W Wayfair Inc

Q3 Direct Retail Net Revenue Growth of 36% Year over Year to $2.3 billion

19.1 million Active Customers, up 38% Year over Year

Wayfair Inc. (NYSE: W), one of the world’s largest online destinations for the home, today reported financial results for its third quarter ended September 30, 2019.

Third Quarter 2019 Financial Highlights

• Direct Retail net revenue, consisting of sales generated primarily through Wayfair’s sites, increased $607.2 million to $2.3 billion, up 35.9% year over year
• Gross profit was $539.9 million or 23.4% of total net revenue
• GAAP net loss was $272.0 million
• Adjusted EBITDA was $(144.2) million or (6.3)% of total net revenue
• GAAP basic and diluted net loss per share was $2.94
• Non-GAAP diluted net loss per share was $2.23
• Non-GAAP free cash flow was $(180.9) million
• At the end of the third quarter, cash, cash equivalents, and short-term and long-term investments totaled $1.3 billion

   

"We are pleased to report Q3 Direct Retail net revenue growth of $607 million up 36 percent year over year. This period of strong growth took place, despite some short-term tariff related volatility. We could not be more confident in the future growth of the business," noted Niraj Shah, CEO, co-founder and co-chairman, Wayfair. "Our business continues to benefit from meaningful long term investments that directly and dramatically impact the customer experience further propelled by a massive structural shift in shopping behavior from offline to online. To further cement our leadership position and growth trajectory, we have continued to expand our logistics network to meet a high level of customer demand in both North America and Europe and, among other initiatives, are driving deeper penetration in emerging category opportunities across the business. We are excited for the upcoming holiday season, and expect to continue to disrupt the current retail landscape through innovative solutions to traditional customer pain points as we solidify Wayfair's position as the best place to shop across all home-related categories."

Other Third Quarter Highlights

• The number of active customers in our Direct Retail business reached 19.1 million as of September 30, 2019, an increase of 37.6% year over year
• LTM net revenue per active customer was $449 as of September 30, 2019, an increase of 1.4% year over year
• Orders per customer, measured as LTM orders divided by active customers, was 1.85 for the third quarter of 2019, compared to 1.84 for the third quarter of 2018
• Repeat customers placed 67.3% of total orders in the third quarter of 2019, compared to 66.3% in the third quarter of 2018
• Repeat customers placed 6.1 million orders in the third quarter of 2019, an increase of 33.6% year over year
• Orders delivered in the third quarter of 2019 were 9.1 million, an increase of 31.5% year over year
• Average order value was $252 for the third quarter of 2019, compared to $244 for the third quarter of 2018
• In the third quarter of 2019, 53.8% of total orders delivered for our Direct Retail business were placed via a mobile device, compared to 49.4% in the third quarter of 2018

Webcast and Conference Call

Wayfair will host a conference call and webcast to discuss its third quarter 2019 financial results today at 8 a.m. (ET). Investors and participants can access the call by dialing (833) 286-5803 in the U.S. and (647) 689-4448 internationally. The passcode for the conference line is 6381388. The call will also be available via live webcast at investor.wayfair.com along with supporting slides. An archive of the webcast conference call will be available shortly after the call ends. The archived webcast will be available at investor.wayfair.com.

About Wayfair

Wayfair believes everyone should live in a home they love. Through technology and innovation, Wayfair makes it possible for shoppers to quickly and easily find exactly what they want from a selection of more than 14 million items across home furnishings, décor, home improvement, housewares and more. Committed to delighting its customers every step of the way, Wayfair is reinventing the way people shop for their homes - from product discovery to final delivery.

The Wayfair family of sites includes:

• Wayfair - Everything home for every budget.
• Joss & Main - Stylish designs to discover daily.
• AllModern - The best of modern, priced for real life.
• Birch Lane - Classic home. Comfortable cost.
• Perigold - The widest-ever selection of luxury home furnishings.

Wayfair generated $8.6 billion in net revenue for the twelve months ended September 30, 2019. Headquartered in Boston, Massachusetts with operations throughout North America and Europe, the company employs more than 16,000 people.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal and state securities laws. All statements other than statements of historical fact contained in this press release, including statements regarding the strength of our product offering, the expansion of our logistics network, our future results of operations and financial position, our business strategy and our plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "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 our 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 press release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

A list and description of risks, uncertainties and other factors that could cause or contribute to differences in our results can be found in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent filings. We qualify all of our forward-looking statements by these cautionary statements.

Non-GAAP Financial Measures

To supplement our unaudited consolidated and condensed financial statements presented in accordance with generally accepted accounting principles ("GAAP"), this earnings release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA as a percentage of total net revenue ("Adjusted EBITDA Margin"), free cash flow and non-GAAP net loss and diluted net loss per share. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure in this earnings release.

Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures that are calculated as income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest and other income and expense, (benefit from) provision for income taxes, and non-recurring items. We have included Adjusted EBITDA and Adjusted EBITDA Margin in this earnings release because they are key measures used by our management and our board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA Margin facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation and related taxes, excludes an item that we do not consider to be indicative of our core operating performance. Investors should, however, understand that equity-based compensation will be a significant recurring expense in our business and an important part of the compensation provided to our employees. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Free cash flow is a non-GAAP financial measure that is calculated as net cash (used in) provided by operating activities less net cash used to purchase property and equipment and site and software development costs. We believe free cash flow is an important indicator of our business performance, as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Non-GAAP diluted net loss per share is a non-GAAP financial measure that is calculated as GAAP net loss plus equity-based compensation expense and related taxes, (benefit from) provision for income taxes, and non-recurring items divided by weighted average shares. We believe that adding back equity-based compensation expense and related taxes and (benefit from) provision for income taxes, and non-recurring items as adjustments to our GAAP diluted net loss before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.

We calculate forward-looking non-GAAP Adjusted EBITDA based on internal forecasts that omit certain amounts that would be included in forward-looking GAAP net loss. We do not attempt to provide a reconciliation of forward-looking non-GAAP Adjusted EBITDA guidance to forward looking GAAP net loss because forecasting the timing or amount of items that have not yet occurred and are out of the Company’s control is inherently uncertain and unavailable without unreasonable efforts. Further, we believe that such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of financial performance.

We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that the non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry.

The following table reflects the reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA Margin for each of the periods indicated (in thousands):

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Reconciliation of Adjusted EBITDA

 

 

 

 

 

 

 

 

Net loss

 

$

(272,035

)

 

$

(151,726

)

 

$

(654,362

)

 

$

(360,235

)

Depreciation and amortization

 

50,250

 

 

32,544

 

 

134,172

 

 

87,426

 

Equity-based compensation and related taxes

 

65,275

 

 

36,317

 

 

173,963

 

 

95,074

 

Interest expense, net

 

14,432

 

 

7,066

 

 

33,922

 

 

18,269

 

Other (income), net

 

(2,182

)

 

(1,054

)

 

(5,582

)

 

(2,661

)

Provision for income taxes

 

76

 

 

448

 

 

1,502

 

 

953

 

Adjusted EBITDA

 

$

(144,184

)

 

$

(76,405

)

 

$

(316,385

)

 

$

(161,174

)

 

 

 

 

 

 

 

 

 

Net revenue

 

$

2,305,487

 

 

$

1,705,645

 

 

$

6,593,567

 

 

$

4,765,170

 

Adjusted EBITDA Margin

 

(6.3

)%

 

(4.5

)%

 

(4.8

)%

 

(3.4

)%

 

The following table presents Adjusted EBITDA attributable to our segments, and the reconciliation of net loss to consolidated Adjusted EBITDA is presented in the preceding table (in thousands):

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Segment Adjusted EBITDA

 

 

 

 

 

 

 

 

U.S.

 

$

(62,878

)

 

$

(26,036

)

 

$

(91,002

)

 

$

(26,774

)

International

 

(81,306

)

 

(50,369

)

 

(225,383

)

 

(134,400

)

Adjusted EBITDA

 

$

(144,184

)

 

$

(76,405

)

 

$

(316,385

)

 

$

(161,174

)

 

A reconciliation of GAAP net loss to non-GAAP diluted net loss, the most directly comparable GAAP financial measure, in order to calculate non-GAAP diluted net loss per share, is as follows (in thousands, except per share data):

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Net loss

 

$

(272,035

)

 

$

(151,726

)

 

$

(654,362

)

 

$

(360,235

)

Equity-based compensation and related taxes

 

65,275

 

 

36,317

 

 

173,963

 

 

95,074

 

Provision for income taxes

 

76

 

 

448

 

 

1,502

 

 

953

 

Non-GAAP net loss

 

$

(206,684

)

 

$

(114,961

)

 

$

(478,897

)

 

$

(264,208

)

Non-GAAP net loss per share, basic and diluted

 

$

(2.23

)

 

$

(1.28

)

 

$

(5.22

)

 

$

(2.96

)

Weighted average common shares outstanding, basic and diluted

 

92,540

 

 

89,792

 

 

91,820

 

 

89,144

 

 

The following table presents a reconciliation of free cash flow to net cash used in operating activities for each of the periods indicated (in thousands):

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Net cash (used in) provided by operating activities

 

$

(76,441

)

 

$

7,804

 

 

$

(160,523

)

 

$

42,331

 

Purchase of property and equipment

 

(68,628

)

 

(49,411

)

 

(183,968

)

 

(110,504

)

Site and software development costs

 

(35,831

)

 

(17,196

)

 

(94,697

)

 

(45,769

)

Free cash flow

 

$

(180,900

)

 

$

(58,803

)

 

$

(439,188

)

 

$

(113,942

)

 

Key Financial and Operating Metrics (in thousands, except LTM Net Revenue per Active Customer and Average Order Value)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Consolidated Financial Metrics

 

 

 

 

 

 

 

 

Net Revenue

 

$

2,305,487

 

 

$

1,705,645

 

 

$

6,593,567

 

 

$

4,765,170

 

Adjusted EBITDA

 

$

(144,184

)

 

$

(76,405

)

 

$

(316,385

)

 

$

(161,174

)

Free cash flow

 

$

(180,900

)

 

$

(58,803

)

 

$

(439,188

)

 

$

(113,942

)

Direct Retail Financial and Operating Metrics

 

 

 

 

 

 

 

 

Direct Retail Net Revenue

 

$

2,299,680

 

 

$

1,692,456

 

 

$

6,562,620

 

 

$

4,722,267

 

Active Customers

 

19,071

 

 

13,860

 

 

19,071

 

 

13,860

 

LTM Net Revenue per Active Customer

 

$

449

 

 

$

443

 

 

$

449

 

 

$

443

 

Orders Delivered

 

9,121

 

 

6,938

 

 

26,446

 

 

19,278

 

Average Order Value

 

$

252

 

 

$

244

 

 

$

248

 

 

$

245

 

 

The following table presents Direct Retail and Other net revenues attributable to the Company’s reportable segments for the periods presented (in thousands):

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

U.S. Direct Retail

 

$

1,960,847

 

 

$

1,460,056

 

 

$

5,593,923

 

 

$

4,043,270

 

U.S. Other

 

5,807

 

 

13,189

 

 

30,947

 

 

42,903

 

U.S. segment net revenue

 

1,966,654

 

 

1,473,245

 

 

5,624,870

 

 

4,086,173

 

International Direct Retail

 

338,833

 

 

232,400

 

 

968,697

 

 

678,997

 

International segment net revenue

 

338,833

 

 

232,400

 

 

968,697

 

 

678,997

 

Total net revenue

 

$

2,305,487

 

 

$

1,705,645

 

 

$

6,593,567

 

 

$

4,765,170

 

   

WAYFAIR INC. CONSOLIDATED AND CONDENSED BALANCE SHEETS (In thousands, except share and per share data) (Unaudited)

 

 

 

September 30, 2019

 

December 31, 2018

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

1,295,385

 

 

$

849,461

 

Short-term investments

 

6,049

 

 

114,278

 

Accounts receivable, net of allowance of $17,849 and $9,312 at September 30, 2019 and December 31, 2018, respectively

 

75,677

 

 

50,603

 

Inventories

 

68,622

 

 

46,164

 

Prepaid expenses and other current assets

 

224,968

 

 

195,430

 

Total current assets

 

1,670,701

 

 

1,255,936

 

Property and equipment, net

 

547,056

 

 

606,977

 

Goodwill and intangible assets, net

 

19,211

 

 

2,585

 

Operating lease right-of-use assets

 

756,716

 

 

—

 

Long-term investments

 

—

 

 

6,526

 

Other noncurrent assets

 

13,951

 

 

18,826

 

Total assets

 

$

3,007,635

 

 

$

1,890,850

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

814,439

 

 

$

650,174

 

Accrued expenses

 

267,351

 

 

212,997

 

Unearned revenue

 

151,367

 

 

148,057

 

Other current liabilities

 

200,502

 

 

127,995

 

Total current liabilities

 

1,433,659

 

 

1,139,223

 

Lease financing obligation, net of current portion

 

—

 

 

183,056

 

Operating lease liabilities

 

813,861

 

 

—

 

Long-term debt

 

1,435,927

 

 

738,904

 

Other liabilities

 

6,617

 

 

160,388

 

Total liabilities

 

3,690,064

 

 

2,221,571

 

 

 

 

 

 

Convertible preferred stock, $0.001 par value per share: 10,000,000 shares authorized and none issued at September 30, 2019 and December 31, 2018

 

—

 

 

—

 

Stockholders’ deficit:

 

 

 

 

Class A common stock, par value $0.001 per share, 500,000,000 shares authorized, 65,502,165 and 62,329,701 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

66

 

 

63

 

Class B common stock, par value $0.001 per share, 164,000,000 shares authorized, 27,372,273 and 28,417,882 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

27

 

 

28

 

Additional paid-in capital

 

1,054,135

 

 

753,657

 

Accumulated deficit

 

(1,735,201

)

 

(1,082,689

)

Accumulated other comprehensive (loss)

 

(1,456

)

 

(1,780

)

Total stockholders’ deficit

 

(682,429

)

 

(330,721

)

Total liabilities and stockholders’ deficit

 

$

3,007,635

 

 

$

1,890,850

 

WAYFAIR INC. CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

2019

 

2018

 

2019

 

2018

Net revenue

 

$

2,305,487

 

 

$

1,705,645

 

 

$

6,593,567

 

 

$

4,765,170

 

Cost of goods sold (1)

 

1,765,566

 

 

1,312,875

 

 

5,023,590

 

 

3,663,569

 

Gross profit

 

539,921

 

 

392,770

 

 

1,569,977

 

 

1,101,601

 

Operating expenses:

 

 

 

 

 

 

 

 

Customer service and merchant fees (1)

 

91,255

 

 

66,664

 

 

256,230

 

 

182,340

 

Advertising

 

281,846

 

 

202,587

 

 

784,981

 

 

541,815

 

Selling, operations, technology, general and administrative (1)

 

426,529

 

 

268,785

 

 

1,153,286

 

 

721,120

 

Total operating expenses

 

799,630

 

 

538,036

 

 

2,194,497

 

 

1,445,275

 

Loss from operations

 

(259,709

)

 

(145,266

)

 

(624,520

)

 

(343,674

)

Interest expense, net

 

(14,432

)

 

(7,066

)

 

(33,922

)

 

(18,269

)

Other income, net

 

2,182

 

 

1,054

 

 

5,582

 

 

2,661

 

Loss before income taxes

 

(271,959

)

 

(151,278

)

 

(652,860

)

 

(359,282

)

Provision for income taxes

 

76

 

 

448

 

 

1,502

 

 

953

 

Net loss

 

$

(272,035

)

 

$

(151,726

)

 

$

(654,362

)

 

$

(360,235

)

Net loss per share, basic and diluted

 

$

(2.94

)

 

$

(1.69

)

 

$

(7.13

)

 

$

(4.04

)

Weighted average number of common stock outstanding used in computing per share amounts, basic and diluted

 

92,540

 

 

89,792

 

 

91,820

 

 

89,144

 

 

(1) Includes equity-based compensation and related taxes as follows:

 

Cost of goods sold

 

$

1,450

 

 

$

727

 

 

$

3,759

 

 

$

1,929

 

Customer service and merchant fees

 

2,374

 

 

1,549

 

 

6,619

 

 

3,652

 

Selling, operations, technology, general and administrative

 

61,451

 

 

34,041

 

 

163,585

 

 

89,493

 

 

 

$

65,275

 

 

$

36,317

 

 

$

173,963

 

 

$

95,074

 

   

WAYFAIR INC. CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

 

 

 

Nine months ended September 30,

 

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net loss

 

$

(654,362

)

 

$

(360,235

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

Depreciation and amortization

 

134,172

 

 

87,426

 

Equity-based compensation

 

162,014

 

 

88,148

 

Amortization of discount and issuance costs on convertible notes

 

40,737

 

 

13,699

 

Other non-cash adjustments

 

(1,659

)

 

177

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(25,309

)

 

(3,157

)

Inventories

 

(22,716

)

 

(7,757

)

Prepaid expenses and other current assets

 

(29,648

)

 

(37,376

)

Accounts payable and accrued expenses

 

215,786

 

 

187,733

 

Unearned revenue and other liabilities

 

22,382

 

 

80,509

 

Other assets

 

(1,920

)

 

(6,836

)

Net cash (used in) provided by operating activities

 

(160,523

)

 

42,331

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Sale and maturities of short-term investments

 

115,468

 

 

45,955

 

Purchase of property and equipment

 

(183,968

)

 

(110,504

)

Site and software development costs

 

(94,697

)

 

(45,769

)

Other investing activities

 

(15,977

)

 

(399

)

Net cash used in investing activities

 

(179,174

)

 

(110,717

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from issuance of convertible notes, net of issuance costs

 

935,146

 

 

—

 

Premiums paid for capped call confirmations

 

(145,728

)

 

—

 

Taxes paid related to net share settlement of equity awards

 

(1,510

)

 

(1,097

)

Deferred financing costs

 

(791

)

 

—

 

Net proceeds from exercise of stock options

 

90

 

 

104

 

Net cash provided by (used in) financing activities

 

787,207

 

 

(993

)

Effect of exchange rate changes on cash and cash equivalents

 

(1,586

)

 

(945

)

Net increase (decrease) in cash and cash equivalents

 

445,924

 

 

(70,324

)

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

Beginning of period

 

849,461

 

 

558,960

 

End of period

 

$

1,295,385

 

 

$

488,636

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191031005257/en/

Media Relations Contact: Jane Carpenter, 617-502-7595 PR@wayfair.com

Investor Relations Contact: Jane Gelfand IR@wayfair.com