Wayfair Announces Third Quarter 2022 Results

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

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.

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:

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:

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:

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:

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