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Item 1. Financial Statements

2024-05-02 compared with 2023-11-01 · 129 added, 151 removed, 351 unchanged (44% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, December 31,

March 31, December 31,

(in millions, except share and per share data)

22 unchanged sentences

Convertible preferred stock, $ 0.001 par value per share:

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

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

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

10,000,000 shares authorized and none issued at March 31, 2024 and December 31, 2023

Class A common stock, par value $ 0.001 per share, 500,000,000 shares authorized, 94,737,000 and 92,457,562 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Class B common stock, par value $ 0.001 per share, 164,000,000 shares authorized, 25,691,295 shares issued and outstanding at March 31, 2024 and December 31, 2023

Additional paid-in capital

4 unchanged sentences

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions, except per share data)

12 unchanged sentences

Other expense, net ( 4 ) ( 1 )

Gain on debt extinguishment — 96 100 96

Loss before income taxes ( 245 ) ( 353 )

8 unchanged sentences

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

Net loss $ ( 248 ) $ ( 355 )

Other comprehensive (loss) income:

Other comprehensive loss:

Foreign currency translation adjustments — 2

Net unrealized gain (loss) on available-for-sale investments — — 1 ( 2 )

Net unrealized gain on available-for-sale investments — 1

Comprehensive loss $ ( 248 ) $ ( 352 )

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

7 unchanged sentences

(in millions)

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

Net loss — — — ( 283 ) — ( 283 )

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

Equity-based compensation — — 132 — — 132

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

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

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

Net loss — — — ( 163 ) — ( 163 )

Other comprehensive loss — — — — ( 1 ) ( 1 )

Issuance of common stock upon vesting of RSUs 3 — — — — —

Equity-based compensation — — 154 — — 154

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

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

Nine Months Ended

Class A and Class B Common Stock

Shares Amount Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Stockholders' Deficit

(in millions)

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

Net loss — — — ( 355 ) — ( 355 )

Other comprehensive loss — — — — ( 7 ) ( 7 )

Other comprehensive income — — — — 3 3

Issuance of common stock upon vesting of RSUs 2 — — — — —

Equity-based compensation — — 157 — — 157

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

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

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

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

Balance at December 31, 2023 118 $ — $ 1,316 $ ( 4,018 ) $ ( 5 ) $ ( 2,707 )

Net loss — — — ( 248 ) — ( 248 )

Other comprehensive income — — — — 1 1

Issuance of common stock upon vesting of RSUs 2 — — — — —

Equity-based compensation — — 130 — — 130

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

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

Balance at March 31, 2024 120 $ — $ 1,446 $ ( 4,266 ) $ ( 5 ) $ ( 2,825 )

See notes to unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

Cash flows from (for) operating activities:

Cash flows for operating activities:

Net loss $ ( 248 ) $ ( 355 )

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

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 104 104

2 unchanged sentences

Impairment and other related net charges — 13

Gain on debt extinguishment ( 100 ) ( 96 )

Other non-cash adjustments ( 1 ) —

2 unchanged sentences

Inventories ( 7 ) 8

Prepaid expenses and other current assets 17 39

Other assets 2 —

Accounts payable and other current liabilities ( 106 ) ( 294 )

Other liabilities 12 15

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

Cash flows for investing activities:

Prepaid expenses and other assets 34 19

Accounts payable and other liabilities ( 152 ) ( 172 )

Net cash used in operating activities ( 139 ) ( 147 )

Cash flows (for) from investing activities:

Purchase of short- and long-term investments ( 36 ) —

2 unchanged sentences

Site and software development costs ( 41 ) ( 53 )

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

Net cash (used in) provided by investing activities ( 75 ) 64

Cash flows from financing activities:

Repurchase of common stock — ( 75 )

Proceeds from issuance of convertible notes, net of issuance costs 678 678

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

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

Payments to extinguish convertible debt ( 514 ) ( 504 )

Net cash provided by financing activities — —

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 1 ) 3

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

Net decrease in cash, cash equivalents and restricted cash ( 215 ) ( 80 )

Cash, cash equivalents and restricted cash

4 unchanged sentences

See notes to unaudited condensed consolidated financial statements

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions)

7 unchanged sentences

See notes to unaudited condensed consolidated financial statements

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Notes to Condensed Consolidated Financial Statements

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

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

Recent Accounting Pronouncements

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

Wayfair believes that there have been no significant changes during the three months ended March 31, 2024 to the items disclosed in Note 1, Summary of Significant Accounting Policies , included in Part II, Item 8, Financial Statements and Supplementary Data , of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 statement disclosures.

Supplemental Financial Statement Disclosures

Accounts Receivable, Net

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

As of March 31, 2024, accounts receivable was $ 113 million, net of allowance for credit losses of $ 25 million.

As of December 31, 2023, accounts receivable was $ 140 million, net of allowance for credit losses of $ 22 million.

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

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

The changes in the allowance for credit losses were not material for the three months ended March 31, 2024.

Management believes credit risk is mitigated for the three months ended March 31, 2024, as approximately 99.4 % of the net revenue recognized was collected in advance of recognition .

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Contract Liabilities

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

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

Contractual liabilities, included in other current liabilities, were $ 187 million at March 31, 2024 and $ 204 million at December 31, 2023.

During the three months ended March 31, 2024, Wayfair recognized $ 123 million of net revenue that was included within other current liabilities as of December 31, 2023.

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

Refer to Note 10, Segment and Geographic Information, for additional information.

Impairment and Other Related Net Charges

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

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

Restructuring Charges

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

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

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

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

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

As a result, during the three months ended March 31, 2024, Wayfair incurred $ 79 million of charges recorded within restructuring charges on the condensed consolidated statements of operations.

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

As of March 31, 2024, $ 34 million is accrued within other current liabilities for employee severance benefits which are expected to be paid in the second quarter of 2024.

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

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

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

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

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

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

As of March 31, 2024 and December 31, 2023, Wayfair’s marketable securities, which primarily consisted of corporate bonds and other government obligations that are priced at fair value, were classified as available-for-sale investments.

During the three months ended March 31, 2024 and 2023, Wayfair did not have any realized gains or losses.

During the three months ended March 31, 2024 and 2023, Wayfair recorded interest income, including interest earned from cash and cash equivalents and marketable securities, of $ 12 million and $ 7 million, respectively.

During the three months ended March 31, 2024 and 2023, Wayfair did not recognize any credit losses related to its available-for-sale debt securities.

As of March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023:

March 31, 2024

Losses Estimated

(in millions)

Investment securities $ 20 $ — $ — $ 20

Total $ 20 $ — $ — $ 20

December 31, 2023

3 unchanged sentences

Total $ 29 $ — $ — $ 29

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Fair Value Measurements

9 unchanged sentences

Wayfair does not have assets that are classified as Level 3.

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

September 30, 2023

The following tables set forth the fair value of Wayfair's financial assets measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023:

March 31, 2024

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Total cash and cash equivalents 1,107 — — 1,107

Short-term investments:

Investment securities — 20 — 20

Certificate of deposit 30 — — 30

Total short-term investments 30 20 — 50

Prepaid expenses and other current assets:

1 unchanged sentence

Total $ 1,141 $ 20 $ — $ 1,161

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

December 31, 2023

7 unchanged sentences

Investment securities — 29 — 29

Prepaid expenses and other current assets:

Certificate of deposit (1)

Total $ 1,326 $ 29 $ — $ 1,355

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

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Debt and Other Financing

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

10 unchanged sentences

Long-term debt $ 3,095 $ 3,092

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

Revolving Credit Facility

1 unchanged sentence

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

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

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

Wayfair had $ 72 million in outstanding letters of credit as of March 31, 2024, primarily as security for lease agreements.

As of March 31, 2024, there were no revolving loans outstanding under the Revolver.

Convertible Non-Accreting Notes

In May 2023, Wayfair issued $ 690 million in aggregate principal amount of 3.50 % Convertible Senior Notes due 2028 (the “2028 Notes”), which includes the exercise in full of a $ 90 million option granted to the initial purchasers.

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

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

10 unchanged sentences

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

Seniority of the Notes

The Notes are general senior unsecured obligations of Wayfair.

The Notes rank senior in right of payment to any of Wayfair’s future indebtedness that is expressly subordinated in right of payment to the Notes, rank equal in right of payment to Wayfair’s existing and future unsecured indebtedness that is not so subordinated and are effectively subordinated in right of payment to any of Wayfair’s secured indebtedness to the extent of the value of the assets securing such indebtedness.

The Non-Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of Wayfair’s subsidiaries, including Wayfair LLC’s guaranty of the 2025 Accreting Notes, and the 2025 Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of Wayfair’s subsidiaries (other than Wayfair LLC).

The Notes are governed by separate indentures between Wayfair, as issuer, and U.S.

Bank National Association, as trustee.

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

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

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Conversion and Redemption Terms of the Notes

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

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

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

The conditional conversion features of the 2028 Notes were triggered during the calendar quarter ended March 31, 2024, and the 2028 Notes therefore became convertible in the calendar quarter ended June 30, 2024 pursuant to the applicable last reported sales price condition.

The conditional conversion features of the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes were not triggered during the calendar quarter ended March 31, 2024, therefore, the 2024 Notes, 2025 Notes, 2026 Notes and 2027 Notes are not convertible during the calendar quarter ended June 30, 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.

1 unchanged sentence

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

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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.

3 unchanged sentences

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.

Accounting for the Notes

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

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

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

Conversions of Notes

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

During the three months ended March 31, 2024, there were no conversions of the Notes.

Interest Expense

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

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

During the three months ended March 31, 2024, Wayfair recognized contractual interest expense and debt discount amortization of $ 15 million and $ 3 million, respectively.

During the three months ended March 31, 2023, Wayfair recognized contractual interest expense and debt discount amortization of $ 11 million and $ 1 million, respectively.

Fair Value of Notes

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

As of March 31, 2024, the estimated fair value of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes, 2028 Notes and 2025 Accreting Notes was $ 115 million, $ 699 million, $ 882 million, $ 913 million, $ 1.1 billion and $ 36 million, respectively.

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

1 unchanged sentence

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

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

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

As of March 31, 2024, the if-converted value of the 2027 Notes and 2028 Notes exceeded the principal value by $ 48 million and $ 333 million, respectively.

As of March 31, 2024, the if-converted value of the 2024 Notes, 2025 Notes, 2026 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”).

2 unchanged sentences

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

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

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

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

Related to the CBSA review, during the three months ended March 31, 2024, Wayfair incurred approximately $ 6 million to cost of goods sold and $ 1 million to selling, operations, technology, general and administrative within the condensed consolidated statement of operations.

During the three months ended March 31, 2024, Wayfair made payments of approximately $ 4 million of duties and $ 1 million of interest charges based on assessments received related to the year ended December 31, 2022 and 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 options to mitigate exposure.

As of March 31, 2024, approximately $ 10 million was recorded within other current liabilities in the condensed 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.

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

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Stockholders’ Deficit

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

Since Wayfair's initial public offering through March 31, 2024, 56,347,119 shares of Class B common stock were converted to the same number of shares of Class A common stock.

Stock Repurchase Programs

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

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

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

During the three months ended March 31, 2024 and 2023, Wayfair did not repurchase any shares of Class A common stock under its stock repurchase programs.

Equity-Based Compensation

3 unchanged sentences

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

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

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

As of March 31, 2024, 14,207,455 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 three months ended March 31, 2024:

Shares Weighted-Average

3 unchanged sentences

RSUs forfeited/canceled ( 720,589 ) $ 99.23

Unvested at September 30, 2023

Unvested at March 31, 2024

3,508,852 $ 93.74

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

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

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

As of March 31, 2024, unrecognized equity-based compensation expense related to RSUs expected to vest over time is $ 209 million with a weighted-average remaining vesting term of 0.6 years.

The following table summarizes activity for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

Weighted average grant date fair value of RSUs $ 65.40 $ 41.63

Total fair value of vested RSUs (in millions) $ 172 $ 171

Intrinsic value of RSUs vested (in millions) $ 129 $ 117

As of March 31, 2024, the aggregate intrinsic value of unvested RSUs was $ 238 million.

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

3 unchanged sentences

Total equity-based compensation expense $ 119 $ 144

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

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

Equity-based compensation costs capitalized as site and software development costs were $ 11 million and $ 13 million for the three months ended March 31, 2024 and 2023, respectively.

The provision for income taxes, net recorded during the three months ended March 31, 2024 is primarily related to income tax benefits for tax losses earned in the U.S.

and certain foreign jurisdictions and U.S.

1 unchanged sentence

state minimum and foreign taxes.

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

Wayfair had no material unrecognized tax benefits as of March 31, 2024 and December 31, 2023.

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.

Many non- U.S.

tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar 2 model rules beginning in 2024 or announced their plans to enact legislation in future years.

The currently enacted Pillar 2 model rules did not have a material impact on our provision for income taxes for the three months ended March 31, 2024.

Loss per Share

8 unchanged sentences

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

Table o f Contents

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions, except per share data)

2 unchanged sentences

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

116 106 113 106

Loss per share

2 unchanged sentences

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

1 unchanged sentence

Shares related to convertible debt instruments 36 23

Total 42 34 42 34

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.

10 unchanged sentences

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.

The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies , included in Part II, Item 8, Financial Statements and Supplementary Data , of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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

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

Table o f Contents

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.

7 unchanged sentences

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

2 unchanged sentences

Total net revenue $ 2,729 $ 2,774

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

Adjusted EBITDA:

$ 123 $ ( 51 ) $ 313 $ ( 109 )

International ( 46 ) ( 43 )

3 unchanged sentences

Net loss $ ( 248 ) $ ( 355 )

Table o f Contents

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

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

2023 2022 2023 2022

Three Months Ended March 31,

(in millions)

6 unchanged sentences

Restructuring charges (b)

Gain on debt extinguishment (c)

— ( 96 ) ( 100 ) ( 96 )

Total reconciling items $ 323 $ 341

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

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

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

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

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

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

locations and $ 8 million related to construction in progress assets at identified U.S.

During the three months ended March 31, 2024, Wayfair incurred $ 79 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2024 workforce reductions.

During the three months ended March 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.

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

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

What changed 10-Q

Item 1. Financial Statements