Q3 Net Revenue of $2.8 billion
22.6 million Active Customers
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, 2022.
Third Quarter 2022 Financial
Highlights
- Total net revenue of $2.8 billion decreased $281 million, down
9.0% year over year
- U.S. net revenue of $2.4 billion decreased $155 million, down
6.0% year over year
- International net revenue of $0.4 billion decreased $126
million, down 24.0% year over year. International Net Revenue
Constant Currency Growth was (22.6)%
- Gross profit was $824 million or 29.0% of total net
revenue
- Net loss was $283 million and Non-GAAP Adjusted EBITDA was
$(124) million
- Diluted loss per share was $2.66
- Non-GAAP Adjusted Diluted Loss per Share was $2.11
- Net cash flows used in operating activities was $431 million
and Non-GAAP Free Cash Flow was $(538) million
- Cash, cash equivalents and short-term investments totaled $1.3
billion
“We’re continuing the work we set out last quarter to control
the controllables and orienting Wayfair in this environment around
three key principles: driving cost efficiency, nailing the basics,
and earning customer and supplier loyalty every day. We are all
focused on taking the steps needed to reach adjusted EBITDA
profitability and cash flow neutrality in short order,” said Niraj
Shah, CEO, co-founder and co-chairman, Wayfair.
“We have direct visibility to over half a billion dollars of
savings, with work well underway to deliver this target in 2023.
However, we are not stopping there and have identified meaningful
incremental efficiency opportunities, which we are also actioning
as we speak. Our execution against these initiatives is thoughtful
and deliberate to ensure that we make progress toward our
profitability targets without compromising the long-term growth
potential in front of us.”
Other Third Quarter
Highlights
- Active customers totaled 22.6 million as of September 30, 2022,
a decrease of 22.6% year over year
- LTM net revenue per active customer was $547 as of September
30, 2022, an increase of 13.0% year over year
- Orders per customer, measured as LTM orders divided by active
customers, was 1.82 for the third quarter of 2022, compared to 1.92
for the third quarter of 2021
- Orders delivered in the third quarter of 2022 were 8.7 million,
a decrease of 20.9% year over year
- Repeat customers placed 77.8% of total orders in the third
quarter of 2022, compared to 76.3% in the third quarter of
2021
- Repeat customers placed 6.8 million orders in the third quarter
of 2022, a decrease of 19.0% year over year
- Average order value was $325 for the third quarter of 2022,
compared to $283 for the third quarter of 2021
- In the third quarter of 2022, 58.6% of total orders delivered
were placed via a mobile device, compared to 57.7% in the third
quarter of 2021
Key Financial and Operating
Metrics
Three months ended September
30,
Nine months ended September
30,
2022
2021
2022
2021
(in millions, except LTM Net
Revenue per Active Customer, Average Order Value and per share
data)
Key Financial Statement
Metrics:
Net revenue
$
2,840
$
3,121
$
9,117
$
10,456
Gross profit
$
824
$
883
$
2,523
$
3,014
(Loss) income from operations
$
(372
)
$
(70
)
$
(1,054
)
$
102
Net (loss) income
$
(283
)
$
(78
)
$
(980
)
$
71
(Loss) earnings per share:
Basic
$
(2.66
)
$
(0.75
)
$
(9.28
)
$
0.68
Diluted
$
(2.66
)
$
(0.75
)
$
(9.28
)
$
0.65
Net cash (used in) provided by operating
activities
$
(431
)
$
(131
)
$
(772
)
$
321
Key Operating Metrics:
Active customers (1)
23
29
23
29
LTM net revenue per active customer
(2)
$
547
$
484
$
547
$
484
Orders delivered (3)
9
11
29
40
Average order value (4)
$
325
$
283
$
313
$
264
Non-GAAP Financial Measures:
Adjusted EBITDA
$
(124
)
$
101
$
(345
)
$
618
Free Cash Flow
$
(538
)
$
(205
)
$
(1,113
)
$
114
Adjusted Diluted (Loss) Earnings per
Share
$
(2.11
)
$
0.14
$
(5.99
)
$
3.08
(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)
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 represents the
total orders delivered in that 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.
Webcast and Conference
Call
Wayfair will host a conference call and webcast to discuss its
third quarter 2022 financial results today at 8 a.m. (ET).
Investors and participants should register for the call in advance
by visiting https://bit.ly/3C1I0xq. After registering, instructions
will be shared on how to join the call. The call will also be
available via live webcast at https://bit.ly/3e4MtY7 and supporting
slides will be available at investor.wayfair.com. An archive of the
webcast conference call will be available shortly after the call
ends at http://investor.wayfair.com.
About Wayfair
Wayfair is the destination for all things home: helping
everyone, anywhere create their feeling of home. From expert
customer service, to the development of tools that make the
shopping process easier, to carrying one of the widest and deepest
selections of items for every space, style, and budget, Wayfair
gives everyone the power to create spaces that are just right for
them.
The Wayfair family of brands includes:
- Wayfair - Everything home — for a space that's all you.
- Joss & Main - The ultimate style edit for home.
- AllModern - All of modern, made simple.
- Birch Lane - A fresh take on the classics.
- Perigold - An undiscovered world of luxury design.
- Wayfair Professional - Just right for Pros.
Wayfair generated $12.4 billion in net revenue for the twelve
months ended September 30, 2022. Headquartered in Boston,
Massachusetts with operations throughout North America and Europe,
Wayfair employs approximately 17,000 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 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, profitability goals and the
financial impact and expected savings of our recent reduction in
force, available liquidity and access to financing sources, our
business strategy, plans and objectives of management for future
operations, including our growth and expansion and optimization
initiatives, consumer activity and behaviors, including seasonal
trends, e-commerce adoption trends, developments in our technology
and systems and anticipated results of those developments, the
impact of macroeconomic factors, including the novel coronavirus
(COVID-19) pandemic and the rise in inflation and interest rates,
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,"
"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.
WAYFAIR INC.
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Unaudited)
September 30,
2022
December 31,
2021
(in millions, except share and
per share data)
Assets:
Current assets
Cash and cash equivalents
$
731
$
1,706
Short-term investments
557
693
Accounts receivable, net
332
226
Inventories
103
69
Prepaid expenses and other current
assets
281
318
Total current assets
2,004
3,012
Operating lease right-of-use assets
852
849
Property and equipment, net
763
674
Other non-current assets
34
35
Total assets
$
3,653
$
4,570
Liabilities and Stockholders'
Deficit:
Current liabilities
Accounts payable
$
1,056
$
1,166
Other current liabilities
905
1,051
Total current liabilities
1,961
2,217
Long-term debt
3,134
3,052
Operating lease liabilities, net of
current
909
892
Other non-current liabilities
27
28
Total liabilities
6,031
6,189
Stockholders’ deficit:
Convertible preferred stock, $0.001 par
value per share: 10,000,000 shares authorized and none issued at
September 30, 2022 and December 31, 2021
—
—
Class A common stock, par value $0.001 per
share: 500,000,000 shares authorized, 80,772,544 and 79,150,937
shares issued and outstanding at September 30, 2022 and December
31, 2021
—
—
Class B common stock, par value $0.001 per
share: 164,000,000 shares authorized, 25,691,397 and 25,691,761
shares issued and outstanding at September 30, 2022 and December
31, 2021
—
—
Additional paid-in capital
565
337
Accumulated deficit
(2,929
)
(1,949
)
Accumulated other comprehensive loss
(14
)
(7
)
Total stockholders’ deficit
(2,378
)
(1,619
)
Total liabilities and stockholders’
deficit
$
3,653
$
4,570
WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September
30,
Nine months ended September
30,
2022
2021
2022
2021
(in millions, except per share
data)
Net revenue (1)
$
2,840
$
3,121
$
9,117
$
10,456
Cost of goods sold (2)
2,016
2,238
6,594
7,442
Gross profit
824
883
2,523
3,014
Operating expenses:
Customer service and merchant fees (2)
156
140
469
432
Advertising
353
315
1,067
1,033
Selling, operations, technology, general
and administrative (2)
656
498
1,970
1,435
Impairment and other related charges
—
—
40
12
Restructuring charges
31
—
31
—
Total operating expenses
1,196
953
3,577
2,912
(Loss) income from operations
(372
)
(70
)
(1,054
)
102
Interest expense, net
(5
)
(8
)
(19
)
(24
)
Other (expense) income, net
(1
)
4
—
(1
)
Gain on debt extinguishment
96
—
96
—
(Loss) income before income taxes
(282
)
(74
)
(977
)
77
Provision for income taxes, net
1
4
3
6
Net (loss) income
$
(283
)
$
(78
)
$
(980
)
$
71
(Loss) earnings per share:
Basic
$
(2.66
)
$
(0.75
)
$
(9.28
)
$
0.68
Diluted
$
(2.66
)
$
(0.75
)
$
(9.28
)
$
0.65
Weighted-average number of shares of
common stock outstanding used in computing per share amounts:
Basic
106
104
106
104
Diluted
106
104
106
107
(1)
The following tables present net
revenues attributable to our reportable segments for the periods
indicated:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
(in millions)
U.S. net revenue
$
2,440
$
2,595
$
7,778
$
8,514
International net revenue
400
526
1,339
1,942
Total net revenue
$
2,840
$
3,121
$
9,117
$
10,456
(2)
Includes equity-based
compensation and related taxes as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
(in millions)
Cost of goods sold
$
2
$
3
$
8
$
9
Customer service and merchant fees
8
7
25
19
Selling, operations, technology, general
and administrative
113
79
335
236
$
123
$
89
$
368
$
264
WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September
30,
2022
2021
(in millions)
Cash flows from operating
activities:
Net (loss) income
$
(980
)
$
71
Adjustments used to reconcile net (loss)
income to net cash (used in) provided by operating activities:
Depreciation and amortization
270
240
Equity-based compensation
355
237
Amortization of discount and issuance
costs on convertible notes
7
6
Impairment and other related charges
40
12
Gain on debt extinguishment
(96
)
—
Other non-cash adjustments
20
2
Changes in operating assets and
liabilities:
Accounts receivable, net
(113
)
(58
)
Inventories
(35
)
(15
)
Prepaid expenses and other current
assets
39
(38
)
Other assets
—
1
Accounts payable and other current
liabilities
(294
)
(133
)
Other liabilities
15
(4
)
Net cash (used in) provided by operating
activities
(772
)
321
Cash flows from investing
activities:
Purchase of short- and long-term
investments
(420
)
(775
)
Sale and maturities of short- and
long-term investments
550
701
Purchase of property and equipment
(136
)
(78
)
Site and software development costs
(205
)
(129
)
Other investing activities, net
—
5
Net cash used in investing activities
(211
)
(276
)
Cash flows from financing
activities:
Repurchase of common stock
(75
)
(300
)
Proceeds from issuance of convertible
notes, net of issuance costs
678
—
Premiums paid for capped calls
(80
)
—
Payment of principal upon maturity of
convertible debt
(3
)
—
Payments to extinguish convertible
debt
(504
)
—
Other financing activities, net
—
(2
)
Net cash flows provided by (used in)
financing activities
16
(302
)
Effect of exchange rate changes on cash
and cash equivalents
(8
)
(7
)
Net decrease in cash and cash
equivalents
(975
)
(264
)
Cash and cash equivalents:
Beginning of period
1,706
2,129
End of period
$
731
$
1,865
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, Free Cash Flow, Adjusted Diluted (Loss) Earnings per Share
and Net Revenue Constant Currency Growth. 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.
Net Revenue Constant Currency Growth is a non-GAAP financial
measure that is calculated by translating the current period local
currency net revenue by the currency exchange rates used to
translate the financial statements in the comparable prior-year
period. We believe Net Revenue Constant Currency Growth is an
important indicator of our business performance, as it provides
useful information to investors and others in understanding and
evaluating trends in our operating results in the same manner as
our management.
Adjusted EBITDA is a non-GAAP financial measure that is
calculated as net (loss) income before depreciation and
amortization, equity-based compensation and related taxes, interest
expense, net, other income (expense), net, provision for income
taxes, net, non-recurring items and other items not indicative of
our ongoing operating performance. We have included Adjusted EBITDA
in this earnings release because it is a key measure 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
facilitates operating performance comparisons on a period-to-period
basis as these costs may vary independent of business performance.
For instance, we exclude the impact of equity-based compensation
and related taxes as we do not consider this item to be indicative
of our core operating performance. Investors should, however,
understand that equity-based compensation and related taxes 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 provides useful information to
investors and others in understanding and evaluating our operating
results in the same manner as our management and board of
directors.
Adjusted Diluted (Loss) Earnings per Share is a non-GAAP
financial measure that is calculated as net (loss) income plus
equity-based compensation and related taxes, provision for income
taxes, net, non-recurring items and other items not indicative of
our ongoing operating performance, and, if dilutive, interest
expense associated with convertible debt instruments under the
if-converted method divided by the weighted-average number of
shares of common stock used in the computation of diluted (loss)
earnings per share. We believe that these adjustments to our
adjusted diluted net income before calculating per share amounts
for all periods presented provides a more meaningful comparison
between our operating results from period to period.
Free Cash Flow is a non-GAAP financial measure that is
calculated as net cash flows from or for operating activities less
net cash flows used to purchase property and equipment and site and
software development costs (collectively, "Capital Expenditures").
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.
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) income. We do not attempt to
provide a reconciliation of forward-looking non-GAAP Adjusted
EBITDA guidance to forward looking GAAP net (loss) income because
forecasting the timing or amount of items that have not yet
occurred and are out of our 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.
The non-GAAP measures have limitations as analytical tools. 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)
income to Adjusted EBITDA for each of the periods indicated:
Three months ended September
30,
Nine months ended September
30,
2022
2021
2022
2021
(in millions)
Reconciliation of Adjusted
EBITDA
Net (loss) income
$
(283
)
$
(78
)
$
(980
)
$
71
Depreciation and amortization
94
82
270
240
Equity-based compensation and related
taxes
123
89
368
264
Interest expense, net
5
8
19
24
Other (income) expense, net
1
(4
)
—
1
Provision for income taxes, net
1
4
3
6
Other:
—
Impairment and other related charges
(1)
$
—
$
—
$
40
$
12
Restructuring charges (2)
$
31
$
—
$
31
$
—
Gain on debt extinguishment (3)
$
(96
)
$
—
$
(96
)
$
—
Adjusted EBITDA
$
(124
)
$
101
$
(345
)
$
618
(1)
In the nine months ended
September 30, 2022, we recorded $40 million of lease impairment and
other related charges related to changes in market conditions
around future sublease income for one of our office locations in
the U.S. In the nine months ended September 30, 2021, we recorded
$12 million of customer service center impairment and other related
charges related to our plan to consolidate customer service centers
in identified U.S. locations.
(2)
In the three and nine months
ended September 30, 2022, we recorded a $31 million charge to
restructuring charges for severance costs associated with the
August 2022 workforce reductions. There were no similar charges in
the prior period ended September 30, 2021.
(3)
In the three and nine months
ended September 30, 2022, we recorded a $96 million gain on debt
extinguishment upon repurchase of $375 million in aggregate
principal amount of our 2024 Notes and $229 million in aggregate
principal amount of our 2025 Notes in September 2022. There were no
similar charges in the prior period ended September 30, 2021.
The following table presents Adjusted EBITDA attributable to our
segments, and the reconciliation of net (loss) income to Adjusted
EBITDA is presented in the preceding table:
Three months ended September
30,
Nine months ended September
30,
2022
2021
2022
2021
(in millions)
Segment Adjusted EBITDA:
U.S.
$
(51
)
$
167
$
(109
)
$
717
International
(73
)
(66
)
(236
)
(99
)
Adjusted EBITDA
$
(124
)
$
101
$
(345
)
$
618
A reconciliation of the numerator and denominator for diluted
(loss) earnings per share, the most directly comparable GAAP
financial measure, to the numerator and denominator for Adjusted
Diluted (Loss) Earnings per Share, in order to calculate Adjusted
Diluted (Loss) Earnings per Share is as follows:
Three months ended September
30,
Nine months ended September
30,
2022
2021
2022
2021
(in millions, except per share
data)
Numerator:
Net (loss) income
$
(283
)
$
(78
)
$
(980
)
$
71
Effect of dilutive securities:
Interest expense associated with
convertible debt instruments
—
—
—
(2
)
Numerator for diluted EPS - net (loss)
income available to common stockholders after the effect of
dilutive securities
(283
)
(78
)
(980
)
69
Adjustments to net (loss) income:
Interest expense associated with
convertible debt instruments
—
—
—
25
Equity-based compensation and related
taxes
123
89
368
264
Provision for income taxes, net
1
4
3
6
Other:
—
Impairment and other related charges
—
—
40
12
Restructuring charges
31
—
31
—
Gain on debt extinguishment
(96
)
—
(96
)
—
Numerator for Adjusted Diluted EPS -
Adjusted net income
$
(224
)
$
15
$
(634
)
$
376
Denominator:
Denominator for basic EPS -
weighted-average number of shares of common stock outstanding
106
104
106
104
Effect of dilutive securities:
Restricted stock units
—
—
—
3
Convertible debt instruments
—
—
—
—
Dilutive potential common shares
—
—
—
3
Denominator for diluted EPS - adjusted
weighted-average number of shares of common stock outstanding after
the effect of dilutive securities
106
104
106
107
Adjustments to effect of dilutive
securities:
Restricted stock units
—
2
—
—
Convertible debt instruments
—
—
—
15
Denominator for Adjusted Diluted EPS -
adjusted weighted-average number of shares of common stock
outstanding after the effect of dilutive securities
106
106
106
122
Diluted (Loss) Earnings per Share
$
(2.66
)
$
(0.75
)
$
(9.28
)
$
0.65
Adjusted Diluted (Loss) Earnings per
Share
$
(2.11
)
$
0.14
$
(5.99
)
$
3.08
The following table presents a reconciliation of net cash (used
in) provided by operating activities to Free Cash Flow for each of
the periods indicated:
Three months ended September
30,
Nine months ended September
30,
2022
2021
2022
2021
(in millions)
Net cash (used in) provided by operating
activities
$
(431
)
$
(131
)
$
(772
)
$
321
Purchase of property and equipment
(43
)
(29
)
(136
)
(78
)
Site and software development costs
(64
)
(45
)
(205
)
(129
)
Free Cash Flow
$
(538
)
$
(205
)
$
(1,113
)
$
114
View source
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