What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-03 · 128 added, 125 removed, 334 unchanged (43% of the section changed)

18 unchanged sentences

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

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

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

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

1 unchanged sentence

We qualify all of our forward-looking statements by these cautionary statements.

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

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

Wayfair is one of the world’s largest online destinations for the home.

4 unchanged sentences

We turn these customers into recurring shoppers by creating a seamless shopping experience across their entire journey — offering best-in-class product discovery, purchasing, fulfillment and customer service.

In the second quarter of 2023, our business generated lower sales compared to the second quarter of 2022.

As of June 30, 2023, we had 22 million active customers, and 80.1% of second quarter 2023 orders came from repeat buyers.

The lower sales were a function of normalization in average order value as we lapped a period of intense inflation in 2022, which was offset by a recovery in order volume, which showed positive growth year-over-year.

In the third quarter of 2023, our business generated higher sales compared to the third quarter of 2022.

As of September 30, 2023, we had 22 million active customers and 79.7% of third quarter 2023 orders came from repeat buyers.

The higher sales were a function of increased order volume, partially offset by normalization in average order value as we lapped a period of intense inflation in 2022.

We also continued to manage our advertising spend according to a return on investment-oriented approach that carefully tracks and monitors the results of advertising campaigns as we seek to maintain appropriate return targets.

Global Considerations

We are continuing to closely monitor macroeconomic impacts, including, but not limited to, rising and fluctuating interest rates and inflation on our business, results of operations and financial results.

We are continuing to closely monitor macroeconomic impacts, including, but not limited to, geopolitical events and rising and fluctuating interest rates and inflation on our business, results of operations and financial results.

These developments have and may continue to negatively impact global economic activity and consumer behavior, which have and may continue to adversely affect our business and our results of operations.

10 unchanged sentences

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

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

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

2023 2022 2023 2022

19 unchanged sentences

Free Cash Flow $ 42 $ (538) $ (64) $ (1,113)

Adjusted Diluted Earnings (Loss) per share

Adjusted Diluted Loss per share

$ (0.13) $ (2.11) $ (1.02) $ (5.99)

11 unchanged sentences

Results of Consolidated Operations

Comparison of the three months ended June 30, 2023 and 2022

During the three months ended June 30, 2023, net revenue decreased by $113 million, or 3.4%, compared to the same period in 2022, which reflects recent macroeconomic pressures felt by consumers.

The decrease in net revenue was due to lower average order value due, in part, to normalization of inflationary pressures in the supply chain compared to the same period in 2022.

During the three months ended June 30, 2023, our United States (“U.S.”) net revenue decreased by 0.4% and International net revenue decreased by 20.9% compared to the same period in 2022.

During the three months ended June 30, 2023, International Net Revenue Constant Currency Growth was (18.2)% (see “Non-GAAP Financial Measures” below).

Three Months Ended June 30,

Comparison of the three months ended September 30, 2023 and 2022

During the three months ended September 30, 2023, net revenue increased by $104 million, or 3.7%, compared to the same period in 2022.

The increase in net revenue was due to increased orders partially offset by decreased average order value attributable to normalization of inflationary pressures in the supply chain compared to the same period in 2022.

Additionally, LTM orders per active customer increased during the three months ended September 30, 2023 compared to the same period in 2022.

During the three months ended September 30, 2023, our United States (“U.S.”) net revenue increased by 5.4% and International net revenue decreased by 7.0% compared to the same period in 2022.

During the three months ended September 30, 2023, International Net Revenue Constant Currency Growth was (7.8)% (see “Non-GAAP Financial Measures” below).

Three Months Ended September 30,

2023 2022 % Change

5 unchanged sentences

Cost of goods sold

Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs and fees earned for supplier services rendered.

During the three months ended June 30, 2023, cost of goods sold decreased by $202 million, or 8.5%, as compared to the same period in 2022.

The decrease in cost of goods sold is primarily driven by operational cost savings initiatives.

As a percentage of net revenue, cost of goods sold decreased to 68.9% for the three months ended June 30, 2023 compared to 72.7% in the same period in 2022 due to mix shifts, operational efficiencies and decreased logistics costs.

Three Months Ended June 30,

During the three months ended September 30, 2023, cost of goods sold increased by $11 million, or 0.5%, as compared to the same period in 2022.

The increase in cost of goods sold is primarily driven by the increase in orders delivered.

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

Three Months Ended September 30,

2023 2022 % Change

3 unchanged sentences

Operating expenses

Operating expenses consist of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses and impairment and other related net charges.

Operating expenses consist of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses and restructuring charges.

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

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 % Change

5 unchanged sentences

596 656 (9.1) %

Impairment and other related net charges 1 40 (97.5) %

Restructuring charges — 31 n.m.

Total operating expenses $ 1,069 $ 1,196 (10.6) %

4 unchanged sentences

20.2 % 23.1 %

Impairment and other related net charges — % 1.2 %

Restructuring charges — % 1.1 %

36.2 % 42.1 %

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

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

Three Months Ended June 30,

Three Months Ended September 30,

(in millions)

1 unchanged sentence

Selling, operations, technology, general and administrative $ 137 $ 113

During the three months ended June 30, 2023, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative increased by $35 million, or 26.9% compared to the same period in 2022, driven by increased vested restricted stock units in 2023 compared to the same period in 2022.

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

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

Three Months Ended June 30,

Three Months Ended September 30,

Customer service and merchant fees 4.4 % 5.2 %

1 unchanged sentence

Customer Service and Merchant Fees

During the three months ended June 30, 2023, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $17 million, or 11.1%, compared to the same period in 2022.

The decrease in customer service and merchant fees is due to the decrease in net revenue in 2023 compared to the same period in 2022.

As a percentage of net revenue, total customer service and merchant fees decreased to 4.5% for the three months ended June 30, 2023 compared to 4.9% in the same period in 2022 due to decreased compensation costs.

During the three months ended June 30, 2023, our advertising expenses decreased by $26 million, or 6.9%, as compared to the same period in 2022.

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

The decrease in customer service and merchant fees is primarily due to the decrease in compensation costs in 2023 compared to the same period in 2022.

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

During the three months ended September 30, 2023, our advertising expenses decreased by $16 million, or 4.5%, as compared to the same period in 2022.

The decrease reflects our response to changing market conditions as we sought to maintain our return targets across various channels.

As a percentage of net revenue, advertising expenses decreased to 11.1% for the three months ended June 30, 2023 compared to 11.5% in the same period in 2022 due, in part, to changes in advertising channel mix and our efforts to drive efficiency across our channel portfolio.

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

Selling, operations, technology, general and administrative

During the three months ended June 30, 2023, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $94 million, or 16.6% as compared to the same period in 2022.

The decrease is primarily due to lower personnel and information technology costs, partially offset by increases in depreciation and amortization.

As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 19.9% for the three months ended June 30, 2023 compared to 21.0% in the same period in 2022, primarily due to decreased compensation costs.

Impairment and other related net charges

During the three months ended June 30, 2023, impairment and other related charges decreased by $39 million or 97.5% as compared to the same period in 2022.

As a percentage of net revenue, impairment and other related net charges decreased to an immaterial percentage from 1.2% in the same period in 2022.

During the three months ended June 30, 2023, we recorded a charge of $1 million related to construction in progress assets at identified U.S.

During the three months ended September 30, 2023, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $84 million, or 15.5% as compared to the same period in 2022.

The decrease is primarily due to decreased personnel and information technology costs, partially offset by increased depreciation and amortization.

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

Restructuring charges

During the three months ended September 30, 2023, we incurred no restructuring charges, compared to restructuring charges of $31 million for the same period in 2022.

The charges incurred during the three months ended September 30, 2022 consisted primarily of one-time employee severance and benefit costs associated with the August 2022 workforce reductions.

Interest expense, net

During the three months ended June 30, 2023, our interest expense, net decreased by $1 million, or 16.7% compared to the same period in 2022, primarily due to higher interest income.

Three Months Ended June 30,

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

Three Months Ended September 30,

2023 2022 % Change

1 unchanged sentence

Interest expense, net $ (5) $ (5) — %

Other income, net

During the three months ended June 30, 2023, other income, net increased by $2 million or 200.0% compared to the same period in 2022.

Included in our other income, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

Three Months Ended June 30,

Other expense, net

During the three months ended September 30, 2023, other expense, net increased by $3 million or 300.0% compared to the same period in 2022.

Included in other expense, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

Three Months Ended September 30,

2023 2022 % Change

(in millions)

Other income, net $ 3 $ 1 200.0 %

Other expense, net $ (4) $ (1) 300.0 %

Gain on debt extinguishment

During the three months ended June 30, 2023, we used $514 million of the net transaction amount from the issuance of the 2028 Notes 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, we 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.

Refer to Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , of this Quarterly Report on Form 10-Q for additional information.

Three Months Ended June 30,

During the three months ended September 30, 2023, we recorded no gain on debt extinguishment, compared to a $96 million gain on debt extinguishment recorded for the same period in 2022.

In connection with the issuance of our 2027 Notes, we recorded a $96 million gain on debt extinguishment for the three months ended September 30, 2022, representing the difference between the cash paid for principal of $504 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $600 million.

Three Months Ended September 30,

2023 2022 % Change

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Provision for income taxes, net

During the three months ended June 30, 2023, our provision for income taxes, net increased by $1 million or 100.0% compared to the same period in 2022, primarily related to the level and mix of income earned in the U.S.

During the three months ended September 30, 2023, our provision for income taxes, net increased by $1 million or 100.0% compared to the same period in 2022, primarily related to the level and mix of income earned in the U.S.

and certain foreign jurisdictions and U.S.

1 unchanged sentence

Refer to Note 8, Income Taxes , included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q for additional information.

Three Months Ended June 30,

Three Months Ended September 30,

2023 2022 % Change

1 unchanged sentence

Provision for income taxes, net $ 2 $ 1 100.0 %

Comparison of the six months ended June 30, 2023 and 2022

During the six months ended June 30, 2023, net revenue decreased by $332 million, or 5.3%, compared to the same period in 2022, which reflects recent macroeconomic pressures felt by consumers.

Comparison of the nine months ended September 30, 2023 and 2022

During the nine months ended September 30, 2023, net revenue decreased by $228 million, or 2.5%, compared to the same period in 2022, which reflects recent macroeconomic pressures felt by consumers.

The decrease in net revenue was due to lower average order value due, in part, to normalization of inflationary pressures in the supply chain compared to the same period in 2022.

During the six months ended June 30, 2023, our U.S net revenue decreased by 2.6% and International net revenue decreased by 20.7% compared to the same period in 2022.

During the six months ended June 30, 2023, International Net Revenue Constant Currency Growth was (16.4)% (see “Non-GAAP Financial Measures” below).

Six Months Ended June 30,

During the nine months ended September 30, 2023, our U.S net revenue decreased by 0.1% and International net revenue decreased by 16.6% compared to the same period in 2022.

During the nine months ended September 30, 2023, International Net Revenue Constant Currency Growth was (13.8)% (see “Non-GAAP Financial Measures” below).

Nine Months Ended September 30,

2023 2022 % Change

5 unchanged sentences

Cost of goods sold

During the six months ended June 30, 2023, cost of goods sold decreased by $439 million, or 9.6%, compared to the same period in 2022.

During the nine months ended September 30, 2023, cost of goods sold decreased by $428 million, or 6.5%, compared to the same period in 2022.

The decrease in cost of goods sold is primarily driven by operational cost savings initiatives.

As a percentage of net revenue, cost of goods sold decreased to 69.6% for the six months ended June 30, 2023 compared to 72.9% in the same period in 2022 due to mix shifts, operational efficiencies and decreased logistics costs.

Six Months Ended June 30,

As a percentage of net revenue, cost of goods sold decreased to 69.4% for the nine months ended September 30, 2023 compared to 72.3% in the same period in 2022 due to mix shifts, operational efficiencies and decreased logistics costs.

Nine Months Ended September 30,

2023 2022 % Change

5 unchanged sentences

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 % Change

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Impairment and other related net charges 14 40 (65.0) %

Restructuring charges 65 — n.m.

Restructuring charges 65 31 109.7 %

Total operating expenses $ 3,364 $ 3,577 (6.0) %

7 unchanged sentences

37.8 % 39.1 %

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

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

Six Months Ended June 30,

Nine Months Ended September 30,

(in millions)

1 unchanged sentence

Selling, operations, technology, general and administrative $ 434 $ 335

During the six months ended June 30, 2023, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative increased by $74 million, or 31.0% compared to the same period in 2022, driven by increased vested restricted stock units in 2023 compared to the same period in 2022.

During the nine months ended September 30, 2023, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative increased by $97 million, or 26.9% compared to the same period in 2022, driven by increased vested restricted stock units in 2023 compared to the same period in 2022.

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

Six Months Ended June 30,

Nine Months Ended September 30,

Customer service and merchant fees 4.5 % 4.9 %

1 unchanged sentence

Customer Service and Merchant Fees

During the six months ended June 30, 2023, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $29 million, or 9.8% compared to the same period in 2022.

The decrease in customer service and merchant fees is due to decreased compensation costs.

As a percentage of net revenue, total customer service and merchant fees decreased to 4.8% for the six months ended June 30, 2023 compared to 5.0% in the same period in 2022 due to a decrease in net revenue.

During the six months ended June 30, 2023, our advertising expenses decreased by $35 million or 4.9% as compared to the same period in 2022.

During the nine months ended September 30, 2023, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $48 million, or 10.8% compared to the same period in 2022.

The decrease in customer service and merchant fees is primarily due to decreased compensation costs in 2023 compared to the same period in 2022.

As a percentage of net revenue, total customer service and merchant fees decreased to 4.7% for the nine months ended September 30, 2023 compared to 5.1% in the same period in 2022 due to decreased compensation costs.

During the nine months ended September 30, 2023, our advertising expenses decreased by $51 million or 4.8% as compared to the same period in 2022.

The decrease reflects our response to changing market conditions as we sought to maintain our return targets across various channels.

As a percentage of net revenue, advertising expenses remained constant at 11.4% for the six months ended June 30, 2023 and 2022 due in part to maintaining efficiencies in our advertising channel mix.

As a percentage of net revenue, advertising expenses decreased to 11.4% for the nine months ended September 30, 2023 compared to 11.7% in 2022 due in part to maintaining efficiencies in our advertising channel mix and our efforts to drive efficiency across our channel portfolio.

Selling, operations, technology, general and administrative

During the six months ended June 30, 2023, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $135 million, or 12.4% compared to the same period in 2022.

The decrease is primarily due to lower personnel and information technology costs, partially offset by increases in depreciation and amortization.

As a percentage of net revenue, total selling, operations, technology, general and administrative expenses increased to 21.1% for the six months ended June 30, 2023 compared to 20.9% in the same period in 2022, primarily due to the decrease in net revenue.

During the nine months ended September 30, 2023, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $219 million, or 13.4% compared to the same period in 2022.

The decrease is primarily due to decreased personnel and information technology costs, partially offset by increased depreciation and amortization.

As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 20.8% for the nine months ended September 30, 2023 compared to 21.6% in the same period in 2022, primarily due to decreased compensation costs.

Impairment and other related net charges

During the six months ended June 30, 2023, impairment and other related charges decreased by $26 million or 65.0% as compared to the same period in 2022.

During the nine months ended September 30, 2023, impairment and other related charges decreased by $26 million or 65.0% as compared to the same period in 2022.

As a percentage of net revenue, impairment and other related net charges decreased to 0.2% from 0.4% in the same period in 2022.

During the six months ended June 30, 2023, we 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.

During the nine months ended September 30, 2023, we 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.

During the nine months ended September 30, 2022, we recorded a charge of $40 million inclusive of $32 million of noncash impairment of the right-of-use asset, $7 million for the non-cash impairment of fixed assets at identified U.S.

locations and the remainder for other items.

Restructuring charges

On January 20, 2023, we announced an update to our 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, we incurred $65 million of charges, consisting primarily of one-time employee severance and benefit costs.

During the nine months ended September 30, 2023, restructuring charges increased by $34 million or 109.7% as compared to the same period in 2022.

As a percentage of net revenue, restructuring charges increased to 0.7% from 0.3% in the same period in 2022.

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

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

Interest expense, net

During the six months ended June 30, 2023, our interest expense, net decreased by $4 million, or 28.6%, compared to the same period in 2022, primarily driven by higher interest income.

Six Months Ended June 30,

During the nine months ended September 30, 2023, our interest expense, net decreased by $4 million, or 21.1%, compared to the same period in 2022, primarily driven by higher interest income.

Nine Months Ended September 30,

2023 2022 % Change

1 unchanged sentence

Interest expense, net $ (15) $ (19) (21.1) %

Other income, net

During the six months ended June 30, 2023, other income, net increased by $1 million, or 100.0% compared to the same period in 2022.

Included in our other income, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

Six Months Ended June 30,

Other expense, net

During the nine months ended September 30, 2023, we recorded other expense, net of $2 million compared to no other expense, net recorded for the same period in 2022.

Included in other expense, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

Nine Months Ended September 30,

2023 2022 % Change

(in millions)

Other income, net $ 2 $ 1 100.0 %

Other expense, net $ (2) $ — n.m.

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

Gain on debt extinguishment

During the six months ended June 30, 2023, we used $514 million of the net transaction amount from the issuance of the 2028 Notes 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.

During the nine months ended September 30, 2023, our gain on debt extinguishment increased by $4 million or 4.2% compared to the same period in 2022.

In connection with the issuance of our 2028 Notes, we 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.

In connection with the issuance of our 2027 Notes, we recorded a $96 million gain on debt extinguishment, representing the difference between the cash paid for principal of $504 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $600 million.

Refer to Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements and Supplementary Data , of this Quarterly Report on Form 10-Q for additional information.

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 % Change

(in millions)

Gain on debt extinguishment $ 100 $ — n.m.

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

Gain on debt extinguishment $ 100 $ 96 4.2 %

Provision for income taxes, net

During the six months ended June 30, 2023, our provision for income taxes, net increased by $2 million or 100.0% compared to the same period in 2022, primarily related to the level and mix of income earned in the U.S.

During the nine months ended September 30, 2023, our provision for income taxes, net increased by $3 million or 100.0% compared to the same period in 2022, primarily related to the level and mix of income earned in the U.S.

and certain foreign jurisdictions and U.S.

1 unchanged sentence

Refer to Note 8, Income Taxes , included in Part I, Item 1, Financial Statements, in this Quarterly Report on Form 10-Q for additional information.

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 % Change

3 unchanged sentences

Sources of Liquidity

At June 30, 2023, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $1.3 billion.

At September 30, 2023, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $1.3 billion.

Additionally, we have a $600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”).

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

We had outstanding letters of credit, primarily as security for certain lease agreements, for $77 million as of June 30, 2023, which reduced the availability of credit under the Revolver.

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

We had outstanding letters of credit, primarily as security for certain lease agreements, for $76 million as of September 30, 2023, which reduced the availability of credit under the Revolver.

Excluding liquidity available through our Revolver, the following table shows sources of liquidity for the periods presented:

June 30, December 31,

September 30, December 31,

(in millions)

14 unchanged sentences

Credit Agreement and Convertible Debt

As of June 30, 2023, we had $3.2 billion principal amount of indebtedness outstanding.

As of September 30, 2023, we had $3.2 billion principal amount of indebtedness outstanding.

Under the terms of our Revolver, we may use proceeds to finance working capital, to refinance existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes.

2 unchanged sentences

See Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q.

The conditional conversion features of the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes (collectively, the “Non-Accreting Notes” and together with the 2025 Accreting Notes, the “Notes”) were not triggered during the second quarter of 2023, and therefore the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes are not convertible in the third quarter of 2023 pursuant to the applicable last reported sales price conditions.

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 (collectively with the 2028 Notes, the “Non-Accreting Notes” and together with the 2025 Accreting Notes, the “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 2025 Accreting Notes are convertible at any time prior to the close of business on the second business day immediately preceding the maturity date.

During the period ended June 30, 2023, there were no conversions of the Notes.

During the period ended September 30, 2023, there were no conversions of the Notes.

Whether any of the Non-Accreting Notes will be convertible in future quarters will depend on the satisfaction of the applicable last reported sales price condition or another conversion condition in the future.

5 unchanged sentences

For information regarding our credit agreement and convertible notes, see Note 4, Debt and Other Financing , included in Part I, Item 1, Financial Statements , in this Quarterly Report on Form 10-Q and Note 6, Debt and Other Financing , included in Part II, Item 8, Financial Statements and Supplementary Data, in our Annual Report on Form 10-K for the year ended December 31, 2022.

As of June 30, 2023, we were in compliance with all the terms and conditions of our debt agreements.

As of September 30, 2023, we were in compliance with all the terms and conditions of our debt agreements.

Stock Repurchase Program

5 unchanged sentences

The actual timing, number and value of shares repurchased under the Repurchase Programs in the future will be determined by us in our discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs and whether there is a better alternative use of capital.

As of June 30, 2023, we have repurchased 2,354,491 shares of Class A common stock for approximately $612 million under the Repurchase Programs.

As of September 30, 2023, we have repurchased 2,354,491 shares of Class A common stock for approximately $612 million under the Repurchase Programs.

Trends and Historical Cash Flows

Six Months Ended

Nine Months Ended

(in millions)

1 unchanged sentence

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

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

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

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

Net cash provided by financing activities $ 77 $ 16

Operating Activities

1 unchanged sentence

Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net loss.

Cash flows provided by operating activities increased by $411 million during the six months ended June 30, 2023 compared to the same period in 2022, primarily due to an increase in net cash adjusted for non-cash items of $239 million and an increase of $172 million for cash provided by operating assets and liabilities.

Cash flows provided by operating activities increased by $963 million during the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to an increase in net cash adjusted for non-cash items of $499 million and an increase of $464 million for cash provided by changes in operating assets and liabilities.

Investing Activities

Cash flows provided by investing activities increased by $238 million during the six months ended June 30, 2023 compared to the same period in 2022, primarily due to increases in sales and maturities of short- and long-term investments of $222 million, decreases in purchases of short- and long-term investments of $402 million and decreases in purchases property and equipment and site and software development costs of $58 million.

Purchases of property and equipment and site and software development costs (collectively, “Capital Expenditures”) were 3.0% of net revenue for the six months ended June 30, 2023 and related primarily to equipment purchases and improvements for leased warehouses within our expanding logistics network and ongoing investments in our proprietary technology and operational platform.

Cash flows used in investing activities decreased by $181 million during the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to decreases in sales and maturities of short- and long-term investments of $321 million, partially offset by decreases in purchases of short- and long-term investments of $416 million and decreases in purchases of property and equipment and site and software development costs of $86 million.

Purchases of property and equipment and site and software development costs (collectively, “Capital Expenditures”) were 2.9% of net revenue for the nine months ended September 30, 2023 and related primarily to equipment purchases and improvements for leased warehouses within our expanding logistics network and ongoing investments in our proprietary technology and operational platform.

Financing Activities

Cash flows provided by financing activities increased by $152 million during the six months ended June 30, 2023 compared to the same period in 2022, primarily due to $678 million of proceeds from the issuance of convertible notes, net of issuance costs, partially offset by an aggregate payment of $514 million to extinguish convertible debt and $87 million of premiums paid for capped call confirmations.

The remaining increase is due to $75 million of repurchases of our Class A common stock during the six months ended June 30, 2022.

Cash flows provided by financing activities increased by $61 million during the nine months ended September 30, 2023 compared to the same period in 2022, primarily due to $75 million of repurchases of our Class A common stock and $3 million of principal payments upon maturity of convertible debt, both of which occurred during the nine months ended September 30, 2022.

These are partially offset by increased payments to extinguish convertible debt of $10 million and increased premiums paid for capped call confirmations of $7 million.

Contractual Obligations

During the six months ended June 30, 2023, we entered into contractual obligations of $124 million for certain enforceable and legally binding software license and freight commitments.

During the nine months ended September 30, 2023, we entered into contractual obligations of $124 million for certain enforceable and legally binding software license and freight commitments.

Other than the foregoing additional obligations, there have been no material changes to our contractual obligations and estimates as compared to the contractual obligations described in Contractual Obligations included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K for the year ended December 31, 2022.

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

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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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

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Adjusted EBITDA $ 100 $ (124) $ 214 $ (345)

During the six months ended June 30, 2023, we 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, we 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, we recorded $40 million of lease impairment and other charges related to changes in market conditions around future sublease income for one of our office locations in the U.S.

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

During the nine months ended September 30, 2022, we 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 three and nine months ended September 30, 2022, we 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, we recorded a $100 million gain on debt extinguishment upon repurchase of $83 million in aggregate principal amount of our 2024 Notes and $535 million in aggregate principal amount of our 2025 Notes.

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

Free Cash Flow

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

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

7 unchanged sentences

Gain on debt extinguishment — (96) (100) (96)

Numerator for Adjusted Diluted Earnings (Loss) per Share - Adjusted net income (loss)

Numerator for Adjusted Diluted Loss per Share - Adjusted net loss

$ (15) $ (224) $ (115) $ (634)

Denominator for basic and diluted loss per share - weighted-average number of shares of common stock outstanding 116 106 113 106

Adjustments to effect of dilutive securities:

Restricted stock units 1 — — —

Denominator for Adjusted Diluted Earnings (Loss) per Share - Adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities

Denominator for Adjusted Diluted Loss per Share - Adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities

116 106 113 106

Diluted Loss per Share $ (1.40) $ (2.66) $ (4.99) $ (9.28)

Adjusted Diluted Earnings (Loss) per Share $ 0.21 $ (1.94) $ (0.90) $ (3.90)

Adjusted Diluted Loss per Share $ (0.13) $ (2.11) $ (1.02) $ (5.99)

Net Revenue Constant Currency Growth

18 unchanged sentences

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 2. Management’s Discussion and Analysis