Wayfair Announces Fourth Quarter and Full Year 2020 Results

Wayfair Inc. (NYSE: W), one of the world’s largest online destinations for the home, today reported financial results for its fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Financial Highlights

• Total net revenue of $3.7 billion increased $1.1 billion, up 44.9% year over year
• U.S. net revenue of $3.0 billion increased $0.9 billion, up 40.1% year over year
• International net revenue of $671.8 million increased $278.2 million, up 70.7% year over year. International segment Net Revenue Constant Currency Growth was 66.7%
• Gross profit was $1.1 billion, or 29.0% of total net revenue
• Net income was $23.8 million
• Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin were $263.2 million and 7.2% of total net revenue
• Diluted earnings per share was $0.23
• Non-GAAP Adjusted Diluted Earnings Per Share was $1.24
• Non-GAAP Free Cash Flow was $128.3 million
• Cash, cash equivalents and short- and long-term investments totaled $2.6 billion

Full Year 2020 Financial Highlights

• Total net revenue of $14.1 billion increased $5.0 billion, up 55.0% year over year
• U.S. net revenue of $11.9 billion increased $4.1 billion, up 53.3% year over year
• International net revenue of $2.2 billion increased $0.9 billion, up 64.8% year over year. International segment Net Revenue Constant Currency Growth was 64.9%
• Gross profit was $4.1 billion, or 29.1% of total net revenue
• Net income was $185.0 million
• Non-GAAP Adjusted EBITDA and Adjusted EBITDA Margin were $946.9 million and 6.7% of total net revenue
• Diluted earnings per share was $1.86
• Non-GAAP Adjusted Diluted Earnings Per Share was $5.04
• Non-GAAP Free Cash Flow was $1.1 billion

“In Q4, Wayfair delivered another solid quarter of growth, profitability, and free cash flow. Online shopping behavior is becoming increasingly entrenched and consumer demand for the home category remains strong. Wayfair is capitalizing on these tailwinds by delivering a truly differentiated experience for both customers and suppliers. In the process, we are cementing our position as the leading platform for the Home, reinforcing our brand to tens of millions of customers, and developing innovative and value-added solutions for thousands of our suppliers,” said Niraj Shah, CEO, co-founder and co-chairman, Wayfair. “As we look beyond the pandemic period, we are confident that our long-term orientation and years of investments should translate to compounding share gains and increasing profitability in a rapidly growing e-commerce market.”

Other Fourth Quarter Highlights

• The number of active customers reached 31.2 million as of December 31, 2020, an increase of 53.7% year over year
• LTM net revenue per active customer was $453 as of December 31, 2020, an increase of 1.1% year over year
• Orders per customer, measured as LTM orders divided by active customers, was 1.96 for the fourth quarter of 2020, compared to 1.86 for the fourth quarter of 2019
• Repeat customers placed 72.5% of total orders delivered in the fourth quarter of 2020, compared to 68.6% in the fourth quarter of 2019
• Repeat customers placed 11.9 million orders in the fourth quarter of 2020, an increase of 55.6% year over year
• Orders delivered in the fourth quarter of 2020 were 16.5 million, an increase of 47.1% year over year
• Average order value was $223 for the fourth quarter of 2020, compared to $226 for the fourth quarter of 2019
• In the fourth quarter of 2020, 59.9% of total orders delivered were placed via a mobile device, compared to 54.8% in the fourth quarter of 2019

Key Financial and Operating Metrics

Webcast and Conference Call

Wayfair will host a conference call and webcast to discuss its fourth quarter and full year 2020 financial results today at 8 a.m. (ET). Investors and participants should register for the call in advance by visiting http://bit.ly/39Qb3pC. After registering, instructions will be shared on how to join the call. The call will also be available via live webcast at http://bit.ly/3odrjpS 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 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 22 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 $14.1 billion in net revenue for full year 2020. Headquartered in Boston, Massachusetts with operations throughout North America and Europe, Wayfair 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 our investment plans and anticipated returns on those investments, our future customer growth, our future results of operations and financial position, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, consumer activity and behaviors, e-commerce adoption trends, developments in our technology and systems and anticipated results of those developments and the impact of the novel coronavirus (COVID-19) pandemic and our response to it, 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 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, Adjusted Diluted Earnings (Loss) 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.

Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures that are calculated as net income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest (expense), net, other (expense) income, net, provision for income taxes, net, non-recurring items and other items not indicative of our ongoing operating performance. 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 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 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 from or for operating activities less net cash 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.

Adjusted Diluted Earnings (Loss) Per Share is a non-GAAP financial measure that is calculated as GAAP net income (loss) 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 earnings (loss) per share. We believe that these adjustments to our non-GAAP diluted net income (loss) before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.

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.

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 income (loss). We do not attempt to provide a reconciliation of forward-looking non-GAAP Adjusted EBITDA guidance to forward looking GAAP net income (loss) 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 income (loss) to Adjusted EBITDA, as well as Adjusted EBITDA Margin, for each of the periods indicated:

(1) In 2020, we recorded a $4.0 million loss related to severance costs associated with February 2020 workforce reductions. The values were recorded in selling, operations, technology, general and administrative expenses.

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

A reconciliation of the numerator and denominator for diluted earnings (loss) per share, the most directly comparable GAAP financial measure, to the numerator and denominator for Adjusted Diluted Earnings (Loss) Per Share, in order to calculate Adjusted Diluted Earnings (Loss) Per Share is as follows:

The following tables present net revenues attributable to our reportable segments for the periods indicated:

The following table presents a reconciliation of net cash from or for operating activities to Free Cash Flow for each of the periods indicated:

Quarterly Financial Metrics (Unaudited)

The following tables set forth selected financial quarterly metrics and other financial and operations data for the eight quarters ended December 31, 2020:

The following table reflects the reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated:

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