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☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Exact name of registrant as specified in its charter)

Delaware									36-4791999
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification Number)
4 Copley Place			Boston,			MA			02116
(Address of principal executive offices)									(Zip Code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading symbol(s)			Name of each exchange on which registered
Class A Common Stock, $0.001 par value			W			The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer			☒			Accelerated filer			☐
Non-accelerated filer			☐			Smaller reporting company			☐
						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒

See notes to unaudited condensed consolidated financial statements

The accompanying unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q are those of Wayfair Inc. and its wholly-owned subsidiaries. Unless the context indicates otherwise, “Wayfair,” “the Company" or similar terms refer to Wayfair Inc. and its subsidiaries. In the Company’s opinion, the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting and reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Furthermore, interim results are not necessarily indicative of the results for the full year ended December 31, 2023 or future periods.

The Company has identified significant accounting policies that are critical to understanding its business and results of operations. Wayfair believes that there have been no significant changes during the three and nine months ended September 30, 2023 to the items disclosed in Note 1, Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The Company has considered recently issued accounting pronouncements and does not believe that any are applicable or expected to have a material impact on the consolidated financial statements.

As of September 30, 2023, accounts receivable was $132 million, net of allowance for credit losses of $33 million. As of December 31, 2022, accounts receivable was $272 million, net of allowance for credit losses of $24 million. The changes in the allowance for credit losses were not material for the three and nine months ended September 30, 2023. Management believes credit risk is mitigated for the three and nine months ended September 30, 2023, as approximately 99.4% and 99.5%, respectively, of the net revenue recognized was collected in advance of recognition.

Contract liabilities included in other current liabilities were $214 million at September 30, 2023 and $224 million at December 31, 2022. During the nine months ended September 30, 2023, Wayfair recognized $152 million of net revenue that was included within other current liabilities as of December 31, 2022.

Net revenue from contracts with customers is disaggregated by geographic region because this manner of disaggregation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors. Refer to Note 10, Segment and Geographic Information, for additional information.

During the nine months ended September 30, 2023, Wayfair recorded charges of $14 million, inclusive of $5 million related to consolidation of certain customer service centers and $9 million related to construction in progress assets at identified U.S. locations. These charges are recorded within impairment and other related net charges on the condensed consolidated statements of operations.

In January 2023, Wayfair announced an update to the Company’s cost efficiency plan, including a workforce reduction involving approximately 1,750 employees. As a result of this workforce reduction, during the nine months ended September 30, 2023, Wayfair incurred $65 million of charges recorded within restructuring charges on the condensed consolidated statements of operations.

Wayfair does not expect to incur any further material charges related to this workforce reduction. The charges consisted primarily of one-time employee severance and benefit costs.

As of September 30, 2023 and December 31, 2022, Wayfair’s marketable securities, which primarily consisted of corporate bonds and other government obligations that are priced at fair value, were classified as available-for-sale investments. During the three and nine months ended September 30, 2023 and 2022, Wayfair did not have any realized gains or losses.

During the three and nine months ended September 30, 2023 and 2022, Wayfair did not recognize any credit losses related to its available-for-sale debt securities. As of September 30, 2023 and December 31, 2022, Wayfair did not have an allowance for credit losses recorded related to its available-for-sale debt securities.

The following table presents details of Wayfair’s investment securities:

Wayfair's financial assets and liabilities are measured at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The three levels of inputs used to measure fair value are as follows:

▪Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities

▪Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability

▪Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability

This hierarchy requires Wayfair to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Wayfair classifies cash equivalents and certificate of deposits within Level 1 because these are valued using quoted market prices. The fair value of Level 1 financial assets is based on quoted market prices of the identical underlying security. Wayfair classifies short-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active. Wayfair does not have assets that are classified as Level 3.

The following tables set forth the fair value of Wayfair's financial assets measured at fair value on a recurring basis:

						September 30, 2023
						Level 1						Level 2						Level 3						Total
						(in millions)
Cash and cash equivalents:
Cash						$	913					$	—					$	—					$	913
Cash equivalents						368						—						—						368
Total cash and cash equivalents						1,281						—						—						1,281
Prepaid expenses and other current assets:
Certificate of deposit (1)						10						—						—						10
Total						$	1,291					$	—					$	—					$	1,291

(1) The certificate of deposit is classified as restricted cash that is primarily restricted to funds held in collateral.

The following table presents the outstanding principal amount and carrying value of debt and other financing:

Wayfair has a five-year senior secured revolving credit facility (the “Revolver”), which matures on March 24, 2026, and provides for non-amortizing revolving loans in an aggregate amount of $600 million. Under the Revolver, Wayfair may, from time to time, request letters of credit, which reduce the availability of credit under the Revolver. Wayfair had $76 million in outstanding letters of credit as of September 30, 2023, primarily as security for lease agreements. As of September 30, 2023, there were no revolving loans outstanding under the Revolver.

In May 2023, Wayfair issued $690 million in aggregate principal amount of 3.50% Convertible Senior Notes due 2028 (the “2028 Notes”), which includes the exercise in full of a $90 million option granted to the initial purchasers. In connection with the issuance of the 2028 Notes, Wayfair entered into capped calls that covered, initially, the number of shares of Wayfair’s Class A common stock underlying the 2028 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes (the “2028 Capped Calls”).

The following table summarizes certain terms related to the Company’s current outstanding non-accreting convertible notes (collectively, the “Non-Accreting Notes” and together with the 2025 Accreting Notes, the “Notes”):

Convertible Non-Accreting Notes

Maturity Date

Annual Coupon Rate

Annual Effective Interest Rate

Payment Dates for Semi-Annual Interest Payments in Arrears

2024 Notes

November 1, 2024

1.125%

1.5%

May 1 and November 1

2025 Notes

October 1, 2025

0.625%

0.9%

April 1 and October 1

2026 Notes

August 15, 2026

1.000%

1.2%

February 15 and August 15

2027 Notes

September 15, 2027

3.250%

3.6%

March 15 and September 15

2028 Notes

November 15, 2028

3.500%

3.8%

May 15 and November 15

No cash interest is payable on the 2025 Accreting Notes. Instead, the 2025 Accreting Notes accrue interest at a rate of 2.50% per annum, which accretes to the principal amount on April 1 and October 1 of each year. The 2025 Accreting Notes will mature on April 1, 2025, unless earlier purchased, redeemed or converted. The annual effective interest rate of the 2025 Accreting Notes is 2.7%.

The Notes are general senior unsecured obligations of Wayfair. The Notes rank senior in right of payment to any of Wayfair’s future indebtedness that is expressly subordinated in right of payment to the Notes, rank equal in right of payment to Wayfair’s existing and future unsecured indebtedness that is not so subordinated and are effectively subordinated in right of payment to any of Wayfair’s secured indebtedness to the extent of the value of the assets securing such indebtedness. The Non-Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of Wayfair’s subsidiaries, including Wayfair LLC’s guaranty of the 2025 Accreting Notes, and the 2025 Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of Wayfair’s subsidiaries (other than Wayfair LLC).

The Notes are governed by separate indentures between Wayfair, as issuer, and U.S. Bank National Association, as trustee. The Non-Accreting Notes indenture also includes Wayfair LLC, as guarantor. Each indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or the holders of not less than 25% in aggregate principal amount of the respective Notes then outstanding may declare the entire principal amount or accreted principal amount, as the case may be, of the respective Notes plus accrued interest, if any, to be immediately due and payable.

Wayfair's Notes will mature at their maturity date unless earlier purchased, redeemed or converted. The Notes’ initial conversion terms are summarized below:

Convertible Notes

Maturity Date

Free Convertibility Date

Initial Conversion Rate per $1,000 Principal

Initial Conversion Price

Redemption Date

2024 Notes

November 1, 2024

August 1, 2024

8.5910

$116.40

May 8, 2022

2025 Notes

October 1, 2025

July 1, 2025

2.3972

$417.15

October 4, 2022

2026 Notes

August 15, 2026

May 15, 2026

6.7349

$148.48

August 20, 2023

2027 Notes

September 15, 2027

June 15, 2027

15.7597

$63.45

September 20, 2025

2028 Notes

November 15, 2028

August 15, 2028

21.8341

$45.80

May 20, 2026

2025 Accreting Notes

April 1, 2025

-

13.7931

$72.50

May 9, 2023

The conversion rate is subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of Wayfair’s Class A common stock, but will not be adjusted for accrued and unpaid interest.

Wayfair will settle any conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or a combination thereof, with the form of consideration determined at Wayfair’s election. The holders of the Non-Accreting Notes may convert all or a portion of such Notes prior to certain specified dates (each, a “Free Convertibility Date”) under the following circumstances (in each case, as applicable to each series of Non-Accreting Notes):

•during any calendar quarter (and only during such calendar quarter), if the last reported sale price of Wayfair’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five-business day period after any ten consecutive trading day period (the “measurement period") in which the trading price (as defined in the applicable indenture) per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Wayfair’s Class A common stock and the conversion rate on each such trading day;

•if Wayfair calls the notes for redemption, at any time prior to 5:00 p.m. (New York City time) (“the close of business”) on the second scheduled trading day immediately preceding the redemption date; and

•upon the occurrence of specified corporate events (as set forth in the applicable indenture).

On or after the applicable Free Convertibility Date until the close of business on the second scheduled trading day immediately preceding the applicable maturity date, holders of the Non-Accreting Notes may convert their Non-Accreting Notes at any time.

The conditional conversion features of the 2028 Notes were triggered during the calendar quarter ended September 30, 2023, and the 2028 Notes therefore became convertible in the calendar quarter ended December 31, 2023 pursuant to the applicable last reported sales price condition. Because the conditional conversion features of the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes were not triggered during the calendar quarter ended September 30, 2023, the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes are not convertible during the calendar quarter ended December 31, 2023 pursuant to the applicable last reported sales price conditions.

The holders of the 2025 Accreting Notes may convert all or a portion of their 2025 Accreting Notes at any time prior to the close of business on the second business day immediately preceding the maturity date. Wayfair will settle any conversion of 2025 Accreting Notes with a number of shares of Wayfair’s Class A common stock per $1,000 original principal amount of 2025 Accreting Notes equal to the accreted principal amount of such original principal amount of 2025 Accreting Notes divided by the conversion price.

Upon the occurrence of a fundamental change (as defined in the applicable indenture), holders of the applicable series of Notes may require Wayfair to repurchase all or a portion of such Notes for cash at a price equal to 100% of the principal amount (or accreted principal amount) of such Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date (such interest to be included in the accreted principal amount for the 2025 Accreting Notes).

Holders of the Non-Accreting Notes who convert their respective Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the applicable indenture) may be entitled to a premium in the form of an increase in the conversion rate of the respective Notes. Holders of the 2025 Accreting Notes who convert in connection with a make-whole fundamental change (as defined in the applicable indenture) may be entitled to a premium in the form of an increase in the conversion rate.

Wayfair may not redeem the Notes prior to certain dates (the “Redemption Date”). On or after the applicable Redemption Date, Wayfair may redeem for cash all or part of the applicable series of Notes if the last reported sale price of Wayfair’s Class A common stock equals or exceeds 130% (Non-Accreting Notes) or 276% (2025 Accreting Notes) of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which Wayfair provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which Wayfair provides notice of the redemption. The redemption price will be either 100% of the principal amount (or accreted principal amount) of the notes to be redeemed, plus accrued and unpaid interest, if any, or the if-converted value if the holder elects to convert their Notes upon receiving notice of redemption.

The Notes are recorded as a single unit within liabilities in the condensed consolidated balance sheets as the conversion features within the Notes are not derivatives that require bifurcation and the Notes do not involve a substantial premium. Transaction costs to issue the Notes were recorded as direct deductions from the related debt liabilities and amortized to interest expense, net using the effective interest method over the terms of the corresponding Notes.

The net transaction amount from the issuance of the 2028 Notes, in the second quarter of 2023, was $591 million after deducting the initial purchasers’ discounts, the offering expenses payable by Wayfair and the net proceeds used to purchase the 2028 Capped Calls.

Additionally, during the second quarter of 2023, Wayfair used $514 million of the net transaction amount to repurchase for cash $83 million aggregate principal amount of the 2024 Notes and $535 million aggregate principal amount of the 2025 Notes in privately negotiated repurchase transactions. In accounting for the repurchases of the 2024 Notes and 2025 Notes, Wayfair recorded a $100 million gain on debt extinguishment, representing the difference between the cash paid for principal of $514 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $614 million. Wayfair intends to use the remaining net proceeds from the issuance of the 2028 Notes for working capital and general corporate purposes, including, but not limited to, operating and capital expenditures. Wayfair may also use a portion of the net proceeds to finance acquisitions, strategic transactions, investments, repurchases of Class A common stock or the repayment, redemption, purchase or exchange of indebtedness (including the Notes).

During the three and nine months ended September 30, 2023, there were no conversions of the Notes.

During the three months ended September 30, 2023, Wayfair recognized contractual interest expense and debt discount amortization of $15 million and $3 million, respectively, and during the nine months ended September 30, 2023, contractual interest expense and debt discount amortization of $40 million and $6 million, respectively.

During the three months ended September 30, 2022, Wayfair recognized contractual interest expense and debt discount amortization of $7 million and $2 million, respectively, and during the nine months ended September 30, 2022, contractual interest expense and debt discount amortization of $21 million and $6 million, respectively.

As of September 30, 2023, the estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2025 Accreting Notes was $115 million, $650 million, $771 million, $841 million, $1.0 billion and $31 million, respectively. The estimated fair value of the Non-Accreting Notes was determined through consideration of quoted market prices. The estimated fair value of the 2025 Accreting Notes was determined through an option pricing model using Level 3 inputs including volatility and credit spread. The fair values of the Non-Accreting Notes and the 2025 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, Cash, Cash Equivalents and Restricted Cash, Investments and Fair Value Measurements. As of September 30, 2023, the if-converted value of the 2028 Notes exceeded the principal value by $223 million.

As of September 30, 2023, the if-converted value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2025 Accreting Notes did not exceed the principal value.

The 2024 Capped Calls, 2025 Capped Calls, 2026 Capped Calls, 2027 Capped Calls and 2028 Capped Calls (collectively, the “Capped Calls”) are expected generally to reduce the potential dilution and/or offset the cash payments Wayfair is required to make in excess of the principal amount of the Non-Accreting Notes upon conversion of the Non-Accreting Notes if the market price per share of Wayfair’s Class A common stock is greater than the strike price of the applicable Capped Call (which corresponds to the initial conversion price of the applicable Non-Accreting Notes and is subject to certain adjustments under the terms of the applicable Capped Call), with such reduction and/or offset subject to a cap based on the cap price of the applicable Capped Calls (the “Initial Cap Price”). The Capped Calls can, at Wayfair’s option, remain outstanding until their maturity date, even if all or a portion of the Non-Accreting Notes are converted, repurchased or redeemed prior to such date.

Each of the Capped Calls has an initial cap price per share of Wayfair’s Class A common stock, which represented a premium over the last reported sale price (or, with respect to the 2025 Capped Calls, the volume-weighted average price) of Wayfair’s Class A common stock on the date the corresponding Non-Accreting Notes were priced (the “Cap Price Premium”), and is subject to certain adjustments under the terms of the corresponding agreements. Collectively, the Capped Calls cover, initially, the number of shares of Wayfair’s Class A common stock underlying the Non-Accreting Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Non-Accreting Notes.

The initial terms for the Capped Calls are presented below:

Capped Calls						Maturity Date						Initial Cap Price						Cap Price Premium
2024 Capped Calls						November 1, 2024						$219.63						150%
2025 Capped Calls						October 1, 2025						$787.08						150%
2026 Capped Calls						August 15, 2026						$280.15						150%
2027 Capped Calls						September 15, 2027						$97.62						100%
2028 Capped Calls						November 15, 2028						$73.28						100%

The Capped Calls are separate transactions from the Non-Accreting Notes, are not subject to the terms of the Non-Accreting Notes and will not affect any holder’s rights under the Non-Accreting Notes. Similarly, holders of the Non-Accreting Notes do not have any rights with respect to the Capped Calls. The Capped Calls do not meet the criteria for separate accounting as a derivative as they are indexed to Wayfair's stock and meet the requirements to be classified in equity. The premiums paid for the Capped Calls were included as a net reduction to additional paid-in capital within stockholders’ deficit when they were entered.

From time to time, Wayfair is involved in litigation matters and other legal claims that arise during the ordinary course of business. The Company records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. Litigation and legal claims are inherently unpredictable and claims cannot be predicted with certainty. An unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s results of operations or financial condition, and regardless of the outcome, these matters can be costly and time consuming, as it can divert management's attention from important business matters and initiatives, negatively impacting Wayfair's overall operations. In addition, Wayfair may also find itself at greater risk to outside party claims as it increases its operations in jurisdictions where the laws with respect to the potential liability of online retailers are uncertain, unfavorable, or unclear.

However, Wayfair does not currently believe that the outcome of any legal matters will have a material adverse effect on Wayfair’s results of operations or financial condition.

The Canada Border Services Agency (“CBSA”) is examining Wayfair’s payment of duties under the Special Measures Import Act (the “CBSA review”) for goods imported into Canada for the years ended December 31, 2023 and 2022 and part of the year ended December 31, 2021. As of September 30, 2023, the estimated potential liability for the CBSA review is $10 million and is recorded within other current liabilities in the condensed consolidated balance sheets. During the three and nine months ended September 30, 2023 approximately $7 million was recorded to cost of sales and approximately $1 million was recorded to selling, operations, technology, general and administrative within the condensed consolidated statements of operations.

Because loss contingencies are inherently unpredictable, this assessment is subjective and requires judgments about future events. As a result, it is at least reasonably possible that this estimate may change in the near term and the effect of the potential change could be material. Wayfair believes it has substantial factual and legal grounds to contest certain elements of the CBSA review, along with any associated interest.

Since Wayfair's initial public offering through September 30, 2023, 56,347,119 shares of Class B common stock were converted to the same number of shares of Class A common stock.

During the three and nine months ended September 30, 2023, Wayfair did not repurchase any shares of Class A common stock under its stock repurchase programs.

During the three months ended September 30, 2022, Wayfair did not repurchase any shares of Class A common stock. During the nine months ended September 30, 2022, Wayfair repurchased 548,173 shares of Class A common stock for $75 million under its stock repurchase programs.

In April 2023, Wayfair’s stockholders approved the 2023 Incentive Award Plan (the “2023 Plan”) to replace Wayfair’s 2014 Incentive Award Plan, as amended (the “2014 Plan” and, together with the 2023 Plan, the “Incentive Plans”). The Incentive Plans were adopted by the board of directors (the “Board”) to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent. The Incentive Plans are administered by the Board for awards to non-employee directors and by the compensation committee of the Board for other participants and provide for the issuance of equity-based awards including stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance awards and stock payments.

Under the 2023 Plan, 20,525,663 shares of Class A common stock initially were available for future award grants. As of September 30, 2023, 16,452,692 shares of Class A common stock remained available for future grant under the 2023 Plan.

The following table presents activity relating to RSUs for the nine months ended September 30, 2023:

						Shares						Weighted-Average Grant Date Fair Value
Unvested at December 31, 2022						10,170,203						$	100.05
RSUs granted						4,815,022						$	45.41
RSUs vested						(7,585,420)						$	62.84
RSUs forfeited/canceled						(1,888,574)						$	108.06
Unvested at September 30, 2023						5,511,231						$	100.75

The intrinsic value of RSUs that vested during the nine months ended September 30, 2023 and 2022 were $411 million and $210 million, respectively. As of September 30, 2023, the aggregate intrinsic value of unvested RSUs was $334 million.

As of September 30, 2023, unrecognized equity-based compensation expense related to RSUs expected to vest over time is $409 million with a weighted-average remaining vesting term of 0.8 years.

Equity-based compensation was classified as follows in the condensed consolidated statements of operations:

Equity-based compensation costs capitalized as software costs were $15 million and $45 million for the three and nine months ended September 30, 2023, respectively, and $10 million and $28 million for the three and nine months ended September 30, 2022, respectively.

The provision for income taxes, net recorded during the three and nine months ended September 30, 2023 is primarily related to income tax benefits for tax losses earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes, as well as related changes in increases in the Company’s valuation allowance on deferred tax assets, as well as some U.S. state minimum and foreign taxes. Wayfair had no material unrecognized tax benefits as of September 30, 2023 and December 31, 2022.

Wayfair follows the two-class method when computing earnings or loss per share for its two issued classes of common stock - Class A and Class B. Basic earnings or loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings or loss per share is computed using the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, common stock equivalents outstanding during the period and stock issuable upon conversion of the convertible debt instruments. Wayfair's common stock equivalents consist of shares issuable upon the release of restricted stock units. The dilutive effect of these common stock equivalents is reflected in diluted earnings or loss per share by application of the treasury stock method. The dilutive effect of shares issuable upon conversion of the convertible debt instruments is included in the calculation of diluted earnings or loss per share under the if-converted method.

For periods in which Wayfair has reported net losses, diluted loss per share is the same as basic loss per share, as the effects of common stock equivalents outstanding and shares issuable upon conversion of convertible debt instruments are antidilutive and, therefore, excluded from the calculation of diluted loss per share.

Wayfair allocates undistributed earnings between the classes on a one-to-one basis when computing earnings or loss per share. As a result, basic and diluted earnings or loss per Class A and Class B shares are equivalent.

The following table presents the calculation of basic and diluted loss per share:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
						(in millions, except per share data)
Numerator:
Numerator for basic and diluted loss per share - net loss						$	(163)					$	(283)					$	(564)					$	(980)
Denominator:
Denominator for basic and diluted loss per share - weighted-average number of shares of common stock outstanding						116						106						113						106
Loss per share
Basic						$	(1.40)					$	(2.66)					$	(4.99)					$	(9.28)
Diluted						$	(1.40)					$	(2.66)					$	(4.99)					$	(9.28)

The potential common shares from anti-dilutive securities excluded from the weighted-average shares of common stock used to calculate diluted loss per share were as follows:

Wayfair may settle conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or any combination thereof at its election. Wayfair will settle conversions of the 2025 Accreting Notes in shares of Wayfair’s Class A common stock. The Capped Calls are generally expected to reduce the potential dilution of Wayfair's Class A common stock upon any conversion of the Notes and/or offset the cash payments Wayfair is required to make in excess of the principal amount of the Notes upon conversion of the Notes to the extent the market price per share of Wayfair’s Class A common stock is greater than the strike price of the Capped Calls (which corresponds to the initial conversion prices of the Non-Accreting Notes, subject to certain adjustments under the terms of the Capped Calls), with such reduction and/or offset capped at the Initial Cap Price.

For more information on the structure of the Notes and the Capped Calls, see Note 4, Debt and Other Financing.

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated on a regular basis by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. Wayfair’s CODM is its Chief Executive Officer. 

Wayfair's operating and reportable segments are the U.S. and International. These segments reflect the way the CODM allocates resources and evaluates financial performance, which is based upon each segment's Adjusted EBITDA. Adjusted EBITDA is defined as net income or loss before depreciation and amortization, equity-based compensation and related taxes, interest income or expense, net, other income or expense, net, provision or benefit for income taxes, net, non-recurring items, and other items not indicative of ongoing operating performance. These charges are excluded from the evaluation of segment performance because it facilitates reportable segment performance comparisons on a period-to-period basis as these costs may vary independent of business performance.

Wayfair allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative expenses based on the usage and relative contribution provided to the segments. It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, impairment and other related net charges and restructuring charges, as well as interest income or expense, net, other income or expense, net, gain or loss on debt extinguishment and provision or benefit for income taxes, net. There are no net revenue transactions between Wayfair's reportable segments.

The U.S. segment primarily consists of amounts earned through product sales through Wayfair's family of sites in the U.S.

The International segment primarily consists of amounts earned through product sales through Wayfair's international sites.

Net revenue from external customers for each group of similar products and services are not reported to the CODM. Separate identification of this information for purposes of segment disclosure is impractical, as it is not readily available and the cost to develop it would be excessive. No individual country outside the U.S. provided greater than 10% of consolidated net revenue.

The following tables present net revenue and Adjusted EBITDA attributable to Wayfair’s reportable segments for the periods presented:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
						(in millions)
U.S. net revenue						$	2,572					$	2,440					$	7,772					$	7,778
International net revenue						372						400						1,117						1,339
Total net revenue						$	2,944					$	2,840					$	8,889					$	9,117

(1)The following adjustments are made to reconcile total reportable segments Adjusted EBITDA to consolidated net loss:

See “Non-GAAP Financial Measures” in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q for more information regarding the use of Adjusted EBITDA.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, 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 and profitability goals, the financial impact and expected savings of our recent reduction in workforce, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, including our international expansion and omni-channel strategy, consumer activity and behaviors, developments in our technology and systems and anticipated results of those developments and the impact of macroeconomic events, interest rates and rising inflation, 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,” “continues,” “could,” “intends,” “goals,” “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 Wayfair’s 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 Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise.

Factors that could cause or contribute to differences in our future results include, without limitation, the following:

•adverse macroeconomic conditions, including inflation, slower growth or the potential for recession, disruptions in the global supply chain and other conditions affecting the retail environment for products we sell, and other matters that influence consumer spending and preferences;

•our ability to manage our growth and the impacts of our internal restructuring and workforce reduction;

•our ability to acquire and retain customers in a cost-effective manner;

•our ability to increase our net revenue per active customer;

•our ability to build and maintain strong brands;

•our ability to manage our growth and expansion initiatives;

•our ability to expand our business and compete successfully;

•disruptions, capacity constraints or inefficiencies in our information systems network, or any potential cybersecurity incident;

•geopolitical events, natural disasters, public health emergencies, civil disturbances and terrorist attacks; and

•developments in, and the outcome of, legal and regulatory proceedings and investigations to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith.

A further list and description of risks, uncertainties and other factors that could cause or contribute to differences in our future results include the cautionary statements in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, including those set forth under Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022. We qualify all of our forward-looking statements by these cautionary statements.

All dollar and percentage comparisons made refer to the three and nine ended September 30, 2023, compared with the three and nine ended September 30, 2022, unless otherwise noted.

Wayfair is one of the world’s largest online destinations for the home. Through our e-commerce business model, we offer visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 40 million products from over 20 thousand suppliers.

We believe an increasing portion of the dollars spent on home goods will be spent online and that there is an opportunity for acquiring more market share. Our business model is designed to grow our net revenue by acquiring new customers as well as stimulating repeat purchases from our existing customers. Through increasing brand awareness as well as paid and unpaid advertising, we attract new and repeat customers to our family of sites. We turn these customers into recurring shoppers by creating a seamless shopping experience across their entire journey — offering best-in-class product discovery, purchasing, fulfillment and customer service.

In the third quarter of 2023, our business generated higher sales compared to the third quarter of 2022. As of September 30, 2023, we had 22 million active customers and 79.7% of third quarter 2023 orders came from repeat buyers. The higher sales were a function of increased order volume, partially offset by normalization in average order value as we lapped a period of intense inflation in 2022. We also continued to manage our advertising spend according to a return on investment-oriented approach that carefully tracks and monitors the results of advertising campaigns as we seek to maintain appropriate return targets.

We are continuing to closely monitor macroeconomic impacts, including, but not limited to, geopolitical events and rising and fluctuating interest rates and inflation on our business, results of operations and financial results. These developments have and may continue to negatively impact global economic activity and consumer behavior, which have and may continue to adversely affect our business and our results of operations. As our customers react to these global economic conditions, we may take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity.

While it is difficult to quantify and predict all of the impacts these global economic events, including rising and fluctuating inflation and interest rates, will have on our business and to predict consumer spending in the near term, we believe the long-term opportunity that we see for shopping for the home online remains unchanged.

We will continue to monitor economic conditions as we work to manage our business to meet the evolving needs of our customers, employees, suppliers, partners, stockholders and communities.

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed in Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022.

We measure our business using the key financial statement and operating metrics that are reflected in the below table. See “Non-GAAP Financial Measures” below for more information regarding our use of Adjusted EBITDA, Free Cash Flow and Adjusted Diluted Earnings or Loss per share and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure.

Our Free Cash Flow and Adjusted Diluted Earnings or Loss per share are measured on a consolidated basis, while our Adjusted EBITDA is measured on a consolidated and reportable segment basis. All other key financial statement and operating metrics are derived and reported from our consolidated net revenue.

We use the following metrics to assess the near and longer-term performance of our overall business:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2023						2022						2023						2022
						(in millions, except LTM net revenue per active customer, average order value and per share data)
Key Financial Statement Metrics:
Net revenue						$	2,944					$	2,840					$	8,889					$	9,117
Gross profit						$	917					$	824					$	2,723					$	2,523
Loss from operations						$	(152)					$	(372)					$	(641)					$	(1,054)
Net loss						$	(163)					$	(283)					$	(564)					$	(980)
Loss per share:
Basic						$	(1.40)					$	(2.66)					$	(4.99)					$	(9.28)
Diluted						$	(1.40)					$	(2.66)					$	(4.99)					$	(9.28)
Net cash provided by (used in) operating activities						$	121					$	(431)					$	191					$	(772)
Key Operating Metrics:
Active customers (1)						22						23						22						23
LTM net revenue per active customer (2)						$	538					$	547					$	538					$	547
Orders delivered (3)						10						9						30						29
Average order value (4)						$	297					$	325					$	297					$	313
Non-GAAP Financial Measures:
Adjusted EBITDA						$	100					$	(124)					$	214					$	(345)
Free Cash Flow						$	42					$	(538)					$	(64)					$	(1,113)
Adjusted Diluted Loss per share						$	(0.13)					$	(2.11)					$	(1.02)					$	(5.99)

(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) Last twelve months (“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 represent the total orders delivered in any 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.

During the three months ended September 30, 2023, net revenue increased by $104 million, or 3.7%, compared to the same period in 2022. The increase in net revenue was due to increased orders partially offset by decreased average order value attributable to normalization of inflationary pressures in the supply chain compared to the same period in 2022. Additionally, LTM orders per active customer increased during the three months ended September 30, 2023 compared to the same period in 2022.

During the three months ended September 30, 2023, our United States (“U.S.”) net revenue increased by 5.4% and International net revenue decreased by 7.0% compared to the same period in 2022. During the three months ended September 30, 2023, International Net Revenue Constant Currency Growth was (7.8)% (see “Non-GAAP Financial Measures” below).

Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs, including associated applicable customs duties and fees earned for supplier services rendered. During the three months ended September 30, 2023, cost of goods sold increased by $11 million, or 0.5%, as compared to the same period in 2022. The increase in cost of goods sold is primarily driven by the increase in orders delivered.

As a percentage of net revenue, cost of goods sold decreased to 68.9% for the three months ended September 30, 2023 compared to 71.0% in the same period in 2022 due to mix shifts, operational efficiencies and decreased logistics costs.

Operating expenses consist of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses and restructuring charges. We disclose separately the equity-based compensation and related taxes that are included in customer service and merchant fees and selling, operations, technology and general and administrative expenses.

						Three Months Ended September 30,
						2023						2022						% Change
						(in millions)
Customer service and merchant fees (2)						$	136					$	156					(12.8)		%
Advertising						337						353						(4.5)		%
Selling, operations, technology, general and administrative (2)						596						656						(9.1)		%
Restructuring charges						—						31						n.m. (1)
Total operating expenses						$	1,069					$	1,196					(10.6)		%
As a percentage of net revenue:
Customer service and merchant fees (2)						4.6		%				5.5		%
Advertising						11.4		%				12.4		%
Selling, operations, technology, general and administrative (2)						20.2		%				23.1		%
Restructuring charges						—		%				1.1		%
						36.2		%				42.1		%

(1) Not meaningful (n.m.) year-over-year comparison

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

						Three Months Ended September 30,
						2023						2022
						(in millions)
Customer service and merchant fees						$	7					$	8
Selling, operations, technology, general and administrative						$	137					$	113

During the three months ended September 30, 2023, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative increased by $23 million, or 19.0% compared to the same period in 2022, driven by increased vested restricted stock units in 2023 compared to the same period in 2022.

The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes:

						Three Months Ended September 30,
						2023						2022
Customer service and merchant fees						4.4		%				5.2		%
Selling, operations, technology, general and administrative						15.6		%				19.1		%

During the three months ended September 30, 2023, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $19 million, or 12.8%, compared to the same period in 2022. The decrease in customer service and merchant fees is primarily due to the decrease in compensation costs in 2023 compared to the same period in 2022.

As a percentage of net revenue, total customer service and merchant fees decreased to 4.6% for the three months ended September 30, 2023 compared to 5.5% in the same period in 2022 primarily due to decreased compensation costs.

During the three months ended September 30, 2023, our advertising expenses decreased by $16 million, or 4.5%, as compared to the same period in 2022. The decrease reflects our response to changing market conditions as we sought to maintain our return targets across various channels.

As a percentage of net revenue, advertising expenses decreased to 11.4% for the three months ended September 30, 2023 compared to 12.4% in the same period in 2022 due, in part, to changes in advertising channel mix and our efforts to drive efficiency across our channel portfolio.

During the three months ended September 30, 2023, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $84 million, or 15.5% as compared to the same period in 2022. The decrease is primarily due to decreased personnel and information technology costs, partially offset by increased depreciation and amortization.

As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 20.2% for the three months ended September 30, 2023 compared to 23.1% in the same period in 2022, primarily due to decreased compensation costs and increased net revenue.

During the three months ended September 30, 2023, we incurred no restructuring charges, compared to restructuring charges of $31 million for the same period in 2022. The charges incurred during the three months ended September 30, 2022 consisted primarily of one-time employee severance and benefit costs associated with the August 2022 workforce reductions.

During the three months ended September 30, 2023, our interest expense, net remained constant compared to the same period in 2022.

						Three Months Ended September 30,
						2023						2022						% Change
						(in millions)
Interest expense, net						$	(5)					$	(5)					—		%

During the three months ended September 30, 2023, other expense, net increased by $3 million or 300.0% compared to the same period in 2022. Included in other expense, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

During the three months ended September 30, 2023, we recorded no gain on debt extinguishment, compared to a $96 million gain on debt extinguishment recorded for the same period in 2022. In connection with the issuance of our 2027 Notes, we recorded a $96 million gain on debt extinguishment for the three months ended September 30, 2022, representing the difference between the cash paid for principal of $504 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $600 million.