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Item 1. Financial Statements

2023-11-01 compared with 2023-08-03 · 113 added, 97 removed, 389 unchanged (35% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, December 31,

September 30, December 31,

(in millions, except share and per share data)

22 unchanged sentences

Convertible preferred stock, $ 0.001 par value per share:

10,000,000 shares authorized and none issued at June 30, 2023 and December 31, 2022

Class A common stock, par value $ 0.001 per share, 500,000,000 shares authorized, 86,919,329 and 82,903,862 shares issued and outstanding at June 30, 2023 and December 31, 2022

Class B common stock, par value $ 0.001 per share, 164,000,000 shares authorized, 25,691,323 and 25,691,397 shares issued and outstanding at June 30, 2023 and December 31, 2022

10,000,000 shares authorized and none issued at September 30, 2023 and December 31, 2022

Class A common stock, par value $ 0.001 per share, 500,000,000 shares authorized, 90,489,548 and 82,903,862 shares issued and outstanding at September 30, 2023 and December 31, 2022

Class B common stock, par value $ 0.001 per share, 164,000,000 shares authorized, 25,691,295 and 25,691,397 shares issued and outstanding at September 30, 2023 and December 31, 2022

Additional paid-in capital

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

12 unchanged sentences

Interest expense, net ( 5 ) ( 5 ) ( 15 ) ( 19 )

Other income, net 3 1 2 1

Other expense, net ( 4 ) ( 1 ) ( 2 ) —

Gain on debt extinguishment — 96 100 96

10 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

1 unchanged sentence

Net loss $ ( 163 ) $ ( 283 ) $ ( 564 ) $ ( 980 )

Other comprehensive loss:

Other comprehensive (loss) income:

Foreign currency translation adjustments ( 1 ) ( 2 ) — ( 5 )

11 unchanged sentences

(in millions)

Balance at March 31, 2022 105 $ — $ 374 $ ( 2,268 ) $ ( 10 ) $ ( 1,904 )

Balance at June 30, 2022 106 $ — $ 513 $ ( 2,646 ) $ ( 12 ) $ ( 2,145 )

Net loss — — — ( 283 ) — ( 283 )

Other comprehensive loss — — — — ( 2 ) ( 2 )

Issuance of common stock upon vesting of RSUs 1 — — — — —

Equity-based compensation — — 132 — — 132

Premiums paid for capped calls — — ( 80 ) — ( 80 )

Balance at September 30, 2022 106 $ — $ 565 $ ( 2,929 ) $ ( 14 ) $ ( 2,378 )

Balance at June 30, 2023 113 $ — $ 988 $ ( 3,681 ) $ ( 5 ) $ ( 2,698 )

Balance at March 31, 2023 111 $ — $ 894 $ ( 3,635 ) $ ( 4 ) $ ( 2,745 )

Net loss — — — ( 163 ) — ( 163 )

2 unchanged sentences

Equity-based compensation — — 154 — — 154

Premiums paid for capped calls — — ( 87 ) — — ( 87 )

Balance at June 30, 2023 113 $ — $ 988 $ ( 3,681 ) $ ( 5 ) $ ( 2,698 )

Balance at September 30, 2023 116 $ — $ 1,142 $ ( 3,844 ) $ ( 6 ) $ ( 2,708 )

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

Six Months Ended

Nine Months Ended

Class A and Class B Common Stock

11 unchanged sentences

Repurchase of common stock ( 1 ) — ( 75 ) — — ( 75 )

Balance at June 30, 2022 106 $ — $ 513 $ ( 2,646 ) $ ( 12 ) $ ( 2,145 )

Premiums paid for capped calls — — ( 80 ) — — ( 80 )

Balance at September 30, 2022 106 $ — $ 565 $ ( 2,929 ) $ ( 14 ) $ ( 2,378 )

Balance at December 31, 2022 109 $ — $ 737 $ ( 3,280 ) $ ( 7 ) $ ( 2,550 )

4 unchanged sentences

Premiums paid for capped calls — — ( 87 ) — — ( 87 )

Balance at June 30, 2023 113 $ — $ 988 $ ( 3,681 ) $ ( 5 ) $ ( 2,698 )

Balance at September 30, 2023 116 $ — $ 1,142 $ ( 3,844 ) $ ( 6 ) $ ( 2,708 )

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

16 unchanged sentences

Net cash provided by (used in) operating activities 191 ( 772 )

Cash flows from (for) investing activities:

Cash flows for investing activities:

Purchase of short- and long-term investments ( 4 ) ( 420 )

2 unchanged sentences

Site and software development costs ( 154 ) ( 205 )

Net cash provided by (used in) investing activities 49 ( 189 )

Cash flows from (for) financing activities:

Net cash used in investing activities ( 30 ) ( 211 )

Cash flows from financing activities:

Repurchase of common stock — ( 75 )

1 unchanged sentence

Premiums paid for capped call confirmations ( 87 ) ( 80 )

Payment of principal upon maturity of convertible debt — ( 3 )

Payments to extinguish convertible debt ( 514 ) ( 504 )

Net cash provided by (used in) financing activities 77 ( 75 )

Effect of exchange rate changes on cash and cash equivalents 3 ( 7 )

Net increase (decrease) in cash and cash equivalents 199 ( 612 )

Cash and cash equivalents:

Net cash provided by financing activities 77 16

Effect of exchange rate changes on cash, cash equivalents and restricted cash 3 ( 8 )

Net increase (decrease) in cash, cash equivalents and restricted cash 241 ( 975 )

Cash, cash equivalents and restricted cash

Beginning of period

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

2 unchanged sentences

Purchase of property and equipment included in accounts payable and other liabilities $ ( 8 ) $ 14

Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets

Cash and cash equivalents $ 1,281 $ 731

Restricted cash included within prepaid expenses and other current assets 10 —

Total cash, cash equivalents and restricted cash $ 1,291 $ 731

See notes to unaudited condensed consolidated financial statements.

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The Company has identified significant accounting policies that are critical to understanding its business and results of operations.

Wayfair believes that there have been no significant changes during the three and six months ended June 30, 2023 to the items disclosed in Note 1, Summary of Significant Accounting Policies , included in Part II, Item 8, Financial Statements and Supplementary Data , of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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

Recent Accounting Pronouncements

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Accounts Receivable, Net

As of June 30, 2023, accounts receivable was $ 128 million, net of allowance for credit losses of $ 30 million.

As of September 30, 2023, accounts receivable was $ 132 million, net of allowance for credit losses of $ 33 million.

As of December 31, 2022, accounts receivable was $ 272 million, net of allowance for credit losses of $ 24 million.

The changes in the allowance for credit losses were not material for the three and six months ended June 30, 2023.

Management believes credit risk is mitigated for the three and six months ended June 30, 2023, as approximately 99.8 % and 99.6 %, respectively, of the net revenue recognized was collected in advance of recognition.

The changes in the allowance for credit losses were not material for the three and nine months ended September 30, 2023.

Management believes credit risk is mitigated for the three and nine months ended September 30, 2023, as approximately 99.4 % and 99.5 %, respectively, of the net revenue recognized was collected in advance of recognition.

Contract Liabilities

Contract liabilities included in other current liabilities were $ 250 million at June 30, 2023 and $ 224 million at December 31, 2022.

During the six months ended June 30, 2023, Wayfair recognized $ 146 million of net revenue that was included within other current liabilities as of December 31, 2022.

Contract liabilities included in other current liabilities were $ 214 million at September 30, 2023 and $ 224 million at December 31, 2022.

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

Net revenue from contracts with customers is disaggregated by geographic region because this manner of disaggregation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors.

1 unchanged sentence

Impairment and Other Related Net Charges

During the six months ended June 30, 2023, Wayfair recorded charges of $ 5 million related to consolidation of certain customer service centers in identified U.S.

During the three and six months ended June 30, 2023, Wayfair recorded charges of $ 1 million and $ 9 million, respectively, related to construction in progress assets at identified U.S.

During the nine months ended September 30, 2023, Wayfair recorded charges of $ 14 million, inclusive of $ 5 million related to consolidation of certain customer service centers and $ 9 million related to construction in progress assets at identified U.S.

These charges are recorded within impairment and other related net charges on the condensed consolidated statements of operations.

Restructuring Charges

On January 20, 2023, Wayfair announced an update to the Company’s cost efficiency plan, including a workforce reduction involving approximately 1,750 employees.

As a result of this workforce reduction, during the six months ended June 30, 2023,

In January 2023, Wayfair announced an update to the Company’s cost efficiency plan, including a workforce reduction involving approximately 1,750 employees.

As a result of this workforce reduction, during the nine months ended September 30,

2023, Wayfair incurred $ 65 million of charges recorded within restructuring charges on the condensed consolidated statements of operations.

Wayfair does not expect to incur any further material charges related to this workforce reduction.

The charges consist primarily of one-time employee severance and benefit costs.

Cash and Cash Equivalents, Investments and Fair Value Measurements

As of June 30, 2023 and December 31, 2022, all of Wayfair’s marketable securities, which primarily consisted of corporate bonds and other government obligations that are priced at fair value, were classified as available-for-sale investments.

During the three and six months ended June 30, 2023 and 2022, Wayfair did not have any realized gains or losses.

During the three and six months ended June 30, 2023 and 2022, Wayfair did not recognize any credit losses related to its available-for-sale debt securities.

Further, as of June 30, 2023 and December 31, 2022, Wayfair did not have an allowance for credit losses recorded related to its available-for-sale debt securities.

The following tables present details of Wayfair’s investment securities:

June 30, 2023

Losses Estimated

(in millions)

Investment securities $ 4 $ — $ — $ 4

Total $ 4 $ — $ — $ 4

The charges consisted primarily of one-time employee severance and benefit costs.

Cash, Cash Equivalents and Restricted Cash, Investments and Fair Value Measurements

As of September 30, 2023 and December 31, 2022, Wayfair’s marketable securities, which primarily consisted of corporate bonds and other government obligations that are priced at fair value, were classified as available-for-sale investments.

During the three and nine months ended September 30, 2023 and 2022, Wayfair did not have any realized gains or losses.

During the three and nine months ended September 30, 2023 and 2022, Wayfair did not recognize any credit losses related to its available-for-sale debt securities.

As of September 30, 2023 and December 31, 2022, Wayfair did not have an allowance for credit losses recorded related to its available-for-sale debt securities.

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

December 31, 2022

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

June 30, 2023

September 30, 2023

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Total cash and cash equivalents 1,281 — — 1,281

Short-term investments:

Investment securities — 4 — 4

Prepaid expenses and other current assets:

Certificate of deposit (1)

Total $ 1,291 $ — $ — $ 1,291

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

December 31, 2022

10 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Debt Instrument Principal Amount Unamortized Debt Discount Net Carrying Amount Principal Amount Unamortized Debt Discount Net Carrying Amount

13 unchanged sentences

Under the Revolver, Wayfair may, from time to time, request letters of credit, which reduce the availability of credit under the Revolver.

Wayfair had $ 77 million in outstanding letters of credit as of June 30, 2023, primarily as security for lease agreements.

As of June 30, 2023, there were no revolving loans outstanding under the Revolver.

Wayfair had $ 76 million in outstanding letters of credit as of September 30, 2023, primarily as security for lease agreements.

As of September 30, 2023, there were no revolving loans outstanding under the Revolver.

Convertible Non-Accreting Notes

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

Because the conditional conversion features of the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes were not triggered during the calendar quarter ended June 30, 2023, the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes are not convertible during the calendar quarter ended September 30, 2023.

The conditional conversion features of the 2028 Notes are not applicable until the calendar quarter ending December 31, 2023.

The conditional conversion features of the 2028 Notes were triggered during the calendar quarter ended September 30, 2023, and the 2028 Notes therefore became convertible in the calendar quarter ended December 31, 2023 pursuant to the applicable last reported sales price condition.

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

The holders of the 2025 Accreting Notes may convert all or a portion of their 2025 Accreting Notes at any time prior to the close of business on the second business day immediately preceding the maturity date.

1 unchanged sentence

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

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

conversion rate of the respective Notes.

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

6 unchanged sentences

Proceeds from 2028 Notes Transactions and Partial Extinguishment of 2024 Notes and 2025 Notes

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

In addition, Wayfair used $ 514 million of the net transaction amount to repurchase for cash $ 83 million aggregate principal amount of the 2024 Notes and $ 535 million aggregate principal amount of the 2025 Notes in privately negotiated repurchase transactions.

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

Additionally, during the second quarter of 2023, Wayfair used $ 514 million of the net transaction amount to repurchase for cash $ 83 million aggregate principal amount of the 2024 Notes and $ 535 million aggregate principal amount of the 2025 Notes in privately negotiated repurchase transactions.

In accounting for the repurchases of the 2024 Notes and 2025 Notes, Wayfair recorded a $ 100 million gain on debt extinguishment, representing the difference between the cash paid for principal of $ 514 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $ 614 million.

2 unchanged sentences

Conversions of Notes

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

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

Interest Expense

During the three months ended June 30, 2023, Wayfair recognized contractual interest expense and debt discount amortization of $ 14 million and $ 2 million, respectively, and during the six months ended June 30, 2023, contractual interest expense and debt discount amortization of $ 25 million and $ 3 million, respectively.

During the three months ended June 30, 2022, Wayfair recognized contractual interest expense and debt discount amortization of $ 7 million and $ 2 million, respectively, and during the six months ended June 30, 2022, contractual interest expense and debt discount amortization of $ 13 million and $ 4 million, respectively.

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

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

Fair Value of Notes

As of June 30, 2023, the estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2025 Accreting Notes was $ 116 million, $ 648 million, $ 784 million, $ 856 million, $ 1.1 billion and $ 34 million, respectively.

As of September 30, 2023, the estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2025 Accreting Notes was $ 115 million, $ 650 million, $ 771 million, $ 841 million, $ 1.0 billion and $ 31 million, respectively.

The estimated fair value of the Non-Accreting Notes was determined through consideration of quoted market prices.

The estimated fair value of the 2025 Accreting Notes was determined through an option pricing model using Level 3 inputs including volatility and credit spread.

The fair values of the Non-Accreting Notes and the 2025 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, Cash and Cash Equivalents, Investments and Fair Value Measurements .

As of June 30, 2023, the if-converted value of the 2027 Notes and 2028 Notes exceeded the principal value by $ 17 million and $ 289 million, respectively.

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

The fair values of the Non-Accreting Notes and the 2025 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, Cash, Cash Equivalents and Restricted Cash, Investments and Fair Value Measurements .

September 30, 2023, the if-converted value of the 2028 Notes exceeded the principal value by $ 223 million.

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

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

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Legal Matters

From time to time, Wayfair is involved in claims that arise during the ordinary course of business.

From time to time, Wayfair is involved in litigation matters and other legal claims that arise during the ordinary course of business.

The Company records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability.

Although litigation is inherently unpredictable and claims cannot be predicted with certainty, Wayfair does not currently believe that the outcome of any legal matters will have a material adverse effect on Wayfair's results of operation or financial condition.

Regardless of the outcome, litigation can be costly and time consuming, as it can divert management's attention from important business matters and initiatives, negatively impacting Wayfair's overall operations.

Litigation and legal claims are inherently unpredictable and claims cannot be predicted with certainty.

An unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s results of operations or financial condition, and regardless of the outcome, these matters can be costly and time consuming, as it can divert management's attention from important business matters and initiatives, negatively impacting Wayfair's overall operations.

In addition, Wayfair may also find itself at greater risk to outside party claims as it increases its operations in jurisdictions where the laws with respect to the potential liability of online retailers are uncertain, unfavorable, or unclear.

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

Canada Border Services Agency

The Canada Border Services Agency (“CBSA”) is examining Wayfair’s payment of duties under the Special Measures Import Act (the “CBSA review”) for goods imported into Canada for the years ended December 31, 2023 and 2022 and part of the year ended December 31, 2021.

As of September 30, 2023, the estimated potential liability for the CBSA review is $ 10 million and is recorded within other current liabilities in the condensed consolidated balance sheets.

During the three and nine months ended September 30, 2023 approximately $ 7 million was recorded to cost of sales and approximately $ 1 million was recorded to selling, operations, technology, general and administrative within the condensed consolidated statements of operations.

Because loss contingencies are inherently unpredictable, this assessment is subjective and requires judgments about future events.

As a result, it is at least reasonably possible that this estimate may change in the near term and the effect of the potential change could be material.

Wayfair believes it has substantial factual and legal grounds to contest certain elements of the CBSA review, along with any associated interest.

Stockholders’ Deficit

Since Wayfair's initial public offering through June 30, 2023, 56,347,091 shares of Class B common stock were converted to the same number of shares of Class A common stock.

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

Stock Repurchase Programs

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

During the three months ended June 30, 2022, Wayfair did not repurchase any shares of Class A common stock.

During the six months ended June 30, 2022, Wayfair repurchased 548,173 shares of Class A common stock for $ 75 million under its stock repurchase programs .

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

During the three months ended September 30, 2022, Wayfair did not repurchase any shares of Class A common stock.

During the nine months ended September 30, 2022, Wayfair repurchased 548,173 shares of Class A common stock for $ 75 million under its stock repurchase programs .

Equity-Based Compensation

On April 25, 2023 (the “2023 Plan Effective Date”), Wayfair’s stockholders approved the 2023 Incentive Award Plan (the “2023 Plan”) to replace Wayfair’s 2014 Incentive Award Plan, as amended (the “2014 Plan” and, together with the 2023 Plan, the “Incentive Plans”).

In April 2023, Wayfair’s stockholders approved the 2023 Incentive Award Plan (the “2023 Plan”) to replace Wayfair’s 2014 Incentive Award Plan, as amended (the “2014 Plan” and, together with the 2023 Plan, the “Incentive Plans”).

The Incentive Plans were adopted by the board of directors (the “Board”) to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent.

The Incentive Plans are administered by the Board for awards to non-employee directors and by the compensation committee of the Board for other participants and provide for the issuance of equity-based awards including stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance awards and stock payments.

Under the 2023 Plan, the number of Class A common stock reserved for future award grants is the sum of (i) 15,000,000 shares of Class A common stock, (ii) any shares of Class A common stock which remained available for grant under the 2014 Plan as of the 2023 Plan Effective Date and (iii) any shares of Class A common stock subject to 2014 Plan awards that become available for issuance under the 2023 Plan pursuant to its terms after the 2023 Plan Effective Date.

Under the 2023 Plan, 20,525,663 shares of Class A common stock initially were available for future award grants.

As of June 30, 2023, 17,636,121 shares of Class A common stock remained available for future grant under the 2023 Plan.

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

As of September 30, 2023, 16,452,692 shares of Class A common stock remained available for future grant under the 2023 Plan.

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

Shares Weighted-Average

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RSUs forfeited/canceled ( 1,888,574 ) $ 108.06

Unvested at June 30, 2023

Unvested at September 30, 2023

5,511,231 $ 100.75

The intrinsic value of RSUs that vested during each of the six months ended June 30, 2023 and 2022 was $ 166 million.

As of June 30, 2023, the aggregate intrinsic value of unvested RSUs was $ 513 million.

As of June 30, 2023, unrecognized equity-based compensation expense related to RSUs expected to vest over time is $ 497 million with a weighted-average remaining vesting term of 0.7 years.

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

As of September 30, 2023, the aggregate intrinsic value of unvested RSUs was $ 334 million.

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

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

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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Total equity-based compensation expense $ 139 $ 122 $ 447 $ 355

Equity-based compensation costs capitalized as software costs were $ 17 million and $ 30 million for the three and six months ended June 30, 2023, respectively, and $ 10 million and $ 18 million for the three and six months ended June 30, 2022, respectively.

The provision for income taxes, net recorded during the three and six months ended June 30, 2023 is primarily related to income tax benefits for tax losses earned in the U.S.

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

The provision for income taxes, net recorded during the three and nine months ended September 30, 2023 is primarily related to income tax benefits for tax losses earned in the U.S.

and certain foreign jurisdictions and U.S.

1 unchanged sentence

state minimum and foreign taxes.

Wayfair had no material unrecognized tax benefits as of June 30, 2023 and December 31, 2022.

Wayfair had no material unrecognized tax benefits as of September 30, 2023 and December 31, 2022.

Loss per Share

Wayfair follows the two-class method when computing earnings or loss per share for its two issued classes of common stock - Class A and Class B.

Basic earnings or loss per share is computed using the weighted-average number of shares of common stock outstanding during the period.

Diluted earnings or loss per share is computed using the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, common stock equivalents outstanding during the period and stock issuable upon conversion of the convertible debt instruments.

Wayfair's common stock equivalents consist of shares issuable upon the release of restricted stock units.

The dilutive effect of these common stock equivalents is reflected in diluted earnings or loss per share by application of the treasury stock method.

The dilutive effect of shares issuable upon conversion of the convertible debt instruments is included in the calculation of diluted earnings or loss per share under the if-converted method.

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

Wayfair allocates undistributed earnings between the classes on a one-to-one basis when computing earnings or loss per share.

As a result, basic and diluted earnings or loss per Class A and Class B shares are equivalent.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

4 unchanged sentences

Wayfair may settle conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or any combination thereof at its election.

Wayfair will settle conversions of the 2025 Accreting Notes in shares.

Wayfair will settle conversions of the 2025 Accreting Notes in shares of Wayfair’s Class A common stock.

T he Capped Calls are generally expected to reduce the potential dilution of Wayfair's Class A common stock upon any conversion of the Notes and/or offset the cash payments Wayfair is required to make in excess of the principal amount of the Notes upon conversion of the Notes to the extent the market price per share of Wayfair’s Class A common stock is greater than the strike price of the Capped Calls (which corresponds to the initial conversion prices of the Non-Accreting Notes, subject to certain adjustments under the terms of the Capped Calls), with such reduction and/or offset capped at the Initial Cap Price.

19 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

3 unchanged sentences

Total net revenue $ 2,944 $ 2,840 $ 8,889 $ 9,117

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

8 unchanged sentences

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

3 unchanged sentences

Interest expense, net 5 5 15 19

Other income, net ( 3 ) ( 1 ) ( 2 ) ( 1 )

Other expense, net 4 1 2 —

Provision for income taxes, net 2 1 6 3

4 unchanged sentences

Total reconciling items $ 263 $ 159 $ 778 $ 635

During the six months ended June 30, 2023, Wayfair recorded charges of $ 5 million related to consolidation of certain customer service centers in identified U.S.

During the three and six months ended June 30, 2023, Wayfair recorded charges of $ 1 million and $ 9 million, respectively, related to construction in progress assets at identified U.S.

During the three and six months ended June 30, 2022, Wayfair recorded $ 40 million of lease impairment and other charges related to changes in market conditions around future sublease income for one office location in the U.S.

During the six months ended June 30, 2023, Wayfair incurred $ 65 million of charges consisting primarily of one-time employee severance and benefit costs associated with January 2023 workforce reductions.

During the three and six months ended June 30, 2023, Wayfair recorded a $ 100 million gain on debt extinguishment upon repurchase of $ 83 million in aggregate principal amount of the 2024 Notes and $ 535 million in aggregate principal amount of the 2025 Notes.

During the nine months ended September 30, 2022, Wayfair recorded $ 40 million of lease impairment and other charges related to changes in market conditions around future sublease income for one office location in the U.S.

During the nine months ended September 30, 2023, Wayfair incurred $ 65 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2023 workforce reductions.

During the three and nine months ended September 30, 2022, Wayfair incurred $ 31 million of charges consisting primarily of one-time employee severance and benefit costs associated with the August 2022 workforce reductions.

During the nine months ended September 30, 2023, Wayfair recorded a $ 100 million gain on debt extinguishment upon repurchase of $ 83 million in aggregate principal amount of the 2024 Notes and $ 535 million in aggregate principal amount of the 2025 Notes.

During the three and nine months ended September 30, 2022, Wayfair recorded a $ 96 million gain on debt extinguishment upon repurchase of $ 375 million aggregate principal amount of the 2024 Notes and $ 229 million in aggregate principal amount of the 2025 Notes.

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

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-Q

Item 1. Financial Statements