What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 267 added, 223 removed, 742 unchanged (40% of the section changed)

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Loss

Consolidated Statement of Stockholders' Deficit

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Notes to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Wayfair Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 22, 2024 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company changed its method for accounting for convertible debt in 2021.

Basis for Opinion

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Completeness of Sales Return Reserves

Description of the Matter

As described in Note 2 to the consolidated financial statements, the Company had product revenue of $12.2 billion for the year ended December 31, 2022, which was net of sales return reserves of $52 million.

As described in Note 1 and Note 2 to the consolidated financial statements, the Company had sales return reserves of $45 million, which were recorded as a reduction to net revenue for the year ended December 31, 2023.

Auditing the Company's measurement of sales return reserves on product revenue under its contracts with customers was especially challenging because the calculation involves subjective management assumptions about products delivered as of the balance sheet date that could be subject to return in future periods under the Company's returns policy.

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To test the Company’s reserves for returns on product revenue, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the calculations and evaluating the significant assumptions used by management to estimate its reserves.

To test management’s significant assumptions, we performed procedures which included (1) agreeing revenues by month in the analysis to the Company’s general ledger, (2) examining monthly sales return levels for the 12 months before year end and the period subsequent to year end for unusual items or trends not consistent with the Company’s historical analysis of product returns, and (3) testing the historical accuracy of the Company’s estimates of returns on product revenue recorded in prior periods by comparing the reserve to returns actually processed.

To test management’s significant assumptions, we performed procedures which included (1) agreeing revenues used in the analysis to the Company’s general ledger, (2) examining sales return levels for the 12 months before year end and the period subsequent to year end for unusual items or trends not consistent with the Company’s historical analysis of product returns, and (3) testing the historical accuracy of the Company’s estimates of returns on product revenue recorded in prior periods by comparing the reserve to returns actually processed.

We also compared the Company’s projections of future sales returns as of the balance sheet date with actual returns made subsequent to year end.

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February 22, 2024

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CONSOLIDATED BALANCE SHEETS

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Convertible preferred stock, $ 0.001 par value per share:

10,000,000 shares authorized and none issued at December 31, 2022 and 2021

Class A common stock, par value $ 0.001 per share, 500,000,000 shares authorized, 82,903,862 and 79,150,937 shares issued and outstanding at December 31, 2022 and 2021

Class B common stock, par value $ 0.001 per share, 164,000,000 shares authorized, 25,691,397 and 25,691,761 shares issued and outstanding at December 31, 2022 and 2021

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

Class A common stock, par value $ 0.001 per share, 500,000,000 shares authorized, 92,457,562 and 82,903,862 shares issued and outstanding at December 31, 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 December 31, 2023 and December 31, 2022

Additional paid-in capital

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See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS

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Total operating expenses 4,480 4,800 3,989

(Loss) income from operations ( 1,384 ) ( 94 ) 360

Loss from operations ( 813 ) ( 1,384 ) ( 94 )

Interest expense, net ( 17 ) ( 27 ) ( 32 )

Other expense, net ( 4 ) ( 4 ) ( 9 )

Other income (expense), net 1 ( 4 ) ( 4 )

Gain on debt extinguishment 100 96 —

(Loss) income before income taxes ( 1,319 ) ( 130 ) 205

Loss before income taxes ( 729 ) ( 1,319 ) ( 130 )

Provision for income taxes, net 9 12 1

Net (loss) income $ ( 1,331 ) $ ( 131 ) $ 185

(Loss) earnings per share:

Net loss $ ( 738 ) $ ( 1,331 ) $ ( 131 )

Loss per share:

Basic $ ( 6.47 ) $ ( 12.54 ) $ ( 1.26 )

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See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Year Ended December 31,

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(in millions)

Net (loss) income $ ( 1,331 ) $ ( 131 ) $ 185

Other comprehensive (loss) income:

Net loss $ ( 738 ) $ ( 1,331 ) $ ( 131 )

Other comprehensive income (loss):

Foreign currency translation adjustments 1 1 ( 2 )

Net unrealized loss on available-for-sale investments ( 1 ) — —

Comprehensive (loss) income $ ( 1,331 ) $ ( 133 ) $ 182

Net unrealized gain (loss) on available-for-sale investments 1 ( 1 ) —

Comprehensive loss $ ( 736 ) $ ( 1,331 ) $ ( 133 )

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

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Balance at December 31, 2020 100 $ — $ 699 $ ( 1,886 ) $ ( 5 ) $ ( 1,192 )

Net income — — — 185 — 185

Net loss — — — ( 131 ) — ( 131 )

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

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Shares issued upon conversion of convertible notes 4 — 265 — — 265

Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes — — ( 842 ) — — ( 842 )

Cumulative effect of adopting new credit allowance standard — — — ( 6 ) — ( 6 )

Equity component of issuance of convertible notes, net of premium paid on capped calls — — 78 — — 78

Cumulative effect of adopting new convertible debt standard — — ( 699 ) 68 — ( 631 )

Balance at December 31, 2021 105 — 337 ( 1,949 ) ( 7 ) ( 1,619 )

Net loss — — — ( 1,331 ) — ( 1,331 )

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

Issuance of common stock upon vesting of RSUs 5 — — — — —

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

Shares issued upon conversion of convertible notes 4 — 265 — — 265

Cumulative effect of adopting new convertible debt standard — — ( 699 ) 68 — ( 631 )

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

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

Net loss — — — ( 738 ) — ( 738 )

Other comprehensive income — — — — 2 2

Issuance of common stock upon vesting of RSUs 9 — — — — —

Equity-based compensation — — 666 — — 666

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

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

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See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

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(in millions)

Cash flows (for) from operating activities:

Net (loss) income $ ( 1,331 ) $ ( 131 ) $ 185

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities

Cash flows from (for) operating activities:

Net loss $ ( 738 ) $ ( 1,331 ) $ ( 131 )

Adjustments to reconcile net loss to net cash provided by (used) in operating activities:

Depreciation and amortization 417 371 322

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Inventories 16 ( 21 ) ( 17 )

Prepaid expenses and other current assets 26 ( 28 ) ( 61 )

Other assets 1 — ( 1 )

Accounts payable and other current liabilities ( 177 ) 9 532

Other liabilities — 4 58

Net cash (used in) provided by operating activities ( 674 ) 410 1,417

Cash flows from (for) investing activities:

Prepaid expenses and other assets 16 27 ( 28 )

Accounts payable and other liabilities ( 18 ) ( 177 ) 13

Net cash provided by (used in) operating activities 349 ( 674 ) 410

Cash flows (for) from investing activities:

Purchase of short- and long-term investments ( 36 ) ( 430 ) ( 989 )

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Other investing activities, net 2 — 5

Net cash provided by (used in) investing activities 1 ( 515 ) ( 236 )

Net cash (used in) provided by investing activities ( 152 ) 1 ( 515 )

Cash flows from (for) financing activities:

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

Proceeds from borrowings — — 200

Repayment of borrowings — — ( 200 )

Payments to extinguish convertible debt ( 514 ) ( 504 ) —

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Net cash provided by (used in) financing activities 77 16 ( 303 )

Effect of exchange rate changes on cash and cash equivalents 1 ( 16 ) 13

Net (decrease) increase in cash and cash equivalents ( 656 ) ( 424 ) 1,547

Cash and cash equivalents:

Effect of exchange rate changes on cash, cash equivalents and restricted cash 2 1 ( 16 )

Net increase (decrease) in cash, cash equivalents and restricted cash 276 ( 656 ) ( 424 )

Cash, cash equivalents and restricted cash

Beginning of year

End of year $ 1,050 $ 1,706 $ 2,130

$ 1,050 $ 1,706 $ 2,130

$ 1,326 $ 1,050 $ 1,706

See notes to consolidated financial statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

2023 2022 2021

(in millions)

Supplemental cash flow information:

Cash paid for interest on long-term debt $ 53 $ 27 $ 27

$ 27 $ 27 $ 17

Non-cash impact to equity upon conversion of convertible notes, net of taxes $ — $ — $ 265

Purchase of property and equipment included in accounts payable and other liabilities $ 19 $ ( 6 ) $ 41

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

Cash and cash equivalents $ 1,322 $ 1,050 $ 1,706

Restricted cash included within prepaid expenses and other current assets 4 — —

Total cash, cash equivalents and restricted cash $ 1,326 $ 1,050 $ 1,706

See notes to consolidated financial statements.

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Notes to Consolidated Financial Statements

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Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

Wayfair considers all highly liquid investments purchased with an original maturity (at the date of purchase) of three months or less to be the equivalent of cash.

Cash equivalents, which consist primarily of money market accounts and certificates of deposits with original maturities of three months or less, are carried at cost, which approximates fair value.

Wayfair’s restricted cash is primarily restricted to funds held in collateral, which is recorded within prepaid expenses and other current assets on the consolidated balance sheets.

Wayfair classifies investments in certificates of deposits and marketable securities with original maturities of greater than three months as short-term investments on the consolidated balance sheets.

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However, management considers the risk of credit loss to be minimized by Wayfair’s policy of investing in financial instruments issued by highly-rated financial institutions.

When assessing the risk of credit loss, management considers factors such as the severity and the reason of the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management’s intended holding period and time horizon for selling.

When assessing the risk of credit loss, management considers factors such as the severity and the reason for the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management’s intended holding period and time horizon for selling.

From time to time, Wayfair may enter into equity investments that align with organizational strategies and growth initiatives.

Equity investments in companies for which the Company does not have the ability to exercise significant influence are accounted for as equity securities.

These are measured at fair value and classified as other non-current assets within the consolidated balance sheets with observable changes recorded within other expense, net on the consolidated statements of operations.

These are measured at fair value and classified as other non-current assets within the consolidated balance sheets with observable changes recorded within other income or expense, net on the consolidated statements of operations.

Equity Method Investments

Wayfair accounts for investments using the equity method of accounting when the Company has the ability to exercise significant influence, but not controlling financial interest over an investee.

The equity method investments are classified as other non-current assets within the consolidated balance sheets and the proportional share of income or loss is recorded within other expense, net on the consolidated statements of operations.

The equity method investments are classified as other non-current assets within the consolidated balance sheets and the proportional share of income or loss is recorded within other income or expense, net on the consolidated statements of operations.

Equity method investments are reviewed for indicators of impairment on a quarterly basis.

An equity method investment is written down to the estimated fair value if there is evidence of a loss in value which is other-than-temporary.

Notes to Consolidated Financial Statements (Continued)

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Concentrations of Credit Risk

Financial instruments that subject Wayfair to credit risk consist of cash and cash equivalents, short-term investments and accounts receivable.

The risk for cash and cash equivalents is minimized by Wayfair's policy to maintain these balances with major financial institutions of high-credit quality.

Financial instruments that subject Wayfair to credit risk consist of cash, cash equivalents, and restricted cash, short-term investments and accounts receivable.

The risk for cash, cash equivalents and restricted cash is minimized by Wayfair's policy to maintain these balances with major financial institutions of high-credit quality.

At times, cash balances may exceed federally insured limits;

however, to date, Wayfair has not incurred any losses on these investments.

As of December 31, 2022 and 2021, Wayfair had $ 122 million and $ 187 million in banks located outside of the U.S.

however, to date, Wayfair has not incurred any losses on these balances.

As of December 31, 2023 and 2022, Wayfair had $ 111 million and $ 122 million, respectively, in bank deposits located outside of the United States (“U.S.”).

The risk for short-term investments is minimized by Wayfair's policy of investing in financial instruments issued by highly-rated financial institutions.

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Wayfair's exposure to credit loss is minimized through customer risk assessments performed prior to customer checkout and Wayfair's policy of monitoring the creditworthiness of its customers to which it grants credit terms in the normal course of business.

Further, management believes credit risk is mitigated since approximately 98 % of the net revenue recognized for the twelve months ended December 31, 2022 was collected in advance of recognition.

Further, management believes credit risk is mitigated since approximately 99.4 % of the net revenue recognized for the year ended December 31, 2023 was collected in advance of recognition.

Inventories consisting of finished goods are stated at the lower of cost or net realizable value, determined by the first-in, first-out (“FIFO”) method, and consist of product for resale.

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If a readily determinable market price does not exist, fair value is estimated using discounted expected cash flows attributable to the asset.

Notes to Consolidated Financial Statements (Continued)

Wayfair generally leases office and warehouse facilities under noncancelable agreements.

Upon each agreement's commencement date, Wayfair determines if the agreement is part of an arrangement that is or that contains a lease, the lease classification and recognizes the ROU assets and lease liabilities for all leases with the exception of leases with terms of 12 months or less.

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Wayfair generally leases office, retail and warehouse facilities under non cancellable agreements.

Upon each agreement's commencement date, Wayfair determines if the agreement is part of an arrangement that is or that contains a lease, the lease classification and recognizes the right-of-use (“ROU”) assets and lease liabilities for all leases with the exception of leases with terms of 12 months or less.

Wayfair has arrangements with lease and non-lease components, and accounts for lease and non-lease components as a single lease component for corporate headquarters offices and field offices.

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Operating lease liabilities are classified as other current liabilities and operating lease liabilities based on when lease payments are due.

As of December 31, 2022 and 2021 Wayfair did no t have material finance lease arrangements.

As of December 31, 2023 and 2022 Wayfair did no t have any material finance lease arrangements.

Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term at the lease commencement date.

As most of the leases do not provide an implicit rate, Wayfair uses an estimated IBR based on the information available at the commencement date of the respective lease to determine the present value of future payments.

As most of the leases do not provide an implicit rate, Wayfair uses an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date of the respective lease to determine the present value of future payments.

The determination of the IBR requires judgment and is primarily based on publicly available information for companies within the same industry and with similar credit profiles.

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Capital accounts are translated at their historical exchange rates when the capital transaction occurred.

Translation adjustments arising from the use of differing exchange rates from period to period are included in other comprehensive (loss) income below net (loss) income and accumulated other comprehensive loss within total stockholders’ deficit.

Transaction gains and losses are included in other expense, net, which is reflected in net (loss) income.

Translation adjustments arising from the use of differing exchange rates from period to period are included in other comprehensive income or loss below net income or loss and accumulated other comprehensive income or loss within total stockholders’ deficit.

Transaction gains and losses are included in other income or expense, net, which is reflected in net income or loss.

Revenue Recognition

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Net revenue from product sales includes shipping costs charged to the customer and is recorded net of taxes collected from customers, which are recorded in other current liabilities and are remitted to governmental authorities.

Cash discounts and rebates earned by customers at the time of purchase and estimates for sales return allowances are deducted from gross revenue in determining net revenue.

Cash discounts and rebates earned by customers at the time of purchase and estimates for sales return allowances are recorded as a deduction to net revenue.

Allowances for sales returns are estimated and recorded based on prior returns history, recent trends and projections for returns on

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sales in the current period.

These estimates are based on historical rates of customer returns and allowances as well as the specific identification of outstanding returns that have not yet been received by Wayfair.

Wayfair maintains a membership rewards program for customer purchases made with the Credit Card Program.

In exchange for providing intellectual property as part of the Credit Card Program, Wayfair records net revenue based on spending activity and

Notes to Consolidated Financial Statements (Continued)

the profitability of the card portfolio.

In exchange for providing intellectual property as part of the Credit Card Program, Wayfair records net revenue based on spending activity and the profitability of the card portfolio.

Spending activity of the underlying accounts represents customer purchases used with their respective cards, and the profitability of the card portfolio is based on the financial performance of the underlying credit portfolio.

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Shipping and Fulfillment Costs:

Shipping costs include outbound shipping costs.

Shipping costs include outbound shipping costs, including associated applicable customs duties.

Fulfillment costs include costs incurred to operate and staff the fulfillment centers and provide other inbound supply chain services such as ocean freight and drayage.

Costs to operate and staff the CastleGate and WDN networks include rent and depreciation expenses associated with various facilities, costs to receive, inspect, pick, package and prepare customer orders for delivery, and direct and indirect labor costs including payroll, payroll-related benefits and equity-based compensation.

Costs to operate and staff the CastleGate and Wayfair Delivery Network (“WDN”) include rent and depreciation expenses associated with various facilities, costs to receive, inspect, pick, package and prepare customer orders for delivery, and direct and indirect labor costs including compensation, compensation-related benefits and equity-based compensation.

Shipping and fulfillment costs are offset by fees earned by providing logistic services to suppliers including order fulfillment, warehousing and inbound supply chain services such as ocean freight and drayage through Wayfair's CastleGate business.

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Customer Service and Merchant Fees

Customer service and merchant fees consist of labor-related costs, including payroll, payroll-related benefits and equity-based compensation of employees involved in customer service activities, merchant processing fees associated with customer payments made by credit cards and debit cards and other variable fees.

Customer service and merchant fees consist of labor-related costs, including compensation, compensation-related benefits and equity-based compensation of employees involved in customer service activities, merchant processing fees associated with customer payments made by credit cards and debit cards and other variable fees.

Merchant processing fees totaled $ 256 million, $ 258 million and $ 275 million in the years ended December 31, 2023, 2022 and 2021.

Advertising consists of direct response performance marketing costs, such as display advertising, paid search advertising, social media advertising, search engine optimization, comparison shopping engine advertising, television advertising, direct mail, catalog and print advertising.

Costs for advertising are expensed when the advertising begins.

Costs for advertising are expensed as incurred.

Prepayments for advertising that has not been incurred are included in prepaid expenses and other current assets, and advertising costs that have been incurred but not paid are included in other current liabilities.

Notes to Consolidated Financial Statements (Continued)

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Selling, Operations, Technology, General and Administrative

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The position is based upon several factors including management's evaluation of Wayfair and its subsidiaries' financial requirements, the short- and long-term operational and fiscal objectives of Wayfair and the tax consequences associated with the repatriation of earnings.

(Loss) Earnings per Share

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

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

Diluted (loss) earnings 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, and to a lesser extent, the incremental shares of common stock issuable upon the exercise of stock options.

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

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

For periods in which Wayfair has reported net losses, diluted (loss) earnings per share is the same as basic (loss) earnings 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) earnings per share.

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

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

Notes to Consolidated Financial Statements (Continued)

Previously Adopted Accounting Pronouncements

Convertible Debt

Wayfair adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06") on January 1, 2021 using the modified retrospective approach for all financial instruments that are outstanding as of the adoption date.

The new standard eliminates the cash conversion and beneficial conversion feature models that previously required separate accounting for conversion features.

Entities that had those conversion features will report less interest expense as those conversion features were recorded as debt discounts which were amortized over the term of the debt.

In addition, this ASU requires the application of the if-converted method when calculating diluted earnings per share.

Under the new standard, the conversion of debt that is accounted for as a liability in its entirety will not result in any gain or loss if the conversion feature is exercised according to the original conversion terms.

If those terms allowed the issuer to include cash as part of the settlement of the conversion feature, the issuer will first reduce the carrying amount of the convertible debt, including any unamortized premium, discount or issuance costs, by the value of the cash or other assets transferred and then recognize the remaining carrying value of the debt in the capital accounts.

Earnings or 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 are 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 share per Class A and Class B shares are equivalent.

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Recently Issued Accounting Pronouncements

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendment should be applied retrospectively to all prior periods presented in the financial statements.

Wayfair is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, to update reportable income tax disclosure requirements, primarily through enhanced disclosures on the rate reconciliation table and other disclosures, including total income taxes paid by jurisdiction.

The amendment is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The amendment should be applied prospectively, with retrospective adoption permitted.

Wayfair is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures.

Supplemental Financial Statement Disclosures

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The changes in the allowance for credit losses were not material for the year ended December 31, 2023.

Management believes credit risk is mitigated since approximately 98 % of the net revenue recognized for the year ended December 31, 2022 was collected in advance of recognition.

Management believes credit risk is mitigated for the year ended December 31, 2023, as approximately 99.4 % of the net revenue recognized was collected in advance of recognition.

Prepaid Expenses and Other Current Assets

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Supplier receivables and credits receivable 90 69

Restricted cash 4 —

Other current assets 35 33

Total prepaid expenses and other current assets $ 289 $ 293

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Other Non-current Assets

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Total other non-current assets $ 51 $ 34

Notes to Consolidated Financial Statements (Continued)

Amortization expense related to intangible assets was $ 1 million, $ 1 million and $ 2 million for the years ended December 31, 2022, 2021 and 2020.

Amortization expense related to intangible assets was $ 1 million for the years ended December 31, 2023, 2022 and 2021.

Goodwill was $ 0.4 million for the years ended December 31, 2023 and 2022.

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Sales return allowance 45 52

Short-term debt (Note 6) 117 —

Other accrued expenses and current liabilities 222 215

Total other current liabilities $ 949 $ 868

Contractual liabilities included in unearned revenue and other accrued expenses and current liabilities were $ 214 million and $ 10 million, at December 31, 2022, and $ 299 million and $ 7 million, at December 31, 2021.

During the year ended December 31, 2022, Wayfair recognized $ 216 million and $ 4 million of net revenue included in unearned revenue and other accrued expenses and current liabilities, which was recorded as of December 31, 2021.

Contract Liabilities

Contract liabilities included in unearned revenue and other accrued expenses and current liabilities were $ 195 million and $ 9 million at December 31, 2023, respectively, and $ 214 million and $ 10 million at December 31, 2022, respectively.

During the year ended December 31, 2023, Wayfair recognized $ 153 million and $ 7 million of net revenue that was included in unearned revenue and other accrued expenses and current liabilities, respectively, as of December 31, 2022.

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

Refer to Note 13, Segment and Geographic Information, for additional information.

Restructuring Charges

During the third quarter of 2022, Wayfair announced a workforce reduction involving approximately 870 employees in connection with its previously announced plans to manage operating expenses and realign investment priorities.

During the year ended December 31, 2022, Wayfair incurred a total of $ 31 million of costs, consisting primarily of one-time employee severance and benefit costs, recorded to restructuring charges within the consolidated and condensed statements of operations.

As of December 31, 2022, substantially all payments related to the employee severance and benefits costs were paid.

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, Wayfair expects to incur between approximately $ 68 million and $ 78 million of costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2023.

Cash and Cash Equivalents, Investments and Fair Value Measurements

As of December 31, 2022 and 2021, 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.

Wayfair did no t have any realized gains nor losses during the years ended December 31, 2022 and 2021.

During the year ended December 31, 2020, Wayfair collected $ 161 million of proceeds from the sale of long-term investments and recognized a realized gain of $ 1 million.

During the years ended December 31, 2022, 2021 and 2020, Wayfair recorded interest income, including interest earned from cash and cash equivalents and the marketable securities, of $ 13 million, $ 5 million and $ 6 million.

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 year ended December 31, 2023, Wayfair incurred $ 65 million of charges recorded within restructuring charges on the consolidated statements of operations.

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

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

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In January 2024, Wayfair announced a workforce realignment plan, including a workforce reduction involving approximately 1,650 employees.

As a result, Wayfair expects to incur between approximately $ 70 million and $ 80 million of

costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter

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

As of December 31, 2023 and 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 years ended December 31, 2023, 2022 and 2021, Wayfair did not have any realized gains or losses.

During the years ended December 31, 2023, 2022 and 2021, Wayfair recorded interest income, including interest earned from cash and cash equivalents and marketable securities, of $ 47 million, $ 13 million and $ 5 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, Wayfair did not recognize any credit losses related to its available-for-sale debt securities.

Further, as of December 31, 2022 and 2021, Wayfair did not record an allowance for credit losses related to its available-for-sale debt securities.

Notes to Consolidated Financial Statements (Continued)

The following tables present details of Wayfair’s investment securities as of December 31, 2022 and 2021:

As of December 31, 2023 and 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 as of December 31, 2023 and 2022:

December 31, 2023

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Wayfair classifies cash equivalents and certificate of deposits within Level 1 because these are valued using quoted market prices.

The fair value of Level 1 financial assets is based on quoted market prices of the identical underlying security.

The fair value of Level 1 financial assets is based on quoted market prices of the identical

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underlying security.

Wayfair classifies short-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active.

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Investment securities — 29 — 29

Prepaid expenses and other current assets:

Certificate of deposit (1)

Total $ 1,326 $ 29 $ — $ 1,355

Notes to Consolidated Financial Statements (Continued)

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

December 31, 2022

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Property and equipment, net $ 748 $ 774

Depreciation and amortization expense was $ 370 million, $ 322 million and $ 284 million, of which $ 224 million, $ 171 million and $ 132 million was attributable to the amortization expense of site and software development costs for the years ended December 31, 2022, 2021 and 2020.

Total costs capitalized of site and software development costs, net of accumulated amortization, totaled $ 283 million and $ 193 million as of December 31, 2022 and 2021.

For the years ended December 31, 2023, 2022, and 2021, depreciation and amortization expense was $ 416 million, $ 370 million and $ 322 million, respectively, of which $ 279 million, $ 224 million and $ 171 million, respectively, was attributable to the

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amortization expense of site and software development costs.

Total costs capitalized of site and software development costs, net of accumulated amortization, totaled $ 265 million and $ 283 million as of December 31, 2023 and 2022, respectively.

Impairment and other related net charges

For the year ended December 31, 2022, Wayfair recorded a charge of $ 15 million for the non-cash impairment of fixed assets.

During the year ended December 31, 2023, Wayfair recorded charges of $ 9 million related to construction in progress assets at identified U.S.

During the year ended December 31, 2022, Wayfair recorded charges of $ 15 million for the non-cash impairment of fixed assets.

This is inclusive of $ 7 million, related to an impairment of a U.S.

office location due to current sublease market conditions and $ 8 million for other non-cash impairment charges, related to construction in progress assets at an International warehouse.

For the year ended December 31, 2021, in connection with the consolidation of certain customer service centers in identified U.S.

locations, Wayfair recorded a charge of $ 5 million for the non-cash impairment of fixed assets.

During the year ended December 31, 2021, in connection with the consolidation of certain customer service centers in identified U.S.

locations, Wayfair recorded charges of $ 5 million for the non-cash impairment of fixed assets.

For further information, refer to Note 5 , Leases .

For the year ended December 31, 2020, no impairment of long-lived assets had been recorded.

Wayfair has lease arrangements for warehouses, Wayfair Delivery Network facilities, which includes consolidation centers, cross docks and last mile delivery facilities and office spaces.

Wayfair has lease arrangements for warehouses, WDN facilities, which includes consolidation centers, cross docks and last mile delivery facilities and office spaces.

These leases expire at various dates through 2044.

Operating lease expense was $ 180 million, $ 160 million and $ 159 million for the years ended December 31, 2022, 2021 and 2020.

Sublease income was $ 14 million, $ 17 million, and $ 11 million for the years ended December 31, 2022, 2021 and 2020.

Notes to Consolidated Financial Statements (Continued)

Operating lease expense was $ 190 million, $ 180 million and $ 160 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Sublease income was $ 2 million, $ 14 million, and $ 17 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The following table presents other information related to leases:

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Right-of-use assets obtained in exchange for lease obligations $ 100 $ 170

Right-of-use asset amortization $ 130 $ 115

December 31, 2023 December 31, 2022

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Imputed interest ( 336 )

Total $ 1,018

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The following table presents total operating leases liabilities:

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As there is no control of the underlying assets during the construction period, Wayfair is not considered the owner of the construction project for accounting purposes.

These operating leases will commence between 2023 and 2027 with lease terms of 10 to 12 years.

These operating leases will commence during 2024 through 2028 with lease terms of 1 to 12 years.

Impairment and other related net charges

During the year ended December 31, 2022, Wayfair identified an indicator of impairment for one of the U.S.

office locations, which was primarily due to current sublease market conditions.

Wayfair performed an analysis and determined that the carrying amount of the asset group exceeded its fair value, which was calculated based on estimated future sublease income.

As a result, Wayfair recorded a charge of $ 40 million during the year ended December 31, 2022, which included $ 32 million of non-cash impairment of the ROU asset, $ 7 million for the non-cash impairment of fixed assets and the remainder for other items.

In the fourth quarter of 2022, Wayfair recorded a $ 9 million recovery related to the termination of the lease.

Notes to Consolidated Financial Statements (Continued)

During the year ended December 31, 2021, Wayfair enacted a plan to consolidate certain customer service centers in identified U.S.

As a result, Wayfair recorded a charge of $ 12 million during the year ended December 31, 2021, which included $ 6 million for the non-cash impairment of ROU assets, $ 5 million for the non-cash impairment of fixed assets and the remainder for other items.

During the year ended December 31, 2023, Wayfair recorded charges of $ 5 million related to the consolidation of certain customer service centers in identified U.S.

During the year ended December 31, 2022, Wayfair recorded net charges of $ 23 million of lease impairment and other related net charges primarily related to changes in market conditions around future sublease income for one of our office locations in the U.S.

During the year ended December 31, 2021, in connection with the consolidation of certain customer service centers in identified U.S.

locations, Wayfair recorded charges of $ 6 million related to the impairment of ROU assets.

For further information, refer to Note 4, Property and Equipment, net .

Debt and Other Financing

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

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

December 31, 2023 December 31, 2022

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Long-term debt $ 3,092 $ 3,137

(1) Short-term debt consists of the 2024 Notes and is presented within other current liabilities in the consolidated balance sheets.

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Revolving Credit Facility

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The Credit Agreement provides for a $ 600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”).

The Revolver replaced the previous $ 200 million senior secured revolving credit facility (the “Previous Revolver”), which was set to mature on February 21, 2022.

Wayfair paid all amounts owed under the Previous Revolver and terminated all lending commitments thereunder.

Debt issuance costs for the Revolver are included in other non-current assets and are amortized to interest expense over the Revolver’s term.

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The obligations of the Borrower and the Guarantors are secured by first-priority liens on substantially all of the assets of the Borrower and the Guarantors, including, with certain exceptions, all of the capital stock of Wayfair’s domestic subsidiaries and 65 % of the capital stock of Wayfair’s first-tier foreign subsidiaries.

Notes to Consolidated Financial Statements (Continued)

On October 11, 2021, the parties amended the Credit Agreement (“Amendment No.

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Following Amendment No.

1, the Revolver borrowings bear interest through maturity at a variable rate based upon, at the Borrower’s option, (i) the LIBOR rate, (ii) the base rate (which is the highest of (x) the prime rate, (y) one-half of 1.00 % in excess of the federal funds effective rate and (z) 1.00 % in excess of the one-month LIBOR rate) or (3) with respect to loans denominated in Pounds Sterling, the RFR rate (which is the greater of (x) the SONIA rate and (y) 0.00 %), plus, in each case an applicable margin.

As of December 31, 2022, the applicable margin for LIBOR loans is 1.25 % per annum, the applicable margin for base rate loans is 0.25 % per annum and the applicable margin for RFR loans is 1.2826 % per annum.

1, the Revolver borrowings bear interest through maturity at a variable rate based upon, at the Borrower’s option, (i) the LIBOR rate, (ii) the base rate (which is the highest of (x) the prime rate, (y) one-half of 1.00 % in excess of the federal funds effective rate and (z) 1.00 % in excess of the one-month LIBOR rate) or (iii) with respect to loans denominated in Pounds Sterling, the RFR rate (which is the greater of (x) the SONIA rate and (y) 0.00 %), plus, in each case an applicable margin.

On June 13, 2023, the parties amended the Credit Agreement (“Amendment No.

2”) to reflect the phaseout of USD LIBOR and the implementation of Adjusted Term SOFR.

Following Amendment No.

2, the Revolver borrowings bear interest through maturity at a variable rate based upon, at the Borrower’s option, (i) Adjusted Term SOFR, (ii) the base rate (which is the highest of (x) the prime rate, (y) the NYFRB Rate in effect plus one-half of 1.00 % and (z) Adjusted Term SOFR for a one-month interest period plus 1.00 %), or (iii) with respect to loans denominated in an Alternative Currency (other than Pounds Sterling), the Adjusted Eurocurrency Rate (which is equal to (x) the Eurocurrency Rate for such interest period multiplied by (y) the Statutory Reserve Rate).

As of December 31, 2023, the applicable margin for Adjusted Term SOFR or Eurocurrency loans is 1.25 % per annum, the applicable margin for base rate loans is 0.25 % per annum and the applicable margin for RFR loans is 1.2826 % per annum.

The applicable margin is subject to specified changes depending on Wayfair’s Consolidated Senior Secured Debt to Consolidated EBITDA Ratio, as defined in the Credit Agreement.

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As of December 31, 2023, Wayfair was in compliance with all covenants.

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Convertible Non-Accreting Notes

The following table summarizes certain terms related to the outstanding convertible notes, excluding the 2025 Accreting Notes:

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

Convertible Non-Accreting Notes Maturity Date Annual Coupon Rate Annual Effective Interest Rate Payment Dates for Semi-Annual Interest Payments in Arrears

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2027 Notes September 15, 2027 3.250 % 3.6 % March 15 and September 15

2028 Notes November 15, 2028 3.500 % 3.8 % May 15 and November 15

In November 2018, Wayfair issued $ 575.0 million in aggregate principal amount of 1.125 % Convertible Senior Notes due 2024 (the “2024 Notes”), which included the exercise in full of a $ 75.0 million option granted to the initial purchasers.

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In September 2022, in connection with the issuance of the 2027 Notes, as defined below, Wayfair repurchased for cash approximately $ 375 million aggregate principal amount of the 2024 Notes.

In May 2023, in connection with the issuance of the 2028 Notes, as defined below, Wayfair repurchased for cash approximately $ 83 million aggregate principal amount of the 2024 Notes.

For more information, see “Extinguishment and Conversions of Notes” below.

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In September 2022, in connection with the issuance of the 2027 Notes, as defined below, Wayfair repurchased for cash approximately $ 229 million aggregate principal amount of the 2025 Notes.

In May 2023, in connection with the issuance of the 2028 Notes, as defined below, Wayfair repurchased for cash approximately $ 535 million aggregate principal amount of the 2025 Notes.

For more information, see “Extinguishment and Conversions of Notes” below.

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In connection with the 2026 Notes, Wayfair entered into capped calls that covered, initially, the number of shares of Wayfair’s Class A common stock underlying the 2026 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2026 Notes (the “2026 Capped Calls”).

Notes to Consolidated Financial Statements (Continued)

In September 2022, Wayfair issued $ 690.0 million in aggregate principal amount of 3.25 % Convertible Senior Notes due 2027 (the “2027 Notes”), and together with the 2024 Notes, 2025 Notes, 2026 Notes, the “Non-Accreting Notes”), which included the exercise in full of a $ 90.0 million option granted to the initial purchasers.

In September 2022, Wayfair issued $ 690.0 million in aggregate principal amount of 3.250 % Convertible Senior Notes due 2027 (the “2027 Notes”), which included the exercise in full of a $ 90.0 million option granted to the initial purchasers.

In connection with the issuance of the 2027 Notes, Wayfair entered into capped calls that covered, initially, the number of shares of Wayfair’s Class A common stock underlying the 2027 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2027 Notes (the “2027 Capped Calls”).

In May 2023, Wayfair issued $ 690.0 million in aggregate principal amount of 3.500 % Convertible Senior Notes due 2028 (the “2028 Notes” and together with the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, the “Non-Accreting Notes”), which included the exercise in full of a $ 90.0 million option granted to the initial purchasers.

In connection with the issuance of the 2028 Notes, Wayfair entered into capped calls that covered, initially, the number of shares of Wayfair’s Class A common stock underlying the 2028 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2028 Notes (the “2028 Capped Calls”).

Convertible Accreting Notes

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Instead, the 2025 Accreting Notes accrue interest at a rate of 2.50 % per annum, which accretes to the principal amount on April 1 and October 1 of each year.

The 2025 Accreting Notes will mature on April 1, 2025, unless earlier purchased, redeemed or converted.

The 2025 Accreting Notes will

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mature on April 1, 2025, unless earlier purchased, redeemed or converted.

The annual effective interest rate of the 2025 Accreting Notes is 2.7 %.

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The Non-Accreting Notes indenture also includes Wayfair LLC, as guarantor.

Each indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or the holders of not less than 25 % in aggregate principal amount of the respective notes then outstanding may declare the entire principal amount of the respective notes plus accrued interest, if any, to be immediately due and payable.

Each indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the trustee or the holders of not less than 25 % in aggregate principal amount of the respective Notes then outstanding may declare the entire principal amount or accreted principal amount, as the case may be, of the respective Notes plus accrued interest, if any, to be immediately due and payable.

Conversion and Redemption Terms of the Notes

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Convertible Notes Maturity Date Free Convertibility Date Initial Conversion Rate per $1,000 Principal Initial Conversion Price Redemption Date

2022 Notes September 1, 2022 June 1, 2022 9.6100 $ 104.06 September 8, 2020

2024 Notes November 1, 2024 August 1, 2024 8.5910 $ 116.40 May 8, 2022

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2027 Notes September 15, 2027 June 15, 2027 15.7597 $ 63.45 September 20, 2025

2028 Notes November 15, 2028 August 15, 2028 21.8341 $ 45.80 May 20, 2026

2025 Accreting Notes April 1, 2025 - 13.7931 $ 72.50 May 9, 2023

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

During the third quarter of 2022, upon maturity of the 2022 Notes, Wayfair paid in cash the remaining outstanding principal to the holders of the 2022 Notes.

Notes to Consolidated Financial Statements (Continued)

Wayfair will settle any conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or a combination thereof, with the form of consideration determined at Wayfair’s election.

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

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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 December 31, 2022, the 2024 Notes, 2025 Notes, 2026 Notes, and 2027 Notes are not convertible during the calendar quarter ended March 31, 2023.

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

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

Wayfair will settle any conversion of 2025 Accreting Notes with a number of shares of Wayfair’s Class A common stock per $ 1,000 original principal amount of 2025 Accreting Notes equal to the accreted principal amount of such original principal amount of 2025 Accreting Notes divided by the conversion price.

Upon the occurrence of a fundamental change (as defined in the applicable indenture), holders of the Notes may require Wayfair to repurchase all or a portion of the Notes for cash at a price equal to 100 % of the principal amount (or accreted principal amount) of the 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 indenture) may be entitled to a premium in the form of an increase in the conversion rate of the respective notes.

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.

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The redemption price will be either 100 % of the principal amount (or accreted principal amount) of the notes to be redeemed, plus accrued and unpaid interest, if any, or the if-converted value if the holder elects to convert their Notes upon receiving notice of redemption.

Notes to Consolidated Financial Statements (Continued)

Accounting for the Notes

The Notes are recorded as a single unit within liabilities in the consolidated and condensed balance sheets as the conversion features within the Notes are not derivatives that require bifurcation and the Notes do not involve a substantial premium.

The Notes are recorded as a single unit within liabilities in the consolidated balance sheets as the conversion features within the Notes are not derivatives that require bifurcation and the Notes do not involve a substantial premium.

Transaction costs to issue the Notes were recorded as direct deductions from the related debt liabilities and amortized to interest expense, net using the effective interest method over the terms of the corresponding Notes.

Interest for the Accreting Notes is amortized to interest expense, net using the effective interest method over the term of the Accreting Notes and recorded to other long-term liabilities in the consolidated and condensed balance sheet.

Upon accretion to the principal amount on April 1 and October 1 of each year, Wayfair will reclassify the interest accrued as of that date to long-term debt.

Proceeds from Notes Transactions

The net proceeds from the sale of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2025 Accreting Notes were approximately $ 562 million, $ 1.5 billion, $ 935 million, $ 678 million and $ 527 million, after deducting the initial purchasers’ discounts, if applicable, and the offering expenses payable by Wayfair.

Wayfair used approximately $ 93 million, $ 255 million, $ 146 million and $ 80 million of the net proceeds from the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes, to purchase the Capped Calls.

Wayfair intends to use the remainder of the net proceeds from the Notes for working capital and general corporate purposes, including, but not limited to, operating and capital expenditures.

Wayfair may also use a portion of the net proceeds to finance acquisitions, strategic transactions, investments, repurchases of Class A common stock or the repayment, redemption, purchase or exchange of indebtedness (including the Notes).

Partial Extinguishment of 2024 Notes and 2025 Notes

During the year ended December 31, 2022, Wayfair used approximately $ 506 million of the net proceeds from the issuance of the 2027 Notes to repurchase for cash approximately $ 375 million aggregate principal amount of the 2024 Notes and approximately $ 229 million aggregate principal amount of the 2025 Notes, as well as aggregate accrued interest of $ 2 million for both the 2024 Notes and 2025 Notes, in privately negotiated repurchase transactions.

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

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

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

Wayfair intends to use the remaining net proceeds from the issuance of the 2028 Notes for working capital and general corporate purposes, including, but not limited to, operating and capital expenditures.

Wayfair may also use a portion of the net proceeds to finance acquisitions, strategic

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transactions, investments, repurchases of Class A common stock or the repayment, redemption, purchase or exchange of indebtedness (including the Notes).

Conversions of Notes

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Total $ 55 $ 8 $ 63 $ 31 $ 8 $ 39 $ 25 $ 7 $ 32

Notes to Consolidated Financial Statements (Continued)

Fair Value of Notes

The estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2025 Accreting Notes was $ 169 million, $ 836 million, $ 553 million, $ 515 million and $ 17 million, as of December 31, 2022.

As of December 31, 2023, the estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2025 Accreting Notes was $ 116 million, $ 684 million, $ 837 million, $ 870 million, $ 1.1 billion and $ 32 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, as defined in Note 3, Cash and Cash Equivalents, Investments and Fair Value Measurements .

The if-converted value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2025 Accreting Notes did not exceed the principal value as of December 31, 2022.

The 2024 Capped Calls, 2025 Capped Calls, 2026 Capped Calls and 2027 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 correspond to the initial conversion price of the applicable Non-Accreting Notes and is subject to certain adjustments under the terms of the applicable Capped Call), with such reduction and/or offset subject to a cap based on the cap price of the applicable Capped Calls (the “Initial Cap Price”).

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

As of December 31, 2023, the if-converted value of the 2028 Notes exceeded the principal value by $ 240 million.

As of December 31, 2023, the if-converted value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2025 Accreting Notes did not exceed the principal value.

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

The Capped Calls can, at Wayfair’s option, remain outstanding until their maturity date, even if all or a portion of the Non-Accreting Notes are converted, repurchased or redeemed prior to such date.

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Collectively, the Capped Calls cover, initially, the number of shares of Wayfair’s Class A common stock underlying the Non-Accreting Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Non-Accreting Notes.

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The initial terms for the Capped Calls are presented below:

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2027 Capped Calls September 15, 2027 $ 97.62 100 %

2028 Capped Calls November 15, 2028 $ 73.28 100 %

The Capped Calls are separate transactions from the Non-Accreting Notes, are not subject to the terms of the Non-Accreting Notes and will not affect any holder’s rights under the Non-Accreting Notes.

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Wayfair has entered into purchase obligations that represent enforceable and legally binding software license and freight commitments.

Payments due under these purchase obligations are $ 210 million in 2023, $ 184 million in 2024, $ 185 million in 2025, $ 2 million in 2026, $ 2 million in 2027 and none thereafter.

Payments due under these purchase obligations are $ 206 million in 2024, $ 217 million in 2025, $ 28 million in 2026, $ 9 million in 2027 and none thereafter.

These payments exclude payments for contracts that are able to be canceled, both in full or in part, since they do not represent legally binding arrangements.

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The aggregate assessments received as of December 31, 2023 are not material to Wayfair's business and Wayfair does not expect the Court's decision to have a significant impact on its business.

Notes to Consolidated Financial Statements (Continued)

Wayfair currently collects and remits sales tax based on the locations of its physical operations, as well as locations where it has economic presence.

Legal Matters

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

Although the results of litigation and claims cannot be predicted with certainty, Wayfair does not currently believe that the outcome of any of these other 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.

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

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

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

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

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

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

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

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 December 31, 2023, the estimated potential liability for the CBSA review, net of any of any amounts that may be recouped through the appeals process, is approximately $ 20 million, inclusive of duties and interest.

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During the year ended December 31, 2023, approximately $ 17 million of this estimated liability was recorded to cost of sales and $ 3 million was recorded to selling, operations, technology, general and administrative within the consolidated statement of operations.

During the year ended December 31, 2023, Wayfair made payments of approximately $ 11 million of duties and $ 2 million of interest charges based on assessments received related to part of the year ended December 31, 2021.

Wayfair is required to pay all assessed amounts in order to exercise its appeal rights.

Wayfair believes there are substantial factual and legal grounds to appeal and partially recuperate these amounts and is exploring other potential avenues to mitigate exposure.

As of December 31, 2023, approximately $ 7 million was recorded within other current liabilities in the consolidated balance sheets.

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.

Employee Benefit Plans

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

During the years ended December 31, 2022 and December 31, 2021, Wayfair repurchased 548,173 and 982,848 shares of Class A common stock for $ 75 million and $ 300 million, respectively, under authorized stock repurchase programs .

Notes to Consolidated Financial Statements (Continued)

During the year ended December 31, 2023, Wayfair did not repurchase any shares of Class A Common stock under the Repurchase Programs.

During the year ended December 31, 2022, Wayfair repurchased 548,173 shares of Class A common stock for $ 75 million under the 2020 Repurchase Program.

During the year ended December 31, 2021, Wayfair did not repurchase any shares of Class A Common stock under the Repurchase Programs.

Equity-Based Compensation

The Board adopted the 2014 Incentive Award Plan (“2014 Plan”) to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent.

In October 2022, the 2014 Plan was amended (the “Amended 2014 Plan”) by the stockholders of Wayfair to increase the aggregate number of shares of Class A common stock authorized for issuance under the 2014 Plan by 5,000,000 shares.

The Amended 2014 Plan is administered by the Board for awards to non-employee directors and by the compensation committee of the Board for other participants and provides for the issuance of stock options, SARs, restricted common stock, restricted stock units (“RSUs”), performance shares, stock payments, cash payments, dividend awards and other incentives.

The Amended 2014 Plan initially made 8,603,066 shares of Class A common stock available for future award grants.

The Amended 2014 Plan also contains an evergreen provision whereby the shares available for future grants are increased on the first day of each calendar year from January 1, 2016 through and including January 1, 2024.

As of January 1, 2023, 4,379,140 shares of Class A common stock were available for future grant under the Amended 2014 Plan.

Shares or RSUs forfeited, withheld for minimum statutory tax obligations, and unexercised stock option lapses from the Amended 2014 Plan are available for future grant under the Amended 2014 Plan.

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

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

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

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

As of December 31, 2023, 14,808,859 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 year ended December 31, 2023:

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5,186,886 $ 93.68

The intrinsic value of RSUs vested was $ 291 million, $ 735 million, and $ 562 million and for the years ended December 31, 2022, 2021 and 2020.

The aggregate intrinsic value of RSUs unvested was $ 334 million as of December 31, 2022.

Unrecognized equity-based compensation expense related to RSUs expected to vest over time is $ 886 million with a weighted-average remaining vesting term of 1.0 year as of December 31, 2022.

As of December 31, 2023, unrecognized equity-based compensation expense related to RSUs expected to vest over time is $ 325 million with a weighted-average remaining vesting term of 0.7 years.

The following table summarizes the weighted average grant date fair value of RSUs vested for the years ended December 31:

Year Ended December 31,

2023 2022 2021

Weighted average grant date fair value of RSUs $ 50.39 $ 68.61 $ 269.88

Total fair value of vested RSUs (in millions) $ 636 $ 523 $ 337

Intrinsic value of RSUs vested (in millions) $ 532 $ 291 $ 735

As of December 31, 2023, the aggregate intrinsic value of unvested RSUs was $ 320 million.

Equity-based compensation was classified as follows in the consolidated statements of operations for the years ended December 31:

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Total equity-based compensation expense $ 605 $ 513 $ 344

Equity-based compensation costs capitalized as site and software development costs were $ 43 million, $ 28 million and $ 17 million for the years ended December 31, 2022, 2021 and 2020.

Notes to Consolidated Financial Statements (Continued)

Equity-based compensation costs capitalized as site and software development costs were $ 61 million, $ 43 million and $ 28 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The components of the provision for income taxes, net for the years ended December 31, 2023, 2022 and 2021 are presented below:

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(in millions)

Provision (benefit) for income taxes at the federal statutory rate $ ( 277 ) $ ( 27 ) $ 43

Provision for income taxes at the federal statutory rate $ ( 153 ) $ ( 277 ) $ ( 27 )

State income tax expense (benefit), net of federal impact 3 9 ( 1 )

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Intangible property basis step-up — — ( 43 )

Intercompany interest

Other ( 8 ) ( 32 ) —

Provision for income taxes, net $ 9 $ 12 $ 1

The components of (loss) income before income taxes determined by tax jurisdiction, are as follows:

Certain prior period items in the table above were reclassified to conform to the current period presentation.

The components of loss before income taxes determined by tax jurisdiction, are as follows:

Year Ended December 31,

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Total $ ( 729 ) $ ( 1,319 ) $ ( 130 )

Notes to Consolidated Financial Statements (Continued)

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities for the periods presented are as follows:

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Deferred tax assets:

Accounts receivable $ 5 $ 3

Inventories 3 2

Net operating loss carryforwards $ 763 $ 702

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Intangible property 47 44

Accrued payroll 5 31

Accrued expenses and reserves 26 27

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Prepaid expenses $ ( 17 ) $ ( 19 )

Capitalized technology — ( 42 )

Property and equipment ( 42 ) ( 54 )

Operating lease right-of-use asset ( 217 ) ( 229 )

Convertible debt — ( 8 )

481(a) adjustments ( 5 ) ( 5 )

Other ( 7 ) ( 8 )

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In determining the need for a valuation allowance, Wayfair has given consideration to the cumulative book income and loss positions of each of its entities as well as its worldwide cumulative income position.

Wayfair has assessed, on a jurisdictional basis, the available means of recovering deferred tax assets, including the ability to carry-back net operating losses, the existence of reversing temporary differences, the availability of tax planning strategies and available sources of future taxable income.

At December 31, 2022, Wayfair maintained a full valuation allowance against substantially all of the worldwide net deferred tax assets.

Wayfair has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are primarily compromised of net operating losses, on a jurisdictional basis.

At December 31, 2023, Wayfair has determined that it is more likely than not that Wayfair will not realize the benefits of its deferred tax assets, and as a result, has maintained a full valuation allowance against substantially all of the worldwide net deferred tax assets.

As of December 31, 2023, Wayfair had federal net operating loss carryforwards available to offset future federal taxable income of $ 2.0 billion.

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The ability to utilize these federal and state net operating loss carryforwards may be limited in the future if Wayfair experiences an ownership change pursuant to Internal Revenue Code Section 382.

An ownership change occurs when the ownership percentages of 5% or greater stockholders

Notes to Consolidated Financial Statements (Continued)

change by more than 50% over a three-year period.

An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period.

Through December 31, 2023, Wayfair has determined that the ability to use tax attributes is not impacted by such a restrictive limitation.

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The remaining foreign net operating loss carryforwards do not expire.

As of December 31, 2022, Wayfair has not provided for deferred income taxes on outside basis differences in its foreign subsidiaries of approximately $ 300 million since these basis differences are deemed to be indefinitely reinvested, or it is within the control of Wayfair to recognize these basis differences on a tax-free basis.

As of December 31, 2023, Wayfair has not provided for deferred income taxes on outside basis differences in its foreign subsidiaries of approximately $ 332 million since these basis differences are deemed to be indefinitely reinvested, or it is within

the control of Wayfair to recognize these basis differences on a tax-free basis.

Upon realization of the outside basis differences in the form of dividends or otherwise, Wayfair could be subject to income taxes as well as withholding taxes.

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federal and state and foreign taxing authorities to the extent of future utilization of net operating losses generated in each preceding year.

(Loss) Earnings per Share

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

The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon in principle by over 140 countries.

During 2023, many countries took steps to incorporate Pillar 2 model rule concepts into their domestic laws.

Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2.

Accordingly, Wayfair is still evaluating the potential consequences of Pillar 2 on longer-term financial positions.

Loss per Share

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

Year Ended December 31,

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(in millions, except per share data)

Numerator for basic and diluted (loss) earnings per share - net (loss) income

Numerator for basic and diluted loss per share - net loss

$ ( 738 ) $ ( 1,331 ) $ ( 131 )

Denominator for basic (loss) earnings per share - weighted-average number of shares of common stock outstanding

Effect of dilutive securities:

Restricted stock units — — 3

Dilutive potential common shares — — 3

Denominator for diluted (loss) earnings per share - weighted-average number of shares of common stock outstanding after the effect of dilutive securities

(Loss) earnings per share:

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

Loss per share

Basic $ ( 6.47 ) $ ( 12.54 ) $ ( 1.26 )

Diluted $ ( 6.47 ) $ ( 12.54 ) $ ( 1.26 )

Notes to Consolidated Financial Statements (Continued)

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

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:

Year Ended December 31,

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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.

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These segments reflect the way the CODM allocates resources and evaluates financial performance, which is based upon each segment's Adjusted EBITDA.

Adjusted EBITDA is defined as net (loss) income before depreciation and amortization, equity-based compensation and related taxes, interest expense, net, other expense, net, provision for income taxes, net, non-recurring items, and other items not indicative of ongoing operating performance.

Adjusted EBITDA is defined as net income or loss before depreciation and amortization, equity-based compensation and related taxes, interest income or expense, net, other income or expense, net, provision or benefit for income taxes, net, non-recurring items, and other items not indicative of ongoing operating performance.

These charges are excluded from the evaluation of segment performance because it facilitates reportable segment performance comparisons on a period-to-period basis as these costs may vary independent of business performance.

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Wayfair allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative expenses based on the usage and relative contribution provided to the segments.

It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, impairment and other related net charges and restructuring charges, as well as interest expense, net, other expense, net, gain on debt extinguishment and provision for income taxes, net.

It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, impairment and other related net charges and restructuring charges, as well as interest income or expense, net, other income or expense, net, gain or loss on debt extinguishment and provision or benefit for income taxes, net.

There are no net revenue transactions between Wayfair's reportable segments.

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provided greater than 10% of consolidated net revenue.

Notes to Consolidated Financial Statements (Continued)

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

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( 1,044 ) ( 915 ) ( 745 )

Net (loss) income $ ( 1,331 ) $ ( 131 ) $ 185

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

Net loss $ ( 738 ) $ ( 1,331 ) $ ( 131 )

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

Year Ended December 31,

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Interest expense, net 17 27 32

Other expense, net 4 4 9

Other (income) expense, net ( 1 ) 4 4

Provision for income taxes, net 9 12 1

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Gain on debt extinguishment (c)

( 100 ) ( 96 ) —

Total reconciling items $ 1,044 $ 915 $ 745

In the year ended December 31, 2022, Wayfair recorded $ 40 million of lease impairment and other related charges related to changes in market conditions around future sublease income for one of the office locations in the U.S.

In the fourth quarter of 2022, Wayfair recorded a $ 9 million recovery related to the termination of the lease.

Additionally, Wayfair recorded an impairment charge of $ 8 million related to construction in progress assets at an International warehouse.

In the year ended December 31, 2021, Wayfair recorded $ 12 million of customer service center impairment and other related charges related to a plan to consolidate customer service centers in identified U.S.

In the year ended December 31, 2022, Wayfair recorded a $ 31 million charge to restructuring charges for severance costs associated with the August 2022 workforce reductions.

In the year ended December 31, 2020, Wayfair recorded a $ 4 million charge to restructuring charges for severance costs associated with February 2020 workforce reductions.

In the year ended December 31, 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 aggregate principal amount of the 2025 Notes.

Notes to Consolidated Financial Statements (Continued)

During the year ended December 31, 2023, Wayfair recorded net 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 year ended December 31, 2022, Wayfair recorded net charges of $ 31 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.

and charges of $ 8 million related to construction in progress assets at an International warehouse.

During the year ended December 31, 2021, Wayfair recorded $ 12 million of customer service center impairment and other related charges related to a plan to consolidate customer service centers in identified U.S.

During the year ended December 31, 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 year ended December 31, 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 year ended December 31, 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 year ended December 31, 2022, Wayfair recorded a $ 96 million gain on debt extinguishment upon repurchase of $ 375 million in 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 II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K for more information regarding the use of Adjusted EBITDA.

The following table presents long-lived assets attributable to Wayfair's reportable segments reconciled to the amounts:

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Subsequent Events

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

On January 19, 2024, Wayfair announced a workforce realignment plan, including a workforce reduction involving approximately 1,650 employees.

As a result, Wayfair expects to incur between approximately $ 70 million and $ 80 million of costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2024.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data