Wayfair (W) 10-Q 2020 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to      

Commission File Number: 001-36666 

Wayfair Inc.

(Exact name of registrant as specified in its charter) 

Delaware			36-4791999
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
4 Copley Place	Boston	MA	02116
(Address of principal executive offices)			(Zip Code)

(617) 532-6100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	W	The New York Stock Exchange

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 

Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

Class	Outstanding at July 29, 2020
Class A Common Stock, $0.001 par value per share	68,434,295
Class B Common Stock, $0.001 par value per share	26,956,734

WAYFAIR INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the Quarterly Period Ended June 30, 2020

		Page
Part I. FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated and Condensed Financial Statements
	Consolidated and Condensed Balance Sheets as of June 30, 2020 and December 31, 2019	3
	Consolidated and Condensed Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	4
	Consolidated and Condensed Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019	5
	Consolidated and Condensed Statements of Stockholders' Deficit for the Three and Six Months Ended June 30, 2020 and 2019	6
	Consolidated and Condensed Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	8
	Notes to the Unaudited Consolidated and Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 6.	Exhibits	43
Signatures		45

1

PART I

FINANCIAL INFORMATION

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our investment plans and anticipated returns on those investments, our future customer growth, our future results of operations and financial position, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, consumer activity and behaviors, developments in our technology and systems and anticipated results of those developments and the impact of the recent novel coronavirus (COVID-19) pandemic and our response to it, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions.

Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

Factors that could cause or contribute to differences in our future results include, without limitation, the following:

•our ability to acquire new customers and sustain and/or manage our growth;

•our ability to increase our net revenue per active customer;

•our ability to build and maintain strong brands;

•our ability to manage our global growth and expansion;

•our ability to compete successfully;

•the rate of growth of the Internet and e-commerce;

•economic factors, such as interest rates, the housing market, currency exchange fluctuations and changes in customer spending;

•disruptions or inefficiencies in our supply chain or logistics network, including any impact of the COVID-19 outbreak on our suppliers and third party carriers and delivery agents;

•potential impacts of the COVID-19 outbreak on our business, financial condition, and results of operations;

•world events, natural disasters, public health emergencies (such as the COVID-19 outbreak), civil disturbances, and terrorist attacks; and

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

A further list and description of risks, uncertainties and other factors that could cause or contribute to differences in our future results include the cautionary statements herein and in our other filings with the Securities and Exchange Commission, including those set forth under Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q and under Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019. We qualify all of our forward-looking statements by these cautionary statements.

2

WAYFAIR INC.

CONSOLIDATED AND CONDENSED BALANCE SHEETS

(Unaudited)

	June 30, 2020		December 31, 2019
	(in thousands, except share and per share data)
Assets:
Current assets
Cash and cash equivalents	$	2,181,471	$	582,753
Short-term investments	192,746		404,252
Accounts receivable, net of allowance for credit losses of $28,155 and $22,774 at June 30, 2020 and December 31, 2019, respectively	118,984		99,720
Inventories	42,841		61,692
Prepaid expenses and other current assets	342,985		228,721
Total current assets	2,879,027		1,377,138
Operating lease right-of-use assets	802,456		763,400
Property and equipment, net	667,456		624,544
Goodwill and intangible assets, net	18,007		18,809
Long-term investments	—		155,690
Other noncurrent assets	12,550		13,467
Total assets	$	4,379,496	$	2,953,048
Liabilities and Stockholders' Deficit:
Current liabilities
Accounts payable	$	1,270,495	$	908,097
Accrued expenses	299,714		298,918
Unearned revenue	333,781		167,641
Other current liabilities	379,431		236,863
Total current liabilities	2,283,421		1,611,519
Long-term debt	1,988,213		1,456,195
Operating lease liabilities	863,135		822,602
Other liabilities	32,119		6,940
Total liabilities	5,166,888		3,897,256
Commitments and contingencies (Note 8)
Stockholders’ deficit:
Undesignated preferred stock, $0.001 par value per share: 10,000,000 shares authorized and NaN issued at June 30, 2020 and December 31, 2019	—		—
Class A common stock, par value $0.001 per share, 500,000,000 shares authorized, 68,108,216 and 66,642,611 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	68		67
Class B common stock, par value $0.001 per share, 164,000,000 shares authorized, 26,956,796 and 26,957,815 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	27		27
Additional paid-in capital	1,295,971		1,122,548
Accumulated deficit	(2,082,934)		(2,065,423)
Accumulated other comprehensive loss	(524)		(1,427)
Total stockholders’ deficit	(787,392)		(944,208)
Total liabilities and stockholders’ deficit	$	4,379,496	$	2,953,048

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

3

WAYFAIR INC.

CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share data)
Net revenue	$	4,304,672	$	2,343,251	$	6,634,735	$	4,288,080
Cost of goods sold	2,983,642		1,783,651		4,734,582		3,258,024
Gross profit	1,321,030		559,600		1,900,153		1,030,056
Operating expenses:
Customer service and merchant fees	143,773		88,502		233,236		164,975
Advertising	417,777		259,166		693,537		503,135
Selling, operations, technology, general and administrative	459,482		383,109		935,450		726,757
Total operating expenses	1,021,032		730,777		1,862,223		1,394,867
Income (loss) from operations	299,998		(171,177)		37,930		(364,811)
Interest (expense), net	(28,939)		(10,252)		(51,157)		(19,490)
Other income, net	3,110		322		2,864		3,400
Income (loss) before income taxes	274,169		(181,107)		(10,363)		(380,901)
Provision for income taxes, net	292		831		1,625		1,426
Net income (loss)	$	273,877	$	(181,938)	$	(11,988)	$	(382,327)
Basic earnings (loss) per share	$	2.89	$	(1.98)	$	(0.13)	$	(4.18)
Diluted earnings (loss) per share	$	2.54	$	(1.98)	$	(0.13)	$	(4.18)
Weighted-average number of shares of common stock outstanding used in computing per share amounts:
Basic	94,834		91,802		94,461		91,455
Diluted	119,932		91,802		94,461		91,455

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

4

WAYFAIR INC.

CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Net income (loss)	$	273,877	$	(181,938)	$	(11,988)	$	(382,327)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(1,093)		(439)		230		204
Net unrealized (loss) gain on available-for-sale investments	(73)		47		673		200
Comprehensive income (loss)	$	272,711	$	(182,330)	$	(11,085)	$	(381,923)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

5

WAYFAIR INC.

CONSOLIDATED AND CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT

(Unaudited)

	Three Months Ended
	Class A and Class B Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
		(in thousands)
Balance at March 31, 2019	91,401	$	92	$	802,973	$	(1,281,228)	$	(984)	$	(479,147)
Net loss	—	—		—		(181,938)		—		(181,938)
Other comprehensive loss	—	—		—		—		(392)		(392)
Exercise of options to purchase common stock	4	—		13		—		—		13
Issuance of common stock upon vesting of RSUs	695	1		—		—		—		1
Shares withheld related to net settlement of RSUs	(2)	—		(259)		—		—		(259)
Equity-based compensation expense	—	—		56,365		—		—		56,365
Balance at June 30, 2019	92,098	$	93	$	859,092	$	(1,463,166)	$	(1,376)	$	(605,357)
Balance at March 31, 2020	94,363	$	94	$	1,184,674	$	(2,356,811)	$	642	$	(1,171,401)
Net income	—	—		—		273,877		—		273,877
Other comprehensive loss	—	—		—		—		(1,166)		(1,166)
Exercise of options to purchase common stock	11	—		95		—		—		95
Issuance of common stock upon vesting of RSUs	691	1		—		—		—		1
Equity-based compensation expense	—	—		72,313		—		—		72,313
Equity component of issuance of convertible notes, net (Note 15)	—	—		38,889		—		—		38,889
Balance at June 30, 2020	95,065	$	95	$	1,295,971	$	(2,082,934)	$	(524)	$	(787,392)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

6

WAYFAIR INC.

CONSOLIDATED AND CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT

(Unaudited)

	Six Months Ended
	Class A and Class B Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
		(in thousands)
Balance at December 31, 2018	90,748	$	91	$	753,657	$	(1,082,689)	$	(1,780)	$	(330,721)
Net loss	—	—		—		(382,327)		—		(382,327)
Other comprehensive income	—	—		—		—		404		404
Exercise of options to purchase common stock	25	—		80		—		—		80
Issuance of common stock upon vesting of RSUs	1,328	2		—		—		—		2
Shares withheld related to net settlement of RSUs	(3)	—		(424)		—		—		(424)
Equity-based compensation expense	—	—		105,779		—		—		105,779
Adoption of ASU No. 2016-02	—	—		—		1,850		—		1,850
Balance at June 30, 2019	92,098	$	93	$	859,092	$	(1,463,166)	$	(1,376)	$	(605,357)
Balance at December 31, 2019	93,600	$	94	$	1,122,548	$	(2,065,423)	$	(1,427)	$	(944,208)
Net loss	—	—		—		(11,988)		—		(11,988)
Other comprehensive income	—	—		—		—		903		903
Exercise of options to purchase common stock	18	—		220		—		—		220
Issuance of common stock upon vesting of RSUs	1,447	1		—		—		—		1
Equity-based compensation expense	—	—		134,314		—		—		134,314
Equity component of issuance of convertible notes, net (Note 15)	—	—		38,889		—		—		38,889
Adoption of ASU No. 2016-13	—	—		—		(5,523)		—		(5,523)
Balance at June 30, 2020	95,065	$	95	$	1,295,971	$	(2,082,934)	$	(524)	$	(787,392)

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

7

CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited) 

	Six months ended June 30,
	2020		2019
	(in thousands)
Cash flows from operating activities:
Net loss	$	(11,988)	$	(382,327)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	135,957		83,922
Equity-based compensation	127,081		100,247
Amortization of discount and issuance costs on convertible notes	46,488		23,015
Other non-cash adjustments	(531)		(1,595)
Changes in operating assets and liabilities:
Accounts receivable, net	(24,693)		(27,653)
Inventories	18,828		540
Prepaid expenses and other current assets	(114,296)		(22,432)
Accounts payable and accrued expenses	369,666		128,611
Unearned revenue and other liabilities	331,511		14,914
Other assets	938		(1,324)
Net cash provided by (used in) operating activities	878,961		(84,082)
Cash flows from investing activities:
Sale and maturities of short- and long-term investments	368,310		82,164
Purchase of property and equipment	(104,810)		(115,340)
Site and software development costs	(75,172)		(58,866)
Other investing activities, net	(124)		2,773
Net cash provided by (used in) investing activities	188,204		(89,269)
Cash flows from financing activities:
Proceeds from borrowings	200,000		—
Repayment of borrowings	(200,000)		—
Proceeds from issuance of convertible notes, net of issuance costs	527,423		—
Taxes paid related to net share settlement of equity awards	—		(424)
Deferred financing costs	—		(791)
Net proceeds from exercise of stock options	220		80
Net cash provided by (used in) financing activities	527,643		(1,135)
Effect of exchange rate changes on cash and cash equivalents	3,910		136
Net increase (decrease) in cash and cash equivalents	1,598,718		(174,350)
Cash and cash equivalents:
Beginning of period	582,753		849,461
End of period	$	2,181,471	$	675,111
Supplemental cash flow information:
Cash paid for interest on long-term debt	$	8,681	$	3,720
Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities	$	34,040	$	5,259

The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

8

Notes to Consolidated and Condensed Financial Statements

(Unaudited)

1. Description of Business

Wayfair Inc. (the "Company") is one of the world's largest online destinations for the home. Through its e-commerce business model, the Company offers visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 18 million products from over 12,000 suppliers.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Consolidated and Condensed Financial Statements contained in this Quarterly Report on Form 10-Q are those of the Company and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.

The Consolidated and Condensed Balance Sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.

The accompanying unaudited Consolidated and Condensed Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the results of the interim periods presented. Interim results are not necessarily indicative of the results for the full year ended December 31, 2020 or future periods.

The Company believes that other than the implementation of ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), there have been no significant changes during the six months ended June 30, 2020 to the items disclosed in Note 2, 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, 2019.

Principles of Consolidation 

The accompanying unaudited Consolidated and Condensed Financial Statements of Wayfair Inc. include its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Use of Estimates 

The preparation of the Consolidated and Condensed Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. Actual results could differ from those estimates.

Earnings (Loss) per Share

The Company follows the two-class method when computing earnings (loss) per share for its two issued classes of common stock - Class A and Class B. Basic earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, stock awards, including stock options and restricted stock units, as determined under the treasury stock method, and convertible debt instruments, as determined under the if-converted method. In periods when we have a net loss, stock awards and convertible debt instruments are excluded from our calculations of earnings per share as their inclusion would have an antidilutive effect.

9

Credit Impairment

The Company adopted ASU No. 2016-13 on January 1, 2020 using the modified retrospective transition method. This ASU revises how entities account for credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. As of January 1, 2020, the adoption of ASU 2016-13 resulted in a $5.5 million cumulative adjustment to accumulated deficit on our Consolidated and Condensed Balance Sheet. Refer to Note 4, Credit Losses, for additional detail.

3. Investments and Fair Value Measurements

Investments

As of June 30, 2020 and December 31, 2019, the Company's investments consisted of corporate bonds and other government obligations priced at fair value. These investments were classified as available-for-sale and their estimated fair values were $192.7 million and $559.9 million, respectively.

To the extent the amortized cost basis of the available-for-sale debt securities exceeds the fair value, management assesses the debt securities for credit loss, however management considers the risk of credit loss to be minimized by the Company'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. During the three and six months ended June 30, 2020 and 2019, the Company did 0t recognize any credit losses related to its available-for-sale debt securities. Further, as of June 30, 2020 and December 31, 2019, the Company did 0t record an allowance for credit losses related to its available-for-sale debt securities. During the six months ended June 30, 2020, the Company collected $161.3 million of proceeds from the sale of long-term investments and recognized a realized gain of $0.8 million. The Company did 0t recognize any realized gains or losses during the three months ended June 30, 2020 or during the three and six months ended June 30, 2019.

 The following tables present details of the Company’s investments as of June 30, 2020 and December 31, 2019:

	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	192,041	$	705	$	—	$	192,746
Total	$	192,041	$	705	$	—	$	192,746

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	404,294	$	20	$	(62)	$	404,252
Long-term:
Investment securities	155,616		92		(18)		155,690
Total	$	559,910	$	112	$	(80)	$	559,942

10

Fair Value Measurements

The Company's financial assets and liabilities are measured at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The three levels of inputs used to measure fair value are as follows:

▪Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities

▪Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability

▪Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company measures its cash equivalents and short-term and long-term investments at fair value. The Company classifies its cash equivalents and certificates of deposits within Level 1 because the Company values these investments using quoted market prices. The fair value of the Company's Level 1 financial assets is based on quoted market prices of the identical underlying security. The Company classifies short-term and long-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active. The Company does not have any assets or liabilities classified as Level 3 financial assets.  

The following tables set forth the fair value of the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 based on the three-tier value hierarchy:

	June 30, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash and cash equivalents:
Cash	$	586,610	$	—	$	—	$	586,610
Cash equivalents	1,594,861		—		—		1,594,861
Total cash and cash equivalents	2,181,471		—		—		2,181,471
Short-term investments:
Investment securities	—		192,746		—		192,746
Other non-current assets:
Certificate of deposit	5,200		—		—		5,200
Total	$	2,186,671	$	192,746	$	—	$	2,379,417

	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash and cash equivalents:
Cash	$	308,521	$	—	$	—	$	308,521
Cash equivalents	274,232		—		—		274,232
Total cash and cash equivalents	582,753		—		—		582,753
Short-term investments:
Investment securities	—		404,252		—		404,252
Other non-current assets:
Certificate of deposit	5,076		—		—		5,076
Long-term investments:
Investment securities	—		155,690		—		155,690
Total	$	587,829	$	559,942	$	—	$	1,147,771

11

4. Credit Losses

Accounts receivable are stated net of credit losses, which are recorded based on historical losses as well as management's expectation of future collections. Uncollectible amounts are written off against the allowance after all collection efforts have been exhausted. The Company's exposure to credit loss is minimized through fraud assessments performed prior to customer checkout and the Company's policy of monitoring the creditworthiness of its customers to which it grants credit terms in the normal course of business. Further, management notes credit risk is mitigated as approximately 99% of the net revenue recognized for the three and six months ended June 30, 2020 was collected in advance of recognition.

As of June 30, 2020, the Company reported $119.0 million of accounts receivable, net of allowance for credit losses of $28.2 million. Other than the adjustment related to the adoption of ASU 2016-13, as discussed in Note 2, Summary of Significant Accounting Policies, changes in the allowance for credit losses were not material for the three and six months ended June 30, 2020.

5. Intangible Assets and Goodwill

As of June 30, 2020 and December 31, 2019, the Company had $17.6 million and $18.4 million of intangible assets, respectively. Amortization expense related to intangible assets was $0.4 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively, and $0.8 million and $0.3 million for the six months ended June 30, 2020 and 2019, respectively.

Goodwill was $0.4 million as of June 30, 2020 and December 31, 2019.

6. Property and Equipment, net

The following table summarizes property and equipment, net as of June 30, 2020 and December 31, 2019:

	June 30, 2020		December 31, 2019
	(in thousands)
Furniture and computer equipment	$	537,080	$	509,120
Site and software development costs	367,394		297,252
Leasehold improvements	311,372		228,514
Construction in progress	22,763		45,503
	1,238,609		1,080,389
Less accumulated depreciation and amortization	(571,153)		(455,845)
Property and equipment, net	$	667,456	$	624,544

Property and equipment depreciation and amortization expense was $68.7 million and $44.2 million for the three months ended June 30, 2020 and 2019, respectively, and $135.2 million and $83.6 million for the six months ended June 30, 2020 and 2019, respectively.

7. Leases

The Company has lease arrangements for warehouse, fulfillment center, office, and data center spaces. These leases expire at various dates through 2036. Operating lease expense was $44.2 million and $29.4 million in the three months ended June 30, 2020 and 2019, respectively, and $80.3 million and $55.0 million for the six months ended June 30, 2020 and 2019, respectively.

The following table presents supplemental cash flow information related to leases:

	Six months ended June 30, 2020		Six months ended June 30, 2019
	(in thousands)
Cash payments included in operating cash flows from lease arrangements	$	69,598	$	50,387
Right-of-use assets obtained in exchange for lease obligations	$	78,250	$	138,064

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The following table presents supplemental balance sheet information related to leases:

	June 30, 2020		December 31, 2019
Additional lease information
Weighted average remaining lease term	9.5 years		10 years
Weighted average discount rate	6.7	%	6.7	%

The following table presents future minimum lease payments under non-cancellable leases as of June 30, 2020:

	Amount
	(in thousands)
2020 (excluding the six months ended June 30, 2020)	$	76,545
2021	163,559
2022	157,560
2023	152,990
2024	150,827
Thereafter	587,907
Total future minimum lease payments	1,289,388
Less: Imputed interest	(328,493)
Total	$	960,895

The following table presents total operating leases as of June 30, 2020 and December 31, 2019:

	June 30, 2020		December 31, 2019
	(in thousands)
Balance sheet line item
Other current liabilities	$	97,760	$	91,104
Operating lease liabilities	863,135		822,602
Total operating leases	$	960,895	$	913,706

As of June 30, 2020, the Company has entered into $167.7 million of additional operating leases, primarily related to build-to-suit warehouse leases that have not yet commenced. As the Company does not control the underlying assets during the construction period, the Company is not considered the owner of the construction projects for accounting purposes. These operating leases will commence between 2020 and 2021 with lease terms of 2 to 15 years.

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8. Commitments and Contingencies

Letters of Credit

The Company has issued letters of credit, primarily as security for certain lease agreements, for approximately $54.3 million and $46.7 million, as of June 30, 2020 and December 31, 2019, respectively.

Legal Matters

From time to time the Company is involved in claims that arise during the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company does not currently believe that the outcome of any of these legal matters will have a material adverse effect on the Company'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 the Company's overall operations. In addition, the Company 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

On January 10, 2019 and January 16, 2019, putative securities class action complaints were filed against the Company and 3 of its officers in the U.S. District Court for the District of Massachusetts. The 2 complaints alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, relating to certain prior disclosures of the Company. Each plaintiff was seeking to represent a class of shareholders who purchased or acquired stock of the Company between August 2, 2018 and October 31, 2018 and was seeking damages and other relief based on allegations that the defendants' conduct affected the value of such stock. On July 8, 2020, the consolidated complaint was dismissed with prejudice.

9. Equity-Based Compensation

The board of directors of the Company (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. The 2014 Plan is administered by the Board with respect to awards to non-employee directors and by the compensation committee of the Board with respect to other participants and provides for the issuance of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance shares, stock payments, cash payments, dividend awards and other incentives. Prior to the adoption of the 2014 Plan, Wayfair LLC issued certain equity awards pursuant to the Wayfair LLC Amended and Restated Common Unit Plan (the "2010 Plan"), which was administered by the board of directors of Wayfair LLC. Awards issued under the 2010 Plan that remain outstanding currently represent Class A or Class B common stock of the Company.

For awards granted pursuant to the 2014 Plan, 8,603,066 shares of Class A common stock were initially available for issuance. The 2014 Plan also contains an evergreen provision whereby the shares available for future grant are increased on the first day of each calendar year beginning January 1, 2016 and ending on and including January 1, 2024. As of January 1, 2020, 5,111,305 shares of Class A common stock were available for future grant under the 2014 Plan. Shares or RSUs forfeited, withheld for minimum statutory tax obligations, and unexercised stock option lapses from the 2010 and 2014 Plans are available for future grant under the 2014 Plan.

The following table presents activity relating to stock options for the six months ended June 30, 2020: 

	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)
Outstanding at December 31, 2019	43,606	$	3.00	1.5
Options exercised	(17,485)	$	3.00
Outstanding and exercisable at June 30, 2020	26,121	$	3.00	1.0

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The intrinsic value of stock options exercised was $2.2 million and $3.7 million for the six months ended June 30, 2020 and 2019, respectively. The aggregate intrinsic value of stock options outstanding and currently exercisable is $5.1 million as of June 30, 2020. All stock options were fully vested at June 30, 2020.

The following table presents activity relating to RSUs for the six months ended June 30, 2020: 

	Shares	Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2019	8,112,736	$	95.69
RSUs granted	1,467,735	$	151.05
RSUs vested	(1,447,101)	$	92.00
RSUs forfeited/canceled	(953,319)	$	101.67
Outstanding as of June 30, 2020	7,180,051	$	107.16

The intrinsic value of RSUs vested was $137.1 million and $187.3 million for the six months ended June 30, 2020 and 2019, respectively. The aggregate intrinsic value of RSUs unvested is $1.4 billion as of June 30, 2020. Unrecognized equity-based compensation expense related to outstanding RSUs is $695.5 million with a weighted average remaining vesting term of 1.3 years at June 30, 2020.

10. Unearned Revenue

The Company has three types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are initially recorded in unearned revenue, and are recognized as net revenue when the products are delivered, (ii) unredeemed gift cards and site and store credits, which are initially recorded in unearned revenue, and are recognized in the period they are redeemed, and (iii) membership rewards redeemable for future purchases, which are earned by customers on purchases made with the Company's Wayfair branded, private label credit card, and are initially recorded in other current liabilities, and are recognized as net revenue when redeemed. The portion of gift cards and site and store credits not expected to be redeemed ("breakage") are recognized as net revenue based on historical redemption patterns, which is substantially within twenty-four months from the date of issuance, to the extent there is no requirement for remitting balances to governmental agencies.

Contractual liabilities included in unearned revenue and other current liabilities in the Consolidated and Condensed Balance Sheet were $333.8 million and $6.1 million at June 30, 2020 and $167.6 million and $4.6 million at December 31, 2019, respectively. During the six months ended June 30, 2020, the Company recognized $136.2 million and $2.2 million of net revenue that was included in unearned revenue and other current liabilities, respectively, at December 31, 2019.

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 11, Segment and Geographic Information, for additional detail.

11. Segment and Geographic Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated on a regular basis by the Chief Operating Decision Maker ("CODM") in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its chief executive officer. 

The Company's operating and reportable segments are the U.S. and International. 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 income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest (expense), net, other income, net, provision for income taxes, net, non-recurring items, and other items not indicative of our ongoing operating performance. These charges are excluded from 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 Company allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative 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, interest (expense), net, other income, net, and provision for income taxes, net. There are no net revenue transactions between the Company's reportable segments.

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U.S.

The U.S. segment primarily consists of amounts earned through product sales through the Company's family of sites in the U.S. and through websites operated by third parties in the U.S. The U.S. net revenue for the three and six months ended June 30, 2019 includes $11.5 million and $25.1 million, respectively, of net revenue previously classified as other net revenue.

International

The International segment primarily consists of amounts earned through product sales through the Company's international sites.

Net revenue from external customers for each group of similar products and services are not reported to the CODM. Separate identification of this information for purposes of segment disclosure is impractical, as it is not readily available and the cost to develop it would be excessive. No individual country outside of the U.S. provided greater than 10% of consolidated net revenue.

The following tables present net revenues and Adjusted EBITDA attributable to the Company's reportable segments for the periods presented:

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
U.S. net revenue	$	3,651,704	$	2,000,518	$	5,626,687	$	3,658,216
International net revenue	652,968		342,733		1,008,048		629,864
Total net revenue	$	4,304,672	$	2,343,251	$	6,634,735	$	4,288,080

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Adjusted EBITDA:
U.S.	$	434,574	$	(342)	$	389,479	$	(28,124)
International	5,239		(69,641)		(76,943)		(144,077)
Total reportable segments Adjusted EBITDA	439,813		(69,983)		312,536		(172,201)
Less: reconciling items (1)	(165,936)		(111,955)		(324,524)		(210,126)
Net income (loss)	$	273,877	$	(181,938)	$	(11,988)	$	(382,327)

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

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Depreciation and amortization	$	69,114	$	44,339	$	135,957	$	83,922
Equity-based compensation and related taxes	70,701		56,855		134,693		108,688
Interest expense, net	28,939		10,252		51,157		19,490
Other (income), net	(3,110)		(322)		(2,864)		(3,400)
Provision for income taxes, net	292		831		1,625		1,426
Other (1)	—		—		3,956		—
Total reconciling items	$	165,936	$	111,955	$	324,524	$	210,126

(1) The Company recorded $4.0 million in the six months ended June 30, 2020 in selling, operations, technology, general and administrative expenses in the Consolidated and Condensed Statements of Operations related to severance costs associated with February 2020 workforce reductions.

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12. Income Taxes

The provision for income taxes, net was $0.3 million and $0.8 million for the three months ended June 30, 2020 and 2019, respectively, and $1.6 million and $1.4 million for the six months ended June 30, 2020 and 2019, respectively. The provision for income taxes, net recorded in the three and six months ended June 30, 2020 is primarily related to income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes, offset by a discrete tax benefit related to excess tax benefits on equity awards for U.S. employees. The provision for income taxes, net recorded in the three and six months ended June 30, 2019 is primarily related to income earned in certain foreign jurisdictions and U.S. state income taxes.

Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The Company has deferred tax assets related to its net operating loss carryforwards accumulated since the fourth quarter of 2014 and related to net operating loss carryforwards of certain of its foreign subsidiaries. A valuation allowance against net deferred tax assets is required if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company reassesses the valuation allowance on a quarterly basis and has provided a valuation allowance on substantially all of its worldwide net deferred tax assets.

The Company had 0 material unrecognized tax benefits as of June 30, 2020 and December 31, 2019. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes, net. 

13. Stockholders’ Deficit

Preferred Stock

The Company authorized 10,000,000 shares of undesignated preferred stock, $0.001 par value per share, for future issuance. As of June 30, 2020, the Company had 0 shares of undesignated preferred stock issued or outstanding.

Common Stock

The Company authorized 500,000,000 shares of Class A common stock, $0.001 par value per share, and 164,000,000 shares of Class B common stock, $0.001 par value per share, of which 68,108,216 and 66,642,611 shares of Class A common stock and 26,956,796 and 26,957,815 shares of Class B common stock were outstanding as of June 30, 2020 and December 31, 2019, respectively. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to 1 vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock may be converted into 1 share of Class A common stock at the option of its holder and will be automatically converted into 1 share of Class A common stock upon transfer thereof, subject to certain exceptions. In addition, upon the date on which the outstanding shares of Class B common stock represent less than 10% of the aggregate number of shares of the then outstanding Class A common stock and Class B common stock, or in the event of the affirmative vote or written consent of holders of at least 66 2/3% of the outstanding shares of Class B common stock, all outstanding shares of Class B common stock shall convert automatically into Class A common stock. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of common stock are entitled to receive dividends out of funds legally available if the Board, in its discretion, determines to issue dividends and then only at the times and in the amounts that the Board may determine. Since the Company's initial public offering through June 30, 2020, 55,082,738 shares of Class B common stock were converted to Class A common stock. 

14. Credit Agreement

On February 21, 2019 (the "Closing Date"), the Company, as guarantor, and Wayfair LLC, a wholly-owned subsidiary of the Company, as borrower (the “Borrower”) entered into an Amended and Restated Credit Agreement (the “Amended Credit Agreement”) with Citibank, in its capacity as administrative agent, swing line lender and letter of credit issuer, and certain other lenders party thereto. The Amended Credit Agreement replaced the Company's existing credit facility with Citibank. The Amended Credit Agreement consists of:

•A secured revolving credit facility under which the Borrower may borrow up to $165 million, subject to certain sublimits, with a final maturity date of February 21, 2022 (the “Revolver”).

•The Borrower also has the right, subject to certain customary conditions, to increase the Revolver by $50 million.

•The Revolver has the following sublimits:

◦a $100 million letter of credit sublimit; and

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◦a $15 million swing line sublimit.

The Borrower’s obligations under the Amended Credit Agreement are guaranteed by the Company and certain of its subsidiaries (together, the “Guarantors”). 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 the Company’s domestic subsidiaries and 65% of the capital stock of the Company’s first-tier foreign subsidiaries.

The proceeds of the Revolver may be used to finance working capital, to refinance certain existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes.

Borrowings under the Revolver will bear interest through maturity at a variable rate based upon, at the Borrower’s option, either the Eurodollar rate or the base rate (which is the highest of (x) Citibank’s 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 Eurodollar rate), plus, in each case an applicable margin. As of the Closing Date, the applicable margin for Eurodollar rate loans was 1.75% per annum and the applicable margin for base rate loans was 0.75% per annum. The applicable margin is subject to specified changes depending on the Liquidity (as defined in the Amended Credit Agreement) of the Company.

Any amounts outstanding under the Revolver are due at maturity. In addition, subject to the terms and conditions set forth in the Amended Credit Agreement, the Borrower is required to make certain mandatory prepayments prior to maturity.

The Amended Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, will limit or restrict the ability of the Borrower and the Guarantors, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. The Amended Credit Agreement also contains customary events of default, subject to thresholds and grace periods, including, among others, payment default, covenant default, cross default to other material indebtedness, and judgment default. In addition, the Amended Credit Agreement requires the Company to maintain certain levels of Free Cash Flow (as defined in the Amended Credit Agreement).

In the six months ended June 30, 2020, the Company borrowed under the Revolver. All borrowings were repaid as of June 30, 2020. As a result, there was 0 debt outstanding as of June 30, 2020. The Company did not borrow any amounts under its credit agreement during the year ended December 31, 2019.

15. Convertible Debt

On September 15, 2017, the Company issued $431.25 million in aggregate principal amount of 0.375% Convertible Senior Notes due 2022 (the "2017 Notes"), which includes the exercise in full of a $56.25 million over-allotment option, to certain financial institutions as the initial purchasers of the 2017 Notes (the "2017 Initial Purchasers"). On September 11, 2017, in connection with the pricing of the 2017 Notes, the Company entered into privately negotiated capped call transactions (the "2017 Base Capped Call Transactions") with 2 of the 2017 Initial Purchasers and certain other financial institutions (the "2017 Option Counterparties") and, in connection with the exercise in full of the over-allotment option by the 2017 Initial Purchasers, on September 14, 2017, entered into additional capped call transactions (such additional capped call transactions, the "2017 Additional Capped Call Transactions” and, together with the 2017 Base Capped Call Transactions, the "2017 Capped Call Transactions") with the 2017 Option Counterparties. Collectively, the 2017 Capped Call Transactions covered, initially, the number of shares of the Company’s Class A common stock underlying the 2017 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2017 Notes.

On November 15, 2018, the Company amended and restated the 2017 Capped Call Transactions (the "Restated 2017 Capped Call Transactions") with each of the 2017 Option Counterparties in order to, among other things, provide that the options underlying the Restated 2017 Capped Call Transactions can, at the Company’s option, remain outstanding until September 1, 2022, which is the maturity date for the 2017 Notes, even if all or a portion of the 2017 Notes are converted, repurchased or redeemed prior to such date.

In November 2018, the Company issued $575.0 million in aggregate principal amount of 1.125% Convertible Senior Notes due 2024 (the "2018 Notes"), which includes the exercise in full of a $75.0 million option granted to the initial purchasers, to certain financial institutions as the initial purchasers of the 2018 Notes (the "2018 Initial Purchasers"). The issuance of $500.0 million of 2018 Notes closed on November 19, 2018 and the additional $75.0 million of additional 2018 Notes, which were issued pursuant to the exercise of the 2018 Initial Purchasers' option to purchase such additional 2018 Notes, closed on November 29, 2018. On November 14, 2018, in connection with the pricing of the 2018 Notes, the Company entered

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into privately negotiated capped call transactions (the "2018 Base Capped Call Transactions") with one of the 2018 Initial Purchasers and certain other financial institutions (the "2018 Option Counterparties") and, in connection with the exercise in full of the 2018 Initial Purchasers' option to purchase such additional 2018 Notes, on November 27, 2018, entered into additional capped call transactions (such additional capped call transactions, the "2018 Additional Capped Call Transactions" and, together with the 2018 Base Capped Call Transactions, the "2018 Capped Call Transactions") with the 2018 Option Counterparties. Collectively, the 2018 Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the 2018 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2018 Notes.

On August 19, 2019, the Company issued $948.75 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2026 (the "2019 Notes" and together with the 2017 Notes and 2018 Notes, the "Non-Accreting Notes"), which includes the exercise in full of a $123.75 million option granted to the initial purchasers, to certain financial institutions as the initial purchasers of the 2019 Notes (the "2019 Initial Purchasers"). On August 14, 2019, in connection with the pricing of the 2019 Notes, the Company entered into privately negotiated capped call transactions (the "2019 Base Capped Call Transactions") with certain of the 2019 Initial Purchasers or their affiliates and another financial institution (the "2019 Option Counterparties") and, in connection with the exercise in full of the 2019 Initial Purchasers' option to purchase such additional 2019 Notes, on August 16, 2019, entered into additional capped call transactions (such additional capped call transactions, the "2019 Additional Capped Call Transactions" and, together with the 2019 Base Capped Call Transactions, the "2019 Capped Call Transactions") with the 2019 Option Counterparties. Collectively, the 2019 Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the 2019 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2019 Notes.

On April 8, 2020, the Company issued $535.0 million in aggregate original principal amount of 2.50% Accreting Convertible Senior Notes due 2025 (the "2020 Accreting Notes" and together with the Non-Accreting Notes, the "Notes") to GHEP VII Aggregator, L.P. ("Great Hill"), CBEP Investments, LLC ("Charlesbank") and The Spruce House Partnership LLC. The 2020 Accreting Notes are fully and unconditionally guaranteed on a senior unsecured basis by Wayfair LLC, a wholly-owned subsidiary of the Company, as guarantor.

The net proceeds from the sale of the 2017 Notes, 2018 Notes, 2019 Notes, and the 2020 Accreting Notes were approximately $420.4 million, $562.0 million, $935.1 million, and $527.4 million, respectively, after deducting the initial purchasers’ discounts or placement agent fees, as applicable and the offering expenses payable by the Company. The Company used approximately $44.2 million, $93.4 million, and $145.7 million, respectively, of the net proceeds from the 2017 Notes, 2018 Notes, and 2019 Notes to pay the cost of the 2017 Capped Call Transactions, the 2018 Capped Call Transactions, and the 2019 Capped Call Transactions, respectively. The Company intends to use the remainder of the net proceeds from the Notes for working capital and general corporate purposes. The Company may also use a portion of the net proceeds to finance acquisitions, strategic transactions, investments or the repayment, purchase or exchange of indebtedness (including its existing convertible notes).

The Notes are general senior unsecured obligations of the Company. The Notes rank senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; rank equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; are effectively subordinated in right of payment to any of the Company’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 the Company’s subsidiaries, including Wayfair LLC’s guaranty of the 2020 Accreting Notes; and the 2020 Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of the Company’s subsidiaries (other than Wayfair LLC).

In accounting for the issuance of the Non-Accreting Notes, the Company separated the Non-Accreting Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component, representing the conversion option, which does not meet the criteria for separate accounting as a derivative as it is indexed to the Company's own stock, was determined by deducting the fair value of the liability component from the par value of the Non-Accreting Notes. The difference between the principal amount of the Non-Accreting Notes and the liability component represents the debt discount, which is recorded as a direct deduction from the related debt liability in the Consolidated and Condensed Balance Sheet and amortized to interest expense using the effective interest method over the term of the Non-Accreting Notes. The effective interest rate of the 2017 Notes, 2018 Notes and 2019 Notes is 6.0%, 8.1% and 6.4%, respectively. The equity component of the 2017 Notes, 2018 Notes and 2019 Notes of approximately $95.8 million, $181.5 million and $280.3 million, respectively, is included in additional paid-in capital in the Consolidated and Condensed Balance Sheet and is not remeasured as long as it continues to meet the conditions for equity classification. The Company allocated transaction costs related to the Non-Accreting Notes using the same proportions as the proceeds from the Non-Accreting Notes. Transaction costs attributable

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to the liability component were recorded as a direct deduction from the related debt liability in the Consolidated and Condensed Balance Sheet and amortized to interest expense over the term of the Non-Accreting Notes, and transaction costs attributable to the equity component were netted with the equity component in shareholders’ deficit.

In accounting for the issuance of the 2020 Accreting Notes, the Company determined there was a beneficial conversion feature which was calculated as the excess of the fair value of the underlying common stock at the commitment date less the effective conversion price of the shares convertible at that time. The beneficial conversion feature of $38.9 million was recorded to additional paid-in capital in the Consolidated and Condensed Balance Sheet and represents a debt discount to the 2020 Accreting Notes, which was recorded as a direct deduction from the related debt liability in the Consolidated and Condensed Balance Sheet and is amortized to interest expense using the effective interest method over the term of the 2020 Accreting Notes. The effective interest of the 2020 Accreting Notes is 4.3%. All transaction costs incurred were recorded as a direct deduction from the related debt liability in the Consolidated and Condensed Balance Sheet and are amortized to interest expense using the effective interest method over the term of the 2020 Accreting Notes.

The 2020 Accreting Notes accrue interest at a rate of 2.50% per annum which will accrete to the principal amount on April 1 and October 1 of each year, beginning on October 1, 2020. The interest is amortized to interest expense using the effective interest method over the term of the 2020 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, the Company will reclassify the interest accrued as of that date to long-term debt. The beneficial conversion feature for additional shares which would be issued upon conversion of paid in kind interest will be recorded as additional interest expense and additional paid-in capital over the term of the 2020 Accreting Notes as such interest accrues.

The following table presents the outstanding principal amount and carrying value of the Notes as of the date presented:

	June 30, 2020														December 31, 2019
	2017 Notes		2018 Notes		2019 Notes		2020 Accreting Notes		2017 Notes		2018 Notes		2019 Notes
	(in thousands)
Principal amounts:
Principal	$	431,250	$	575,000	$	948,750	$	535,000	$	431,250	$	575,000	$	948,750
Unamortized debt discount	(49,329)		(147,371)		(260,306)		(44,781)		(59,830)		(161,275)		(277,700)
Net carrying amount	$	381,921	$	427,629	$	688,444	$	490,219	$	371,420	$	413,725	$	671,050

The following tables present total interest expense recognized related to the Notes:

	Three Months Ended June 30,
	2020												2019
	2017 Notes		2018 Notes		2019 Notes		2020 Accreting Notes		2017 Notes		2018 Notes
	(in thousands)
Contractual interest expense	$	404	$	1,617	$	2,372	$	3,192	$	404	$	1,617
Interest cost related to amortization of the debt discount	5,289		7,017		8,619		1,685		4,981		6,467
Total interest expense	$	5,693	$	8,634	$	10,991	$	4,877	$	5,385	$	8,084

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	Six Months Ended June 30,
	2020												2019
	2017 Notes		2018 Notes		2019 Notes		2020 Accreting Notes		2017 Notes		2018 Notes
	(in thousands)
Contractual interest expense	$	809	$	3,234	$	4,691	$	3,192	$	809	$	3,234
Interest cost related to amortization of the debt discount	10,501		13,903		17,154		1,685		9,890		12,811
Total interest expense	$	11,310	$	17,137	$	21,845	$	4,877	$	10,699	$	16,045

The estimated fair value of the 2017 Notes, the 2018 Notes, the 2019 Notes, and the 2020 Accreting Notes was $821.1 million, $1.0 billion, $1.4 billion, and $1.5 billion, respectively, as of June 30, 2020. The estimated fair value of the Non-Accreting Notes was determined through consideration of quoted market prices. The estimated fair value of the 2020 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 2020 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, Investments and Fair Value Measurements. The if-converted value of the 2017 Notes, 2018 Notes, 2019 Notes, and 2020 Accreting Notes respectively, exceeded the principal value by $387.7 million, $401.2 million, $313.9 million, and $923.2 million, respectively, as of June 30, 2020.

2017 Notes

The 2017 Notes were issued pursuant to an indenture, dated September 15, 2017 (the "2017 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company pays interest on the 2017 Notes semiannually in arrears at a rate of 0.375% per annum on March 1 and September 1 of each year. The 2017 Notes are convertible based upon an initial conversion rate of 9.61 shares of the Company’s Class A common stock per $1,000 principal amount of 2017 Notes (equivalent to a conversion price of approximately $104.06 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2017 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2017 Notes will mature on September 1, 2022, unless earlier purchased, redeemed or converted. Prior to June 1, 2022, holders may convert all or a portion of their 2017 Notes only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period (the "2017 Notes measurement period") in which the trading price per $1,000 principal amount of 2017 Notes for each trading day of the 2017 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2017 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after June 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2017 Notes at any time, regardless of the foregoing circumstances. Holders of 2017 Notes who convert their 2017 Notes in connection with a notice of a redemption or a make-whole fundamental change (each as defined in the 2017 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2017 Notes.

The 2017 Notes are convertible during the third quarter of 2020, however, none of the 2017 Notes have been converted to date.

The Company may not redeem the 2017 Notes prior to September 8, 2020. On or after September 8, 2020, the Company may redeem for cash all or part of the 2017 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least 1 of the 5 trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2017 Notes to be redeemed, plus accrued and unpaid interest, if any.

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Upon the occurrence of a fundamental change (as defined in the 2017 Indenture), holders may require the Company to repurchase all or a portion of their 2017 Notes for cash at a price equal to 100% of the principal amount of the 2017 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

The 2017 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 2017 Notes then outstanding may declare the entire principal amount of all the 2017 Notes plus accrued interest, if any, to be immediately due and payable.

2018 Notes

The 2018 Notes were issued pursuant to an indenture, dated November 19, 2018 (the "2018 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company will pay interest on the 2018 Notes semiannually in arrears at a rate of 1.125% per annum on May 1 and November 1 of each year commencing on May 1, 2019. The 2018 Notes are convertible based upon an initial conversion rate of 8.5910 shares of the Company’s Class A common stock per $1,000 principal amount of 2018 Notes (equivalent to a conversion price of approximately $116.40 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2018 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2018 Notes will mature on November 1, 2024, unless earlier purchased, redeemed or converted. Prior to August 1, 2024, holders may convert all or a portion of their 2018 Notes only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the "2018 Notes measurement period") in which the trading price per $1,000 principal amount of 2018 Notes for each trading day of the 2018 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2018 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after August 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2018 Notes at any time, regardless of the foregoing circumstances. Holders of 2018 Notes who convert their 2018 Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the 2018 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2018 Notes.

The 2018 Notes are convertible during the third quarter of 2020, however, none of the 2018 Notes have been converted to date.

The Company may not redeem the 2018 Notes prior to May 8, 2022. On or after May 8, 2022, the Company may redeem for cash all or part of the 2018 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least 1 of the 5 trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2018 Notes to be redeemed, plus accrued and unpaid interest, if any.

Upon the occurrence of a fundamental change (as defined in the 2018 Indenture), holders may require the Company to repurchase all or a portion of their 2018 Notes for cash at a price equal to 100% of the principal amount of the 2018 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

The 2018 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 2018 Notes then outstanding may declare the entire principal amount of all the 2018 Notes plus accrued interest, if any, to be immediately due and payable.

2019 Notes

The 2019 Notes were issued pursuant to an indenture, dated August 19, 2019 (the "2019 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company will pay interest on the 2019 Notes semiannually in

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arrears at a rate of 1.00% per annum on February 15 and August 15 of each year commencing on February 15, 2020. The 2019 Notes are convertible based upon an initial conversion rate of 6.7349 shares of the Company’s Class A common stock per $1,000 principal amount of 2019 Notes (equivalent to a conversion price of approximately $148.48 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2019 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2019 Notes will mature on August 15, 2026, unless earlier purchased, redeemed or converted. Prior to May 15, 2026, holders may convert all or a portion of their 2019 Notes only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “2019 Notes measurement period”) in which the trading price per $1,000 principal amount of 2019 Notes for each trading day of the 2019 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2019 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after May 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2019 Notes at any time, regardless of the foregoing circumstances. Holders of 2019 Notes who convert their 2019 Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the 2019 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2019 Notes.

The 2019 Notes are not convertible during the third quarter of 2020 and none of the 2019 Notes have been converted to date.

The Company may not redeem the 2019 Notes prior to August 20, 2023. On or after August 20, 2023, the Company may redeem for cash all or part of the 2019 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2019 Notes to be redeemed, plus accrued and unpaid interest, if any.

Upon the occurrence of a fundamental change (as defined in the 2019 Indenture), holders may require the Company to repurchase all or a portion of their 2019 Notes for cash at a price equal to 100% of the principal amount of the 2019 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

The 2019 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 2019 Notes then outstanding may declare the entire principal amount of all the 2019 Notes plus accrued interest, if any, to be immediately due and payable.

2020 Accreting Notes

The 2020 Accreting Notes were issued pursuant to an indenture, dated April 8, 2020 (the "2020 Indenture"), among the Company, Wayfair LLC, as guarantor, and U.S. Bank National Association, as trustee. The 2020 Accreting Notes are fully and unconditionally guaranteed on a senior unsecured basis by Wayfair LLC. No cash interest will be payable on the 2020 Accreting Notes. Instead, the 2020 Accreting Notes will accrue interest at a rate of 2.50% per annum which will accrete to the principal amount on April 1 and October 1 of each year, beginning on October 1, 2020. The 2020 Accreting Notes are convertible based upon an initial conversion price of $72.50 per share of the Company’s Class A common stock. The conversion price 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 the Company's Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversion of 2020 Accreting Notes with a number of shares of the Company's Class A common stock per $1,000 original principal amount of 2020 Accreting Notes equal to the accreted principal amount of such original principal amount of 2020 Accreting Notes divided by the conversion price.

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The 2020 Accreting Notes will mature on April 1, 2025, unless earlier purchased, redeemed or converted. Holders may convert all or a portion of their 2020 Accreting Notes at any time prior to the second business day immediately preceding the maturity date. Holders of the 2020 Accreting Notes who convert in connection with a make-whole fundamental change (as defined in the 2020 Indenture) may be entitled to a premium in the form of additional shares of the Company's Class A common stock. None of the 2020 Accreting Notes have been converted to date.

The Company may not redeem the 2020 Accreting Notes prior to May 9, 2023. On or after May 9, 2023, the Company may redeem for cash all or part of the 2020 Accreting Notes if the last reported sale price of the Company's Class A common stock equals or exceeds 276% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the accreted principal amount of the 2020 Accreting Notes to be redeemed, including accrued interest, if any, but excluding, the redemption date.

Upon the occurrence of a fundamental change (as defined in the 2020 Indenture), holders may require the Company to repurchase all or a portion of their 2020 Accreting Notes for cash at a price equal to 100% of the accreted principal amount of the 2020 Accreting Notes to be repurchased (which accreted principal amount upon repurchase will include interest, if any, accrued to, but excluding, the fundamental change repurchase date).

The 2020 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 2020 Accreting Notes then outstanding may declare the entire principal amount of all the 2020 Accreting Notes plus accrued interest, if any, to be immediately due and payable.

Capped Call Transactions

The Restated 2017 Capped Call Transactions, 2018 Capped Call Transactions, and 2019 Capped Call Transactions (collectively, the "Capped Call Transactions") are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the Non-Accreting Notes upon conversion of the Non-Accreting Notes in the event that the market price per share of the Company’s Class A common stock is greater than the strike price of the Capped Call Transactions (which initially corresponds to the initial conversion price of the Non-Accreting Notes and is subject to certain adjustments under the terms of the Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Transactions. The Restated 2017 Capped Call Transactions have an initial cap price of $154.16 per share of the Company’s Class A common stock, which represents a premium of 100% over the last reported sale price of the Company’s Class A common stock on September 11, 2017, which is the date the 2017 Notes priced, and is subject to certain adjustments under the terms of the Restated 2017 Capped Call Transactions. The 2018 Capped Call Transactions have an initial cap price of $219.63 per share of the Company’s Class A common stock, which represents a premium of 150% over the last reported sale price of the Company’s Class A common stock on November 14, 2018, which is the day the 2018 Notes priced, and is subject to certain adjustments under the terms of the 2018 Capped Call Transactions. The 2019 Capped Call Transactions have an initial cap price of $280.15 per share of the Company's Class A common stock, which represents a premium of 150% over the last reported sale price of the Company's Class A common stock on August 14, 2019, which is the day the 2019 Notes priced, and is subject to certain adjustments under the terms of the 2019 Capped Call Transactions. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’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.

The Capped Call Transactions are separate transactions, in each case, entered into by the Company with the 2017 Option Counterparties, the 2018 Option Counterparties, and 2019 Option Counterparties, and are not part of the terms of the Non-Accreting Notes and will not affect any holder’s rights under the Non-Accreting Notes. Holders of the Non-Accreting Notes will not have any rights with respect to the Capped Call Transactions. The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company's stock. The premiums paid for the Capped Call Transactions have been included as a net reduction to additional paid-in capital within shareholders’ deficit.

16. Earnings (Loss) per Share

Basic and diluted net earnings (loss) per share is presented using the two-class method required for participating securities: Class A and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. For more information on the rights of Class A and Class B common stockholders, see Note 13, Stockholders’ Deficit.

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

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of common stock plus, if dilutive, common stock equivalents outstanding during the period and stock issuable upon conversion of our convertible debt instruments. The Company's common stock equivalents consist of shares issuable upon the release of RSUs, and to a lesser extent, the incremental shares of common stock issuable upon the exercise of stock options and unvested restricted stock. The dilutive effect of these common stock equivalents is reflected in diluted earnings (loss) per share by application of the treasury stock method. The dilutive effect of shares issuable upon conversion of the Company's convertible debt instruments are included in the calculation of diluted net earnings (loss) per share under the if-converted method.

For periods in which the Company has generated a net loss, the Company's basic and diluted earnings (loss) per share are the same as basic earnings (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 earnings (loss) per share.

The Company allocates undistributed earnings between the classes on a 1-to-1 basis when computing net earnings (loss) per share. As a result, basic and diluted net income (loss) per Class A and Class B shares of common stock are equivalent.

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

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share data)
Numerator:
Numerator for basic EPS - Net income (loss)	$	273,877	$	(181,938)	$	(11,988)	$	(382,327)
Effect of dilutive securities:
Interest expense associated with convertible debt instruments	30,195		—		—		—
Numerator for diluted EPS - net income (loss) available to common stockholders after the effect of dilutive securities	$	304,072	$	(181,938)	$	(11,988)	$	(382,327)
Denominator:
Denominator for basic EPS - weighted-average number of shares of common stock outstanding	94,834		91,802		94,461		91,455
Effect of dilutive securities:
Employee stock options	31		—		—		—
Restricted stock units	2,788		—		—		—
Convertible debt instruments	22,279		—		—		—
Dilutive potential common shares	25,098		—		—		—
Denominator for diluted EPS - adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities	119,932		91,802		94,461		91,455
Basic earnings (loss) per share	$	2.89	$	(1.98)	$	(0.13)	$	(4.18)
Diluted earnings (loss) per share	$	2.54	$	(1.98)	$	(0.13)	$	(4.18)

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

	Three months ended June 30,			Six months ended June 30,
	2020	2019	2020	2019
	(in thousands)
Outstanding employee stock options	—	55	26	55
Unvested restricted common stock	—	20	—	20
Unvested restricted stock units	933	7,999	7,180	7,999
Shares related to convertible debt instruments	—	9,084	22,279	9,084
Total	933	17,158	29,485	17,158

The Company may settle conversions of the Non-Accreting Notes in cash, shares of the Company's Class A common stock or any combination thereof at its election. The Company will settle conversions of the 2020 Accreting Notes in shares. The Capped Call Transactions are generally expected to reduce the potential dilution of the Company's Class A common stock upon any conversion of Notes and/or offset the cash payments the Company is required to make in excess of the principal amount of the Notes. The number of shares of the Company's Class A common stock potentially issuable and obtainable at the respective conversion prices of the Notes and the Capped Call Transactions, respectively, by year, are as follows:

	2017 Notes / Restated 2017 Capped Call Transactions	2018 Notes / 2018 Capped Call Transactions	2019 Notes / 2019 Capped Call Transactions	2020 Accreting Notes
	(in thousands)
Shares potentially issuable from convertible debt instruments	4,144	4,940	6,390	7,379
Shares obtainable from the exercise of capped call transactions	(1,347)	(2,322)	(3,003)	—
Total	2,797	2,618	3,387	7,379

For more information on the structure of the Notes and the Capped Call Transactions, including potential adjustments to the conversion prices used to determine the shares presented in the preceding table, see Note 15, Convertible Debt.

17. Related Party Transactions

As discussed in Note 15, Convertible Debt, on April 8, 2020, pursuant to the terms of the amended and restated purchase agreement, dated April 7, 2020 (the "Purchase Agreement"), the Company issued $535.0 million in aggregate original principal amount of 2020 Accreting Notes. The issuance of the 2020 Accreting Notes constitutes a related party transaction because of Michael W. Choe's positions as a director of the Company (as of May 12, 2020) and Managing Director and Chief Executive Officer of Charlesbank Capital Partners, LLC, the sole owner of the ultimate general partner of Charlesbank, a party to the Purchase Agreement; Michael Kumin's positions as a director of the Company and a Managing Partner at Great Hill Partners, LP, Manager of the ultimate general partner of Great Hill, a party to the Purchase Agreement; and the limited partnership interests held by Niraj Shah and Steve Conine, the Company's co-founders and co-chairmen, in affiliates of Great Hill and Charlesbank.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the Consolidated and Condensed Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those included in Part I, Item 1, Special Note Regarding Forward Looking Statements, and in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, our actual results may differ materially from those anticipated in these forward-looking statements.

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The following discussion includes financial information prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"), as well as certain non-GAAP financial measures such as Adjusted EBITDA, Free Cash Flow, and Net Revenue Constant Currency Growth. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Management believes the use of these non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance of our business by presenting comparable financial results between periods. For more information on these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, see "Non-GAAP Financial Measures" below.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "Wayfair," "the company," "we," "us," "our," and similar terms include Wayfair Inc. and its subsidiaries, unless the context indicates otherwise. 

Overview

We are one of the world's largest online destinations for the home. Through our e-commerce business model, we offer visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over eighteen million products from over 12,000 suppliers. Because of the large market opportunity we see in front of us, we are currently investing across our business, including investments to expand our international business, to build our proprietary logistics network and to continue developing various product categories.

Our operating and reportable segments are the U.S. and International. The following table presents net revenue attributable to our reportable segments for the periods presented:

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
U.S. net revenue	$	3,651,704	$	2,000,518	$	5,626,687	$	3,658,216
International net revenue	652,968		342,733		1,008,048		629,864
Total net revenue	$	4,304,672	$	2,343,251	$	6,634,735	$	4,288,080

For more information on our segments, see Note 11, Segment and Geographic Information, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q.

COVID-19 Outbreak

We are continuing to closely monitor the impact of the COVID-19 outbreak on our business, results of operations and financial results. The situation surrounding the COVID-19 outbreak remains fluid and the full extent of the positive or negative impact of the COVID-19 outbreak on our business will depend on certain developments including the length of time that the outbreak continues, the impact on consumer activity and behaviors and the effect on our customers, employees, suppliers, partners, and stockholders, all of which are uncertain and cannot be predicted. See Part II, Item 1A, Risk Factors for additional details. We have taken a number of precautionary measures designed to protect the health, safety and financial security of our employees, including suspending all non-essential travel, transitioning a large portion of our employees to working-from-home, reimbursing certain employee technology purchases, providing employee welfare programs, providing emergency paid time off and targeted hourly pay increases, developing no contact delivery methods and implementing social distancing and enhanced cleaning measures in our facilities.

In an effort to contain or slow the COVID-19 outbreak, authorities across the world have implemented various measures, some of which have been subsequently rescinded or modified, including travel bans, stay-at-home orders and shutdowns of certain businesses. We anticipate that these actions and the global health crisis caused by the COVID-19 outbreak will continue to negatively impact global economic activity. While the COVID-19 outbreak has not had a material adverse impact on our operations to date and we believe the long-term opportunity that we see for shopping for the home online remains unchanged, it is difficult to predict all of the positive or negative impacts the COVID-19 outbreak will have on our business.

In the short term, we have seen increased sales and order activity and lower advertising costs in the market since the COVID-19 outbreak. In order to keep up with the increased orders, we have hired and are continuing to hire additional frontline and sales and service workers. However, much is unknown and accordingly the situation remains dynamic and subject to rapid and possibly material change. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our customers, employees, suppliers, partners, stockholders and communities.

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Key Financial and Operating Metrics

We measure our business using financial and operating metrics, as well as non-GAAP financial measures. Our Free Cash Flow non-GAAP financial measure is measured on a consolidated basis, while our Adjusted EBITDA non-GAAP financial measure is measured on a consolidated and reportable segment basis. See Note 11, Segment and Geographic Information, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q for additional information regarding our reportable segments. All other key financial and operating metrics are derived and reported from our consolidated Direct Retail net revenue, which includes sales generated primarily through our family of sites. These metrics do not include net revenue derived from the websites operated by our retail partners and our media solutions business. We do not have access to certain customer level information on net revenue derived through our retail partners and therefore cannot measure or disclose it.

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

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands, except LTM Net Revenue per Active Customer and Average Order Value)
Direct Retail Financial and Operating Metrics:
Direct Retail Net Revenue (1)	$	4,294,236	$	2,331,759	$	6,616,818	$	4,262,940
Active Customers	25,979		17,799		25,979		17,799
LTM Net Revenue per Active Customer	$	440	$	447	$	440	$	447
Orders Delivered	18,892		9,162		28,768		17,325
Average Order Value	$	227	$	255	$	230	$	246
Non-GAAP Financial Measures:
Adjusted EBITDA	$	439,813	$	(69,983)	$	312,536	$	(172,201)
Free Cash Flow	$	1,053,602	$	(91,471)	$	698,979	$	(258,288)

(1) Direct Retail net revenue is calculated by taking consolidated net revenue and excluding U.S. net revenue derived from the websites operated by our retail partners and our media solutions business, which accounted for $10.4 million and $17.9 million of net revenue for the three and six months ended June 30, 2020, respectively, and $11.5 million and $25.1 million of net revenue for the three and six months ended June 30, 2019, respectively.

Non-GAAP Financial Measures

Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this Quarterly Report on Form 10-Q Adjusted EBITDA, a non-GAAP financial measure that we calculate as net income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest (expense), net, other income, net, provision for income taxes, net, non-recurring items, and other items not indicative of our ongoing operating performance. We have provided a reconciliation below of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure. 

We have included Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure used by our management and the Board to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis as these costs may vary independent of business performance. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and the Board.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are: 

▪Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

▪Adjusted EBITDA does not reflect equity-based compensation and related taxes;

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▪Adjusted EBITDA does not reflect changes in our working capital;

▪Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;

▪Adjusted EBITDA does not reflect interest expenses associated with our borrowings;

▪Adjusted EBITDA does not include other items not indicative of our ongoing operating performance, and

▪Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP results.

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

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Reconciliation of Adjusted EBITDA
Net income (loss)	$	273,877	$	(181,938)	$	(11,988)	$	(382,327)
Depreciation and amortization	69,114		44,339		135,957		83,922
Equity-based compensation and related taxes	70,701		56,855		134,693		108,688
Interest expense, net	28,939		10,252		51,157		19,490
Other (income), net	(3,110)		(322)		(2,864)		(3,400)
Provision for income taxes, net	292		831		1,625		1,426
Other (1)	—		—		3,956		—
Adjusted EBITDA	$	439,813	$	(69,983)	$	312,536	$	(172,201)

(1) The Company recorded $4.0 million in the six months ended June 30, 2020 in selling, operations, technology, general and administrative expenses in the Consolidated and Condensed Statements of Operations related to severance costs associated with February 2020 workforce reductions.

Free Cash Flow

To provide investors with additional information regarding our financial results, we have also disclosed here and elsewhere in this Quarterly Report on Form 10-Q Free Cash Flow, a non-GAAP financial measure that we calculate as net cash provided by or used in operating activities less net cash used to purchase property and equipment and site and software development costs (collectively "Capital Expenditures"). We have provided a reconciliation below of Free Cash Flow to net cash provided by or used in operating activities, the most directly comparable GAAP financial measure.

We have included Free Cash Flow in this Quarterly Report on Form 10-Q because it is an important indicator of our business performance as it measures the amount of cash we generate. Accordingly, we believe that Free Cash Flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Free Cash Flow has limitations as an analytical tool because it omits certain components of the cash flow statement and does not represent the residual cash flow available for discretionary expenditures. Further, other companies, including companies in our industry, may calculate Free Cash Flow differently. Accordingly, you should not consider Free Cash Flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, you should consider Free Cash Flow alongside other financial performance measures, including net cash provided by or used in operating activities, Capital Expenditures, and our other GAAP results.

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

	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
	(in thousands)
Net cash provided by (used in) operating activities	$	1,135,251	$	(2,734)	$	878,961	$	(84,082)
Purchase of property and equipment	(44,846)		(54,714)		(104,810)		(115,340)
Site and software development costs	(36,803)		(34,023)		(75,172)		(58,866)
Free Cash Flow	$	1,053,602	$	(91,471)	$	698,979	$	(258,288)

Net Revenue Constant Currency Growth

To provide investors with additional information regarding our financial results, we have disclosed in this Quarterly Report on Form 10-Q Net Revenue Constant Currency Growth, a non-GAAP financial measure that we calculate by translating the current period local currency net revenue by the currency exchange rates used to translate our financial statements in the comparable prior-year period.

Net Revenue Constant Currency Growth is included in this Quarterly Report on Form 10-Q because it is an important indicator of our operating results. Accordingly, we believe that Net Revenue Constant Currency Growth provides useful information to investors and others in understanding and evaluating trends in our operating results in the same manner as our management.

Net Revenue Constant Currency Growth has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. For example, Net Revenue Constant Currency Growth rates, by their nature, exclude the impact of foreign exchange, which may have a material impact on net revenue.

Key Operating Metrics (Direct Retail)

Active Customers

As of the last date of each reported period, we determine our number of active customers by counting the total number of individual customers who have purchased at least once directly from our sites during the preceding twelve-month period. The change in active customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the last twelve months. We view the number of active customers as a key indicator of our growth.

LTM Net Revenue Per Active Customer

We define LTM net revenue per active customer as our total net revenue derived from Direct Retail sales in the last twelve months divided by our total number of active customers for the same preceding twelve-month period. We view LTM net revenue per active customer as a key indicator of our customers' purchasing patterns, including their initial and repeat purchase behavior.

Orders Delivered

We define orders delivered as the total Direct Retail orders delivered in any period, inclusive of orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data. We recognize net revenue when an order is delivered and therefore orders delivered, together with average order value, is an indicator of the net revenue we expect to recognize in a given period. We view orders delivered as a key indicator of our growth.

Average Order Value

We define average order value as total Direct Retail net revenue in a given period divided by the orders delivered in that period. We view average order value as a key indicator of the mix of products on our sites, the mix of offers and promotions and the purchasing behavior of our customers.

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Factors Affecting our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2019.

Components of Our Results of Operations

Net Revenue

Net revenue consists primarily of sales of product from our sites and through the websites of our online retail partners and includes related shipping fees. We deduct cash discounts, allowances and estimated returns from gross revenue to determine net revenue. We recognize product revenue upon delivery to our customers. Net revenue is primarily driven by growth of new and active customers and the frequency with which customers purchase. The products offered on our sites are fulfilled with product we ship to our customers directly from our suppliers and, increasingly, from our CastleGate warehouses.

We also generate net revenue through third-party advertisers that pay us based on the number of advertisement related clicks, actions, or impressions for advertisements placed on our sites. Net revenue earned under these arrangements is included in net revenue and net revenue through our third-party advertisers is recognized in the period in which the click, action or impression occurs. This net revenue has not been material to date.

Cost of Goods Sold

Cost of goods sold consists of:

Product costs: Product costs include the purchase price of products sold, expenses capitalized into Wayfair inventory, which include direct and indirect labor costs, rent, and depreciation expenses, and inbound shipping and handling costs for Wayfair inventory. These costs are partially offset by product rebates earned from suppliers upon shipment of goods and certain fees incurred for other media and merchandising services Wayfair provides to its suppliers to promote products for sale on our sites.

Shipping and Fulfillment costs: Shipping costs include outbound shipping costs. Fulfillment costs include costs incurred to operate and staff our fulfillment centers and provide other inbound supply chain services, such as ocean freight and drayage. Costs to operate and staff our 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. These costs are partially offset by fees incurred for warehousing, fulfillment and other inbound supply chain services Wayfair provides to its suppliers.

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

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 our employees involved in customer service activities and merchant processing fees associated with customer payments made by credit cards and debit cards and other variable fees. Increases in our customer service and merchant fees are driven by the growth in our net revenue and are expected to remain relatively consistent as a percentage of net revenue. We expect customer service and merchant fees expenses to remain relatively stable as a percentage of net revenue.

Advertising

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. We should benefit from deriving a larger base of our net revenue from repeat customers, as we believe the cost of marketing to a repeat customer is less than the cost to acquire a new customer. We expect our absolute marketing dollar spend to continue to grow as our business scales, though advertising costs as a percentage of net revenue will continue to be impacted by factors such as the mix of new and repeat customers, as well as brand, channel, and geographic mix.

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Selling, operations, technology, general and administrative

Selling, operations, technology, general and administrative expenses primarily include labor-related costs, including equity-based compensation, of our operations group, which includes our supply chain and logistics team, our technology team, which builds and supports our sites, category managers, buyers, site merchandisers, merchants, marketers and the team who executes our advertising strategy, and our corporate general and administrative team, which includes human resources, finance and accounting personnel. Also included are administrative and professional service fees including audit and legal fees, insurance and other corporate expenses, including depreciation and rent. We expect selling, operations, technology, general and administrative expenses will continue to increase as we grow our net revenue and operations.

Interest (expense), net

Interest (expense), net consists primarily of interest expense in connection with our convertible notes and other borrowings. Interest expense is offset by interest earned on cash, cash equivalents and short- and long-term investments held by us.

Results of Consolidated Operations

Comparison of the three months ended June 30, 2020 and 2019

Net revenue 

	Three months ended June 30,
	2020		2019		% Change
	(in thousands)
U.S. net revenue	$	3,651,704	$	2,000,518	82.5	%
International net revenue	652,968		342,733		90.5	%
Net revenue	$	4,304,672	$	2,343,251	83.7	%

In the three months ended June 30, 2020, net revenue increased by $2.0 billion, or 83.7%, compared to the same period in 2019, primarily due to growth in our customer base, with the number of active customers increasing by 46.0% as of June 30, 2020 compared to June 30, 2019. Additionally, there was an increase in order frequency, with LTM orders per active customer increasing by 1.6% as of June 30, 2020 compared to June 30, 2019, partially offset by customers spending less per order, with LTM net revenue per active customer decreasing 1.6% as of June 30, 2020 compared to June 30, 2019. Our U.S. net revenue increased 82.5%, while our International net revenue increased 90.5%. International Net Revenue Constant Currency Growth was 96.9%.

Cost of goods sold

	Three months ended June 30,
	2020		2019		% Change
	(in thousands)
Cost of goods sold	$	2,983,642	$	1,783,651	67.3	%

In the three months ended June 30, 2020, cost of goods sold increased by $1.2 billion, or 67.3%, compared to the same period in 2019. The increase in cost of goods sold is primarily driven by an increase in the number of orders delivered, partially offset by efficiencies gained in shipping costs from our logistics network.

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Operating expenses  

	Three months ended June 30,
	2020			2019			% Change
	(in thousands)
Customer service and merchant fees (1)	$	143,773		$	88,502		62.5	%
Advertising	417,777			259,166			61.2	%
Selling, operations, technology, general and administrative (1)	459,482			383,109			19.9	%
Total operating expenses	$	1,021,032		$	730,777		39.7	%
As a percentage of net revenue:
Customer service and merchant fees (1)	3.3		%	3.8		%
Advertising	9.7		%	11.1		%
Selling, operations, technology, general and administrative (1)	10.7		%	16.3		%
	23.7		%	31.2		%

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

	Three months ended June 30,
	2020		2019
	(in thousands)
Customer service and merchant fees	$	4,313	$	2,269
Selling, operations, technology, general and administrative	$	64,035	$	53,269

Our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative expenses increased by $12.8 million in the three months ended June 30, 2020 compared to the same period in 2019, as a result of RSUs awarded in 2019 and the six months ended June 30, 2020.

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

	Three months ended June 30,
	2020		2019
Customer service and merchant fees	3.2	%	3.7	%
Selling, operations, technology, general and administrative	9.2	%	14.1	%

Excluding the impact of equity-based compensation and related taxes, customer service and merchant fees increased by $53.2 million in the three months ended June 30, 2020 compared to the same period in 2019, primarily due to the increase in net revenue during the three months ended June 30, 2020.

Our advertising expenses increased by $158.6 million in the three months ended June 30, 2020 compared to the same period in 2019, primarily as a result of an increase in online advertising. Advertising decreased as a percentage of net revenue in the three months ended June 30, 2020 compared to the same period in 2019. The decrease was primarily attributable to efficiencies in our advertising spend, partially offset by increased investment to generate future customer growth.

Excluding the impact of equity-based compensation and related taxes, selling, operations, technology, general and administrative expenses increased by $65.6 million in the three months ended June 30, 2020 compared to the same period in 2019, primarily due to the increase in net revenue and the associated growth in our operations. The increase in selling, operations, technology, general and administrative was primarily attributable to personnel costs, rent, information technology, and depreciation and amortization.

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Interest (expense), net

	Three months ended June 30,
	2020		2019		% Change
	(in thousands)
Interest (expense), net	$	(28,939)	$	(10,252)	182.3	%

Our interest (expense), net increased by $18.7 million in the three months ended June 30, 2020 compared to the same period in 2019, primarily attributable to our convertible notes and other borrowings.

Comparison of the six months ended June 30, 2020 and 2019

Net revenue 

	Six months ended June 30,
	2020		2019		% Change
	(in thousands)
U.S. net revenue	$	5,626,687	$	3,658,216	53.8	%
International net revenue	1,008,048		629,864		60.0	%
Net revenue	$	6,634,735	$	4,288,080	54.7	%

In the six months ended June 30, 2020, net revenue increased by $2.3 billion, or 54.7%, compared to the same period in 2019, primarily due to growth in our customer base, with the number of active customers increasing by 46.0% as of June 30, 2020 compared to June 30, 2019. The growth in customer base was offset by active customers spending less on average in the six months ended June 30, 2020, with LTM net revenue per active customer decreasing 1.6% as of June 30, 2020 compared to June 30, 2019. Our U.S. net revenue increased 53.8%, while our International net revenue increased 60.0%. International Net Revenue Constant Currency Growth was 64.4%.

Cost of goods sold

	Six months ended June 30,
	2020		2019		% Change
	(in thousands)
Cost of goods sold	$	4,734,582	$	3,258,024	45.3	%

In the six months ended June 30, 2020, cost of goods sold increased by $1.5 billion, or 45.3%, compared to the same period in 2019. The increase in cost of goods sold is primarily driven by an increase in the number of orders delivered, partially offset by efficiencies gained in shipping costs from our logistics network.

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Operating expenses  

	Six months ended June 30,
	2020			2019			% Change
	(in thousands)
Customer service and merchant fees (1)	$	233,236		$	164,975		41.4	%
Advertising	693,537			503,135			37.8	%
Selling, operations, technology, general and administrative (1)	935,450			726,757			28.7	%
Total operating expenses	$	1,862,223		$	1,394,867		33.5	%
As a percentage of net revenue:
Customer service and merchant fees (1)	3.5		%	3.8		%
Advertising	10.5		%	11.7		%
Selling, operations, technology, general and administrative (1)	14.1		%	17.0		%
	28.1		%	32.5		%

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

	Six months ended June 30,
	2020		2019
	(in thousands)
Customer service and merchant fees	$	6,432	$	4,245
Selling, operations, technology, general and administrative	$	124,180	$	102,134

Our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative expenses increased by $24.2 million in the six months ended June 30, 2020 compared to the same period in 2019, as a result of RSUs awarded in 2019 and the six months ended June 30, 2020.

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

	Six months ended June 30,
	2020		2019
Customer service and merchant fees	3.4	%	3.7	%
Selling, operations, technology, general and administrative	12.2	%	14.6	%

Excluding the impact of equity-based compensation and related taxes, customer service and merchant fees increased by $66.1 million in the six months ended June 30, 2020 compared to the same period in 2019, primarily due to the increase in net revenue during the six months ended June 30, 2020.

Our advertising expenses increased by $190.4 million in the six months ended June 30, 2020 compared to the same period in 2019, primarily as a result of an increase in online advertising. Advertising decreased as a percentage of net revenue in the six months ended June 30, 2020 compared to the same period in 2019. The decrease was primarily attributable to efficiencies in our advertising spend, partially offset by increased investment to generate future customer growth.

Excluding the impact of equity-based compensation and related taxes, selling, operations, technology, general and administrative expenses increased by $186.6 million in the six months ended June 30, 2020 compared to the same period in 2019, primarily due to the increase in net revenue and the associated growth in our operations. The increase in selling, operations, technology, general and administrative was primarily attributable to personnel costs, rent, information technology, and depreciation and amortization.

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Interest (expense), net

	Six months ended June 30,
	2020		2019	% Change
	(in thousands)
Interest (expense), net	$	(51,157)	(19,490)	162.5	%

Our interest (expense), net increased by $31.7 million in the six months ended June 30, 2020 compared to the same period in 2019, primarily attributable to our convertible notes and other borrowings.

Liquidity and Capital Resources

 Sources of Liquidity 

	June 30, 2020		December 31, 2019
	(in thousands)
Cash and cash equivalents	$	2,181,471	$	582,753
Short-term investments	$	192,746	$	404,252
Accounts receivable, net	$	118,984	$	99,720
Long-term investments	$	—	$	155,690
Working capital	$	595,606	$	(234,381)

 Historical Cash Flows 

	Six months ended June 30,
	2020		2019
	(in thousands)
Net loss	$	(11,988)	$	(382,327)
Net cash provided by (used in) operating activities	$	878,961	$	(84,082)
Net cash provided by (used in) investing activities	$	188,204	$	(89,269)
Net cash provided by (used in) financing activities	$	527,643	$	(1,135)

At June 30, 2020, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $2.4 billion, which includes $527.4 million of net proceeds from the issuance of our 2020 Accreting Notes in April 2020. We believe that our existing cash and cash equivalents and investments, together with these incremental transactions, cash generated from operations, and the borrowing availability under our revolving credit facility, will be sufficient to meet our anticipated cash needs for at least the foreseeable future. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. In addition, we may elect to raise additional funds at any time through equity, equity-linked or debt financing arrangements. Further, we may from time to time seek to retire, restructure, repurchase or redeem, or otherwise mitigate the equity dilution associated with, our outstanding debt, through cash purchases, stock buybacks of some or all of the shares underlying convertible notes, and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases, exchanges or liability management exercises, if any, will be upon such terms and at such prices and sizes as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Capital Expenditures were 4.4% of net revenue for the year ended December 31, 2019 and related primarily to our ongoing investments in our technology infrastructure and equipment purchases and improvements for leased warehouses within our expanding logistics network. Capital Expenditures were 1.9% of net revenue for the quarter ended June 30, 2020. On an absolute dollar basis, we expect Capital Expenditures for the three months ending September 30, 2020 to be within the range of $95.0 million to $105.0 million as we continue to build out our technology infrastructure and logistics network.

Our future capital requirements and the adequacy of available funds will depend on many factors, including those described herein and in our other filings with the SEC, including those set forth in Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2019. In addition, the recent COVID-19 outbreak has caused disruption in the capital markets. It could make financing more difficult and/or expensive and we may not be able to secure additional financing to meet our operating

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requirements on acceptable terms, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt financing arrangements, those securities and instruments may have rights, preferences or privileges senior to the rights of our common stock, and our stockholders may experience dilution. We will continue to monitor our liquidity during this time of historic disruption and volatility in the global capital markets due to the COVID-19 outbreak.

Operating Activities

Cash flows in connection with operating activities consisted of net loss adjusted for certain non-cash items including depreciation and amortization, equity-based compensation, and certain other non-cash expenses, as well as the effect of changes in working capital and other activities. Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net loss.

Cash provided by operating activities in the six months ended June 30, 2020 was $879.0 million and was driven primarily by cash provided by operating assets and liabilities of $582.0 million, the net impact of certain non-cash items including equity-based compensation of $127.0 million, depreciation and amortization expense of $136.0 million, and amortization of discount and issuance costs related to our convertible notes of $46.5 million, partially offset by net loss of $12.0 million and other non-cash items of $0.5 million.

Cash used in operating activities in the six months ended June 30, 2019 was $84.1 million and was driven primarily by a net loss of $382.3 million and other non-cash items of $1.6 million, partially offset by cash provided by operating assets and liabilities of $92.7 million, the net impact of certain non-cash items including equity-based compensation of $100.2 million, depreciation and amortization expense of $83.9 million, and amortization of discount and issuance costs related to our convertible notes of $23.0 million.

 Investing Activities

Our primary investing activities consisted of purchases of property and equipment, particularly purchases of servers and networking equipment, investment in our sites and software development, disposal of short- and long-term investments, and leasehold improvements for our facilities.

Cash provided by investing activities in the six months ended June 30, 2020 was $188.2 million and was primarily driven by sale and maturities of short-and long-term investments of $368.3 million, partially offset by purchases of property and equipment of $104.8 million and site and software development costs of $75.2 million and other investing activities of $0.1 million.

Cash used in investing activities in the six months ended June 30, 2019 was $89.3 million and was primarily driven by purchases of property and equipment of $115.3 million and site, software development costs of $58.9 million, partially offset by a net increase in the maturity of short-term investments of $82.2 million and other investing activities of $2.7 million.

Financing Activities

Cash provided by financing activities in the six months ended June 30, 2020 was $527.6 million and was primarily due to the $527.4 million of net proceeds from the issuance of our 2020 Accreting Notes, $200.0 million of proceeds from the borrowing under our revolving credit facility and $0.2 million of net proceeds from the exercise of stock options, partially offset by the repayment of $200.0 million of the outstanding balance under our revolving credit facility.

Cash used in financing activities in the six months ended June 30, 2019 was $1.1 million and was primarily due to $0.8 million of deferred finance costs and $0.4 million statutory minimum taxes paid related to net share settlements of equity awards, partially offset by $0.1 million net proceeds from exercise of stock options.

Stock Repurchase Program

On February 22, 2018, we announced that the Board authorized the repurchase of up to $200 million of our Class A common stock. This repurchase program has no expiration but may be suspended or terminated by the Board at any time. Under the repurchase program, we are authorized to repurchase, from time to time, outstanding shares of Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan.

The actual timing, number and value of shares repurchased will be determined by the Company in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs and whether there is a better alternative use of capital. We have no obligation to repurchase any amount of Class A common stock under the program.

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Credit Agreement and Convertible Notes

As disclosed in Note 14, Credit Agreement included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q, in the six months ended June 30, 2020, the Company borrowed under the Revolver. All borrowings were repaid as of June 30, 2020.

As disclosed in Note 15, Convertible Debt, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q, the conditional conversion features of the 2017 Notes and 2018 Notes were triggered during the second quarter of 2020 and the 2017 Notes and 2018 Notes are therefore convertible in the third quarter of 2020 pursuant to the applicable last reported sales price conditions. The conditional conversion feature of the 2019 Notes was not triggered during the second quarter of 2020 and the 2019 Notes are therefore not convertible in the third quarter of 2020 pursuant to the applicable last reported sales price conditions. The 2020 Accreting Notes are convertible at any time prior to the second business day immediately preceding the maturity date. The Non-Accreting Notes were not convertible during the second quarter of 2020. None of the Notes have been converted to date.

Whether the 2017 Notes, the 2018 Notes, or the 2019 Notes will be convertible in future quarters will depend on the satisfaction of the applicable last reported sales price condition or another conversion condition in the future. If one or more holders elect to convert their 2017 Notes, 2018 Notes, or 2019 Notes at a time when any such notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

For information regarding our credit agreement and convertible notes, see Note 14, Credit Agreement, and Note 15, Convertible Debt, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet activities. We do not have any off-balance sheet interest in variable interest entities, which include special purpose entities and other structured finance entities.

Contractual Obligations

As disclosed in Note 15, Convertible Debt, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q, on April 8, 2020, the Company issued $535.0 million in aggregate original principal amount of 2.50% Accreting Convertible Senior Notes due 2025 to GHEP VII Aggregator, L.P., CBEP Investments, LLC and The Spruce House Partnership LLC. Other than the 2020 Accreting Notes, there have been no material changes to our contractual obligations and estimates as compared to the contractual obligations described in Contractual Obligations included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, net revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. 

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in Note 2, 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, 2019, except as disclosed in Note 2, Summary of Significant Accounting Policies - Credit Impairment, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have operations both within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes, foreign currency fluctuations and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

Interest Rate Sensitivity

Cash and cash equivalents and short- and long-term investments were held primarily in cash deposits, certificates of deposit, money market funds, and corporate debt. The fair value of our cash, cash equivalents and short- and long-term investments will fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest.

Our 2017 Notes, which were issued in September 2017, carry a fixed interest rate of 0.375% per year, our 2018 Notes, which were issued in November 2018, carry a fixed interest rate of 1.125% per year, our 2019 Notes, which were issued in August 2019, carry a fixed interest rate of 1.00% per year, and our 2020 Accreting Notes, which were issued in April 2020, carry a fixed interest at a rate of 2.50% per year. Since the Notes bear interest at a fixed rate, we have no direct financial statement risk associated with changes in interest rates.

Interest on the revolving line of credit incurred pursuant to the credit agreement described herein accrues at a floating rate based on a formula tied to certain market rates at the time of incurrence; however, we do not expect that any changes in prevailing interest rates will have a material impact on our results of operations.

Foreign Currency Risk

Most of our sales are denominated in U.S. dollars, and therefore, our total net revenue is not currently subject to significant foreign currency risk. However, as our international business has grown, fluctuations in foreign currency exchange rates have started to have a greater impact. Our operating expenses are denominated in the currencies of the countries in which our operations are located or in which net revenue is generated, and as a result we face exposure to adverse movements in foreign currency exchange rates, particularly changes in the British Pound, Euro, and Canadian Dollar, as the financial results of our international operations are translated from local currency, or functional currency, into U.S. dollars upon consolidation. Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our Consolidated and Condensed Statements of Operations. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we have not engaged in any foreign currency hedging transactions, but we may do so in the future. The effect of foreign currency exchange on our business historically has varied from quarter to quarter and may continue to do so, potentially materially. In addition, volatile market conditions arising from the COVID-19 pandemic may result in changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our net revenue as expressed in U.S. dollars.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, or SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 outbreak. We are continually monitoring and assessing the COVID-19 situation and our internal controls to minimize any impact on their design and operating effectiveness.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding our legal proceedings, see Note 8, Commitments and Contingencies - Legal Matters, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference. 

Item 1A. Risk Factors

Except as set forth below, as of the date of this report, there are no material changes from the risk factors previously disclosed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2019.

The recent global outbreak and spread of the novel coronavirus (“COVID-19”), and any future outbreak or other public health emergency, could materially affect our operations, liquidity, financial performance and results of operations.

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic. In response to this declaration and the rapid spread of COVID-19 globally, authorities across the U.S. and the globe have implemented varying degrees of restriction on social and commercial activity to promote social distancing in an effort to slow the spread of the illness, some of which have been subsequently rescinded or modified, such as travel bans, stay-at-home orders and shutdowns of certain businesses. These measures have impacted and may continue to impact all or portions of our workforce, operations, suppliers and customers and demand for our products and services. For example, the COVID-19 outbreak has disrupted the global supply chain, including many of our suppliers, as factory closures and reduced manufacturing output impacted inventory levels, potentially exacerbated by surging demand for products. In the short term, however, we have also seen increased sales and order activity and lower advertising costs in the market since the COVID-19 outbreak.

The virus also impacted our workforce, moving a large portion of our employees to working-from-home and adding administrative complexity to our everyday human resources and employee technology functions. Disruption caused by business responses to the COVID-19 outbreak, including working-from-home arrangements, may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships, disrupt operations, increase costs and/or decrease net revenues, and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others, any of which could have a material adverse effect on our financial condition and results of operations.

The spread of COVID-19, and any future pandemic, epidemic or similar outbreak, may disrupt our third-party business partners’ ability to meet their obligations to us, which may negatively affect our operations. These third parties include our suppliers and logistics providers, such as FedEx, UPS, DHL, the U.S. Postal Service and other third-party delivery agents, as their workers may be prohibited or otherwise unable to report to work and transporting products within regions or countries may be limited due to extended holidays, factory closures, port closures and increased border controls and closures, among other things.

Further, our efforts to mitigate the impact of COVID-19 through social distancing measures, enhanced cleaning measures and the increased use of personal protective equipment at our warehouses and sites, as well as other steps taken to protect the health, safety and financial security of our employees, may result in other negative impacts on our operations, including increased costs, reduced efficiency levels or labor disputes resulting in a strike or other work stoppage or interruption.

The COVID-19 outbreak has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of and accessibility to capital. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. The COVID-19 outbreak has caused a significant economic slowdown, which could be of an unknown duration, and could lead to increased unemployment, reduced discretionary consumer spending and a corresponding reduction in demand for our products, and could result in a material adverse effect on our business, financial performance and results of operations.

The ultimate magnitude of the impact of COVID-19, including the extent of its impact on our business and financial performance, will depend on numerous evolving factors that we may not be able to accurately predict, including: the length of time that the outbreak continues; its effect on our suppliers, logistics providers and the demand for our products; the effect of governmental regulations imposed in response to the outbreak; the effect on our customers, their communities and customer demand and ability to pay for our products and services, which may be affected by prolonged high unemployment, increased

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consumer debt levels, changes in net worth due to market conditions, and other factors that impact consumer confidence; disruptions or restrictions on our employees’ ability to work and travel, as well as uncertainty regarding all of the foregoing. We cannot at this time predict the full impact of the COVID-19 outbreak, but it could have a larger material adverse effect on our business, liquidity, financial performance and results of operations beyond what is discussed within this report. We will continue to actively monitor the COVID-19 situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our customers, employees, suppliers, partners, stockholders and communities. We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 outbreak and reactions thereto will continue, and expect to face difficulty in accurately predicting our internal financial forecasts.

As noted above, however, in the short term we have seen increased sales and order activity since the COVID-19 outbreak. These results, as well as those of other metrics such as net revenues, gross margins and other financial and operating data, may not be indicative of results for future periods. Some of the increased demand is likely due to customers being required or encouraged to stay at home, school closures and employers requiring employees to work remotely. Some is also likely attributable to the timing of tax refunds and COVID-related stimulus payments. Such increased demand may increase beyond manageable levels, may fluctuate significantly, or may not continue, including the possibility that demand may decrease from historical levels. Much is unknown, including the duration and severity of the COVID-19 pandemic, the amount of time it will take for normal economic activity to resume, and future government actions that may be taken, and accordingly the situation remains dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our suppliers, logistics providers and customers, which ultimately could result in material adverse effects on our business, financial performance and results of operations.

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Item 6. Exhibits.

Exhibit			Incorporated by Reference
Number	Exhibit Description	Filed Herewith	Form	File No.	Filing Date	Exhibit Number
4.1	Form of Indenture by and between Wayfair Inc., Wayfair LLC, as Guarantor, and U.S. Bank National Association, as trustee.		8-K	001-36666	4/8/2020	4.1
4.2	Form of 2.50% Accreting Convertible Senior Notes due 2025 (included in Exhibit 4.1).		8-K	001-36666	4/8/2020	4.2
10.1	Amended and Restated Purchase Agreement, dated as of April 7, 2020, by and among Wayfair Inc., Wayfair LLC, GHEP VII Aggregator, L.P., CBEP Investments, LLC and The Spruce House Partnership LLC.		8-K	001-36666	4/8/2020	10.1
10.2	Form of Registration Rights Agreement by and between Wayfair Inc. and GHEP VII Aggregator, L.P., CBEP Investments, LLC and The Spruce House Partnership LLC.		8-K	001-36666	4/8/2020	10.2
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1#	Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
32.2#	Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Definition Linkbase Document	X

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101.LAB	XBRL Taxonomy Labels Linkbase Document	X
101.PRE	XBRL Taxonomy Presentation Linkbase Document	X
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)	X

+	Indicates a management contract or compensatory plan
#	This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		WAYFAIR INC.
Date: August 5, 2020	By:	/s/ NIRAJ SHAH
		Niraj Shah
		Chief Executive Officer and President
		(Principal Executive Officer)
Date: August 5, 2020	By:	/s/ MICHAEL FLEISHER
		Michael Fleisher
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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