10-Q 1 w-20210930.htm 10-Q w-20210930
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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 September 30, 2021
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 PlaceBostonMA02116
(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 classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share WThe 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 FilerAccelerated filer 
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
Class Outstanding at October 29, 2021
Class A Common Stock, $0.001 par value per share  77,980,692
Class B Common Stock, $0.001 par value per share 26,563,761


WAYFAIR INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2021
  Page
  
 
  
 
   
 
  
 

  
 
  
 

  
 
  
  
  
  
 
  
       39
  
 
1

PART I
 
FINANCIAL INFORMATION

Item 1. Unaudited Consolidated and Condensed Financial Statements

WAYFAIR INC.
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Unaudited)
September 30,
2021
December 31,
2020
(in thousands, except share and per share data)
Assets:  
Current assets  
Cash and cash equivalents$1,864,821 $2,129,440 
Short-term investments528,392 461,698 
Accounts receivable, net166,497 110,299 
Inventories66,621 52,152 
Prepaid expenses and other current assets328,862 292,213 
Total current assets2,955,193 3,045,802 
Operating lease right-of-use assets816,951 808,375 
Property and equipment, net653,673 684,306 
Other non-current assets40,400 31,446 
Total assets$4,466,217 $4,569,929 
Liabilities and Stockholders' Deficit:
Current liabilities
Accounts payable$1,072,529 $1,156,624 
Other current liabilities957,963 1,008,970 
Total current liabilities2,030,492 2,165,594 
Long-term debt3,049,475 2,659,243 
Operating lease liabilities867,595 869,958 
Other non-current liabilities48,736 67,031 
Total liabilities5,996,298 5,761,826 
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 September 30, 2021 and December 31, 2020
  
Class A common stock, par value $0.001 per share: 500,000,000 shares authorized, 77,666,738 and 72,980,490 shares issued and outstanding at September 30, 2021 and December 31, 2020
78 73 
Class B common stock, par value $0.001 per share: 164,000,000 shares authorized, 26,563,761 and 26,564,234 shares issued and outstanding at September 30, 2021 and December 31, 2020
26 27 
Additional paid-in capital
221,733 698,482 
Accumulated deficit(1,747,030)(1,885,950)
Accumulated other comprehensive loss(4,888)(4,529)
Total stockholders’ deficit(1,530,081)(1,191,897)
Total liabilities and stockholders’ deficit$4,466,217 $4,569,929 
See notes to unaudited consolidated and condensed financial statements.
2

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
(in thousands, except per share data)
Net revenue$3,121,083 $3,839,570 $10,456,227 $10,474,305 
Cost of goods sold2,238,355 2,692,142 7,442,412 7,426,724 
Gross profit882,728 1,147,428 3,013,815 3,047,581 
Operating expenses:  
Customer service and merchant fees139,931 139,589 431,802 372,825 
Advertising315,024 344,025 1,032,662 1,037,562 
Selling, operations, technology, general and administrative497,571 441,960 1,435,388 1,377,410 
Customer service center impairment and other charges  12,212  
Total operating expenses952,526 925,574 2,912,064 2,787,797 
(Loss) income from operations(69,798)221,854 101,751 259,784 
Interest expense, net(8,406)(36,315)(23,620)(87,472)
Other income (expense), net3,889 (13,584)(1,657)(10,720)
(Loss) income before income taxes(74,315)171,955 76,474 161,592 
Provision (benefit) for income taxes, net3,706 (1,211)5,833 414 
Net (loss) income$(78,021)$173,166 $70,641 $161,178 
(Loss) earnings per share:
Basic$(0.75)$1.82 $0.68 $1.70 
Diluted$(0.75)$1.67 $0.65 $1.64 
Weighted-average number of shares of common stock outstanding used in computing per share amounts:
Basic104,054 95,373 103,57994,767 
Diluted104,054 109,200 106,60098,021 
 
See notes to unaudited consolidated and condensed financial statements.

3

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
 
 Three months ended September 30,Nine months ended September 30,
 2021202020212020
(in thousands)
Net (loss) income$(78,021)$173,166 $70,641 $161,178 
Other comprehensive (loss) income:
Foreign currency translation adjustments(248)(895)(345)(665)
Net unrealized gain (loss) on available-for-sale investments39 (606)(14)67 
Comprehensive (loss) income$(78,230)$171,665 $70,282 $160,580 
 
See notes to unaudited consolidated and condensed financial statements
4


WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)

Three Months Ended
Class A and Class B Common Stock
SharesAmountAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive Loss
Total
Stockholders'
Deficit
(in thousands)
Balance at June 30, 202095,065 $95 $1,295,971 $(2,082,934)$(524)$(787,392)
Net income— — — 173,166 — 173,166 
Other comprehensive loss— — — — (1,501)(1,501)
Exercise of options to purchase common stock6 — 161 — — 161 
Issuance of common stock upon vesting of RSUs787 1 — — — 1 
Equity-based compensation expense — — 74,425 — — 74,425 
Repurchase of common stock(844)(1)(280,235)— — (280,236)
Shares issued upon conversion of convertible notes583 1 151,419 — — 151,420 
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes— — (829,004)— — (829,004)
Equity component of issuance of convertible notes, net (Note 4)— — 39,374 — — 39,374 
Balance at September 30, 202095,597 $96 $452,111 $(1,909,768)$(2,025)$(1,459,586)
Balance at June 30, 2021103,577 $104 $131,706 $(1,669,009)$(4,679)$(1,541,878)
Net loss— — — (78,021)— (78,021)
Other comprehensive loss— — — — (209)(209)
Issuance of common stock upon vesting of RSUs649  — — —  
Equity-based compensation expense — — 89,621 — — 89,621 
Shares issued upon conversion of convertible notes (Note 4)4 — 406 — — 406 
Balance at September 30, 2021104,230 $104 $221,733 $(1,747,030)$(4,888)$(1,530,081)

See notes to unaudited consolidated and condensed financial statements.
5

Nine Months Ended
Class A and Class B Common Stock
SharesAmountAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Deficit
(in thousands)
Balance at December 31, 201993,600 $94 $1,122,548 $(2,065,423)$(1,427)$(944,208)
Net income— — — 161,178 — 161,178 
Other comprehensive loss— — — — (598)(598)
Exercise of options to purchase common stock24 — 380 — — 380 
Issuance of common stock upon vesting of RSUs2,234 2 — — — 2 
Equity-based compensation expense— — 208,740 — — 208,740 
Repurchase of common stock(844)(1)(280,235)— — (280,236)
Shares issued upon conversion of convertible notes583 1 151,419 — — 151,420 
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes— — (829,004)— — (829,004)
Equity component of issuance of convertible notes, net of premium paid on capped calls— — 78,263 — — 78,263 
Cumulative effect of adopting new credit allowance standard— — — (5,523)— (5,523)
Balance at September 30, 202095,597 $96 $452,111 $(1,909,768)$(2,025)$(1,459,586)
Balance at December 31, 202099,545 $100 $698,482 $(1,885,950)$(4,529)$(1,191,897)
Net income— — — 70,641 — 70,641 
Other comprehensive loss— — — — (359)(359)
Exercise of options to purchase common stock19 — 56 — — 56 
Issuance of common stock upon vesting of RSUs2,011 1 — — — 1 
Equity-based compensation expense — — 256,654 — — 256,654 
Repurchase of common stock(983)(1)(300,207)— — (300,208)
Shares issued upon conversion of convertible notes (Note 4)3,638 4 265,230 — — 265,234 
Cumulative effect of adopting new convertible debt standard— — (698,482)68,279 — (630,203)
Balance at September 30, 2021104,230 $104 $221,733 $(1,747,030)$(4,888)$(1,530,081)

See notes to unaudited consolidated and condensed financial statements.

6

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) 
 Nine months ended September 30,
 20212020
(in thousands)
Cash flows from operating activities:  
Net income$70,641 $161,178 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization240,154 208,532 
Equity-based compensation237,073 197,199 
Amortization of discount and issuance costs on convertible notes5,873 78,225 
Loss on impairment12,212  
Other non-cash adjustments2,483 12,065 
Changes in operating assets and liabilities:
Accounts receivable, net(57,568)(14,891)
Inventories(14,823)7,602 
Prepaid expenses and other current assets(37,982)(93,055)
Other assets833 612 
Accounts payable and other current liabilities(133,234)597,173 
Other liabilities(4,475)55,348 
Cash flows from operating activities321,187 1,209,988 
Cash flows from investing activities: 
Purchase of short- and long-term investments(774,708)(19,994)
Sale and maturities of short- and long-term investments701,091 466,310 
Purchase of property and equipment(77,593)(146,303)
Site and software development costs(128,634)(109,678)
Other investing activities, net5,200 (124)
Net cash (for) from investing activities(274,644)190,211 
Cash flows from financing activities: 
Repurchase of common stock(300,208)(280,236)
Proceeds from borrowings 200,000 
Repayment of borrowings (200,000)
Proceeds from issuance of convertible notes, net of issuance costs 2,027,758 
Premiums paid for capped call confirmations (255,024)
Payments to extinguish convertible debt (1,040,349)
Other financing activities, net(2,448)380 
Net cash (for) from financing activities(302,656)452,529 
Effect of exchange rate changes on cash and cash equivalents(8,506)7,458 
Net (decrease) increase in cash and cash equivalents(264,619)1,860,186 
Cash and cash equivalents:  
Beginning of period2,129,440 582,753 
End of period$1,864,821 $2,442,939 
Supplemental cash flow information:  
Cash paid for interest on long-term debt$18,743 $14,173 
Issuance of common stock for conversion of convertible debt$265,234 $45,447 
Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities$21,987 $38,391 
See notes to unaudited consolidated and condensed financial statements.
7

Wayfair Inc.
Notes to Consolidated and Condensed Financial Statements
(Unaudited)
 
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated and condensed 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, references to “we,” “us” and “our” refer to Wayfair Inc. and its subsidiaries. In our opinion, the accompanying unaudited consolidated and condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the 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 our Annual Report on Form 10-K for the year ended December 31, 2020. Furthermore, interim results are not necessarily indicative of the results for the full year ended December 31, 2021 or future periods.

Wayfair believes that other than the adoption of new accounting pronouncements that follow, there have been no significant changes during the three and nine months ended September 30, 2021 to the items disclosed in Note 1, Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the year ended December 31, 2020.
Adoption of New Accounting Pronouncements
Convertible Debt
Wayfair adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06") on January 1, 2021 using the modified retrospective approach for all financial instruments that are outstanding as of the adoption date. The new standard eliminates the cash conversion and beneficial conversion feature models that previously required separate accounting for conversion features. Entities that had those conversion features will report less interest expense as those conversion features were recorded as debt discounts which were amortized over the term of the debt. In addition, this ASU requires the application of the if-converted method when calculating diluted earnings per share. Under the new standard, the conversion of debt that is accounted for as a liability in its entirety will not result in any gain or loss if the conversion feature is exercised according to the original conversion terms. If those terms allowed the issuer to include cash as part of the settlement of the conversion feature, the issuer will first reduce the carrying amount of the convertible debt, including any unamortized premium, discount or issuance costs, by the value of the cash or other assets transferred and then recognize the remaining carrying value of the debt in the capital accounts.
The adoption of ASU 2020-06 resulted in the following adjustments to the consolidated and condensed balance sheets:
January 1, 2021Adoption of ASU 2020-06December 31, 2020
(in thousands)
Balance sheet line item:
Long-term debt$3,310,065 $650,822 $2,659,243 
Other non-current liabilities$46,413 $(20,618)$67,031 
Additional paid-in capital
$ $(698,482)$698,482 
Accumulated deficit$(1,817,671)$68,279 $(1,885,950)
8

The adoption of ASU 2020-06 resulted in the following adjustments to our calculations of basic and diluted loss per share for the three months ended September 30, 2021:
Under ASU 2020-06DifferenceUnder Legacy Accounting
Loss per share:
Basic$(0.75)$0.28 $(1.03)
Diluted$(0.75)$0.28 $(1.03)
The adoption of ASU 2020-06 resulted in the following adjustments to our calculations of basic and diluted earnings (loss) per share for the nine months ended September 30, 2021:
Under ASU 2020-06DifferenceUnder Legacy Accounting
Earnings (loss) per share:
Basic$0.68 $1.04 $(0.36)
Diluted$0.65 $1.01 $(0.36)
The adoption of ASU 2020-06 did not materially impact our cash flows or compliance with debt covenants.
Income Taxes
Wayfair adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) on January 1, 2021, using the modified retrospective approach. This ASU simplifies the accounting for income taxes, removes certain exceptions to the general principles in Topic 740, and clarifies and amends existing guidance to improve consistent application. The effect of adoption of the new guidance was not material to our consolidated financial statements.
Investments
Wayfair classifies investments in certificates of deposits and marketable securities with original maturities of greater than three months as short-term investments and long-term investments on our consolidated balance sheets. Short-term investments mature in less than twelve months from the balance sheet date. We determine the cost basis of an investment sold using the specific identification method. To the extent the amortized cost basis of the available-for-sale debt securities exceeds the fair value, management assesses the debt securities for credit loss. However, management considers the risk of credit loss to be minimized by Wayfair’s policy of investing in financial instruments issued by highly-rated financial institutions. When assessing the risk of credit loss, management considers factors such as the severity and the reason of the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management’s intended holding period and time horizon for selling.

From time to time, Wayfair may enter into equity investments that align with our organizational strategies and growth initiatives. Equity investments in companies for which we do not have the ability to exercise significant influence are accounted for at estimated fair value, with adjustments for observable changes in prices or impairments, and are classified as other non-current assets on our consolidated and condensed balance sheets with adjustments recognized in other income (expense), net on our consolidated and condensed statements of operations. Each reporting period, we perform a qualitative assessment to evaluate whether each investment is impaired. Our assessment includes a review of recent operating results and trends, recent sales or acquisitions of the investee securities and other readily observable information. If the investment is impaired, we write it down to its estimated fair value.

Equity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee, and we classify equity-method investments as other non-current assets on our consolidated and condensed balance sheets. Our share of the earnings or losses as reported by equity-method investees, amortization of basis differences, related gains or losses, and impairments, if any, are recognized in our consolidated and condensed statements of operations. Each reporting period, we evaluate whether declines in fair value below carrying value are other-than-temporary and if so, we write down the investment to its estimated fair value.
9

2. Supplemental Financial Statement Disclosures
Accounts Receivable, Net
As of September 30, 2021, we reported accounts receivable of $166.5 million, net of allowance for credit losses of $18.6 million. As of December 31, 2020, we reported accounts receivable of $110.3 million, net of allowance for credit losses of $21.4 million. The changes in the allowance for credit losses were not material for the three and nine months ended September 30, 2021. Management believes credit risk is mitigated since approximately 99% of the net revenue recognized for the three and nine months ended September 30, 2021 was collected in advance of recognition.
Contractual Liabilities
Contractual liabilities included in other current liabilities was $287.6 million at September 30, 2021 and $298.1 million at December 31, 2020. During the nine months ended September 30, 2021, Wayfair recognized $239.4 million of net revenue that was included in other current liabilities as of December 31, 2020.
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 detail.
Customer Service Center Impairment and Other Charges
In the first quarter of 2021, Wayfair enacted a plan to consolidate certain customer service centers in identified U.S. locations to transition toward virtual service models. Factors that influenced our decision were our ability to utilize a greater use of remote and home office applications and our ability to provide superior customer care. As a result, we recorded a charge of $12.2 million during the first quarter of 2021, which included $6.3 million for the non-cash impairment of right-of-use (“ROU”) assets, $5.0 million for the non-cash accelerated depreciation of fixed assets and the remainder for other items. The impairment of ROU assets represents the excess of estimated future remaining call center lease commitments over expected future sublease income in certain affected facilities.
3. Cash and Cash Equivalents, Investments and Fair Value Measurements
Investments
As of September 30, 2021 and December 31, 2020, all of 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. Wayfair did not have any realized gains nor losses during the three and nine months ended September 30, 2021 or during the three months ended September 30, 2020. During the nine months ended September 30, 2020, Wayfair collected $161.3 million of proceeds from the sale of long-term investments and recognized a realized gain of $0.8 million. During the three and nine months ended September 30, 2021 and September 30, 2020, Wayfair did not recognize any credit losses related to its available-for-sale debt securities. Further, as of September 30, 2021 and December 31, 2020, Wayfair did not record an allowance for credit losses related to its available-for-sale debt securities.
In the second quarter of 2021, Wayfair entered into an agreement with a vendor in which Wayfair received warrants to acquire shares of the vendor’s common stock. In the third quarter of 2021, the vendor completed an initial public offering of its common stock. As of September 30, 2021, these warrants, which vest over a five-year period, were valued at approximately $7.6 million and were classified in other non-current assets. We recorded an increase in the fair value of the warrants in the three and nine months ended September 30, 2021 of $1.8 million in other income (expense), net on our consolidated and condensed statements of operations.
Furthermore, we have committed to make $20.0 million of other equity investments in connection with our impact investment initiatives. In the third quarter of 2021, Wayfair made a $5.0 million initial investment which was accounted for under the equity method. 
The following tables present details of Wayfair’s investment securities as of September 30, 2021 and December 31, 2020:
 September 30, 2021
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Short-term:    
Investment securities$528,391 $31 $(30)$528,392 
10

 December 31, 2020
 Amortized
Cost
Gross Unrealized GainsGross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Short-term:   
Investment securities$461,683 $20 $(5)$461,698 
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. We classify our cash equivalents and certificate of deposits within Level 1 because we value these investments using quoted market prices. The fair value of our Level 1 financial assets is based on quoted market prices of the identical underlying security. We classify short-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active. None of our cash and cash equivalents or investments are classified as Level 3.  
11

The following tables set forth the fair value of Wayfair’s financial assets measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020:
 September 30, 2021
 Level 1Level 2Level 3Total
(in thousands)
Cash and cash equivalents:   
Cash$502,599 $ $ $502,599 
Cash equivalents1,362,222   1,362,222 
Total cash and cash equivalents1,864,821   1,864,821 
Short-term investments:
Investment securities 528,392  528,392 
Total$1,864,821 $528,392 $ $2,393,213 
 December 31, 2020
 Level 1Level 2Level 3Total
(in thousands)
Cash and cash equivalents:    
Cash$638,621 $ $ $638,621 
Cash equivalents1,490,819   1,490,819 
Total cash and cash equivalents2,129,440   2,129,440 
Short-term investments:   
Investment securities 461,698  461,698 
Other non-current assets:
Certificate of deposit5,200   5,200 
Total$2,134,640 $461,698 $ $2,596,338 
12

4. Debt and Other Financing
The following table presents the outstanding principal amount and carrying value of debt and other financing as of the dates presented:
September 30, 2021December 31, 2020
Debt InstrumentPrincipal AmountUnamortized Debt DiscountNet Carrying AmountPrincipal AmountUnamortized Debt DiscountNet Carrying Amount
(in thousands)
2022 Notes$2,704 $(10)$2,694 $18,036 $(1,596)$16,440 
2024 Notes575,000 (6,860)568,140 575,000 (132,892)442,108 
2026 Notes948,744 (9,611)939,133 948,750 (242,911)705,839 
2025 Notes1,518,000 (13,999)1,504,001 1,518,000 (289,954)1,228,046 
2025 Accreting Notes35,868 (361)35,507 288,464 (21,654)266,810 
Total Debt$3,049,475 $2,659,243 
Short-term debt$ $ 
Long-term debt$3,049,475 $2,659,243 
Revolving Credit Facility
On March 24, 2021, Wayfair and certain of its subsidiaries (together, the “Guarantors”) and Wayfair LLC, a wholly-owned subsidiary of Wayfair, as borrower (the “Borrower”), entered into a new credit agreement (the “Credit Agreement”) with the lending institutions from time-to-time parties thereto and Citibank, N.A., in its capacity as administrative agent, collateral agent, swingline lender and a letter of credit issuer. The Credit Agreement provides for a $600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”). The Revolver replaced our previous $200 million senior secured revolving credit facility (the “Previous Revolver”), which was set to mature on February 21, 2022. Wayfair paid all amounts owed under the Previous Revolver and terminated all lending commitments thereunder. Debt issuance costs for the Revolver are included in other non-current assets and are amortized to interest expense over the Revolver’s term. As of September 30, 2021, there were no revolving loans outstanding under the Revolver.
Under the Credit Agreement, the Borrower may, from time to time, request letters of credit, which reduce the availability of credit under the Revolver. Wayfair had approximately $59.7 million outstanding letters of credit as of September 30, 2021, primarily as security for lease agreements, which reduced the availability of credit under the Revolver. Any amounts outstanding under the Revolver are due at maturity. In addition, subject to the terms and conditions set forth in the Credit Agreement, the Borrower is required to make certain mandatory prepayments prior to maturity.
The proceeds of the Revolver may be used to finance working capital, to refinance existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes. The Borrower’s obligations under the Revolver are guaranteed by the Guarantors. The obligations of the Borrower and the Guarantors are secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors, including, with certain exceptions, all of the capital stock of Wayfair’s domestic subsidiaries and 65% of the capital stock of Wayfair’s first-tier foreign subsidiaries.
Revolver borrowings bear interest through maturity at a variable rate based upon, at the Borrower’s option, either the LIBOR rate or the base rate (which is the highest of (x) the prime rate, (y) one-half of 1.00% in excess of the federal funds effective rate and (z) 1.00% in excess of the one-month LIBOR rate), plus, in each case an applicable margin. As of September 30, 2021, the applicable margin for LIBOR loans is 1.25% per annum and the applicable margin for base rate loans is 0.25% per annum. The applicable margin is subject to specified changes depending on Wayfair’s Consolidated Senior Secured Debt to Consolidated EBITDA Ratio, as defined in the Credit Agreement.
The Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict the ability of the Borrower and the Guarantors, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, or change the nature of their businesses. The Revolver also contains customary events of default, subject to thresholds and grace periods, including, among others, payment default, covenant default, cross default to other material indebtedness and judgment default. In addition, the Credit Agreement requires Wayfair to maintain a Consolidated Senior Secured Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) of 4.0 to 1.0, subject to
13

a 0.5 step-up following certain permitted acquisitions. We do not expect any of these restrictions to affect or limit our ability to conduct business in the ordinary course. As of September 30, 2021, we were in compliance with all covenants.
Convertible Non-Accreting Notes
The following table summarizes certain terms related to our outstanding non-accreting convertible notes (collectively, the “Non-Accreting Notes” and together with the 2025 Accreting Notes, the “Notes”):
Convertible Non-Accreting NotesMaturity DateAnnual Coupon RateAnnual Effective Interest RatePayment Dates for Semi-Annual Interest Payments in Arrears
2022 NotesSeptember 1, 20220.375%0.9%March 1 and September 1
2024 NotesNovember 1, 20241.125%1.5%May 1 and November 1
2026 NotesAugust 15, 20261.000%1.2%February 15 and August 15
2025 NotesOctober 1, 20250.625%0.9%April 1 and October 1
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 NotesMaturity DateFree Convertibility DateInitial Conversion Rate per $1,000 PrincipalInitial Conversion PriceRedemption Date
2022 NotesSeptember 1, 2022June 1, 20229.6100$104.06September 8, 2020
2024 NotesNovember 1, 2024August 1, 20248.5910$116.40May 8, 2022
2026 NotesAugust 15, 2026May 15, 20266.7349$148.48August 20, 2023
2025 NotesOctober 1, 2025July 1, 20252.3972$417.15October 4, 2022
2025 Accreting NotesApril 1, 2025-13.7931$72.50May 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 the notes prior to certain conversion dates (the “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 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).
14

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 following Non-Accreting Notes are convertible during the calendar quarter ended December 31, 2021: the 2022 Notes, the 2024 Notes and the 2026 Notes. The 2025 Notes are not convertible during the fourth quarter of 2021.
The holders of the 2025 Accreting Notes may convert all or a portion of their 2025 Accreting Notes at any time prior to 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 Notes may require Wayfair to repurchase all or a portion of the Notes for cash at a price equal to 100% of the principal amount (or accreted principal amount) of the 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 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 holder elects to convert their Notes upon receiving notice of redemption.
Conversions of Notes
In the three months ended September 30, 2021, holders of the 2022 Notes and 2026 Notes converted $0.4 million of aggregate principal and received 3,934 shares of Wayfair’s Class A common stock. During the nine months ended September 30, 2021, holders of the 2022 Notes and 2026 Notes converted $15.3 million of aggregate principal and received 147,374 shares of Wayfair’s Class A common stock. During the nine months ended September 30, 2021, GHEP VII Aggregator, L.P. (“Great Hill”) converted $253.1 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of Wayfair's Class A common stock. In aggregate, these conversions increased additional paid-in capital by $0.4 million and $265.2 million for the three and nine months ended September 30, 2021.
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Interest Expense
The following tables present total interest expense recognized for the Notes for the three and nine months ended September 30, 2021 and 2020, which included the reversal of interest expense we recorded in 2020 for a portion of interest accretion for the 2025 Accreting Notes that was not realized in 2021:
Three Months Ended September 30,
20212020
Convertible NotesContractual Interest ExpenseDebt Discount AmortizationTotal Interest ExpenseContractual Interest ExpenseDebt Discount AmortizationTotal Interest Expense
(in thousands)
2022 Notes$3 $5 $8 $224 $2,970 $3,194 
2024 Notes1,617 543 2,160 1,617 7,172 8,789 
2026 Notes2,372 478 2,850 2,372 8,759 11,131 
2025 Notes2,372 852 3,224 1,239 6,937 8,176 
2025 Accreting Notes225 25 250 3,310 2,632 5,942 
Total$6,589 $1,903 $8,492 $8,762 $28,470 $37,232 
Nine Months Ended September 30,
20212020
Convertible NotesContractual Interest ExpenseDebt Discount AmortizationTotal Interest ExpenseContractual Interest ExpenseDebt Discount AmortizationTotal Interest Expense
(in thousands)
2022 Notes$26 $42 $68