayfair incurred $79 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2024 workforce reductions. During the six months ended June 30, 2023, Wayfair incurred $65 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2023 workforce reductions. |
(c) | During the three and six months ended June 30, 2023, Wayfair recorded a $100 million gain on debt extinguishment upon repurchase of $83 million in aggregate principal amount of the 2024 Notes and $535 million in aggregate principal amount of the 2025 Notes. |
| | | | | | | | | | | |
See “Non-GAAP Financial Measures” in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q for more information regarding the use of Adjusted EBITDA.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our investment plans and anticipated returns on those investments, our future customer growth, our future results of operations and financial position, including our financial outlook and profitability goals, the financial impact and expected savings of our January 2024 reduction in workforce, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, including our international expansion and omni-channel strategy, consumer activity and behaviors, developments in our technology and systems and anticipated results of those developments, and the impact of macroeconomic events, including interest rates and inflation, and our response to such events, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “continues,” “could,” “intends,” “goals,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.
Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from Wayfair’s expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise.
Factors that could cause or contribute to differences in our future results include, without limitation, the following:
•adverse macroeconomic conditions, including rising and fluctuating interest rates, inflation, slower growth or the potential for recession, disruptions in the global supply chain and other conditions affecting the retail environment for products we sell, and other matters that influence consumer spending and preferences, as well as our ability to plan for and respond to the impact of these conditions;
•our ability to manage our growth and the impacts of our internal restructuring and workforce reduction;
•our ability to acquire and retain customers in a cost-effective manner;
•our ability to increase our net revenue per active customer;
•our ability to build and maintain strong brands;
•our ability to manage our growth and expansion initiatives;
•our ability to expand our business and compete successfully;
•disruptions, capacity constraints or inefficiencies in our information systems network, or any potential cybersecurity incident;
•geopolitical events, including the 2024 United States (“U.S.”) presidential election, natural disasters, public health emergencies, civil disturbances and terrorist attacks; and
•developments in, and the outcome of, legal and regulatory proceedings and investigations to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith.
A further list and description of risks, uncertainties and other factors that could cause or contribute to differences in our future results include the cautionary statements herein and in our other filings with the Securities and Exchange Commission, including those set forth under Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2023. We qualify all of our forward-looking statements by these cautionary statements.
All dollar and percentage comparisons made herein refer to the three and six months ended June 30, 2024, compared with the three and six months ended June 30, 2023, unless otherwise noted.
Overview
Wayfair is one of the world’s largest online destinations for the home. Through our e-commerce business model, we offer visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 30 million products from over 20 thousand suppliers.
We believe an increasing portion of the dollars spent on home goods will be spent online and that there is an opportunity for acquiring more market share. Our business model is designed to grow our net revenue by acquiring new customers as well as stimulating repeat purchases from our existing customers. Through increasing brand awareness as well as paid and unpaid advertising, we attract new and repeat customers to our family of sites. We turn these customers into recurring shoppers by creating a seamless shopping experience across their entire journey — offering best-in-class product discovery, purchasing, fulfillment and customer service.
During the three months ended June 30, 2024, net revenue decreased by 1.7% compared to the same period in 2023. As of June 30, 2024, we had 22 million active customers and during the three months ended June 30, 2024, 81.7% of orders came from repeat buyers. The lower sales were due to lower order volume, which was driven by challenges in the category, compared to the same period in 2023. We also continued to manage our advertising spend according to a return on investment-oriented approach that carefully tracks and monitors the results of advertising campaigns as we seek to maintain appropriate return targets.
Global Considerations
We are continuing to closely monitor macroeconomic impacts, including, but not limited to, geopolitical events and rising and fluctuating interest rates and inflation on our business, results of operations and financial results. These developments have and may continue to negatively impact global economic activity and consumer behavior, which have and may continue to adversely affect our business and our results of operations. As our customers react to these global economic conditions, we may take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity.
While it is difficult to quantify and predict all of the impacts these global economic events, including rising and fluctuating inflation and interest rates, will have on our business and to predict consumer spending in the near term, we believe the long-term opportunity that we see for shopping for the home online remains unchanged.
We will continue to monitor economic conditions as we work to manage our business to meet the evolving needs of our customers, employees, suppliers, partners, stockholders and communities.
Factors Affecting our Performance
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2023.
Key Financial Statement and Operating Metrics
We measure our business using the key financial statement and operating metrics that are reflected in the below table. See “Non-GAAP Financial Measures” below for more information regarding our use of Adjusted EBITDA, Free Cash Flow and Adjusted Diluted Earnings or Loss per Share and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.
Our Free Cash Flow and Adjusted Diluted Earnings or Loss per Share are measured on a consolidated basis, while our Adjusted EBITDA is measured on a consolidated and reportable segment basis. All other key financial statement and operating metrics are derived and reported from our consolidated net revenue.
We use the following metrics to assess the near and longer-term performance of our overall business: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 | | |
| | | | | | | | | | |
| | (in millions, except LTM net revenue per active customer, average order value and per share data) |
Key Financial Statement Metrics: | | | | | | | | | | |
Net revenue | | $ | 3,117 | | | $ | 3,171 | | | $ | 5,846 | | | $ | 5,945 | | | |
Gross profit | | $ | 941 | | | $ | 985 | | | $ | 1,760 | | | $ | 1,806 | | | |
Loss from operations | | $ | (35) | | | $ | (142) | | | $ | (270) | | | $ | (489) | | | |
Net loss | | $ | (42) | | | $ | (46) | | | $ | (290) | | | $ | (401) | | | |
Loss per share: | | | | | | | | | | |
Basic | | $ | (0.34) | | | $ | (0.41) | | | $ | (2.39) | | | $ | (3.60) | | | |
Diluted | | $ | (0.34) | | | $ | (0.41) | | | $ | (2.39) | | | $ | (3.60) | | | |
Net cash provided by operating activities | | $ | 245 | | | $ | 217 | | | $ | 106 | | | $ | 70 | | | |
Key Operating Metrics: | | | | | | | | | | |
Active customers (1) | | 22 | | | 22 | | | 22 | | | 22 | | | |
LTM net revenue per active customer (2) | | $ | 540 | | | $ | 545 | | | $ | 540 | | | $ | 545 | | | |
Orders delivered (3) | | 10 | | | 10 | | | 20 | | | 20 | | | |
Average order value (4) | | $ | 313 | | | $ | 307 | | | $ | 299 | | | $ | 297 | | | |
Non-GAAP Financial Measures: | | | | | | | | | | |
Adjusted EBITDA | | $ | 163 | | | $ | 128 | | | $ | 238 | | | $ | 114 | | | |
Free Cash Flow | | $ | 183 | | | $ | 128 | | | $ | (10) | | | $ | (106) | | | |
Adjusted Diluted Earnings (Loss) per Share | | $ | 0.47 | | | $ | 0.21 | | | $ | 0.16 | | | $ | (0.90) | | | |
| | | | | | | | | | |
(1) The number of active customers represents the total number of individual customers who have purchased at least once directly from our sites during the preceding twelve-month period. The change in active customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the last twelve months. We view the number of active customers as a key indicator of our growth.
(2) Last twelve months (“LTM”) net revenue per active customer represents our total net revenue in the last twelve months divided by our total number of active customers for the same preceding twelve-month period. We view LTM net revenue per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior.
(3) Orders delivered represent the total orders delivered in any period, inclusive of orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data. We recognize net revenue when an order is delivered, and therefore orders delivered, together with average order value, is an indicator of the net revenue we expect to recognize in a given period. We view orders delivered as a key indicator of our growth.
(4) We define average order value as total net revenue in a given period divided by the orders delivered in that period. We view average order value as a key indicator of the mix of products on our sites, the mix of offers and promotions and the purchasing behavior of our customers.
Results of Consolidated Operations
Comparison of the three months ended June 30, 2024 and 2023
Net revenue
During the three months ended June 30, 2024, net revenue decreased by $54 million, or 1.7%, compared to the same period in 2023, which reflects continued macroeconomic pressures felt by consumers. The decrease in net revenue is due to lower order volume, which was driven by challenges in the category, compared to the same period in 2023.
During the three months ended June 30, 2024, our U.S. net revenue decreased by 2.0% and International net revenue increased by 0.3% compared to the same period in 2023. During the three months ended June 30, 2024, International Net Revenue Constant Currency Growth was 1.3% (see “Non-GAAP Financial Measures” below for more information regarding our use of Net Revenue Constant Currency Growth).
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
U.S. net revenue | | $ | 2,730 | | | $ | 2,785 | | | (2.0) | % |
International net revenue | | 387 | | | 386 | | | 0.3 | % |
Net revenue | | $ | 3,117 | | | $ | 3,171 | | | (1.7) | % |
For more information on our segments, see Note 10, Segment and Geographic Information, included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q.
Cost of goods sold
Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs, including associated applicable customs duties and fees earned for supplier services rendered. During the three months ended June 30, 2024, cost of goods sold decreased by $10 million, or 0.5%, compared to the same period in 2023. The decrease in cost of goods sold is primarily driven by operational cost savings initiatives and partially due to lower order volume, which was driven by challenges in the category compared to the same period in 2023.
As a percentage of net revenue, cost of goods sold increased to 69.8% for the three months ended June 30, 2024 compared to 68.9% in the same period in 2023 due to mix shifts and lower net revenue.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
Cost of goods sold | | $ | 2,176 | | $ | 2,186 | | (0.5) | % |
As a percentage of net revenue | | 69.8 | % | | 68.9 | % | | |
| | | | | | |
Operating expenses
Operating expenses consist of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses, impairment and other related net charges and restructuring charges. We disclose separately the equity-based compensation and related taxes that are included in customer service and merchant fees and selling, operations, technology and general and administrative expenses. | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
Customer service and merchant fees (1) | | $ | 121 | | | $ | 144 | | | (16.0) | % |
Advertising | | 365 | | | 352 | | | 3.7 | % |
Selling, operations, technology, general and administrative (1) | | 489 | | | 630 | | | (22.4) | % |
Impairment and other related net charges | | 1 | | | 1 | | | — | % |
| | | | | | |
Total operating expenses | | $ | 976 | | | $ | 1,127 | | | (13.4) | % |
As a percentage of net revenue: | | | | | | |
Customer service and merchant fees (1) | | 3.9 | % | | 4.5 | % | | |
Advertising | | 11.7 | % | | 11.1 | % | | |
Selling, operations, technology, general and administrative (1) | | 15.7 | % | | 19.9 | % | | |
Impairment and other related net charges | | — | % | | — | % | | |
| | | | | | |
| | 31.3 | % | | 35.5 | % | | |
(1) Includes equity-based compensation and related taxes as follows: | | | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| | 2024 | | 2023 |
| | | | |
| | (in millions) |
Customer service and merchant fees | | $ | 5 | | | $ | 8 | |
Selling, operations, technology, general and administrative | | $ | 90 | | | $ | 157 | |
During the three months ended June 30, 2024, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative decreased by $70 million, or 42.4%, compared to the same period in 2023, primarily driven by a decrease in units granted in 2024 compared to the same period in 2023.
The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes: | | | | | | | | | | | | | | |
| | Three Months Ended June 30, |
| | 2024 | | 2023 |
| | | | |
Customer service and merchant fees | | 3.7 | % | | 4.3 | % |
Selling, operations, technology, general and administrative | | 12.8 | % | | 14.9 | % |
| | | | |
| | | | |
Customer Service and Merchant Fees
During the three months ended June 30, 2024, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $20 million, or 14.7%, compared to the same period in 2023. The decrease in customer service and merchant fees is primarily due to decreased compensation costs in 2024 compared to the same period in 2023.
As a percentage of net revenue, total customer service and merchant fees decreased to 3.9% for the three months ended June 30, 2024 compared to 4.5% in the same period in 2023 primarily due to decreased compensation costs.
Advertising
During the three months ended June 30, 2024, our advertising expenses increased by $13 million, or 3.7%, compared to the same period in 2023. The increase is due to advertising holdbacks in the second quarter of 2023 as well as efforts to maintain our efficiency targets.
As a percentage of net revenue, advertising expenses increased to 11.7% for the three months ended June 30, 2024 compared to 11.1% in the same period in 2023 due, in part, to changes in advertising channel mix and our efforts to drive efficiency across our channel portfolio.
Selling, operations, technology, general and administrative
During the three months ended June 30, 2024, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $74 million, or 15.6%, compared to the same period in 2023. The decrease is primarily due to decreased compensation costs.
As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 15.7% for the three months ended June 30, 2024, compared to 19.9% in the same period in 2023, primarily due to decreased compensation costs.
Impairment and other related net charges
During the three months ended June 30, 2024, impairment and other related net charges remained constant at $1 million compared to the same period in 2023.
During the three months ended June 30, 2024, we recorded charges of $1 million related to changes in sublease market conditions for an identified U.S. office location. During the three months ended June 30, 2023, we recorded charges of $1 million related to construction in progress assets at identified U.S. locations.
Interest expense, net
During the three months ended June 30, 2024, interest expense, net decreased by $1 million, or 20.0%, compared to the same period in 2023.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
Interest expense, net | | $ | (4) | | | $ | (5) | | | (20.0) | % |
Other (expense) income, net
During the three months ended June 30, 2024, other (expense) income, net increased by $4 million or 133.3%, compared to the same period in 2023. Included in other (expense) income, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
Other (expense) income, net | | $ | (1) | | | $ | 3 | | | (133.3) | % |
Gain on debt extinguishment
During the three months ended June 30, 2024, gain on debt extinguishment decreased by $100 million or 100.0%, compared to the same period in 2023.
During the three months ended June 30, 2023, we recorded a $100 million gain on debt extinguishment, representing the difference between the cash paid for principal of $514 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $614 million.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
Gain on debt extinguishment | | $ | — | | | $ | 100 | | | (100.0) | % |
Provision for income taxes, net
During the three months ended June 30, 2024, our provision for income taxes, net remained constant at $2 million compared to the same period in 2023. Refer to Note 8, Income Taxes, included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q for additional information.
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
Provision for income taxes, net | | $ | 2 | | | $ | 2 | | | — | % |
Comparison of the six months ended June 30, 2024 and 2023
Net revenue
During the six months ended June 30, 2024, net revenue decreased by $99 million, or 1.7%, compared to the same period in 2023, which reflects continued macroeconomic pressures felt by consumers. The decrease in net revenue is due to lower order volume, which was driven by challenges in the category, compared to the same period in 2023.
During the six months ended June 30, 2024, our U.S. net revenue decreased by 1.5% and International net revenue decreased by 2.7% compared to the same period in 2023. During the six months ended June 30, 2024, International Net Revenue Constant Currency Growth was (3.0)% (see “Non-GAAP Financial Measures” below for more information regarding our use of Net Revenue Constant Currency Growth). | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | |
| | 2024 | | 2023 | | % Change |
| | | | | | |
| | (in millions) | | |
U.S. net revenue | | $ | 5,121 | | | $ | 5,200 | | | (1.5) | % |
International net revenue | | 725 | | | 745 | | | (2.7) | % |
Net revenue | | $ | 5,846 | | | $ | 5,945 | | | (1.7) | % |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
For more information on our segments, see Note 10, Segment and Geographic Information, included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q.
Cost of goods sold
Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs, including associated applicable customs duties and fees earned for supplier services rendered. During the six months ended June 30, 2024, cost of goods sold decreased by $53 million, or 1.3%, compared to the same period in 2023. The decrease in cost of goods sold is primarily driven by operational cost savings initiatives and partially due to lower order volume, which was driven by challenges in the category compared to the same period in 2023.
As a percentage of net revenue, cost of goods sold increased to 69.9% for the six months ended June 30, 2024, compared to 69.6% in the same period in 2023 du