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Wayfair Announces Second Quarter 2019 Results

08/01/2019

Q2 Direct Retail Net Revenue Growth of 42% Year over Year to $2.3 billion

17.8 million Active Customers, up 39% Year over Year

BOSTON--(BUSINESS WIRE)-- Wayfair Inc. (NYSE: W), one of the world’s largest online destinations for the home, today reported financial results for its second quarter ended June 30, 2019.

Second Quarter 2019 Financial Highlights

  • Direct Retail net revenue, consisting of sales generated primarily through Wayfair’s sites, increased $690.8 million to $2.3 billion, up 42.1% year over year
  • Gross profit was $559.6 million or 23.9% of total net revenue
  • GAAP net loss was $181.9 million
  • Adjusted EBITDA was $(70.0) million or (3.0)% of total net revenue
  • GAAP basic and diluted net loss per share was $1.98
  • Non-GAAP diluted net loss per share was $1.35
  • Non-GAAP free cash flow was $(91.5) million
  • At the end of the second quarter, cash, cash equivalents, and short-term and long-term investments totaled $714.5 million

     

“We are very pleased to report another strong quarter with Direct Retail net revenue up $691 million, an increase of 42 percent year over year,” said Niraj Shah, CEO, co-founder and co-chairman, Wayfair. “In addition to a successful second annual Way Day, we are seeing our investments across the business drive greater and greater value to our suppliers and customers. As we continue to strengthen our global logistics network through the addition of Castlegate warehouses and last mile delivery facilities, we are driving cost efficiencies and building an unparalleled experience for our customers with even faster delivery. We look forward to building on this tremendous momentum as we continue to scale our operations and capture an out-sized share of the consumer spending moving online in our market segment.”

Other Second Quarter Highlights

  • The number of active customers in our Direct Retail business reached 17.8 million as of June 30, 2019, an increase of 39.1% year over year
  • LTM net revenue per active customer was $447 as of June 30, 2019, an increase of 1.6% year over year
  • Orders per customer, measured as LTM orders divided by active customers, was 1.86 for the second quarter of 2019, compared to 1.82 for the second quarter of 2018
  • Repeat customers placed 67.8% of total orders in the second quarter of 2019, compared to 66.0% in the second quarter of 2018
  • Repeat customers placed 6.2 million orders in the second quarter of 2019, an increase of 46.1% year over year
  • Orders delivered in the second quarter of 2019 were 9.2 million, an increase of 42.0% year over year
  • Average order value was $255 for the second quarter of 2019, compared to $254 for the second quarter of 2018
  • In the second quarter of 2019, 53.5% of total orders delivered for our Direct Retail business were placed via a mobile device, compared to 49.2% in the second quarter of 2018

Webcast and Conference Call

Wayfair will host a conference call and webcast to discuss its second 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 7278645. 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 $8.0 billion in net revenue for the twelve months ended June 30, 2019. Headquartered in Boston, Massachusetts with operations throughout North America and Europe, the company employs more than 14,500 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 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 June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Reconciliation of Adjusted EBITDA

 

 

 

 

 

 

 

 

Net loss

 

$

(181,938

)

 

$

(100,734

)

 

$

(382,327

)

 

$

(208,509

)

Depreciation and amortization

 

44,339

 

 

28,920

 

 

83,922

 

 

54,882

 

Equity based compensation and related taxes

 

56,855

 

 

31,610

 

 

108,688

 

 

58,757

 

Interest expense, net

 

10,252

 

 

5,796

 

 

19,490

 

 

11,203

 

Other (income), net

 

(322

)

 

(666

)

 

(3,400

)

 

(1,607

)

Provision for income taxes

 

831

 

 

265

 

 

1,426

 

 

505

 

Adjusted EBITDA

 

$

(69,983

)

 

$

(34,809

)

 

$

(172,201

)

 

$

(84,769

)

 

 

 

 

 

 

 

 

 

Net revenue

 

$

2,343,251

 

 

$

1,655,256

 

 

$

4,288,080

 

 

$

3,059,525

 

Adjusted EBITDA Margin

 

(3.0

)%

 

(2.1

)%

 

(4.0

)%

 

(2.8

)%

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 June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Segment Adjusted EBITDA

 

 

 

 

 

 

 

 

U.S.

 

$

(342

)

 

$

7,200

 

 

$

(28,124

)

 

$

(738

)

International

 

(69,641

)

 

(42,009

)

 

(144,077

)

 

(84,031

)

Adjusted EBITDA

 

$

(69,983

)

 

$

(34,809

)

 

$

(172,201

)

 

$

(84,769

)

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 June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Net loss

 

$

(181,938

)

 

$

(100,734

)

 

$

(382,327

)

 

$

(208,509

)

Equity based compensation and related taxes

 

56,855

 

 

31,610

 

 

108,688

 

 

58,757

 

Provision for income taxes

 

831

 

 

265

 

 

1,426

 

 

505

 

Non-GAAP net loss

 

$

(124,252

)

 

$

(68,859

)

 

$

(272,213

)

 

$

(149,247

)

Non-GAAP net loss per share, basic and diluted

 

$

(1.35

)

 

$

(0.77

)

 

$

(2.98

)

 

$

(1.68

)

Weighted average common shares outstanding, basic and diluted

 

91,802

 

 

89,158

 

 

91,455

 

 

88,814

 

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 June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Net cash provided by (used in) operating activities

 

$

(2,734

)

 

$

47,604

 

 

$

(84,082

)

 

$

34,527

 

Purchase of property and equipment

 

(54,714

)

 

(39,730

)

 

(115,340

)

 

(61,093

)

Site and software development costs

 

(34,023

)

 

(15,419

)

 

(58,866

)

 

(28,573

)

Free cash flow

 

$

(91,471

)

 

$

(7,545

)

 

$

(258,288

)

 

$

(55,139

)

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

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Consolidated Financial Metrics

 

 

 

 

 

 

 

 

Net Revenue

 

$

2,343,251

 

 

$

1,655,256

 

 

$

4,288,080

 

 

$

3,059,525

 

Adjusted EBITDA

 

$

(69,983

)

 

$

(34,809

)

 

$

(172,201

)

 

$

(84,769

)

Free cash flow

 

$

(91,471

)

 

$

(7,545

)

 

$

(258,288

)

 

$

(55,139

)

Direct Retail Financial and Operating Metrics

 

 

 

 

 

 

 

 

Direct Retail Net Revenue

 

$

2,331,759

 

 

$

1,640,921

 

 

$

4,262,940

 

 

$

3,029,811

 

Active Customers

 

17,799

 

 

12,792

 

 

17,799

 

 

12,792

 

LTM Net Revenue per Active Customer

 

$

447

 

 

$

440

 

 

$

447

 

 

$

440

 

Orders Delivered

 

9,162

 

 

6,452

 

 

17,325

 

 

12,340

 

Average Order Value

 

$

255

 

 

$

254

 

 

$

246

 

 

$

246

 

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 June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

U.S. Direct Retail

 

$

1,989,026

 

 

$

1,397,009

 

 

$

3,633,076

 

 

$

2,583,214

 

U.S. Other

 

11,492

 

 

14,335

 

 

25,140

 

 

29,714

 

U.S. segment net revenue

 

2,000,518

 

 

1,411,344

 

 

3,658,216

 

 

2,612,928

 

International Direct Retail

 

342,733

 

 

243,912

 

 

629,864

 

 

446,597

 

International segment net revenue

 

342,733

 

 

243,912

 

 

629,864

 

 

446,597

 

Total net revenue

 

$

2,343,251

 

 

$

1,655,256

 

 

$

4,288,080

 

 

$

3,059,525

 

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

 

 

June 30,
2019

 

December 31,
2018

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

675,111

 

 

$

849,461

 

Short-term investments

 

39,342

 

 

114,278

 

Accounts receivable, net of allowance of $12,644and $9,312 at June 30, 2019 and December 31, 2018, respectively

 

77,295

 

 

50,603

 

Inventories

 

45,611

 

 

46,164

 

Prepaid expenses and other current assets

 

219,541

 

 

195,430

 

Total current assets

 

1,056,900

 

 

1,255,936

 

Property and equipment, net

 

480,492

 

 

606,977

 

Goodwill and intangible assets, net

 

560

 

 

2,585

 

Operating lease right-of-use assets

 

630,731

 

 

 

Long-term investments

 

 

 

6,526

 

Other noncurrent assets

 

13,417

 

 

18,826

 

Total assets

 

$

2,182,100

 

 

$

1,890,850

 

Liabilities and Stockholders' Equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

779,938

 

 

$

650,174

 

Accrued expenses

 

218,607

 

 

212,997

 

Unearned revenue

 

155,811

 

 

148,057

 

Other current liabilities

 

179,155

 

 

127,995

 

Total current liabilities

 

1,333,511

 

 

1,139,223

 

Lease financing obligation, net of current portion

 

 

 

183,056

 

Operating lease liabilities

 

685,489

 

 

 

Long-term debt

 

761,604

 

 

738,904

 

Other liabilities

 

6,853

 

 

160,388

 

Total liabilities

 

2,787,457

 

 

2,221,571

 

 

 

 

 

 

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

 

 

 

 

Stockholders’ deficit:

 

 

 

 

Class A common stock, par value $0.001 per share, 500,000,000 shares authorized, 64,591,843 and 62,329,701 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

65

 

 

63

 

Class B common stock, par value $0.001 per share, 164,000,000 shares authorized, 27,506,309 and 28,417,882 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively

 

28

 

 

28

 

Additional paid-in capital

 

859,092

 

 

753,657

 

Accumulated deficit

 

(1,463,166

)

 

(1,082,689

)

Accumulated other comprehensive (loss)

 

(1,376

)

 

(1,780

)

Total stockholders’ deficit

 

(605,357

)

 

(330,721

)

Total liabilities and stockholders’ deficit

 

$

2,182,100

 

 

$

1,890,850

 

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

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Net revenue

 

$

2,343,251

 

 

$

1,655,256

 

 

$

4,288,080

 

 

$

3,059,525

 

Cost of goods sold (1)

 

1,783,651

 

 

1,270,249

 

 

3,258,024

 

 

2,350,694

 

Gross profit

 

559,600

 

 

385,007

 

 

1,030,056

 

 

708,831

 

Operating expenses:

 

 

 

 

 

 

 

 

Customer service and merchant fees (1)

 

88,502

 

 

61,792

 

 

164,975

 

 

115,676

 

Advertising

 

259,166

 

 

177,582

 

 

503,135

 

 

339,228

 

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

 

383,109

 

 

240,972

 

 

726,757

 

 

452,335

 

Total operating expenses

 

730,777

 

 

480,346

 

 

1,394,867

 

 

907,239

 

Loss from operations

 

(171,177

)

 

(95,339

)

 

(364,811

)

 

(198,408

)

Interest expense, net

 

(10,252

)

 

(5,796

)

 

(19,490

)

 

(11,203

)

Other income, net

 

322

 

 

666

 

 

3,400

 

 

1,607

 

Loss before income taxes

 

(181,107

)

 

(100,469

)

 

(380,901

)

 

(208,004

)

Provision for income taxes

 

831

 

 

265

 

 

1,426

 

 

505

 

Net loss

 

$

(181,938

)

 

$

(100,734

)

 

$

(382,327

)

 

$

(208,509

)

Net loss per share, basic and diluted

 

$

(1.98

)

 

$

(1.13

)

 

$

(4.18

)

 

$

(2.35

)

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

 

91,802

 

 

89,158

 

 

91,455

 

 

88,814

 

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

Cost of goods sold

 

$

1,317

 

 

$

637

 

 

$

2,309

 

 

$

1,202

 

Customer service and merchant fees

 

2,269

 

 

1,133

 

 

4,245

 

 

2,103

 

Selling, operations, technology, general and administrative

 

53,269

 

 

29,840

 

 

102,134

 

 

55,452

 

 

 

$

56,855

 

 

$

31,610

 

 

$

108,688

 

 

$

58,757

 

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

 

 

Six months ended June 30,

 

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net loss

 

$

(382,327

)

 

$

(208,509

)

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

 

 

 

 

Depreciation and amortization

 

83,922

 

 

54,882

 

Equity based compensation

 

100,247

 

 

54,213

 

Amortization of discount and issuance costs on convertible notes

 

23,015

 

 

9,353

 

Other non-cash adjustments

 

(1,595

)

 

133

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(27,653

)

 

3,058

 

Inventories

 

540

 

 

(2,741

)

Prepaid expenses and other current assets

 

(22,432

)

 

(22,354

)

Accounts payable and accrued expenses

 

128,611

 

 

95,743

 

Unearned revenue and other liabilities

 

14,914

 

 

52,211

 

Other assets

 

(1,324

)

 

(1,462

)

Net cash (used in) provided by operating activities

 

(84,082

)

 

34,527

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Sale and maturities of short-term investments

 

82,164

 

 

26,646

 

Purchase of property and equipment

 

(115,340

)

 

(61,093

)

Site and software development costs

 

(58,866

)

 

(28,573

)

Other investing activities

 

2,773

 

 

(267

)

Net cash used in investing activities

 

(89,269

)

 

(63,287

)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

(424

)

 

(635

)

Deferred financing costs

 

(791

)

 

 

Net proceeds from exercise of stock options

 

80

 

 

74

 

Net cash used in financing activities

 

(1,135

)

 

(561

)

Effect of exchange rate changes on cash and cash equivalents

 

136

 

 

(187

)

Net decrease in cash and cash equivalents

 

(174,350

)

 

(29,508

)

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

Beginning of period

 

849,461

 

 

558,960

 

End of period

 

$

675,111

 

 

$

529,452

 

 

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

Investor Relations Contact:
Jane Gelfand
IR@wayfair.com

Source: Wayfair Inc.

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