NYSE:W $109.00 +0.71 (+0.66%) Volume: 116,969 View details » December 11, 2018

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Kate Gulliver, Investor Relations

4 Copley Place - Floor 7
Boston, MA 02116
P: 617-502-7040
E: IR@wayfair.com

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Wayfair Announces Third Quarter 2015 Results

11/10/2015

Q3 Direct Retail Revenue Growth of 90.9% Year over Year to $545.0 million

Q3 Total Net Revenue Growth of 76.7% Year over Year to $594.0 million

4.6 million Active Customers, up 60.6% Year over Year

BOSTON--(BUSINESS WIRE)-- Wayfair Inc. (NYSE:W), one of the world’s largest online destinations for home furnishings and décor, today reported financial results for its third quarter ended September 30, 2015.

Third Quarter 2015 Financial Highlights

  • Total net revenue increased to $594.0 million, up 76.7% year over year
  • Direct Retail revenue, consisting of sales generated primarily through the sites of Wayfair’s five brands, increased to $545.0 million, up 90.9% year over year
  • Gross profit was $141.4 million or 23.8% of total net revenue, compared to 23.5% of total net revenue in the same quarter last year
  • Adjusted EBITDA was $(1.4) million or (0.2)% of total net revenue
  • GAAP net loss was $15.5 million
  • GAAP basic and diluted net loss per share was $0.18
  • Non-GAAP diluted net loss per share was $0.13
  • Non-GAAP free cash flow was $35.3 million
  • At the end of the Third Quarter, cash, cash equivalents, and short-term and long-term investments totaled $399.8 million

“We are very pleased to report the third quarter in a row of tremendous growth across the business,” said Niraj Shah, CEO, co-founder and co-chairman, Wayfair. “New customer growth and repeat customer growth continue to accelerate at a phenomenal pace as we enhance our offering and build greater brand awareness with consumers. We are well positioned to enter the holiday season with key improvements across assortment, merchandising and marketing - and look forward to further building our leadership position as the number one destination for home furnishings and décor.”

Other Highlights

  • The number of active customers in our Direct Retail business reached 4.6 million as of September 30, 2015, up 60.6% year over year
  • LTM net revenue per active customer increased to $371, up 8.5% year over year
  • Orders per customer, measured as LTM orders divided by active customers, increased to 1.69 for the Third Quarter, up from 1.65 year over year
  • Repeat customers placed 55.2% of total orders in the Third Quarter of 2015, compared to 49.8% in the Third Quarter of 2014
  • Repeat customers placed 1.3 million orders in the Third Quarter of 2015, an increase of 96.0% year over year
  • Orders delivered in the Third Quarter of 2015 were 2.3 million, an increase of 76.8% year over year
  • Average order value was $235 for the Third Quarter 2015, an increase of 8.3% year over year
  • In the Third Quarter of 2015, 35.1% of total orders delivered for our Direct Retail business were placed via a mobile device, up from 28.7% in the Third Quarter of 2014

Conference Call

Wayfair will host a conference call and webcast to discuss its Third Quarter 2015 financial results today at 8:00 a.m. (ET). Investors and participants can access the call by dialing (877) 201-0168 in the U.S. and (647) 788-4901 internationally. The passcode for the conference line is 56941253. 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 Inc. offers an extensive selection of home furnishings and décor across all styles and price points. The Wayfair family of brands includes:

  • Wayfair.com, an online destination for all things home
  • Joss & Main, an online flash sales site offering inspiring home design daily
  • AllModern, a go-to online source for modern design
  • DwellStudio, a design house for fashion-forward modern furnishings
  • Birch Lane, a collection of classic furnishings and timeless home décor

Wayfair is headquartered in Boston, Massachusetts, with additional locations in New York, Utah, Kentucky, Ireland, U.K. and Germany.

Forward-Looking Statements

This earnings release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding the size and expected growth of the market. These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond the Company’s control. The Company’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to: our ability to acquire new customers, our ability to sustain and/or manage our growth, our ability to increase our total net revenue per active customer, our ability to build and maintain strong brands and other risks detailed in the Company’s other publicly available filings with the Securities and Exchange Commission. The forward-looking statements included in this earnings release represent the Company’s views as of the date of this earnings release. The Company anticipates that subsequent events and developments will cause its views to change. The Company undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

EXPLANATORY NOTE

The consolidated and condensed financial statements and other disclosures contained in this earnings release are those of Wayfair Inc. Prior to the effectiveness of Wayfair’s registration statement on Form S-1 related to its initial public offering in October 2014, Wayfair LLC was the principal operating entity. In connection with the initial public offering of Wayfair Inc., Wayfair LLC completed a corporate reorganization pursuant to which Wayfair LLC became a wholly-owned subsidiary of Wayfair Inc., and the holders of equity interests in Wayfair LLC became stockholders of Wayfair Inc.

Non-GAAP Financial Measures

To supplement Wayfair’s 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. Wayfair uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Wayfair’s ongoing operational performance. Wayfair has 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 earnings (loss) before depreciation and amortization, equity-based compensation and related taxes, interest and other income and expense and (benefit from) provision for income taxes. Wayfair has included Adjusted EBITDA and Adjusted EBITDA Margin in this earnings release because they are key measures used by its management and its board of managers to evaluate its 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 facilitate 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, Wayfair believes 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 managers.

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

Non-GAAP diluted net loss per share is a non-GAAP financial measure that is calculated as GAAP net loss attributable to common stockholders plus accretion of convertible redeemable preferred units, equity-based compensation and related taxes, (benefit from) provision for income taxes, and non-recurring items divided by weighted average shares. Wayfair believes that adding back accretion of convertible redeemable preferred units, equity-based compensation expense and related tax and (benefit from) provision for income taxes, and non-recurring items as adjustments to its 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.

Wayfair does not itself, nor does it 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 used by Wayfair 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 its 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,


2015   2014
2015   2014
Reconciliation of Adjusted EBITDA







Net loss


$ (15,478 )
$ (24,143 )
$ (61,948 )
$ (75,544 )
Depreciation and amortization
9,207

5,547

23,351

14,438
Equity based compensation and related taxes
7,985



23,248

5,528
Interest (income), net
(325 )
(89 )
(897 )
(222 )
Other (income) expense, net
(2,746 )
309

(2,542 )
405
(Benefit from) provision for income taxes
(88 )
59  
31  
76  
Adjusted EBITDA
$ (1,445 )
$ (18,317 )
$ (18,757 )
$ (55,319 )








 
Net revenue
$ 593,972

$ 336,188

$ 1,510,095

$ 910,332
Adjusted EBITDA Margin
(0.2 )%
(5.4 )%
(1.2 )%
(6.1 )%












 

A reconciliation of GAAP net loss attributable to common stockholders 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,


2015     2014

2015     2014
Net loss attributable to common stockholders
$ (15,478 )

$ (28,891 )

$ (61,948 )

$ (92,047 )
Accretion of convertible redeemable preferred units



4,748





16,503
Equity based compensation and related taxes
7,985





23,248


5,528
(Benefit from) provision for income taxes
(88 )

59


31


76
Other (1)
(2,997 )      
  (2,997 )  
 
Non-GAAP net loss
$ (10,578 )     $ (24,084 )     $ (41,666 )     $ (69,940 )
Non-GAAP net loss per share, basic and diluted
$ (0.13 )     $ (0.59 )     $ (0.50 )     $ (1.72 )















 
Weighted average common shares outstanding, basic and diluted
83,886    
40,513    
83,569    
40,722  















 

(1) In the three and nine months ended September 30, 2015, we recorded a $3.0 million gain from the sale of our Australian business. Because the sale was unrelated to current operations, non-recurring, and neither comparable to prior periods or predictive of future results, we have chosen to exclude it from the non-GAAP net loss in evaluating management performance. We recorded this expense in "Other income (expense), net” in the unaudited consolidated and condensed statements of operations.

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


 
 


Three months ended September 30,
Nine months ended September 30,


2015   2014
2015   2014
Net cash provided by (used in) operating activities
$ 51,504

$ (11,066 )
$ 44,755

$ (50,837 )
Purchase of property, equipment, and leasehold improvements
(11,491 )
(6,837 )
(36,695 )
(31,168 )
Site and software development costs
(4,681 )
(4,495 )
(13,107 )
(10,643 )
Free cash flow
$ 35,332  
$ (22,398 )
$ (5,047 )
$ (92,648 )
















 

 
 

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,


2015   2014
2015   2014
Consolidated Financial Metrics







Net Revenue
$ 593,972

$ 336,188

$ 1,510,095

$ 910,332
Adjusted EBITDA
$ (1,445 )
$ (18,317 )
$ (18,757 )
$ (55,319 )
Free cash flow
$ 35,332

$ (22,398 )
$ (5,047 )
$ (92,648 )
Direct Retail Financial and Operating Metrics







Direct Retail Net Revenue
$ 544,971

$ 285,502

$ 1,354,665

$ 755,036
Active Customers
4,591

2,858

4,591

2,858
LTM Net Revenue per Active Customer
$ 371

$ 342

$ 371

$ 342
Orders Delivered
2,323

1,314

6,079

3,536
Average Order Value
$ 235

$ 217

$ 223

$ 214
















 

     
     

WAYFAIR INC.

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)









 




September 30,
2015



December 31,
2014
Assets







Current assets







Cash and cash equivalents


$ 278,690



$ 355,859
Short-term investments


46,654



60,000
Accounts receivable, net of allowance of $3,240 and $2,545 at September 30, 2015 and December 31, 2014, respectively


9,719



5,949
Inventories


22,552



19,798
Prepaid expenses and other current assets


75,486  


45,262  
Total current assets


433,101



486,868
Property and equipment, net


88,642



60,639
Goodwill and intangible assets, net


3,899



6,478
Long-term investments


74,460




Other noncurrent assets


1,242  


1,538  
Total assets


$ 601,344  


$ 555,523  
Liabilities and Stockholders’ Equity







Current liabilities







Accounts payable


$ 192,552



$ 147,873
Accrued expenses


52,083



42,335
Deferred revenue


45,027



26,784
Other current liabilities


24,070  


15,600  
Total current liabilities


313,732



232,592
Other liabilities


32,916  


17,392  
Total liabilities


346,648  


249,984  








 
Convertible preferred stock, $0.001 par value per share: 10,000,000 shares authorized and none issued at September 30, 2015 and December 31, 2014







Stockholders’ equity:







Class A common stock, par value $0.001 per share, 500,000,000 shares authorized, 44,145,083 and 37,002,874 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively


44



37
Class B common stock, par value $0.001 per share, 164,000,000 shares authorized, 39,894,391 and 46,179,192 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively


40



46
Additional paid-in capital


374,794



363,944
Accumulated deficit


(120,070 )


(58,122 )
Accumulated other comprehensive loss


(112 )


(366 )
Total stockholders’ equity


254,696  


305,539  

Total liabilities and stockholders’ equity




$ 601,344  


$ 555,523  












 
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,





2015    
2014


2015    
2014
Net revenue


$

593,972




$

336,188




$

1,510,095




$

910,332


Cost of goods sold (1)


  452,586  

  257,161  

  1,145,073  

  697,644  
Gross profit


  141,386  

  79,027  

  365,022  

  212,688  

















 
Operating expenses:
















Customer service and merchant fees (1)



21,109



14,239



55,417



37,321
Advertising



70,711



49,763



190,249



136,478
Merchandising, marketing and sales (1)



27,083



13,437



74,131



41,868
Operations, technology, general and administrative (1)



40,912



25,203



109,887



71,558
Amortization of acquired intangible assets


  208  

  249  

  694  

  748  
Total operating expenses


  160,023  

  102,891  

  430,378  

  287,973  
Loss from operations



(18,637 )


(23,864 )


(65,356 )


(75,285 )
Interest income, net



325



89



897



222
Other income (expense), net


  2,746  

  (309 )

  2,542  

  (405 )
Loss before income taxes



(15,566 )


(24,084 )


(61,917 )


(75,468 )
(Benefit from) provision for income taxes


  (88 )

  59  

  31  

  76  
Net loss



(15,478 )


(24,143 )


(61,948 )


(75,544 )
Accretion of convertible redeemable preferred units


   

  (4,748 )

   

  (16,503 )
Net loss attributable to common stockholders


$

(15,478

)

$

(28,891

)

$

(61,948

)

$

(92,047

)
Net loss attributable to common stockholders per share, basic and diluted


$

(0.18

)

$

(0.71

)

$

(0.74

)

$

(2.26

)
Weighted average common shares outstanding, basic and diluted


  83,886  

  40,513  

 

83,569  

  40,722  





















 

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






















 

Cost of goods sold




$

96




$




$

246




$


Customer service and merchant fees





236









743





253


Merchandising, marketing and sales





3,414









10,484





4,054


Operations, technology, general and administrative




 

4,239

 

 

 

 

11,775

 

 

1,221

 




$

7,985

 

$

 

$

23,248

 

$

5,528

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

      Nine months ended September 30,




2015       2014
Cash flows from operating activities







Net loss


$ (61,948 )


$ (75,544 )
Adjustments to reconcile net loss to net cash used in operating activities







Depreciation and amortization


23,351



14,438
Equity based compensation


21,741



5,528
Gain on sale of a business


(2,997 )



Other non-cash adjustments


1,395



888
Changes in operating assets and liabilities:







Accounts receivable


(3,832 )


2,376
Inventories


(2,778 )


(6,155 )
Prepaid expenses and other current assets


(28,419 )


(12,721 )
Accounts payable and accrued expenses


60,340



(1,108 )
Deferred revenue and other liabilities


37,927



24,578
Other assets


(25 )


(3,117 )
Net cash provided by (used in) operating activities


44,755         (50,837 )








 
Cash flows from investing activities







Purchase of short-term and long-term investments


(141,309 )


(110,000 )
Sale and maturities of short-term investments


78,715



59,964
Purchase of property and equipment


(36,695 )


(31,168 )
Site and software development costs


(13,107 )


(10,643 )
Cash received from the sale of a business (net of cash sold)


2,860




Other investing activities, net


302  


(3,015 )
Net cash used in investing activities


(109,234 )       (94,862 )








 
Cash flows from financing activities







Taxes paid related to net share settlement of equity awards


(12,899 )



Net proceeds from exercise of stock options


374




Net proceeds from issuance of Series B convertible redeemable preferred units








154,774
Repurchase of common units






(23,500 )

Dividends paid to Series A convertible redeemable preferred holders








(15,000 )
Repurchase of employee equity


 


(5,528 )
Net cash (used in) provided by financing activities


(12,525 )


110,746  
Effect of exchange rate changes on cash and cash equivalents


(165 )


(29 )
Net (decrease) in cash and cash equivalents


(77,169 )


(34,982 )
Cash and cash equivalents







Beginning of period


355,859  


65,289  
End of period


$ 278,690  


$ 30,307  

Source: Wayfair Inc.

Wayfair

Media Relations Contact:

Jane Carpenter, 617-502-7595

jcarpenter@wayfair.com

Investor Relations Contact:

Kate Gulliver, 617-880-8108

IR@wayfair.com