What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-24 · 303 added, 323 removed, 368 unchanged (63% of the section changed)

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You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

Risks Related to the COVID-19 Pandemic

The ongoing global pandemic, and any future outbreaks or other public health emergencies, could materially affect our business, liquidity, financial condition and operating results.

The ongoing COVID-19 pandemic and the various responses to it globally have created significant volatility, uncertainty and economic disruption.

Risks Related to Macroeconomic Conditions and Industry Trends

Global economic conditions and the effect of economic pressures and other business factors on discretionary consumer spending and consumer preferences may have a material adverse effect on our business, results of operations and financial condition.

Uncertainties in global economic conditions that are beyond our control have in the past impacted our business and may in the future materially adversely affect our business, results of operations, financial condition and stock price.

These adverse economic conditions include inflation, slower growth or recession, new or increased tariffs and other, changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the economy, armed hostilities, such as the ongoing military conflict between Russia and Ukraine, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell, and other matters that influence consumer spending and preferences.

In addition, consumer confidence and spending can be materially adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, including home equity loans and consumer credit, changes in net worth based on market changes and uncertainty, energy shortages and cost increases, labor and healthcare costs, government actions and general uncertainty regarding the overall future economic environment.

Consumers may view a substantial portion of the products we offer as discretionary items rather than necessities.

As a result, our operating results are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending.

Declines in consumer spending have and, in the future, may result in decreased demand for our products and services which may have an adverse effect on our results of operations.

A downturn in the economic environment can also lead to financial instability, increased credit and collectability risk on our receivables, the failure of important partners, including suppliers, logistics providers, derivative counterparties and other financial institutions, limitations on our ability to issue new debt, reduced liquidity and declines in the fair value of our financial instruments.

These and other economic factors can materially adversely affect our business, results of operations, financial condition and stock price.

The ongoing COVID-19 pandemic, and any future outbreaks or other public health emergencies, could materially affect our business, liquidity, financial condition and operating results.

The COVID-19 pandemic has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility and disruption of financial markets.

The COVID-19 pandemic and the various responses to it globally have created significant volatility, uncertainty and economic disruption.

Authorities across the U.S.

and the globe have implemented and continue to implement varying degrees of restriction on social and commercial activity in an effort to slow the spread of the virus, some of which have been subsequently rescinded or modified, such as travel bans, stay-at-home orders and shutdowns of certain businesses.

These measures have impacted and may continue to impact all or portions of our workforce, operations, suppliers and customers and demand for our products and services.

In particular, while we have seen increased sales and order activity at times during the COVID-19 pandemic, the pandemic has significantly disrupted the global supply chain, including many of our suppliers.

Such disruptions, including staffing shortages, production slowdowns, stoppages and/or disruptions in delivery systems, could materially and adversely affect our suppliers’ ability to provide products in a timely manner, or at all, and could materially and adversely affect our logistics providers’ ability to distribute products to our customers in a timely manner, or at all.

We expect issues related to the global supply chain to continue into 2022.

In addition, the ongoing COVID-19 pandemic has disrupted, and may continue to disrupt, third-party business partners’ ability to meet their obligations to us.

These third parties include our suppliers and logistics providers, such as FedEx, UPS, DHL, the U.S.

Postal Service and other third-party delivery agents, as their workers may be prohibited or otherwise unable to report to work and transporting products within regions or countries may be limited due to extended holidays, factory closures, port closures and increased labor shortages, among other things.

We have also incurred, and may continue to incur, higher shipping costs due to various surcharges by third-party delivery agents on retailers related to the increased shipping demand resulting from the COVID-19 pandemic.

These higher costs affected us over the past year and may continue to affect us in the future.

The COVID-19 pandemic also impacted our workforce, causing us to move a large portion of our employees to work-from-home and adding administrative complexity to our everyday human resources and employee technology functions.

Furthermore, if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, the impact of vaccine mandates and the willingness of our employees to comply with such mandates, facility closures, remote working or other restrictions in connection with the COVID-19 pandemic, our operations will likely be adversely impacted.

Further, the steps we have taken to protect the health, safety and financial security of our employees, including instituting testing and vaccination requirements at our facilities, may result in other negative impacts on our operations, including increased costs, reduced efficiency levels or labor disputes resulting in a strike or other work stoppage or interruption.

The COVID-19 pandemic has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of and accessibility to capital.

If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all.

The COVID-19 pandemic has caused and could continue to cause periods of significant economic slowdown, which could lead to reduced discretionary consumer spending and a corresponding reduction in demand for our products and could result in a material adverse effect on our business, financial condition and operating results.

To counteract the effects of the COVID-19 pandemic, governments around the world have implemented fiscal stimulus measures and vaccination rollouts, however, the magnitude and overall effectiveness of these actions remain uncertain and certain

federal and state laws and regulations intended to reduce the spread of COVID-19 are in direct conflict, which means we may be unable to comply with all applicable laws and regulations in some of the jurisdictions in which we operate.

Further, the full extent of the impact of COVID-19, including the extent of its impact on our business and financial condition, will depend on numerous evolving factors that we may not be able to accurately predict, including, but not limited to:

the length of time that the pandemic continues;

the availability, distribution and continued efficacy of available treatments and vaccines;

vaccination rates among the general public and our employees;

its effect on our suppliers, logistics providers and the demand for our products;

the effect of governmental regulations imposed in response to the pandemic;

the effect on our customers, their communities and customer demand and ability to pay for our products and services, which may be affected by increased consumer debt levels, changes in net worth due to market conditions and other factors that impact consumer confidence;

disruptions or restrictions on our employees’ ability to work and travel, as well as uncertainty regarding all of the foregoing.

While the home industry has fared much better during the COVID-19 pandemic than other sectors of the economy, the recent surges in COVID-19 cases due to new variants and the resurgence of inflation brought on by labor and supply shortages have had and may continue to have an adverse impact upon our business.

Much is still unknown, including the duration and severity of the COVID-19 pandemic, the emergence of variants of COVID-19 that may continue to prolong the pandemic, the amount of time it will take for normal economic activity to resume, and future government actions that may be taken.

Accordingly the situation remains dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our suppliers, logistics providers and customers, which ultimately could result in material adverse effects on our business, financial condition and operating results.

We cannot at this time predict the full impact of the COVID-19 pandemic, but it could have a larger material adverse effect on our business, liquidity, financial condition and operating results beyond what is discussed within this report.

We will continue to actively monitor the COVID-19 situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our customers, employees, suppliers, partners, stockholders and communities.

We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue, and we expect to face difficulty in accurately forecasting our financial condition and operational results.

Additionally, to the extent the COVID-19 pandemic adversely affects our business, results of operations or financial condition, it may heighten other risks described in this “Risk Factors” section below.

and the globe have implemented varying degrees of restriction on social and commercial activity.

While certain of these restrictions were lifted and phased re-openings occurred in some regions, some restrictions continued through fiscal 2022 in certain regions or to certain extents, and other regions have seen a resurgence of COVID-19 cases resulting in reinstitution or expansion of such measures.

In particular, while we saw increased sales and order activity at times during the COVID-19 pandemic, the pandemic significantly disrupted the global supply chain, including many of our suppliers, logistics providers and other partners.

Such disruptions, including staffing shortages, raw material and labor inflation, factory closures and production slowdowns, port closures a stoppages and/or disruptions in delivery systems, have and may continue to materially and adversely affect our suppliers’ ability to provide products in a timely manner, or at all, and have and may continue to materially and adversely affect our logistics providers’ ability to distribute products to our customers in a timely manner, or at all.

The issues related to the global supply chain may continue into 2023.

The extent of the impact of the COVID-19 pandemic on our business will depend on future developments, which remain highly uncertain and difficult to predict, including the duration, severity and sustained geographic spread of the pandemic, additional waves of increased infections, the virulence and spread of different strains of the virus, and the extent to which associated prevention, containment, remediation and treatment efforts, including global vaccination programs and vaccine acceptance, are successful.

Additionally, to the extent the COVID-19 pandemic or other outbreaks, epidemics, pandemics or public health crises adversely affects our business, results of operations or financial condition, it may heighten other risks described in this “Risk Factors” section below.

Risks Related to Our Business and Industry

Our recent growth rates may not be sustainable or indicative of our future growth.

Our historical growth rates may not be sustainable or indicative of future growth.

We believe that our continued revenue growth will depend upon, among other factors, our ability to:

• build our brands and launch new brands;

• acquire new customers and increase repeat purchases from existing customers;

• develop new features to enhance the consumer experience on our sites, mobile-optimized sites and mobile applications;

• increase the frequency with which new and repeat customers purchase products on our sites through merchandising, data, analytics and technology;

• add new suppliers and deepen our relationships with our existing suppliers;

• grow certain categories where we under index the broader home goods market today;

• enhance the systems our consumers use to interact with our sites and invest in our infrastructure platform;

• increase delivery speed and improve the delivery experience for our customers through the continued build-out of our proprietary logistics network;

• continue to expand internationally;

• continue to execute our omni-channel strategy with the launch of physical retail stores across our family of brands;

• opportunistically pursue strategic acquisitions.

We cannot assure you we will be able to achieve any of the foregoing.

Our customer base may not continue to grow or may decline as a result of increased competition and the maturation of our business.

Failure to continue our revenue growth rates could have a material adverse effect on our financial condition and operating results.

You should not rely on our historical rate of revenue growth as an indication of our future performance.

If we fail to manage our growth effectively, our business, financial condition and operating results could be harmed.

Our historical growth rates may not be sustainable or indicative of future growth.

To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and expand, train and manage our employee base.

To support our continued growth, we have rapidly increased employee headcount since our inception.

To support continued growth, we must effectively integrate, develop and motivate a large number of new employees.

If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees and staff, or if we are not successful in retaining our existing employees and staff, our business may be harmed.

Moreover, in 2020 we implemented reductions in force and may in the future implement other reductions in force.

Any reduction in force may yield unintended consequences and costs, such as attrition beyond the intended reduction in force, the distraction of employees, reduced employee morale and adverse effects to our reputation as an employer, which could make it more difficult for us to hire new employees in the future, and the risk that we may not achieve the anticipated benefits from the reduction in force.

Properly managing our growth will require us to establish consistent policies across regions and functions, and a failure to do so could likewise harm our business.

Moreover, beginning in 2022 and continuing in 2023, in an effort to reduce our operational costs and improve our organizational efficiency, we implemented a cost efficiency plan, part of which included an internal restructuring and a workforce reduction.

Any reduction in force may yield unintended consequences and costs, such as attrition beyond the intended reduction in force, the distraction of employees, reduced employee morale and adverse effects to our reputation as an employer, which could make it more difficult for us to hire new employees in the future and to retain and motivate key employees, and there is a risk that we may not achieve the anticipated benefits from the reduction in force.

We also face significant competition for personnel.

Failure to manage our hiring needs effectively or successfully integrate our new hires may have a material adverse effect on our business, financial condition and operating results.

Properly managing our growth will also require us to establish consistent policies across regions and functions, and a failure to do so could likewise harm our business.

Further, we have a substantial number of hourly employees.

In January 2021, we announced a minimum wage increase for all U.S.

employees to at least $15 per hour.

While we are at or above current local and federal minimum wage requirements across the U.S, any future local or federal minimum wage increases may increase our labor costs, which may have an adverse effect on our results of operations.

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The growth of our business may require significant additional resources to meet these daily requirements, which may not scale in a cost-effective manner or may negatively affect the quality of our sites and customer experience.

Further, we may face a number of challenges to our expansion into physical retail locations, including locating retail space with a cost and geographic profile that will allow us to operate in highly desirable shopping locations, hiring in-store talent and expanding our physical retail operations in a cost-effective manner.

We may also have to enter into long-term leases before we know whether our physical retail strategy or a particular geography will be successful.

We are also required to manage relationships with a growing number of suppliers, customers and other third parties.

Further, we have faced and may continue to face a number of challenges to our expansion into physical retail locations, including locating retail space with a cost and geographic profile that will allow us to operate in highly desirable shopping locations, hiring in-store talent and expanding our physical retail operations in a cost-effective manner.

We have entered into and may continue to enter into long-term leases before we know whether our physical retail strategy or a particular geography will be successful.

We are also required to manage relationships with a growing number of suppliers, customers and other third parties across the world.

Our information technology systems and our internal controls and procedures may not be adequate to support future growth of our supplier and employee base.

Failure to manage our growth and organizational change effectively could lead us to over-invest or under-invest in technology and operations;

result in weaknesses in our infrastructure, systems or controls;

give rise to operational mistakes, losses or loss of productivity or business opportunities;

reduce customer satisfaction;

limit our ability to respond to competitive pressures;

and result in loss of employees and reduced productivity of remaining employees.

If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected.

If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, our business, financial condition and operating results could be harmed.

If we fail to acquire new customers, reactivate prior customers or retain existing customers, or fail to do so in a cost-effective manner, our business, financial condition and operating results could be harmed.

Our success depends on our ability to acquire and retain customers in a cost-effective manner.

In order to expand our customer base, we must appeal to and acquire customers who have historically used other means of commerce to purchase home goods and may prefer alternatives to our offerings, such as traditional brick and mortar retailers, the websites of our competitors or our suppliers' own websites.

We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers.

Our paid advertising efforts consist primarily of online channels, including display advertising, paid search advertising, social media advertising, search engine optimization, comparison shopping engine advertising, television advertising, direct mail, catalog and print advertising.

We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers and to reactivate prior customers.

Our paid advertising efforts consist of television advertising, direct mail, catalog and print advertising, and online channel advertising, including display advertising, paid search advertising, social media advertising, search engine optimization and comparison shopping engine advertising.

These efforts are expensive and may not result in the cost-effective acquisition of customers.

We cannot assure you that the net profit from new customers we acquire will ultimately exceed the cost of acquiring those customers.

Our marketing expenses have varied from period to period, and we expect this trend to continue as we test new channels and refine our marketing strategies.

We may increase or decrease our marketing spend within a period, based on the degree of our achievement of intended results, which may result in increased or decreased customer engagement in any given period.

We cannot assure you that the net profit from new or returning customers we acquire will ultimately exceed the cost of acquiring those customers.

Additionally, actions by third parties to block or impose restrictions on the delivery of certain advertisements could also adversely impact our business.

If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers or retain existing customers.

If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers or efficiencies in our logistics network, our net revenue may decrease, and our business, financial condition and operating results may be materially adversely affected.

We believe that many of our new customers originate from word-of-mouth and other non-paid referrals from existing customers.

Therefore, we must ensure that our existing customers remain loyal to us in order to continue receiving those referrals.

If our efforts to satisfy our existing customers are not successful, we may not be able to acquire new customers in sufficient numbers to continue to grow our business, or we may be required to incur significantly higher marketing expenses in order to acquire new customers.

If we are unable to acquire new customers or reactivate prior customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers or efficiencies in our logistics network, our net revenue may decrease, and our business, financial condition and operating results may be materially adversely affected.

We also utilize non-paid advertising.

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We obtain a significant amount of traffic via search engines and, therefore, rely on search engines such as Google, Bing and Yahoo!.

Although we employ search engine optimization and search engine marketing strategies, our ability to maintain and increase the number of visitors directed to our website and application is not entirely within our control.

Search engines frequently update and change the logic that determines the placement and display of results of a user's search, such that the purchased or algorithmic placement of links to our sites can be negatively affected.

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As e-commerce and social networking continue to rapidly evolve, we must continue to establish relationships with these channels and may be unable to develop or maintain these relationships on acceptable terms.

If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers or retain our existing customers and our financial condition would suffer.

If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers, reactivate prior customers or retain our existing customers and our financial condition would suffer.

Further, some of our new customers originate from word of mouth or other non-paid referrals from existing customers.

If our efforts to satisfy our existing customers are not successful, we may not be able to acquire new customers or reactivate prior customers through these referrals, which may adversely affect how we continue to grow our business, or may require us to incur significantly higher marketing expenses in order to acquire new customers.

Our success depends in part on our ability to increase our net revenue per active customer.

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• maintaining a high-quality and diverse portfolio of products and services;

• providing adequate customer service;

• delivering products on time and without damage;

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If we fail to increase net revenue per active customer, generate repeat purchases or maintain high levels of customer engagement, our growth prospects, operating results and financial condition could be materially adversely affected.

We have faced and may face price competition in the future.

In addition, competitors with whom we compete, or who can obtain better pricing, more favorable contractual terms and conditions, or more favorable allocations of products during periods of limited supply may be able to offer lower prices than we are able to offer.

Our operating results and financial condition may be adversely affected by these and other industry-wide pricing pressures.

Our business depends on our ability to build and maintain strong brands.

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Maintaining and enhancing our brands is critical to expanding our base of customers and suppliers.

Our ability to maintain and enhance our brand depends largely on our ability to maintain customer confidence in our product and service offerings, including by maintaining product availability and delivering products on time and without damage.

Our ability to maintain and enhance our brands depends largely on our ability to maintain customer confidence in our product and service offerings, including by maintaining product availability and delivering products on time and without damage.

If customers do not have a satisfactory shopping experience, they may seek out alternative offerings from our competitors and may not return to our sites as often in the future, or at all.

In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product quality or availability, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation.

In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product quality or availability, poor customer service, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation.

Such negative publicity also could have an adverse effect on the size, engagement and loyalty of our customer base and result in decreased net revenue, which could adversely affect our business and financial results.

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If these third parties do not meet our or our customers' expectations, our brands may suffer irreparable damage.

In addition, maintaining and enhancing these brands may require us to make substantial investments, and these investments may not be successful.

In addition, maintaining and enhancing our brands may require us to make substantial investments, and these investments may not be successful.

If we fail to promote and maintain our brands, or if we incur excessive expenses in this effort, our business, operating results and financial condition may be materially adversely affected.

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Maintaining and enhancing our brands will depend largely on our ability to provide high quality products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be able to do successfully.

Customer complaints or negative publicity about our sites, products, delivery times, company practices, employees, customer data handling and security practices or customer support, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and result in harm to our brands.

Our efforts to expand our business into new brands, channels, products, services, technologies and geographic regions will subject us to additional business, legal, financial and competitive risks and may not be successful.

Our business success depends to some extent on our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographies.

For example, we launched the Kelly Clarkson Home Collection in 2020, Hykkon, a European Union flagship brand in 2019, and in 2016 we launched Wayfair.ca in Canada.

Launching new brands and services or expanding internationally requires significant upfront investments, including investments in marketing, information technology and additional personnel.

Our newly opened physical retail stores may not achieve sales or operations targets and may negatively impact our financial results

We opened three new physical retail stores in 2022.

We believe that continued expansion into new physical retail stores represents a growth opportunity for us.

Our growth strategy is dependent on our ability to identify and open future store locations in new and existing markets.

Our ability to open stores in a timely and successful manner depends in part on the following factors:

the availability of desirable store locations;

the availability and costs of construction labor and materials;

local permitting timelines;

the ability to negotiate acceptable lease and development terms at reasonable rates, including the length of rental periods and renewal options and the ability to obtain termination rights;

our ability to obtain all required approvals and comply with other regulatory requirements;

our relationships with current and prospective landlords;

the ability to secure and manage the inventory necessary for the launch and operation of new stores;

the availability of capital funding for expansion;

and general economic conditions.

Any or all of these factors and conditions could materially adversely affect our growth and profitability.

New store openings may negatively impact our financial results due to the effect of store opening costs and lower sales during the initial period following opening.

New stores, particularly those in new markets, build their brand recognition and customer base over time and, as a result, may have lower margins and incur higher operating expenses.

We may not anticipate all of the challenges imposed by the expansion of our operations into new geographic markets.

We may not manage our expansion effectively, and our failure to achieve or properly execute our expansion plans could limit our growth or have a material adverse effect on our business, financial condition and results of operations.

Our efforts to expand our business into new brands, channels, products, services, technologies and geographic markets will subject us to additional business, legal, financial and competitive risks and may not be successful.

Our business success depends to some extent on our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographic markets from time to time.

For example, we launched Wayfair.ie in Ireland in 2022, the Kelly Clarkson Home Collection in 2020 and Hykkon, a European Union flagship brand in 2019.

Launching new brands and services or expanding internationally is time-consuming, requires significant amounts of management time and resources, substantial upfront investments, including investments in marketing, information technology and additional personnel.

Expanding our brands internationally is particularly challenging because it requires us to gain country-specific knowledge about consumers, regional competitors and local laws, construct catalogs specific to the country, build local logistics capabilities and customize portions of our technology for local markets.

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If this occurs, our business, financial condition and operating results may be materially adversely affected.

Expansion of our international operations will require management attention and resources, involves additional risks, and may be unsuccessful, which could harm our future business development and existing domestic operations.

We believe international expansion represents a significant growth opportunity for us.

We currently deliver products to customers in a number of countries, and plan to expand into other international markets in order to grow our business, which will require significant management attention and resources.

For example, we have made and will continue to make significant investments in information technology, logistics, supplier relationships, merchandising and marketing in the foreign jurisdictions in which we operate or plan to operate.

We have limited experience in selling our products to conform to different local cultures, standards and regulations, and the products we offer may not appeal to customers in the same manner, if at all, in other geographies.

We may have to compete with local companies who understand the local market better than we do and/or may have greater brand recognition than we do.

In addition, to deliver satisfactory performance for customers in international locations, it may be necessary to locate physical facilities, such as consolidation centers and warehouses, in foreign markets, and we may have to invest in these facilities before we can determine whether or not our foreign operations are successful.

We have limited experience establishing such facilities internationally and therefore may decide not to continue with the expansion of international operations.

We may not be successful in expanding into additional international markets or in generating net revenue from foreign operations.

Furthermore, different privacy, censorship, liability, intellectual property and other laws and regulations in foreign countries may cause our business, financial condition and operating results to be materially adversely affected.

Our future results could be materially adversely affected by a number of factors inherent in international operations, including:

• localization of our product offerings, including translation into foreign languages and adaptation for local practices, standards and regulations;

• the need to vary our practices in ways with which we have limited or no experience or which are less profitable or carry more risk to us;

• new and different sources of competition;

• unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

• differing labor regulations where labor laws may be more advantageous to employees as compared to the U.S.;

• different or more stringent regulations relating to data protection, privacy, encryption and security, including the use of commercial and personal information, particularly in the European Union;

• different laws or regulations regarding restrictions on pricing or discounts;

• changes in a specific country's or region's political or economic conditions, including the United Kingdom's exit from the European Union, commonly referred to as "Brexit";

• the rising cost of labor in the foreign countries in which our suppliers operate, resulting in increases in our costs of doing business internationally;

• challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs and maintain our corporate culture across geographies;

• risks resulting from changes in currency exchange rates;

• limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;

• different or lesser intellectual property protection;

• exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.

Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions;

• business licensing or certification requirements, such as for imports, exports and international operations;

• differing payment processing systems as well as consumer use and acceptance of electronic payment methods, such as payment cards;

• differing fulfillment, distribution, logistics and systems infrastructure.

Operating internationally requires significant management attention and financial resources.

We cannot be certain that the investment and additional resources required to establish and expand our international operations will produce desired levels of net revenue or profitability.

If we invest substantial time and resources to establish and expand our international operations and are unable to do so successfully and in a timely manner, our business, financial condition and operating results may be materially adversely affected.

Our international operations subject us to various additional legal, regulatory, financial and other risks.

During 2022, our international net revenue accounted for approximately 14% of our total net revenue.

Expanding our international operations to grow our business will require significant management attention and resources and expose us to additional risks.

As we expand, we also become subject to certain laws, including the Foreign Corrupt Practices Act, as well as the laws of the foreign countries in which we operate, which may impose new or changing regulatory restrictions and requirements, including in the areas of data privacy and sustainability.

Violations of these laws could subject us to sanctions or other penalties that could have an adverse effect on our reputation, operating results and financial condition.

A failure to implement our expansion initiatives properly, or the adverse impact of political or economic risks in our current or new international markets, could have a material adverse effect on our results of operations and financial condition.

In all international markets we face established local and international competitors.

In many of these locations, the real estate, labor and employment, transportation and logistics and other operating requirements differ dramatically from those in the locations where we have more experience.

Consumer demand and behavior, as well as tastes and purchasing trends, may differ substantially, and as a result, sales of our products may not be successful, or the margins on those sales may not be in line with those we currently anticipate.

Our potential inability to anticipate and address differences that we encounter as we expand internationally may divert financial, operational, and managerial resources from our existing operations, which could adversely impact our financial condition and results of operations.

Fluctuations in currency exchange rates could adversely affect our financial performance and our reported results of operations.

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dollar denominated net revenues and expenses.

Additionally, global events as well as geopolitical developments, including regional conflicts in Europe, fluctuating commodity prices, trade tariff developments and inflation have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which has

recently and could continue to amplify the volatility of currency fluctuations.

To date, we have not entered into any currency hedging contracts.

As a result, fluctuations in foreign exchange rates could significantly impact our financial results.

Further, Brexit has and may continue to have a significant impact on currency exchange rates and the global and European economy generally.

The outcome of the referendum caused volatility in global stock markets and foreign currency exchange rate fluctuations, including the strengthening of the U.S.

dollar against the British pound and the euro, and such volatility may continue.

As a result, we may not be able to effectively offset the adverse financial impacts that may result from unfavorable movements in foreign currency exchange rates, and therefore fluctuations in foreign exchange rates could significantly impact our financial results.

We have had a history of losses and we may be unable to achieve or sustain profitability and positive cash flow in the future as we continue to expand our business.

We have had a history of losses and negative cash flow and a resulting accumulated deficit of $3.3 billion as of December 31, 2022.

Although we achieved profitability and positive cash flow in fiscal 2020, we incurred losses in fiscal year 2021 and we can provide no assurance that we will be profitable in future years or achieve our goal of sustained profitability.

We incurred losses in fiscal year 2021 and fiscal year 2022 and we can provide no assurance that we will be profitable in future years or achieve our goal of sustained profitability.

Because the market for purchasing home goods online is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future operating results.

As a result, we may incur future losses that may be larger than anticipated.

Also, we expect our operating expenses to increase over the next several years as we expand internationally, expand into physical retail locations, continue to grow our proprietary logistics network, hire more employees and continue to develop new brands, features and services.

Also, our operating expenses may increase if we continue to expand internationally, add additional physical retail locations, grow our proprietary logistics network, experiment with paid marketing channels, hire more employees and continue to develop new brands, features and services.

Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring new customers, our financial condition and stock price could be materially adversely affected.

Our management generally has broad discretion over the use of our cash resources, and you will be relying on the judgment of our management regarding the application of these resources.

Our management might not apply these resources in ways that increase the value of your investment.

System interruptions that impair customer access to our sites or other performance failures or incidents involving our logistics network, our technology infrastructure or our critical technology partners could damage our business, reputation and brand and substantially harm our business and results of operations.

The satisfactory performance, reliability and availability of our sites, transaction processing systems, logistics network and technology infrastructure are critical to our reputation and our ability to acquire and retain customers, as well as maintain adequate customer service levels.

For example, if one of our data centers or our cloud provider fails or suffers an interruption or degradation of services, we could lose customer data and miss order fulfillment deadlines, which could harm our business.

For example, if our cloud provider fails or suffers an interruption or degradation of services, we could lose customer data and miss order fulfillment deadlines, which could harm our business.

Our systems and operations, including our ability to fulfill customer orders through our logistics network, are also vulnerable to damage or interruption from inclement weather, fire, flood, power loss, telecommunications failure, terrorist attacks, labor disputes, cyber-attacks, data loss, acts of war, break-ins, other physical security threats, earthquake and similar events.

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We may experience periodic system interruptions from time to time.

In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities, seasonal trends in our business or the COVID-19 pandemic, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions.

In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities and seasonal trends in our business, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions.

If there is a substantial increase in the volume of traffic on our sites or the number of orders placed by customers, we may be required to further expand and upgrade our technology, logistics network, transaction processing systems and network infrastructure.

There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our sites or expand and upgrade our systems and infrastructure to accommodate such increases on a timely basis.

In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our sites, which is particularly challenging given the rapid rate at which new technologies, customer preferences and expectations, and industry standards and practices are evolving in the e-commerce industry.

standards and practices are evolving in the e-commerce industry.

Accordingly, we redesign and enhance various functions on our sites on a regular basis, and we may experience instability and performance issues as a result of these changes.

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Our disaster recovery plan may be inadequate, and our business interruption insurance may not be sufficient to compensate us for the losses that could occur.

We rely upon Google Cloud to operate certain aspects of our service and any disruption of or interference with our use of the Google Cloud services would impact our operations and our business would be adversely impacted.

Google Cloud provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a “cloud” computing service.

We have architected our software and computer systems so as to also utilize data processing, storage capabilities and other services provided across multiple Google Cloud data centers.

Given this, along with our inability to rapidly switch our Google Cloud operations to another cloud provider, any disruption of or interference with our use of Google Cloud or any widespread disruption in Google Cloud itself would impact our operations and our business would be adversely impacted.

Our failure or the failure of third-party service providers to protect our sites, networks, systems, confidential information and assets against security breaches or loss could damage our reputation and brand and substantially harm our business and operating results.

We collect, maintain, transmit and store data about our customers, employees, contractors, suppliers, vendors and others, including credit card information and personally identifiable information, as well as other confidential and proprietary information.

We also employ third-party service providers that store, process and transmit certain proprietary, personal and confidential information on our behalf.

We rely on encryption and authentication technology licensed from third parties in an effort to secure our systems and assets and securely transmit, encrypt, anonymize or pseudonymize certain confidential and sensitive information, including credit card numbers.

Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect our assets, our transaction and personal data or other confidential and sensitive information from being breached, compromised or lost.

Despite all of our efforts to protect these assets, our security measures and those of our third-party service providers, may not be effective in preventing a failure of our systems, a loss of assets or a failure of our platforms to operate effectively and be available to us.

This may be as a result of deliberate attempts to infiltrate our systems by state-sponsored attackers or cybercriminals, denial-of-service attacks, viruses, malicious software, zero-day vulnerabilities, break-ins, phishing attacks, social engineering, security breaches or other attacks, or incidents due to employee error or malfeasance.

Failures may also be caused by various other factors, including, disruptions during the process of upgrading or replacing computer software or hardware, power outages, hardware and software errors by the vendors we rely upon, telecommunication or utility failures or natural disasters or other catastrophic events or other disruptions that may jeopardize the security of our assets or information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise maintain, process or transmit including payment card systems and human resources management platforms.

We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers.

In addition, if hosting costs increase over time, or we are unable to optimize our applications for a cloud environment, or we require more computing or storage capacity, our costs could increase disproportionately.

If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected.

A cybersecurity attack, data breach or other security incident could impact our sites, networks, systems, platforms, confidential information and assets causing damage and substantial harm to our business and operating results, reputation and brand, and resulting in proceedings or actions against us by government regulatory bodies or private parties.

We collect, maintain, transmit and store data about our customers, employees, contractors, suppliers, vendors and others, including payment information and personally identifiable information, as well as other personal, confidential and proprietary information.

In certain instances, we leverage and rely on third-party service providers to collect, maintain, transmit and store certain proprietary, personal and confidential information on our behalf, such as credit card data.

To protect such data and other information from being breached, compromised or lost, we maintain and regularly assess against industry standard cybersecurity safeguards and best practices.

Like many businesses, despite all of our efforts to defend against cyber threats and respond to incidents, we, and our third party service providers, have in the past and will in the future continue to be subject to cyber-attacks, cyber security threats and attempts to compromise and penetrate our data security systems and disrupt our operations.

Recent cybersecurity incidents impacting large institutions, including those resulting in the compromise of sensitive data and the disruption of critical systems, suggest that the risk of such cyber events is significant, even when reasonable measures to protect the confidentiality, integrity, and availability of information are implemented.

This may be as a result of deliberate malicious attempts to infiltrate our systems, including but not limited to, state-sponsored attackers or cybercriminal efforts, zero-day vulnerabilities, phishing attacks, software supply chain compromises, or non-malicious factors, including but not limited to, disruptions during the process of upgrading or replacing computer software or hardware, errors by the vendors we rely upon, or other disruptions that may jeopardize the security of our assets or information.

We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched and techniques used to obtain unauthorized access may change frequently and may not be known in the market.

Security incidents such as ransomware attacks are becoming increasingly prevalent and severe, as well as increasingly difficult to detect.

In addition, security breaches or data and asset leaks can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees or by persons with whom we have commercial relationships.

Cyber security incidents, data or asset losses or breaches of our security measures or those of our third-party service providers could result in unauthorized access to our sites, networks and systems;

unauthorized access to and misappropriation of personal information, including consumers' and employees' personally identifiable information, or other confidential or proprietary information of ours or our third parties;

limited or terminated access to certain payment methods or fines or higher transaction fees to use such methods;

viruses, worms, spyware or other malware being served from our sites, networks or systems;

deletion or modification of content or the display of unauthorized content on our sites;

interruption, disruption or malfunction of operations;

Further, the prevalence of remote work by some of our employees and those of our third-party service providers creates increased risk that a cybersecurity incident may occur.

In addition to data loss and compromise, cybersecurity incidents or breaches of our security measures or those of our third-party service providers could result in interruption, disruption or malfunction of operations;

costs relating to breach remediation, deployment or training of additional personnel and protection technologies, responses to governmental investigations and media inquiries and coverage;

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litigation, regulatory action and other potential liabilities.

If any of these breaches of security or other incidents occur, our reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such incidents, such as investigative and remediation costs, the costs of providing individuals and/or data owners with notice of the breach, legal fees, the costs of any additional fraud detection activities, or the costs of prolonged system disruptions or shutdowns, and we could be exposed to a risk of loss, litigation or regulatory action and possible liability.

In addition, any party who is able to illicitly obtain a customer's password could access that customer's transaction data or personal information.

Any compromise or breach of our security measures, or those of our third-party service

providers, could violate applicable privacy, data security and other laws and regulations, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and operating results.

Although we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws and regulations, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and operating results.

Our reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such incidents and we could be exposed to a risk of

loss, litigation or regulatory action and possible liability.

Although we maintain cyber liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

We may need to devote significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from the growth and expansion of our business.

Our business is highly competitive.

Competition presents an ongoing threat to the success of our business.

Our business is rapidly evolving and intensely competitive, and we have many competitors in different industries.

Our competition includes furniture stores, big box retailers, department stores, specialty retailers and online retailers and marketplaces in the U.S., Canada, the United Kingdom and Germany, including those listed in Part I, Item 1, Business .

Our failure to operate effectively in a highly competitive and evolving industry could have a material adverse effect on our business.

Our business is rapidly evolving and intensely competitive, with numerous competitors including furniture stores, big box retailers, department stores, specialty retailers and online retailers and marketplaces in the U.S., Canada, the United Kingdom, Ireland and Germany, including those listed in Part I, Item 1, Business .

We expect competition in e-commerce generally to continue to increase.

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• our selling and marketing efforts;

• our ability to anticipate consumer demand and preferences;

• the quality, price and reliability of products we offer;

• the convenience of the shopping experience that we provide;

• the adequacy of our customer service;

• our ability to distribute our products and manage our operations;

• our reputation and brand strength.

Many of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, faster and less costly shipping, significantly greater financial, marketing and other resources and larger customer bases than we do.

Some of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, faster and less costly shipping, lower prices, significantly greater financial, marketing and other resources and larger customer bases than we do.

These factors may allow our competitors to derive greater net revenue and profits from their existing customer base, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer habits.

These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate net revenue from their customer bases more effectively than we do.

Purchasers of home goods may not choose to shop online, which would prevent us from growing our business.

We believe the online market for home goods is less developed than the online market for apparel, consumer electronics and other consumer products and, we believe, only accounts for a small portion of the market as a whole.

If the online market for home goods does not gain acceptance, our business may suffer.

Our marketing efforts to help grow our business may not be effective, and failure to effectively develop and expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our e-commerce and omnichannel approach to shopping for home goods.

If the online market for home goods does not continue to gain acceptance, a significant portion of our business may suffer.

Our success will depend, in part, on our ability to attract consumers who have historically purchased home goods through traditional retailers.

Furthermore, we may have to incur significantly higher and more sustained advertising and promotional expenditures in order to attract additional online consumers to our sites and convert them into purchasing customers.

Specific factors that could impact consumers' willingness to purchase home goods from us include:

• concerns about buying products, and in particular larger products, without a physical storefront, face-to-face interaction with sales personnel and the ability to physically examine products;

Specific factors that could impact consumers' willingness to purchase home goods from us online, especially in markets where we do not have physical stores, include:

• concerns about buying products, and in particular larger products, without a physical storefront, face-to-face interaction with sales personnel and the inability to physically handle, examine and compare products;

• delivery time associated with online orders;

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• usability, functionality and features of our sites;

If the shopping experience we provide does not appeal to consumers or meet the expectations of existing customers, we may not acquire new customers at rates consistent with historical periods, acquired customers may not become repeat customers and existing customers' buying patterns and levels may be less than historical rates.

We may be subject to product liability and other similar claims if people or property are harmed by the products we sell.

Some of the products we sell may expose us to product liability and other claims and litigation (including class actions) or regulatory action relating to safety, personal injury, death or environmental or property damage.

Some of our agreements with members of our supply chain may not indemnify us from product liability for a particular product, and some members of our supply chain may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.

• our reputation and brand strength.

In addition, if we do not have a clear and relevant promotional calendar to engage our customers, especially in the current macroeconomic environment, our customers may purchase fewer goods from us or we may have to increase our promotional activities.

If the shopping experience we provide does not appeal to consumers or meet the expectations of existing customers, we may not acquire new customers at sustainable rates, acquired customers may not become repeat customers and existing customers' buying patterns and levels may decrease.

We may be subject to product liability and other similar claims and lawsuits if people or property are harmed by the products we sell.

Some of the products we sell may expose us to product recalls, product liability and other claims and litigation (including class actions) or regulatory action relating to safety, personal injury, death or environmental or property damage.

Some members of our supply chain may not have sufficient resources or insurance to satisfy their product liability and other indemnity and defense obligations.

In addition, we are involved in lawsuits, claims and proceedings incident to the ordinary course of our business.

Litigation is inherently unpredictable.

Any claims against us, whether meritorious or not, could result in costly litigation that could adversely affect our business.

Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

If we do not have adequate contractual indemnification or insurance available, such claims could have an adverse effect on our business, financial condition, and results of operations.

Even with adequate insurance and indemnification, our reputation as a provider of high-quality products and services could suffer, damaging our reputation and impacting customer loyalty.

Risks associated with the suppliers from whom our products are sourced could materially adversely affect our financial performance as well as our reputation and brand.

We depend on our ability to provide our customers with a wide range of products from qualified suppliers in a timely and efficient manner.

Political and economic instability, global or regional adverse conditions, such as pandemics or other disease outbreaks or natural disasters, the financial stability of suppliers, suppliers' ability to meet our standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, labor inflation and other factors relating to our suppliers are beyond our control.

As an example, the COVID-19 pandemic has and may continue to adversely impact supplier facilities and operations due to factory closures, raw material and labor inflation and risks of labor shortages, among other things, which may materially and adversely affect our business, financial condition and operating results.

Our agreements with most of our suppliers do not provide for the long-term availability of merchandise or the continuation of particular pricing practices, nor do they usually restrict such suppliers from selling products to other buyers.

Political and economic instability, global or regional adverse conditions, such as military conflicts, pandemics or other disease outbreaks or natural disasters, the financial stability or insolvency of suppliers, suppliers' ability to meet our code of conduct and other business standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, labor inflation and other factors relating to our suppliers are beyond our control.

For example, while we experienced increased sales and order activity at times during the COVID-19 pandemic, the pandemic significantly disrupted the global supply chain, including many of our suppliers due to factory closures, raw material and labor inflation and risks of labor shortages, among other things.

Any ongoing or future disruptions could materially and adversely affect our suppliers’ ability to provide products in a timely manner, or at all, which may materially and adversely affect our business, financial condition and operating results.

Our agreements with most of our suppliers do not provide for the long-term availability or exclusivity of merchandise or the continuation of particular pricing practices.

There can be no assurance that our current suppliers will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise extend current supply relationships to ensure product availability on acceptable commercial terms.

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As such, any issue, or perceived issue, regarding the quality and safety of any items we sell, regardless of the cause, could adversely affect our brand, reputation, operations and financial results.

We are also subject to risks of fraud from our suppliers.

If our suppliers violate our agreements, applicable laws or regulations, or implement fraudulent practices regarding their products, it could harm our business, reputation and brands and our operating results may be negatively affected.

We also are unable to predict whether any of the countries in which our suppliers' products are currently manufactured or may be manufactured in the future will be subject to new, different, or additional trade restrictions imposed by the U.S.

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Furthermore, some or all of our suppliers' foreign operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.

In addition, our business with foreign suppliers, particularly with respect to our international sites, may be affected by changes in the value of the U.S.

In addition, with respect to our business with foreign suppliers, particularly for our international sites, we have in the past and may in the future be affected by changes in the value of the U.S.

dollar relative to other foreign currencies.

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Declines in foreign currencies and currency exchange rates might negatively affect the profitability and business prospects of one or more of our foreign suppliers.

This, in turn, might cause such foreign suppliers to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments, or discontinue selling to us altogether, any of which could ultimately reduce our sales or increase our costs.

This, in turn, has caused and may in the future cause such foreign suppliers to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments, or discontinue selling to us altogether, any of which could ultimately reduce our sales or increase our costs.

We may be unable to source new suppliers or strengthen our relationships with current suppliers.

We have relationships with over 23,000 suppliers.

We have relationships with over 20 thousand suppliers.

Our agreements with suppliers are generally terminable at will by either party upon short notice.

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• demonstrate our ability to help our suppliers increase their sales;

• provide an effective and competitive supplier technology platform;

• offer suppliers a high quality, cost-effective fulfillment process.

• continue to provide suppliers with a dynamic and real-time view of our demand and inventory needs.

If we are unable to provide our suppliers with a compelling return on investment and an ability to increase their sales, we may be unable to maintain and/or expand our supplier network, which would negatively impact our business.

We depend on our suppliers to perform certain services regarding the products that we offer.

We depend on our suppliers and other third parties, including our suppliers and logistics carriers, to perform certain services regarding the products that we offer online.

As part of offering our suppliers’ products for sale on our sites, suppliers are often responsible for conducting a number of traditional retail operations with respect to their respective products, including maintaining inventory, preparing merchandise for shipment to our customers, and, in some cases, delivering products on our behalf.

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If our customers become dissatisfied with the services provided by our suppliers, our business, reputation and brands could suffer.

We depend on our relationships with third parties, including our suppliers and logistics carriers, and changes in our relationships with these parties could adversely impact our net revenue and profits.

We rely on third parties to operate certain elements of our business.

For example, carriers such as FedEx, UPS, DHL and the U.S.

Postal Service deliver many of our small parcel products, and third party national, regional and local transportation companies deliver a portion of our large parcel products, including through our WDN.

Our ability to efficiently ship products to customers may be negatively affected by factors beyond our and our carriers' control, including inclement weather, natural disasters, system interruptions and technology failures, labor activism, supply chain issues, including congestion and delays, labor inflation and increased costs, health pandemics and epidemics (including the COVID-19 pandemic) or bioterrorism.

Additionally, carriers such as FedEx , UPS, DHL and the U.S.

Our ability to efficiently ship products to customers may be negatively affected by factors beyond our and our carriers' control, including inclement weather, natural disasters, system interruptions and technology failures, labor activism, supply chain issues, including congestion and delays, labor inflation and increased costs, military conflicts, health pandemics and epidemics (such as the COVID-19 pandemic) or bioterrorism.

During the COVID-19 pandemic, our third-party business partners and their agents experienced significant operational disruptions due to restrictions on social and commercial activity, including limitations on travel, extended holidays, factory closures, port closures and increased labor shortages.

We have incurred, and may continue to incur, higher shipping costs due to various surcharges by third-party delivery agents on retailers related to the increased shipping demand resulting from the COVID-19 pandemic.

We are also subject to risks of breakage or other damage during delivery by any of these third parties.

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For example, failures by our telecommunications providers have in the past and may in the future interrupt our ability to provide phone support to our customers.

Third parties may in the future determine they no longer wish to do business with us or may decide to take other actions that could harm our business.

Third parties may in the future

determine they no longer wish to do business with us or may decide to take other actions that could harm our business.

We may also determine that we no longer want to do business with them.

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In addition, any such changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy could prevent us from accurately reporting our financial results.

Further, we have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees continue to work remotely due to the COVID-19 pandemic, but we may experience a material impact in the future.

As the majority of our employees continue to work from home in some capacity, new processes, procedures and controls could be required to respond to changes in our business environment, and should any key employees become ill from COVID-19 and unable to work, our ability to operate our internal controls may be adversely affected.

We may be unable to accurately forecast our financial and operating results and appropriately plan our expenses in the future.

We may be unable to accurately forecast our financial and operating results and appropriately plan our expenses in the future or we may fail to meet our publicly announced guidance about our business and future operating results.

Our financial and operating results are inherently uncertain and difficult to forecast because they generally depend on the volume, timing and type of orders we receive, all of which are uncertain.

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This variability makes it difficult to predict sales and could result in significant fluctuations in our net revenue from period-to-period.

Our business is also affected by general economic and business conditions globally.

As a result, forecasted financial and operating results may differ materially from actual results, which could materially adversely affect our financial condition and stock price.

Our business is also affected by economic and business conditions globally, including inflation, slower growth or recession, new or increased tariffs and other, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment, consumer confidence in the economy, consumer debt levels, energy prices, and currency fluctuations.

As a result, forecasted financial and operating results may differ materially from actual results, which may materially adversely affect our financial condition and stock price.

For example, if certain of our assumptions or estimates prove to be wrong, we may spend more than we anticipate acquiring and retaining customers or may generate less net revenue per active customer than anticipated, which could cause us to miss our earnings guidance or negatively impact the results we report, either of which could negatively impact our stock price.

From time to time, we release earnings guidance or other financial guidance in our quarterly and annual earnings conference calls or otherwise, regarding our future performance that represents our management’s estimates as of the date of release.

Our guidance includes forward-looking statements based on projections prepared by our management.

Projections are based upon a number of assumptions and estimates that are based on information known when they are issued, and, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies relating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change.

Some of those key assumptions include broader macroeconomic conditions and the resulting impact of these factors on future consumer spending patterns and our business.

These assumptions are inherently difficult to predict, particularly in the long term.

We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges.

analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance.

Our actual business results may vary significantly from such guidance or estimates or that consensus due to a number of factors, many of which are outside of our control, including global economic uncertainty and financial market conditions, geopolitical events, rising inflation, and rising interest rates, potential recessionary factors, and foreign exchange rate volatility, which could adversely affect our business and future operating results.

We use the reports and models of economic experts in making assumptions relating to consumer discretionary spending and predictions as to timing and pace of any future economic impacts.

If these models are incorrect or incomplete, or if we fail to accurately predict the full impact of certain factors, such as macroeconomic factors, the guidance and other forward-looking statements we provide may also be incorrect or incomplete.

Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of analysts, investors, or other interested parties, the price of our common stock could decline.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results.

In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.

Seasonal trends in our business create variability in our financial and operating results and place increased strain on our operations.

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Any such system, site or service interruptions could prevent us from efficiently receiving or fulfilling orders, which may reduce the volume or quality of goods or services we sell and may cause customer dissatisfaction and harm our reputation and brand.

However, beginning in mid-March 2020, the COVID-19 pandemic and the related responses disrupted our usual seasonal patterns, resulting in higher sales volumes during the second and third fiscal quarters of 2020.

During fiscal year 2021, as global economies began to reopen with rising vaccination rates during the first half of the year, spending patterns shifted as consumers moved back to experiential categories in a broad fashion.

The combination of these changes in consumer spending with continued global supply chain challenges, led to lower sales in the second half of the year as compared to the first.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

In the future, we could be required to or may decide to raise capital through public or private financing or other arrangements.

Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed or desired could harm our business.

Our ability to raise additional capital, if and when required, will depend on, among other factors, investor demand, our operating performance, our credit rating and the condition of the capital markets.

We may sell Class A common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time.

Our convertible notes are and any future issuance of equity or equity-linked securities would be dilutive to holders of our Class A common stock.

New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Class A common stock or our convertible notes.

Debt financing, if available, may involve restrictive covenants and could reduce our operational flexibility or profitability.

If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

Our business may be adversely affected if we are unable to provide our customers a cost-effective shopping platform that is able to respond and adapt to rapid changes in technology.

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Further, in the event that it is more difficult or less compelling for our customers to buy products from us on their mobile or other devices, or if our customers choose not to buy products from us on such devices or to use mobile or other products that do not offer access to our sites or limit the effectiveness of our marketing or other offerings, our customer growth could be harmed and our business, financial condition and operating results may be materially adversely affected.

Limitations on the availability of capital and reductions to capital expenditures may delay or prevent deployment of strategic initiatives.

Implementation of our key strategic initiatives, including our technology transformation, expansion into physical retail and the continued expansion of our proprietary logistics network, require significant capital expenditures.

A lack of available capital resources due to business performance or other financial commitments could prevent or delay the deployment of innovations in our business.

We may reduce capital expenditures significantly or seek additional financing or issue additional securities, which may affect the timing and scope of growth strategy.

We cannot be certain that we will be able to obtain new financing on favorable terms, or at all.

Significant merchandise returns could harm our business.

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From time to time our products are damaged in transit, which can increase return rates and harm our brand.

Uncertainties in global economic conditions and their impact on consumer spending patterns, particularly in the home goods market, could adversely impact our operating results.

Consumers may view a substantial portion of the products we offer as discretionary items rather than necessities.

As a result, our operating results are sensitive to changes in macro-economic conditions that impact consumer spending, including discretionary spending.

Some of the factors adversely affecting consumer spending include levels of unemployment;

consumer debt levels;

changes in net worth based on market changes and uncertainty;

home foreclosures and changes in home values or the overall housing, residential construction or home improvement markets;

fluctuating interest rates;

credit availability, including mortgages, home equity loans and consumer credit;

government actions;

fluctuating fuel and other energy costs;

fluctuating commodity prices and general uncertainty regarding the overall future economic environment.

Adverse economic changes in any of the regions in which we sell our products could reduce consumer confidence and could negatively affect net revenue and have a material adverse effect on our operating results.

Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our net revenue and business.

Our business is highly dependent upon email and other messaging services for promoting our sites and products.

Our business is highly dependent upon email and other messaging services, including our mobile application, for promoting our sites and products.

Daily promotions offered through emails and other messages sent by us, or on our behalf by our vendors, generate a significant portion of our net revenue.

We provide daily emails and "push" communications to customers and other visitors informing them of what is available for purchase on our sites that day, and we believe these messages are an important part of our customer experience and help generate a substantial portion of our net revenue.

If we are unable to successfully deliver emails or other messages to our subscribers, or if subscribers decline to open our emails or other messages, our net revenue and profitability would be materially adversely affected.

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We are subject to risks related to online transactions and payment methods.

We accept payments using a variety of methods, including credit card, debit card, PayPal, credit accounts (including promotional financing), gift cards and customer invoicing.

We accept payments using a variety of methods, including credit card, debit card, electronic and mobile payment technologies, credit accounts (including promotional financing), gift cards and customer invoicing.

We rely on third parties to provide many of these payment methods and payment processing services, including certain Wayfair-branded programs and promotional financing.

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We occasionally receive orders placed with fraudulent credit card data.

We may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the orders.

We have in the past, and may in the future, suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the orders.

Under current credit card practices, we may be liable for fraudulent credit card transactions.

We may also suffer losses from other online transaction fraud, including fraudulent returns.

We have in the past, and may in the future also suffer losses from other online transaction fraud, including fraudulent returns.

If we are unable to detect or control credit card or transaction fraud, our liability for these transactions could harm our business, financial condition and operating results.

We rely on the performance of members of management and highly skilled personnel, and if we are unable to attract, develop, motivate and retain well-qualified employees, our business could be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of Niraj Shah, one of our co-founders, co-chairman of the board of directors (the "Board") and our Chief Executive Officer, Steven Conine, one of our co-founders and co-chairman of the Board, and the other members of our senior management team.

The loss of any of our senior management or other key employees could materially harm our business.

Our future success also depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, particularly mid-level managers, engineers and merchandising and technology personnel.

We have recently implemented workforce reductions and may in the future implement other reductions in force.

For example, in January 2023, as part of our cost efficiency plan, we reduced our workforce by approximately 1,750 employees, representing approximately 10% of our global workforce as of December 31, 2022.

As a result of this workforce reduction, we expect to incur between approximately $68 million and $78 million of costs, consisting primarily of employee severance and benefit costs, in the first quarter of 2023.

Any reduction in force may yield unintended consequences and costs, such as the loss of institutional knowledge, relationships and expertise for certain critical roles, attrition beyond the intended reduction in force, the distraction of employees, reduced employee morale and adverse effects to our reputation as an employer, which could make it more difficult for us to hire new employees in the future, and the risk that we may not achieve the anticipated benefits from the reduction in workforce.

The market for such positions in the Boston area and other cities in which we operate is competitive.

Qualified individuals are in high demand, and we may incur significant costs to attract them.

Our inability to recruit and develop mid-level managers could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements, particularly in light of high attrition rates in some regions where we have operations.

These risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits.

All of our officers and other U.S.

employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace.

We use equity awards to attract talented employees.

If the value or liquidity of our common stock declines significantly and remains depressed, that may prevent us from recruiting and retaining qualified employees.

If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and operating results may be materially adversely affected.

Our business could suffer if we are unsuccessful in making, integrating and maintaining acquisitions and investments.

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For strategic or other operational reasons, we may decide to consolidate or co-locate certain aspects of our business operations or dispose of one or more of our properties.

For example, we have increasingly moved to virtualize certain customer service centers.

If we decide to fully or partially vacate a leased property, we may incur significant costs, including facility closing costs, employee separation and retention expenses, lease termination fees, rent expense in excess of sublease income, impairment charges for right-of-use (“ROU”) assets and leasehold improvements and accelerated depreciation of assets.

Any of these events may materially adversely affect our business, financial condition and operating results.

We rely on the performance of members of management and highly skilled personnel, and if we are unable to attract, develop, motivate and retain well-qualified employees, our business could be harmed.

The loss of any of our senior management or other key employees could materially harm our business.

The market for such positions in the Boston area and other cities in which we operate is competitive and has intensified and may continue to intensify if overall demand in the labor market continues to increase or we incur attrition at levels higher than we have historically.

Qualified individuals are in high demand, and we may incur significant costs to attract them.

Our inability to recruit and develop mid-level managers, including through virtual-only outreach due to the ongoing COVID-19 pandemic, could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements, particularly in light of high attrition rates in some regions where we have operations.

All of our officers and other U.S.

We may not be able to adequately protect our intellectual property rights.

We regard our customer lists, trademarks, domain names, copyrights, patents, trade dress, trade secrets, proprietary technology and similar intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade secret protection, agreements and other methods with our employees and others to protect our proprietary rights.

We regard our customer lists, trademarks, domain names, copyrights, patents, trade dress, trade secrets, proprietary technology and similar intellectual property as critical to our success, and we rely on a combination of trademark, copyright and patent law, trade dress, trade secret protection, agreements, and other methods together with the diligence our employees and others to protect our proprietary rights.

We might not be able to obtain broad protection in the U.S.

or internationally for all of our intellectual property, and we might not be able to obtain effective intellectual property protection in every country in which we sell products or perform services.

For example, we are the registrant of marks for our brands in numerous jurisdictions and of the Internet domain name for the websites of Wayfair.com, Wayfair.ca, Wayfair.co.uk, Wayfair.de and our other sites, as well as various related domain names.

For example, we are the registrant of marks for our brands in numerous jurisdictions and of the Internet domain name for the websites of Wayfair.com, Wayfair.ca, Wayfair.co.uk, Wayfair.de and Wayfair.ie and our other sites, as well as various related domain names.

However, we have not registered our marks or domain names in all major international jurisdictions and may not be able to register or use such domain names in all of the countries in which we currently or intend to conduct business.

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The protection of our intellectual property rights may require the expenditure of significant financial, managerial and operational resources.

We may initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or proprietary rights or to establish the validity of such rights.

We have in the past and may in the future initiate claims or litigation against others for infringement, misappropriation or violation of our intellectual property rights or proprietary rights or to establish the validity of such rights.

Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may materially adversely affect our business, financial condition and operating results.

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Wayfair will begin repurchasing shares under the 2021 Repurchase Program upon the completion of the 2020 Repurchase Program.

During the year that ended December 31, 2022, Wayfair repurchased 548,173 shares of Class A common stock under the Repurchase Programs.

Although the Board has authorized the Repurchase Programs, the programs do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

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In addition, the amount, timing, and execution of our Repurchase Programs may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of our Class A common stock, and the Repurchase Programs could diminish our cash reserves.

In August 2022, President Joseph R.

Biden signed into law the Inflation Reduction Act of 2022 (“IRA”).

The IRA includes, among other things, a 1% excise tax on certain stock repurchases.

We are currently evaluating the impacts of the excise tax on our Repurchase Programs, however we do not currently expect the new law to have a material impact on our results of operations.

Risks Related to our Indebtedness and Capital Raising

Our outstanding indebtedness, or additional indebtedness that we may incur, could limit our operating flexibility and adversely affect our financial condition.

As of December 31, 2022, we had $3.2 billion of principal indebtedness outstanding.

Our indebtedness included unsecured 1.125% Convertible Senior Notes due 2024 that mature on November 1, 2024 (the “2024 Notes”), unsecured 0.625% Convertible Senior Notes due 2025 that mature on October 1, 2025 (the “2025 Notes”), unsecured 1.00% Convertible Senior Notes due 2026 that mature on August 15, 2026 (the “2026 Notes”), unsecured 3.25% Convertible Senior Notes due 2027 that mature on September 15, 2027 (the “2027 Notes” and together with the 2024 Notes, 2025 Notes and the 2026 Notes, the “Non-Accreting Notes”), and unsecured 2.50% Accreting Convertible Senior Notes due 2025 that mature on April 1, 2025 (the “2025 Accreting Notes” and together with the Non-Accreting Notes, the “Notes”).

At maturity of the Non-Accreting Notes, unless earlier purchased, redeemed or converted, we will settle any conversions in cash, shares of Wayfair's Class A common stock or a combination thereof, at our election.

At maturity of the Accreting Notes, unless earlier purchased, redeemed or converted, we will settle any conversions in shares of Wayfair's Class A common stock.

If any Notes are not converted at or prior to maturity, we will be required to pay the holder thereof the principal amount or, with respect to the 2025 Accreting Notes, the accreted principal amount, in cash.

We pay interest semiannually in arrears at fixed rates per annum of 1.125% for the 2024 Notes, 0.625% for the 2025 Notes, 1.00% for the 2026 Notes and 3.25% for the 2027 Notes.

The 2025 Accreting Notes accrue interest at a rate of 2.50% per annum, which accretes semiannually to the principal amount.

Under certain circumstances, the holders of the Notes may require us to repay all or a portion of the principal and interest outstanding under the Notes in cash prior to the maturity date, which could have an adverse effect on our liquidity and financial condition.

We have the ability to borrow up to $600 million under our senior secured revolving credit facility (the “Revolver”) to finance working capital and provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes.

The Revolver replaced our previous $200 million senior secured revolving credit facility which was set to mature on February 21, 2022.

If we draw down on this facility, our interest expense and principal repayment requirements will increase, which could have an adverse effect on our financial results and our ability to make payments on the Notes.

Further, the agreements governing the Revolver contain numerous requirements, including affirmative, negative and financial covenants.

As a result of these covenants, our ability to respond to changes in business and economic conditions and engage in beneficial transactions, including to obtain additional financing as needed, may be restricted.

Our failure to comply with any of these covenants or to meet any payment obligations under the Revolver could result in an event of default which, if not cured or waived, would result in any amounts outstanding, including any accrued interest and unpaid fees, becoming immediately due and payable.

We might not have sufficient working capital or liquidity to satisfy any repayment obligations in the event of an acceleration of those obligations.

Our business may not be able to generate sufficient cash flow from operations, and we can give no assurance that future borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness as such indebtedness matures, including the Notes, and to fund our other liquidity needs.

If this occurs, we will need to refinance all or a portion of our indebtedness on or before maturity.

Any new or refinanced debt may be subject to substantially higher interest rates and restrictive covenants that could reduce our operational flexibility, and there can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms, or at all.

We may need to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing.

We may sell Class A common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time.

Our convertible notes are and any future issuance of equity or equity-linked securities would be dilutive to holders of our Class A common stock.

New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Class A common stock or our convertible notes.

These alternative strategies may not be implemented on satisfactory terms, if at all.

Our ability to refinance our indebtedness or obtain additional financing, or to do so on commercially reasonable terms, may depend on, among other things, our financial condition at the time, our credit rating, restrictions in agreements governing our indebtedness, and other factors, including the condition of the financial markets and the markets in which we compete.

Further, we may from time to time seek to retire, restructure, repurchase or redeem, or otherwise mitigate the equity dilution associated with, our outstanding convertible debt, through cash purchases, stock buybacks of some or all of the shares underlying convertible notes, and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise.

Such repurchases, exchanges or liability management exercises, if any, will be upon such terms and at such prices and sizes as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

Current capital market conditions, including the impact of inflation, have increased borrowing rates and can be expected to significantly increase our cost of capital as compared to prior periods should we seek additional funding.

Recent quantitative tightening by the U.S.

Federal Reserve, along with other central banks around the world, may further negatively affect our short-term ability or desire to incur debt.

Moreover, global capital markets have undergone periods of significant volatility and uncertainty in the past, and there can be no assurance that such financing alternatives will be available to us on favorable terms or at all, should we determine it necessary or advisable to seek additional capital.

If we do not generate sufficient cash flow from operations, and additional borrowings, refinancings or proceeds from equity or debt issuances or asset sales are not available to us, we may not have sufficient cash to enable us to meet all of our obligations, including our obligations under the Revolver or the Notes.

Further, our failure to service our existing and future indebtedness or other liabilities or maintain compliance with the financial covenants in our debt agreements could result in default under the related debt agreements or other alternatives that could result in our stockholders losing some or all of their equity investment in us.

The conditional conversion feature of any series of the Non-Accreting Notes, if triggered, may adversely affect our financial condition and operating results.

If the conditional conversion feature of any series of our Non-Accreting Notes is triggered, holders of such series of Non-Accreting Notes will be entitled to convert the applicable series of Non-Accreting Notes at any time during specified periods at their option.

If one or more holders elect to convert their Non-Accreting Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

To the extent we satisfy our conversion obligation of the Non-Accreting Notes by delivering shares of our Class A common, we would be required to deliver a significant number of shares, which would cause dilution to our existing stockholders.

In addition, even if holders do not elect to convert their Notes in such circumstances, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the applicable series of Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Risks Related to Laws and Regulations

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In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected, and we may not be able to maintain or grow our net revenue and expand our business as anticipated.

Further, as we enter new market segments or channels or geographical areas and expand the products and services we offer, we may be subject to

additional laws and regulatory requirements or prohibited from conducting our business, or certain aspects of it, in certain jurisdictions.

For instance, in 2022 the U.S.

and other countries implemented a series of sanctions against Russia in response to the conflict in Ukraine; U.S.

agencies have enhanced trade restrictions and legislation is currently under consideration that would prohibit importation of goods from certain regions.

Further, as we enter new market segments or channels or geographical areas and expand the products and services we offer, we may be subject to additional laws and regulatory requirements or prohibited from conducting our business, or certain aspects of it, in certain jurisdictions.

We will incur additional costs complying with these additional obligations and any failure or perceived failure to comply would adversely affect our business and reputation.

Failure to comply with federal, state and international laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current, or the enactment of new, laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.

We are subject to a variety of federal, state and international laws and regulations which govern the collection, use, retention, sharing, processing, export and security of personal information.

These laws and regulations are complex and rapidly evolving and subject to potentially differing interpretations.

There is no harmonized approach to these laws and regulations.

Consequently, we increase our risk of non-compliance with applicable foreign data protection laws and regulations as we continue our international expansion.

We may need to change and limit the way we use personal information in operating our business and may have difficulty maintaining a single operating model that is compliant.

Further, many of these laws may require consent from consumers for the use of data for various purposes, including marketing, which may reduce our ability to market our products.

Compliance with such laws and regulations will result in additional costs and may necessitate changes to our business practices and divergent operating models, which may adversely affect our business and financial condition.

Among others, we are subject to the General Data Protection Regulation (“EU GDPR”) in the European Union (“EU”).

In addition, there is also uncertainty regarding potential laws, regulations and policies related to Environmental, Social, Governance (“ESG”) and global environmental sustainability matters, including disclosure obligations and reporting on such matters.

Changes in the legal or regulatory environment affecting ESG and sustainability disclosure, responsible sourcing, supply chain transparency, or environmental protection, among others, including regulations to limit carbon dioxide and other greenhouse gas emissions, to discourage the use of plastic or to limit or to impose additional costs on commercial water use may result in increased compliance costs for us and our business partners, all of which may negatively impact our results of operations, financial condition and cash flows.

The expectations related to ESG and sustainability matters are rapidly evolving, and from time to time, we announce certain initiatives and goals, related to these matters.

We could fail, or be perceived to fail to act responsibly, in our efforts, or we could fail in accurately reporting our progress on such initiatives and goals.

In addition, we could be criticized for the scope of such initiatives or goals.

As a result, we could suffer negative publicity and our reputation could be adversely impacted, which in turn could have a negative impact on investor and customer perceptions.

Failure to comply with federal, state and international laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current, or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business reputation and our financial condition.

We are subject to a variety of federal, state and international privacy laws and regulations that govern the collection, use, retention, sharing, processing, export and security of personal information.

New laws and regulations are rapidly coming into effect while existing legislation is rapidly evolving.

Among others, we are subject to several global laws, including, but not limited to, the General Data Protection Regulation (“EU GDPR”) in the European Union (“EU”).

Following the United Kingdom’s (“U.K.”) withdrawal from the EU, the EU GDPR has been incorporated into U.K.

GDPR”), together with the EU GDPR referred to as “GDPR”).

The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, where required providing notification of data breaches, and taking certain measures when engaging third-party processors.

The GDPR also restricts transfers of data outside of the European Economic Area and the United Kingdom.

Data protection authorities hold a number of enforcement powers, including issuing fines of up to 4% of global annual turnover or €20 million (£17.5 million) (whichever is higher) for the most serious infringements.

The GDPR includes restrictions on cross-border data transfers.

Adequate safeguards must be implemented to enable the transfer of personal data outside of the EEA or the U.K., in particular to the U.S., in compliance with GDPR.

On June 4, 2021, the European Commission (“EC”) issued new forms of standard contractual clauses for data transfers from controllers or processors in the EEA (or otherwise subject to the EU GDPR) to controllers or processors established outside the EEA.

is not subject to the EC’s new standard contractual clauses but has published its own version of standard clauses and, unless objections are raised, will enter into force on March 21, 2022 to enable transfers originating from the U.K to third countries.

We will be required to implement these new safeguards when conducting restricted data transfers under the GDPR and doing so may require significant effort and cost.

The EC has currently concluded that the U.K.

ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the EEA to the U.K, and the U.K.

Government has confirmed that transfers from the U.K.

to the EEA may currently continue to flow freely.

Changes with respect to any of these matters may lead to additional costs and increase our overall risk exposure.

Further, we are subject to various state privacy laws, such as the California Consumer Privacy Act of 2018 (CCPA), which came into effect in January of 2020;

the California Privacy Rights Act (CPRA), which will go into effect in 2023;

the Virginia Consumer Data Protection Act (Virginia CDPA), which will go into effect in 2023;

and the Colorado Privacy Act (ColoPA), which will go into effect in 2023;

all of which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data.

GDPR”), and together with the EU GDPR is referred to herein as “GDPR”).

In the U.S., the Securities and Exchange Commission has proposed new rules requiring public companies to disclose information about a material cybersecurity incident, including any breach of personal data, within four business days of determining that it has experienced a material cybersecurity incident.

Further, we are subject to various state privacy laws, several of which will go into effect in 2023 ( i.e .

California, Virginia, Colorado, and Connecticut), all of which give new data privacy rights to their respective residents and impose significant obligations on controllers and processors of consumer data.

The potential effects of these laws, and any other regulations under consideration around the globe, are far-reaching, uncertain, and evolving, and may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.

These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices.

As a result, our practices may not comply, or may not comply in the future, with all such laws, regulations, requirements and obligations.

Any failure, or perceived failure, by us to comply with our posted privacy policies or with any federal, state or international privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may

result in claims, proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease using certain data sets.

These laws are complex and subject to potentially differing interpretations and there is no harmonized approach to maintaining compliance.

Requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices.

As a result, we may need to limit the way we use personal information and may have difficulty maintaining a single, compliant operating model.

Further, many of these laws may require consent from consumers for the use of data for various purposes, including marketing, which may limit our ability to market our products.

Our practices may not comply, or may not comply in the future, with all such laws, regulations, requirements and obligations.

Any failure, or perceived failure, by us to comply with our posted privacy policies or with any federal, state or international privacy or consumer protection-related laws, regulations, or regulatory guidance or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities and other third parties or other liabilities or require us to change our operations and/or cease using certain data sets.

Any such claim, proceeding or action, including a complaint by an activist to a regulatory authority or other public statement criticizing our practices could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties and otherwise adversely affect our financial condition and operating results.

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If the use of “cookie” tracking technologies is further restricted, regulated, or blocked, or if changes in technology cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, the amount or accuracy of Internet user information we collect would decrease, which could harm our business and operating results.

Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of proprietary or third-party "cookies" and other methods of online tracking for behavioral advertising.

analytics and other purposes.

Cookies are small data files that are sent by websites and stored locally on an Internet user’s computer or mobile device.

We, and third parties who work on our behalf, collect data via cookies that is used to track the behavior of visitors to our sites, to provide a more personal and interactive experience, and to increase the effectiveness of our marketing.

However, Internet users

can easily disable, delete and block cookies directly through browser settings or through other software, browser extensions or hardware platforms that physically block cookies from being created and stored.

and foreign governments have enacted, have considered or are considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools.

In the U.S., online tracking technologies are regulated by state privacy laws, such as the CCPA, federal laws, and self-regulatory frameworks that may be binding on companies that provide online advertising technology services.

These laws and frameworks may require companies to offer consumers the right to opt out of many of these activities.

Online tracking technologies are regulated in the EU and U.K.

via the e-Privacy Directive, which the EU legislature is currently considering updating.

Although the new EU regulation is not expected to come into force in the near future, it may restrict the way we conduct online advertising and other online communications.

Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies, to block other tracking technologies or to require new permissions from users for certain activities, which could if widely adopted significantly reduce the effectiveness of such practices and technologies.

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The regulation of the use of cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and consequently, materially adversely affect our business, financial condition and operating results.

Changes in tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our sites and our financial results.

We may incur additional tax expense or become subject to additional tax exposure, which may adversely affect the commercial use of our sites and our financial rights.

We are subject to the tax laws and regulations of the U.S.

and numerous other jurisdictions in which we do business.

Many judgments are required in determining our worldwide provision for income taxes and other tax liabilities, and we are regularly under audit by the applicable tax authorities, which may not agree with our tax positions.

In addition, our tax liabilities are subject to other significant risks and uncertainties, including those arising from potential changes in laws and regulations in the countries in which we do business, the possibility of adverse determinations with respect to the application of existing laws (in particular with respect to full realization of the incentives contemplated by the Inflation Reduction Act), changes in our business or structure and changes in the valuation of our deferred tax assets and liabilities.

Any unfavorable resolution of these and other uncertainties may have a significant adverse impact on our tax rate and results of operations.

If our tax expense were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our operating results, cash flows and financial condition could be adversely affected.

Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to impose additional or new regulation on our business or levy additional or new sales, income or other taxes relating to our activities.

Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce and digital services.

New or revised international, federal, state or local tax regulations or court decisions may subject us or our customers to additional sales, income and other taxes.

For example, on June 21, 2018, the U.S.

Supreme Court rendered a 5-4 majority decision in South Dakota v.

Wayfair Inc., 17-494 where the Court held, among other things, that a state may require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers in the state, overturning existing court precedent.

Other new or revised taxes and, in particular, digital taxes, sales taxes, VAT and similar taxes could increase the cost of doing business online and decrease the attractiveness of selling products over the Internet.

For example, the U.S.

Supreme Court's decision in South Dakota v.

Wayfair, Inc., removed a significant impediment to the enactment of laws imposing sales tax collection obligations on out-of-state e-commerce companies.

After the Wayfair decision, several U.S.

states imposed an economic presence standard with respect to the imposition of taxes.

These new rules often have uncertainty with respect to the level of activity necessary to cause a taxable presence for taxpayers within the state.

Although we believe that we currently collect sales taxes in all states that require us to do so, a successful assertion by one or more states requiring us to collect sales taxes where we currently do not, or to collect additional sales taxes in a state in which we currently collect them, could result in substantial tax liabilities (including penalties and interest).

Other new or revised taxes, such as digital taxes, sales taxes, VAT and similar taxes could increase the cost of doing business online and decrease the attractiveness of selling products over the Internet.

New taxes and rulings could also create significant increases in internal costs necessary to capture data and collect and remit taxes.

Any of these events could have a material adverse effect on our business, financial condition and operating results.

Risks Related to our Indebtedness

Our outstanding indebtedness, or additional indebtedness that we may incur, could limit our operating flexibility and adversely affect our financial condition.

As of December 31, 2021, we had $3.1 billion of indebtedness outstanding.

Our indebtedness included unsecured 0.375% Convertible Senior Notes due 2022 that mature on September 1, 2022 (the "2022 Notes"), unsecured 1.125% Convertible Senior Notes due 2024 that mature on November 1, 2024 (the "2024 Notes"), unsecured 1.00% Convertible Senior Notes due 2026 that mature on August 15, 2026 (the "2026 Notes"), unsecured 0.625% Convertible Senior Notes due 2025 that mature on October 1, 2025 (the “2025 Notes”, and together with the 2022 Notes, the 2024 Notes and the 2026 Notes, the "Non-Accreting Notes") and unsecured 2.50% Accreting Convertible Senior Notes due 2025 that mature on April 1, 2025 (the “2025 Accreting Notes” and together with the Non-Accreting Notes, the “Notes”).

At maturity of the Accreting Notes, unless earlier purchased, redeemed or converted, we will settle any conversions in shares of Wayfair's Class A common stock.

We pay interest semiannually in arrears at fixed rates per annum of 0.375% for the 2022 Notes, 1.125% for the 2024 Notes, 0.625% for the 2025 Notes and 1.00% for the 2026 Notes.

The 2025 Accreting Notes accrue interest at a rate of 2.50% per annum, which accretes semiannually to the principal amount.

We have the ability to borrow up to $600 million under our senior secured revolving credit facility (the "Revolver") to finance working capital and provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes.

The Revolver replaced our previous $200 million senior secured revolving credit facility which was set to mature on February 21, 2022.

Further, the agreements governing the Revolver contain numerous requirements, including affirmative, negative and financial covenants.

We might not have sufficient working capital or liquidity to satisfy any repayment obligations in the event of an acceleration of those obligations.

If this occurs, we will need to refinance all or a portion of our indebtedness on or before maturity, and there can be no assurance that we will be able to refinance any of our indebtedness on commercially reasonable terms, or at all.

These alternative strategies may not be implemented on satisfactory terms, if at all.

Our ability to refinance our indebtedness or obtain additional financing, or to do so on commercially reasonable terms, will depend on, among other things, our financial condition at the time, restrictions in agreements governing our indebtedness, and other factors, including the condition of the financial markets and the markets in which we compete.

The amounts involved may be material.

If we do not generate sufficient cash flow from operations, and additional borrowings, refinancings or proceeds from asset sales are not available to us, we may not have sufficient cash to enable us to meet all of our obligations, including our obligations under the Notes.

The conditional conversion feature of any series of the Non-Accreting Notes, if triggered, and conversion of the 2025 Accreting Notes may adversely affect our financial condition and operating results.

If the holders of the 2025 Accreting Notes convert their 2025 Accreting Notes, we would be required to settle all of our conversion obligation by delivering shares of our Class A common stock.

During 2020, CBEP Investments, LLC converted $253 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of our Class A common stock.

During 2021, GHEP VII Aggregator, L.P ("Great Hill") converted $253 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of our Class A common stock.

To the extent we satisfy our conversion obligation of the Non-Accreting Notes by delivering shares of our Class A common stock or if the remaining holders of the 2025 Accreting Notes convert their 2025 Accreting Notes, we would be required to deliver a significant number of shares, which would cause dilution to our existing stockholders.

Risks Related to Ownership of our Class A Common Stock

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Due to optional conversions of Class B common stock into Class A common stock following the IPO, our Class B common stock is currently held primarily by our co-founders and their affiliates.

As of December 31, 2021, our co-founders and their affiliates owned shares representing approximately 26.3% of the economic interest and 77.0% of the voting power of our outstanding capital stock.

As of December 31, 2022, our co-founders and th eir affiliates owned shares representing approximately 23.6% of the economic interest and 76.1% of the voting power of our outstanding capital stock.

This concentrated control limits your ability to influence corporate matters for the foreseeable future.

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Future transfers by holders of Class B common stock will generally result in those shares converting on a 1:1 basis to Class A common stock, which will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long-term, which may include our executive officers.

Our stock price may be volatile or may decline regardless of our operating performance.

The market price of our Class A common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including the risks described elsewhere herein, as well as:

• actual or anticipated fluctuations in our results of operations;

• the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates or ratings by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;

• announcements by us or our competitors of new businesses, services or products, significant technical innovations, acquisitions, strategic partnerships, joint ventures, operating results or capital commitments;

• changes in operating performance and stock market valuations of other technology or retail companies generally, or those in our industry in particular;

• price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

• changes in interest rates;

• changes in the Board or our management;

• sales of large blocks of our Class A common stock, including sales by our executive officers, directors and significant stockholders;

• lawsuits threatened or filed against us;

• changes in laws or regulations applicable to our business;

• changes in our capital structure, such as future issuances of debt or equity securities, including in connection with an acquisition or upon conversion of some or all of our outstanding Notes;

• short sales, hedging and other derivative transactions involving our capital stock;

• general economic conditions in the U.S.

• other events or factors, including those resulting from war, incidents of terrorism or responses to these events.

The price of our Class A common stock has been and may in the future be volatile.

This volatility may affect the price at which you could sell your Class A common stock, and the sale of substantial amounts of our Class A common stock could adversely affect the price of our Class A common stock.

Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors, including the other factors discussed in this Risk Factors section.

The sale of substantial amounts of our Class A common stock in the public market, or the perception that these sales might occur, could adversely affect the price of our Class A common stock.

In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies, including e-commerce companies.

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We believe that the publication of this negative information may in the future lead to downward pressure on the price of our stock.

Substantial sales of shares of our Class A common stock could cause the market price of our Class A common stock to decline.

Sales of a substantial number of shares of our Class A common stock in the public market, or the perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities.

We are unable to predict the effect that such sales may have on the prevailing market price of our Class A common stock.

The capped calls expose us to counterparty risk and may affect the value of our common stock.

In connection with the issuance of each series of Non-Accreting Notes, we entered into capped calls with certain financial institutions, which we refer to as the option counterparties.

The capped calls are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

The capped calls are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of

converted Notes, as the case may be, with such reduction and/or offset subject to a cap.

From time to time, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to our Class A common stock and/or purchasing or selling our Class A common stock or other securities of ours in secondary market transactions.

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If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Our management has broad discretion over our existing cash resources and might not use such funds in ways that increase the value of your investment.

Our management generally has broad discretion over the use of our cash resources, and you will be relying on the judgment of our management regarding the application of these resources.

Our management might not apply these resources in ways that increase the value of your investment.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our Class A common stock.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors