Wayfair(US:W)2024-08-01 20:06markdown PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Wayfair Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' deficit, and cash flows, along with detailed notes explaining significant accounting policies, supplemental disclosures, debt, equity, and segment information for the periods ended June 30, 2024 and 2023 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202024%20and%20December%2031%2C%202023) | Metric | Dec 31, 2023 (in millions) | Jun 30, 2024 (in millions) | | :----------------------------- | :------------------------- | :------------------------- | | Total Assets | $3,474 | $3,436 | | Total Liabilities | $6,181 | $6,196 | | Total Stockholders' Deficit | $(2,707) | $(2,760) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023) | Metric (in millions) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | 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) | | Basic Loss per share | $(0.34) | $(0.41) | $(2.39) | $(3.60) | | Diluted Loss per share | $(0.34) | $(0.41) | $(2.39) | $(3.60) | [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023) | Metric (in millions) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(42) | $(46) | $(290) | $(401) | | Foreign currency translation adjustments | $1 | $(1) | $1 | $1 | | Net unrealized gain on available-for-sale investments | $0 | $0 | $0 | $1 | | Comprehensive loss | $(41) | $(47) | $(289) | $(399) | [Condensed Consolidated Statements of Stockholders' Deficit](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023) | Metric (in millions) | Dec 31, 2023 | Jun 30, 2024 | | :------------------- | :----------- | :----------- | | Additional paid-in capital | $1,316 | $1,552 | | Accumulated deficit | $(4,018) | $(4,308) | | Total stockholders' deficit | $(2,707) | $(2,760) | - Equity-based compensation contributed **$233 million** to additional paid-in capital for the six months ended June 30, 2024[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202024%20and%202023) | Metric (in millions) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $106 | $70 | | Net cash (used in) provided by investing activities | $(127) | $49 | | Net cash provided by financing activities | $3 | $77 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(18) | $199 | | Cash, cash equivalents and restricted cash, End of period | $1,308 | $1,249 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) - Wayfair is evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) on its financial statements[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 2. Supplemental Financial Statement Disclosures](index=10&type=section&id=2.%20Supplemental%20Financial%20Statement%20Disclosures) | Metric (in millions) | Dec 31, 2023 | Jun 30, 2024 | | :------------------- | :----------- | :----------- | | Accounts receivable, net | $140 | $161 | | Contract liabilities | $204 | $232 | - Wayfair incurred **$79 million** in restructuring charges for the six months ended June 30, 2024, primarily due to a workforce reduction of approximately **1,650 employees** in January 2024[33](index=33&type=chunk) [Note 3. Cash, Cash Equivalents and Restricted Cash, Investments and Fair Value Measurements](index=11&type=section&id=3.%20Cash%2C%20Cash%20Equivalents%20and%20Restricted%20Cash%2C%20Investments%20and%20Fair%20Value%20Measurements) | Metric (in millions) | Dec 31, 2023 | Jun 30, 2024 | | :------------------- | :----------- | :----------- | | Cash and cash equivalents | $1,322 | $1,304 | | Short-term investments | $29 | $39 | | Total liquidity | $1,351 | $1,343 | - Interest income for the six months ended June 30, 2024, was **$26 million**, up from **$18 million** in the prior year[34](index=34&type=chunk) [Note 4. Debt and Other Financing](index=13&type=section&id=4.%20Debt%20and%20Other%20Financing) | Debt Instrument | Principal Amount (Jun 30, 2024, in millions) | Net Carrying Amount (Jun 30, 2024, in millions) | | :-------------- | :------------------------------------------- | :---------------------------------------------- | | 2024 Notes | $117 | $117 | | 2025 Notes | $754 | $752 | | 2026 Notes | $949 | $945 | | 2027 Notes | $690 | $682 | | 2028 Notes | $690 | $680 | | 2025 Accreting Notes | $38 | $38 | | Total Debt | | $3,214 | - Wayfair has a **$600 million revolving credit facility**, with **$69 million in outstanding letters of credit** and no revolving loans outstanding as of June 30, 2024[39](index=39&type=chunk) - The conditional conversion features for the 2024, 2025, 2026, 2027, and 2028 Notes were not triggered during Q2 2024, meaning they are not convertible in Q3 2024 based on sales price conditions[44](index=44&type=chunk) [Note 5. Commitments and Contingencies](index=16&type=section&id=5.%20Commitments%20and%20Contingencies) - Wayfair does not believe current legal matters will have a material adverse effect on its financial condition[58](index=58&type=chunk) - The Canada Border Services Agency (CBSA) review has an estimated potential liability of approximately **$29 million**, including duties and interest, for which Wayfair is appealing[59](index=59&type=chunk)[60](index=60&type=chunk) [Note 6. Stockholders' Deficit](index=17&type=section&id=6.%20Stockholders'%20Deficit) - **56,347,119 shares** of Class B common stock have been converted to Class A common stock since the IPO through June 30, 2024[62](index=62&type=chunk) - No shares were repurchased under stock repurchase programs during the three and six months ended June 30, 2024 and 2023[63](index=63&type=chunk) [Note 7. Equity-Based Compensation](index=17&type=section&id=7.%20Equity-Based%20Compensation) | Metric (in millions) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | | Total equity-based compensation expense | $214 | $308 | - As of June 30, 2024, **13,103,651 shares** of Class A common stock remained available for future grants under the 2023 Incentive Award Plan[65](index=65&type=chunk) [Note 8. Income Taxes](index=18&type=section&id=8.%20Income%20Taxes) - The provision for income taxes, net, for the three and six months ended June 30, 2024, was **$2 million** and **$5 million**, respectively, primarily due to tax benefits from losses and state/foreign taxes[70](index=70&type=chunk) - The OECD Pillar 2 global minimum tax rules did not have a material impact on Wayfair's income tax provision for the three and six months ended June 30, 2024[71](index=71&type=chunk) [Note 9. Loss per Share](index=18&type=section&id=9.%20Loss%20per%20Share) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic Loss per share | $(0.34) | $(0.41) | $(2.39) | $(3.60) | | Diluted Loss per share | $(0.34) | $(0.41) | $(2.39) | $(3.60) | - Potential common shares from anti-dilutive securities, including unvested restricted stock units and shares related to convertible debt instruments, totaled **39 million** for the three and six months ended June 30, 2024[76](index=76&type=chunk) [Note 10. Segment and Geographic Information](index=19&type=section&id=10.%20Segment%20and%20Geographic%20Information) | Metric (in millions) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | 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 | | U.S. Adjusted EBITDA | $199 | $161 | $320 | $190 | | International Adjusted EBITDA | $(36) | $(33) | $(82) | $(76) | - International Net Revenue Constant Currency Growth was **1.3%** for the three months ended June 30, 2024, but **decreased by 3.0%** for the six months ended June 30, 2024[101](index=101&type=chunk)[126](index=126&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Wayfair's financial condition and results of operations, highlighting key performance drivers, macroeconomic impacts, and a detailed comparison of financial results for the three and six months ended June 30, 2024 and 2023, also discussing liquidity, capital resources, and non-GAAP financial measures [Overview](index=22&type=section&id=Overview) - Net revenue **decreased by 1.7%** for the three months ended June 30, 2024, compared to the same period in 2023, primarily due to lower order volume and category challenges[92](index=92&type=chunk)[100](index=100&type=chunk) - As of June 30, 2024, Wayfair had **22 million active customers**, and **81.7%** of orders came from repeat buyers during the three months ended June 30, 2024[92](index=92&type=chunk)[99](index=99&type=chunk) - Wayfair is closely monitoring macroeconomic impacts, including geopolitical events, rising interest rates, and inflation, which may negatively affect global economic activity and consumer behavior[93](index=93&type=chunk) [Key Financial Statement and Operating Metrics](index=24&type=section&id=Key%20Financial%20Statement%20and%20Operating%20Metrics) | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net revenue (in millions) | $3,117 | $3,171 | $5,846 | $5,945 | | Net loss (in millions) | $(42) | $(46) | $(290) | $(401) | | Active customers (in millions) | 22 | 22 | 22 | 22 | | LTM net revenue per active customer | $540 | $545 | $540 | $545 | | Orders delivered (in millions) | 10 | 10 | 20 | 20 | | Average order value | $313 | $307 | $299 | $297 | | Adjusted EBITDA (in millions) | $163 | $128 | $238 | $114 | | Free Cash Flow (in millions) | $183 | $128 | $(10) | $(106) | | Adjusted Diluted Earnings (Loss) per Share | $0.47 | $0.21 | $0.16 | $(0.90) | [Results of Consolidated Operations](index=25&type=section&id=Results%20of%20Consolidated%20Operations) [Comparison of the three months ended June 30, 2024 and 2023](index=25&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202024%20and%202023) | Metric (in millions) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | | :------------------- | :-------------------------- | :-------------------------- | :------- | | Net revenue | $3,117 | $3,171 | (1.7)% | | Cost of goods sold | $2,176 | $2,186 | (0.5)% | | Gross profit | $941 | $985 | (4.5)% | | Total operating expenses | $976 | $1,127 | (13.4)% | | Loss from operations | $(35) | $(142) | (75.4)% | | Net loss | $(42) | $(46) | (8.7)% | - Equity-based compensation and related taxes **decreased by $70 million (42.4%)** for the three months ended June 30, 2024, compared to the same period in 2023[107](index=107&type=chunk) - Advertising expenses **increased by $13 million (3.7%)** for the three months ended June 30, 2024, due to advertising holdbacks in Q2 2023 and efforts to maintain efficiency targets[111](index=111&type=chunk) [Comparison of the six months ended June 30, 2024 and 2023](index=28&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202024%20and%202023) | Metric (in millions) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :------------------- | :-------------------------- | :-------------------------- | :------- | | Net revenue | $5,846 | $5,945 | (1.7)% | | Cost of goods sold | $4,086 | $4,139 | (1.3)% | | Gross profit | $1,760 | $1,806 | (2.5)% | | Total operating expenses | $2,030 | $2,295 | (11.5)% | | Loss from operations | $(270) | $(489) | (44.8)% | | Net loss | $(290) | $(401) | (27.6)% | - Equity-based compensation and related taxes **decreased by $94 million (30.0%)** for the six months ended June 30, 2024, compared to the same period in 2023[132](index=132&type=chunk) - Restructuring charges **increased by $14 million (21.5%)** to **$79 million** for the six months ended June 30, 2024, due to the January 2024 workforce reductions[142](index=142&type=chunk)[143](index=143&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric (in millions) | Dec 31, 2023 | Jun 30, 2024 | | :------------------- | :----------- | :----------- | | Cash and cash equivalents | $1,322 | $1,304 | | Short-term investments | $29 | $39 | | Total liquidity | $1,351 | $1,343 | - Wayfair has a **$600 million revolving credit facility**, with **$69 million in outstanding letters of credit** and no revolving loans outstanding as of June 30, 2024[152](index=152&type=chunk) - As of June 30, 2024, Wayfair had **$1.1 billion remaining under its authorized share repurchase programs**[201](index=201&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) | Metric (in millions) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | 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) | - Adjusted EBITDA excludes depreciation and amortization, equity-based compensation, interest, other income/expense, income taxes, non-recurring items, and other non-operating performance items[170](index=170&type=chunk) - Free Cash Flow is calculated as net cash provided by or used in operating activities less Capital Expenditures[177](index=177&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - No material changes to critical accounting policies and estimates since December 31, 2023[191](index=191&type=chunk) [Recent Accounting Pronouncements](index=38&type=section&id=Recent%20Accounting%20Pronouncements) - Recent accounting pronouncements are detailed in Note 1, Summary of Significant Accounting Policies[192](index=192&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no significant changes in Wayfair's exposures to market risk since December 31, 2023 - No significant changes in market risk exposures since December 31, 2023[193](index=193&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Wayfair's management concluded that its disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2024, and reported no material changes in internal control over financial reporting during the period - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024[194](index=194&type=chunk) - No material changes in internal control over financial reporting were identified during the period[195](index=195&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Wayfair is involved in routine legal matters but does not anticipate any material adverse effects on its financial condition or operations from their outcomes - Wayfair does not believe current legal matters will have a material adverse effect on its results of operations or financial condition[199](index=199&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there are no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors since the Annual Report on Form 10-K for the year ended December 31, 2023[200](index=200&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) As of June 30, 2024, Wayfair had approximately $1.1 billion remaining under its authorized share repurchase programs, with no repurchases made during the three months ended June 30, 2024 - Approximately **$1.1 billion remaining under its authorized share repurchase programs** as of June 30, 2024[201](index=201&type=chunk) - No share repurchases were made during the three months ended June 30, 2024[201](index=201&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Co-Chairman Steve Conine and CEO Niraj Shah adopted Rule 10b5-1 trading plans on May 7, 2024, to sell up to 650,000 shares each, with plans expiring on September 5, 2025 - Co-Chairman Steve Conine and CEO Niraj Shah adopted Rule 10b5-1 trading plans on May 7, 2024, to sell up to **650,000 shares** each, with an expiration date of September 5, 2025[202](index=202&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and various XBRL-related documents - Includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and XBRL related documents[205](index=205&type=chunk) [Signatures](index=41&type=section&id=Signatures) The report is officially signed by Niraj Shah, Chief Executive Officer and President, and Kate Gulliver, Chief Financial Officer and Chief Administrative Officer, on August 1, 2024 - The report was signed by Niraj Shah (CEO) and Kate Gulliver (CFO) on August 1, 2024[209](index=209&type=chunk)