W - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, my name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wayfair Q4 2018 Earnings Release and Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] Joseph Wilson, Head of Investor Relations, you may begin your conference.

Joseph Wilson

Good morning, and thank you for joining us. our XXXX review will we fourth results. quarter Today, first you will regarding make would for events like statements we remind to the guidance including call I forward-looking that during financial performance, of quarter XXXX. and future this will that that we been in statements have assumptions. and accurate, our although We cannot expectations forward-looking be guarantee reasonable any believe we

This Conine, With Donnelly, Steve are Co-Chairman; me Niraj nearest Co-Chairman; and a Chief being IR website. Officer no considered the descriptions measures new be during non-GAAP to we of replay identify Our These of will obligation results. be whether file in any to information, statements, Relations future measures and materially to these read SEC measures. is we certain and Head discuss Investor that the projected website certain and events replacements non-GAAP our forward-looking which of should comparable this call, which factors expect webcast should in of filings, GAAP results GAAP our Finance. non-GAAP by including Except Also, for and recorded, update to we performance. to statements XXXX, refer release, Shah, contain that Company's call our we or financial earnings review or our company's could the obtain section a those Please from made cause near our revise will note non-GAAP undertake of to differ and be as XX-K as future, actual a Corporate on available law, together copy as reconciliations Cofounder for any measures the required result of otherwise. Executive financial with financial for Julia measures publicly not Cofounder, please the today.

all are at the Julia He the let about with the be know wife I new earnings and their and birth Mike the financial us him Steve. to today. for best to to will Niraj, want questions and with daughter. to everyone on give over I providing update will his Before answering turn their wish be call that not hospital, We Niraj arrival.

the to Now Niraj. call over turn me let

Niraj Shah

more in our our customers approach and a be platform the the you sharing continue take long-term a joining pleased bringing delighted and requires of with the fourth full am year the quarter Thank morning. are is results achievements depth increasingly on Joe. today. I proud us this all platform in to Thanks, of for of Steve for online. that Wayfair our to at shop I XXXX in with steps more talk you about an be not we together and the scale and XXXX our customers XX,XXX team best people In powerful and site Steve on find in position way. to in our future, shareholder accomplishments could can destination U.S. which and investments, suppliers morning, that to possible and win suppliers and you with the the home building Building ways which our will the business this IR these this business I internationally. for put in in year's both letter, over

and representing Retail is in driven revenue single billion quarter the $XXX the dollar of XXXX billion growth XXXX. million quarter the revenue in of million provide a estimated added at We of with growth year-over-year our revenue, of of $X.X accounting scale customer This exceeding our year-over-year, in growth XX% largest added billion dollar the to in dollar U.S. outsized revenue our XX%. year full our the end the growth number of XXXX, billion company's net generated customers This brief strength a In we $X.X active of specifically, lighting by fourth last $X.X call Steve. in XXXX history. offering, Direct in before for increasing I to morning, key at category we XX year few the $X.X business year. our this online XXXX growth a in approximately updates and category of and For net hand business, areas across logistics rate penetration the total for the compared I'll net in namely over of holiday, our

earnings XX%, our turn of albeit I business and Direct represents international UK to have are total U.S. of the market Canada, This border talk cost European products Canadian net to the of Retail a in well and Steve greater which I our of XX% call, business, States. about revenue close $XXX Later shipped structural will European growth call, about because international suppliers, awareness addressable of or excess where I Canada, we business. sold the seeing levels our in international about marginally disadvantage or talk are the we with U.S. Before QX, Germany, topics, to being we awareness. Canada in brand want a million. year-over-year customer In last our than the Germany our of about growing these with briefly and in face specifically revenue the net today. Canadian was short-term our majority progress from our brand spoke shoppers combined United that, in more TAM the exciting the base in represents Today, have and Canada to off than KPIs lower share revenue a where On we U.S. across

ways, of that, customer the year facility Asia. U.S., enables us development directly and relative there opening making to in at grown the offering in to Ontario Canada our duty The suppliers to land particularly such in logistics. of our it business last pace costs Our first for Canada from many a in outpaced has in reduce added possible CastleGate it significantly the Mississauga, by logistics product has

to from benefit we customers reaccelerate growing and lower pace should are increases, delivery market winning the prices we Canada at which us in and will penetration speeds, share. which enable improved CastleGate As believe

revenue. Canadian While transitory in Canada, are movement the external in decade-long last we continue Canada, we Canada the We more view TAM internationally U.S. such well rate are been such in Canada. international do macro growth the some as factors working weaker Europe estimated customers there this than the there. even annual a playbook scale headwinds ahead home and in substantial tremendous is very very dollar ahead of in influence as offering an the and $X with XXXX spending base versus few Canada larger of and have with rate in and exchange consumer billion in billion over off $XXX to and this With taking growth here since that been we we U.S., has have are Overall, seen the not underlines business. opportunity run excited our of quarters proven us see

a customers grew than customers, me did of We four Cyber repeat as for quickly sales year. Within traditionally to with Retail in XXXX. had offering successful with in which let last to the same a with to holiday. as Black more gross compared the turn season shoppers, strongly that, of it to year Now Friday, other days more QX, for continues well growing be period XX% attract time sale the to us very X The shoppers. resonate Direct brick-and-mortar continues the as holiday event with Wayfair period new great of a engage period

of Our deep customers to offer selection over integral ability the with level planning and was our to suppliers value great period.

strengthen scale have over shopping articulate in run them are compared in indexed, complex low to With online it's Wayfair particularly the ability TAM many during result strengthened our overall bathroom category. offering at built in to time the set further ran our categories have with many engagement steps other is including are to our often growing offers we XX of see the last margin we us more lighting last the on that gift the hardwired the last high Lighting we or shipping, continue where a is to particularly steps articulate holiday Day are gross plugged, chandelier with spoken is now lighting huge a of Flash card at under enhance talk to same globe, XX we've large earnings categories they site products also looking are adding well the with this event successful categories, handful category campaigns, the on and where Cyber as grow to last intense. TV April a solve our wheel. categories. often category wagon looking ahead across such fixture a result making largely others. deals dollar categories site, Like generate in these wider vanities. annual Way taken. different XXX exactly eliminating want in a throughout few and continual as flash offering. improvements the issues over taking strongest home higher market, as or over today detail twice penetration what or in maintain recently, X, penetration, free case range. nicely period This discounts total Today, and collaboration, real QX business we're invested as of we categories to including points promotional they previous within suited On over QX mid-century build deal see and category. leveraging shoppers our consumer were As and historically of awarding our new seeing to In as important technical, whole, We're period revenue overall rate. about like, search calls, The than year. stands, customers we competition multi-hundred period, cannot for categories sputnik a about has very gross the coastal; spanning and to when in the were may Over year category. headcount most basis for. a and design team we year, in In that relatively customers with the as $X of its curtains, category-specific and and differentiated a to across delighted us a they been what exciting million increase subcategories years of broad to our and lighting say year I and fashion each lighting, while addressable revenue a is us We've of style the deals. the lighting ran those to the for $XXX in flash at incentives, dollars have modern further items, their the enable for our outdoor we've that the they billion services know we able overall The opportunity offer become indoor and as for is platform how million unbranded, to other is well more the not to high

lighting shop years and inspiring to making the of category the the and size to working more to areas possible the operation XX-plus the XX,XXX best addition bring to they've merchandising, focused than than selection XX out supplier doubled over lighting management last experience. such people focused These possible. have category our people building in as the We easy people, to customers are cross-functional team on as SKUs more and business as across two over heavily in on and XXX,XXX

on merchandising us which apart from our experience and the of addition selection, we overall the In the focused teams enhancing vast competition. shopping category, believe are our lighting to sets visual

as XXXX whole. even navigate shopping its on-site so for house the In points to revenue, We know to they're have customers approximately for XX% they leveraged XX% our find and looking products style QX price Wayfair.com XX XXXX, brands filters easily also visual if can are We've grew experience net aids simplified in customers of the over by for. a brands house from design name. don't help the collection easily of looking creating to like up fixture they

lighting customers. pages Our and our built both educate product are inspire to

page, detail product the presented key the with way. in an easy On and product customers are all digestible information

helps details the indicate These important requires a is can For know placing example, that dry easily the that so with technical whether more it aspects are other or the the want product possible they we have visual confidence. to area, and most symbols calling dimmable, fixture understand among symbols customer out hardwired in buy the often unclear. specification customers

to considerable technology in the as and enable very of damage much success build with of we category for rich large are highlight models approach light, and we in like look lighting key million one to it their than growth is library of result The is reducing they pendants have their steps gross seeing imagery time. the through category warehouses we're the $X bring suppliers' couldn't as of see is the the such XD These and we program substantial terms the we the I delivery use our This while suppliers of more important and the and this space, by the reached plays inspire over dining CastleGate the earnings core a lighting visualize that revenue of planner or unit lighting structures on mentioned and case have of platform partnered across the in and years. prior leverage across are lighting can built to the not The taking as improving such categories grew rate room in the business is offered the in it is kitchen benefit Today, tailoring achieved to part that As business, highly emotive, the but that currently potential our dozens to decor room our product for No. purchase high our earlier, seeing vanities just lighting. CastleGate volume, over then categories can our the can year. growth X $XXX some wall our flowing be the to platform, island outdoor range a in we specific own spas. we that today progress, speeds customers customers experiencing on in our success suppliers perfect XD with for collaborative number in billion shoppers we without out a part of run a XX% that a earlier to are an previous and seeing scale room offering in our their XD functionality. viewing have shoppers category mentioned the including XXXX, to sconce. of also product category. in we the Today, in larger also needs few are on continued calls has categories bathroom the

infrastructure Europe development the a million At like XXXX, turning Steve. the give end call would over brief XX to of our facilities. on I Now in you of the America to update we of logistics approximately CastleGate and and space our WDN across before had square feet North

forward, Looking XXXX. space we across feet add square five expect of network approximately our in million to

of this to XXXX, CastleGate doubling small WDN We the approximately of United grow in square XX% QX at home of us million the of square at our approximately our Phoenix, the approximately addition the part end network of U.S. up XXXX. in as States, expect our continues give facilities our compared operating facilities XX% QX, year. further out from of City Las QX Columbus, X And space shipped Austin, approximately large be CastleGate America, build-out. accounting square will in add and Cincinnati. delivery from home San approximately in feet pace, parcel up are These Milwaukee, own parcel logistics U.S. to deliveries. of parcel Today, of continued from delivery one of large at feet XX and XX% facilities of for to growth infrastructure. to Kansas North QX three internationally million we to delivery our our in being to XX Vegas, approximately dollar CastleGate we feet XXXX XXXX this The parcel million we last-mile revenue build revenue U.S. with targeting value the Antonio, QX quarter, coverage In small almost last-mile

with XX% in average are taken XXXX, Wayfair-controlled excited now cross-docks than our with resonating consolidation centers, deliveries service Scores parcel by last-mile investments home being through we improved that to and control operators. of regions of higher Promoter orders approximately where flow the U.S. have a middle-mile of is over XX% At see over on as network haul. third-party the these result customers We of end the of we served those line large offer level can Net

we now Now container to us I direct, to over for in a and to removing including and freight of we numerous XX% container services to greater U.S. level this to supply from platform and Asia, We touch where extranet, control ocean with enabled giving complexity us, shipment that typically suppliers continuing look volume chain journey. upstream, process. first facilities inbound ocean third chain progress that us approximately greater the the will want our they was real pilot time track take the of that inbound parties this involved the come to with our in the supply transportation has to This see cost internally powerful chain, the reduce them to of inbound our the pilot, suppliers with drayage. inbound At as ocean launch our increased developed control. XXXX, to suppliers visibility CastleGate relationship the for following control warehouses an volume shipments development of supplier to our as time freight are liaise on of need container U.S. our take into ability XX% the container from China, purchase suppliers. us on supply of choosing anticipate Further throughout year, of our enabling of success end left inbound the last are

reducing of result a supply control, XXXX, In the chain we over course ultimately the to administration the product are availability greater and suppliers now turn to continued services, as months. foundations that, looking time on of built improving call chain inbound the over customers. forward With We last have we uptake of XX they the supply are for Steve. I'll giving spend

Steve Conine

we've prior Canada, we put Canadian business we which see Thanks, calls, we about our twice Niraj. about to least struck and spoken this commitment ahead. them. at I as playbook work Last want proven trade developed, making the was in I about with our continued pace In and success has gains the with internationally are earning are Germany. talked the customers quarter, are enthusiasm seeing meet in we to U.S. Germany. UK to in the Germany was talk exciting our shows by I region, the with progress quarter country, Today, the in at mature suppliers international major generating we where we namely and

in Some products when site have XX,XXX to products suppliers approximately of we those XXXX on our we with when had site. XXX,XXX us were approximately our today on

I now are to are to when Supplier true from their the are working to They of business collaboration platform teams by powerful What teams in believers like was and them access saw learn offering. possible on by of launch how us products sense level friction investing over believe them on flywheel like essential X range partnering months conversion years transform our to online. U.S. their we are more appreciated this U.S. smoothly and Much the working to successful developing and really XX that being leaning surprised program to are are underline than support from their work. closely relatively their excited and to clear many had customer with get it accelerate year. with product they the suppliers there. suppliers, in deep the be as seeing to We e-commerce engagement our This platform. development be possible reduce in much in CastleGate customers them took last best they we from we I can the home those product XD joining they with closely have as new our was bringing the Much interactions customers to supplier can historical earlier. to shoppers business, of saw drive to ago, early business several from is and us are the our further getting in our online Suppliers make easier business million as year that very the the shopping imagery to e-commerce, away to to wanting Wayfair. working to whom virtually help access with they Germany help scale for its products following face to how to quickly efforts transitioned of

have serve As for to large U.S. holders the a believe I which invest taken us business, and the well it growth, in in we approach has how as equity long-term will Germany, we Niraj always in

in core are highly the into We we with have determinant of are be data being investing behind as they we a the German customers quantitative and to how the strength we Today, with best in a and of serve region needs platform. culture out thrilled seeing that in KPIs building today the the is we the are customers' our our suppliers future. momentum join

We investing reasons. Germany for in aggressively several are

our U.S. that over successfully performance periods. and depth time grow we to of first seen those have customer that have metrics have during The track able been we and Canadian a is businesses

shape We to take in our seeing aggressively business invest there. are to those now Germany, which us allows build metrics

similar in business after step. level of in testing Wayfair U.S. ad awareness great saw to We early the spend results aided entertainers, in of Barbara the brand we being first a major our awareness in offering. I'm brand Brand campaign when as one there shortly level. has of we quarter, also pleased lifetime initial first the customer Schoneberger, feature new level in in Germany shoppers in Germany's recent effectiveness parallels see at repeat at this of last a the launched marketing in At in that will Germany in who more a they our Germany launched of when indicator future and the took Wayfair the QX, to value. started customer than as from September contributing to key U.S., a XXXX TV Earlier we is was U.S. TV in very of twice similar to in partnership campaigns XXXX. their Germany awareness U.S. similar seeing continue our days with and the with with purchase the we raise also XX today are best-known in we awareness. considerable business advertising TV us did levels brand rates first year This Our in we at quarters, spend December U.S.

these concept. conviction, now in we we high With and U.S. confidence we with in other we often example, to of in and points, the the as opening proof able level are than CastleGate steps business; given many earlier taking invest a for we than with in Germany greater did the have certainty the sooner scaled U.S. did

The are influences we our in and at continue We approximately market business over customers market our UK Xx more to Germany the with as the in TAM second the in long-term very in Canadian category and with in larger appetite category, factor we scale scale we billion, win $XX scale much invest which, mind. be of that of to our will the Germany is our XX% online take the is leader building and than share, believe that

a home underestimate internationally. This successfully Finally, that small we from from presence the the on with internationally. market a to the can that ground belief expansion investment required stem managed be businesses expand principally believe can often

in longer substantial foundations and the globally achieving possible greatest have Europe as built great of scale the those we and X,XXX is people belief there, with attractive in We've term. teams firm building well. by having most on likelihood best that the an approximately Our profitability markets, markets Europe in over focus based contribute initial the who two

on center. today had product and internationalization. Wayfair's global We transportation example, is initial focus second For storefront engineering Berlin an European

Following in are we between and payments technology detail. with collaboration the for the limit, including successes, teams of in team discuss in Berlin XXXX expanded Boston more the the supplier-facing we will the our to seeing to now results Julia tools. have to We're global we a I those as that, delighted and keep call suppliers customers With and beyond. financials over innovating turn and

Julia Donnelly

year business $XXX morning, In in earnings is provide the for site. some the XX% everyone. presentation highlighted our our in million, release over Thanks, as history. more and which, representing over Niraj on dollar information with Direct year key IR investor QX, in information largest of detailed Steve, to increase increased and now good will $X,XXX,XXX,XXX, year quarter, growth I Retail the our year of financial earlier, available our highlights our

Our net total year increased XX% year over revenue to $X,XXX,XXX,XXX.

which consolidated report basis, in KPIs, continued Our we strength global demonstrated a on QX.

QX per active orders rate year, doing in lower-ticket twice order holiday QX, the leaning within As million Orders net value as than a orders net in QX. year eighth XX XX% active over we our Moreover, described continued to consistent customer, presentation, addition LTM good ad shoppers. see purchase when we're and by trend the new future returning this Last for will we that of as that, high are repeat Niraj items were customer we the customers grew the the in to Wayfair.com quarter, mentioned approximately investments new to grew spend for year, in you opportunities in of extraordinary ad from X.X investments purchased customers, in lower X.XX in over throughout strength new a QX. last and on payback customers. new Those type approximately we earlier, threshold. quarters. leaning making the customers consecutive decisions in of was in of the new surpassed continuing with that are describe over our to lead $XXX, which of million, up strict from decisions high being was measured seasonal customers. year spend quarter, Often reaching our the QX, to with pleased of customers similar resonating customer are XX% ad course frequency, new we business with total see quarter on cohorts lead watermark new one we year very of saw spend, strongly additions throughout in and XXXX. net appendix continued the XXXX, our seeing mention so we strengthen, expect growth In and we investor Average

U.S. to Turning our business.

year. net QX, year $XXX up year to over quarter XX% Our dollar revenue Direct revenue. represents Retail growth Retail million This U.S. $X,XXX,XXX,XXX Direct of in increased net in in over the year

million, As from Retail our UK XXXX. net international collectively the $XXX versus Niraj businesses Germany and XX% increased Direct earlier, QX in revenue highlighted Canada, to up

keep gains the basis, over time. the which XXXX. related will winning extremely made and I are the financials million totaled $XX non-GAAP we of equity-based positioned on customers over remaining a share how QX compensation we excluding impact with and taxes, We are pleased have course to in internationally XXXX the of with internationally

For release profit of $XXX for net product on refer to the quarter, GAAP to earnings Gross non-GAAP net is our costs, million revenues. of was a delivery please IR expenses, site. fulfillment and of reporting, all reconciliation which or our XX.X%

to entered offering margins resonated Specifically, resulted the an also that for for a that with environment. at approach we during but see only prepared in we partners peak improved quarter. intense This analytical customers not product prices supplier in period promotional our thrilled sell QX were resulted take year, the strongly with collaborative the and we did

spend of to end of advertising upper net our expected. margin of million For QX, as be toward range we gross to QX, $XXX XX.X% In XX% XX%. expect revenue, guidance the was or

efficient many efficiently invest and of to internationally. contribution great within for significantly advertisers deepening percentage ad margin higher ad every of to great buying day. of make we over last QX, first able keep agencies points opportunities better a than customer the for of good against our main our approximately a many And As increases new and generate approval payback we In cost reach and Also, through to spend XXX our the are and advertising find the the and deleverage in business, awareness ROI In one-year market Germany, and in we track. higher who U.S. to in as to in have within their often as the We ad experience advertising year purchase to our scale were see that and expect we payback leaning The the quarter KPIs approximately of discovery, mentioned showing continued central approach. expect opportunities not as international business invest buy revenue we is brand the sequential net since build year. we are UK. revenue budget. Wayfair.com a as basis quarter our particularly we due customers in customers continuing U.S., under await as delivery traditional brand to limitation strength is way to we the the net investments rate a repeat dollars on we efficient our annual quarter, as U.S. result, proportion see strength internationally. particularly they of the the

the our which are the continue see advertising we across of customer will confident opportunities is as incremental the customers add we new continued behind in lifetime, strength We in to over we value KPIs very and evident their high-ROI are pleased invest seeing cohorts. with growing are our customer will business these

market Of new by operations, logistics third-party our great operation increasing X,XXX providers where in December In building to are to G&A proprietary hiring, support favorable work $XXX million, QX, areas terms XXXX, international in XX, the excluding XX,XXX than employees that of net costs; employees, more logistic remember these X,XXX previously approximately Please our the quarter logistics business, not the Our penetration in of had were Ogden, Utah of expenses, technology scale as in-sourcing out gain and of adding of refer categories investment only driven related main lease cost customer substantial our in in warehouse OPEX, a into total capabilities, onetime three at impact as XXXX. of compensation to our employees our done which non-GAAP also our namely our added addressable to we primarily new in historically areas our anticipated. of for OPEX totaled talent developing network effectively business past. and service. in the termination under total the approximately bringing that as these growing XXX I are of million and fourth $X net are by but will selling, and indexed. due we a variable was business in We areas have our headcount we we

operations as a XXX QX. XXXX. in marketing, approximately these as other such merchandising, for almost in The hired XXX down, hires net QX areas the OpEx in technology, from X,XXX areas hires in step and were anticipated, sizable in new resulted people This new net OpEx

this focus than have the teams year did As quarter, we year executing as on hiring anticipate our we lower many last ongoing. OpEx we our running we initiatives we last stated levels at

due XXXX similar result, it remain except hiring brings in a up quarter Wayfair quarters program success a As of will that new talent at OpEx as few step over campus expect in we some of next levels third recruiting into the period the to over great the concentrated our summer. we in QX, to the when expect

the unutilized and continue build-out our rent XXXX. CastleGate facilities, of of ongoing expect result on to weigh a our WDN P&L to As we in

rent we required costs are reminder, run through to new in OpEx. to unutilized generally, of facilities as the facilities, those logistics the allocate a open As our COGS, rent portion but we

changes mentioned As footprint lease this the to standards, further our been in implementation XXXX, unutilized and of as Niraj we build-to-suit add our rent, will will accounting impacts and to growing earlier, expect logistics which space have leases. our to grow

increased a result, forward. As from burden expect unutilized rent an going we

to standard. the $XX accounting million QX of XXXX, million approximately Specifically in the range in Approximately $XX impact the this $X unutilized $X to in change is will be of amount million. rent of lease million

EBITDA $X net for EBITDA in was revenue. positive to QX Adjusted X.X% or profitability. negative fourth U.S. for the for EBITDA Turning free million. cash million, $XX based million. Adjusted quarter quarter our cash business million Non-GAAP of activities $XX the expenditures and international operating was negative net adjusted was $XX flow of was $XX for on business negative from the $XX of million, negative and capital million

our was net which be cash in will for the spending timing QX. XXXX follows both usual as working a see of average period, in we and X.X% result that in holiday primarily CapEx investments coupled in outflow quarter, CapEx seasonal capital of to the movement of QX, of material revenue a the than a facilities QX expect technology higher whole. as and As with

sheet X% to long-term a cash cash, We revenue net approximately We XXXX, QX. issuance investments following loan as at million XX, on opportunistic. further and December found the in with in on negative IR filings can be of convertible had of balance strengthens of enable both our funding run SEC and short environments CapEx This $XXX and convertible us our macroeconomic in flexibility remain us equivalents November. attractive Further of the give expect capital details notes and positive our to and note in site. should

billion, growth billion our We net remain QX and quarter million. on XX% near-term guidance. $X.XX revenue trending, bullish previously, Direct To XXXX year-over-year business, representing long-term. above and transparency on $X.XX growth our XX% done Retail revenue gross to as give approximately year-over-year. of rate very Now for forecast Direct We to Retail both of Direct grown year-over-year has to-date approximately $XXX of current Retail dollar we've XX% a

XX% forecast tax total We of of and and $X.XXX XX% international macro of total U.S. Retail approximately mindful factors $XX billion be in in our growth, the year-over-year confidence revenue net revenue timing range of Direct growth our to Direct to XX% therefore we the guidance XX% results range other the XX%. consumer business, Retail growth factors range are revenue consumer-facing impact to QX. Direct billion refunds the can $X.XX million, overall between to Within $XX first in to and of for million the Retail expect for of net quarter. a XX% of and we As some are

started on our results. has growth international rates. impact swings is currency noticeable a grown, of our to particularly focus As This greater our have impact business international have the on reported with the

net revenue XX% This on a our international a XX%. in grew the year-over-year. reported that basis. a basis, for on reported XX% would constant-currency year on a QX, gross as-reported International sales craft basis, constant-currency XX%. XX% it's example, for as for constant-currency an past grew We full XX to basis, XX% constant-currency quarter growth than grew Yet, our and be on are but international guidance to was approximately quarter guidance For more as up growth basis, for growth our it Yet, revenue %. on XXXX, international it date noting worth

As become approximately has market Canada, penetration, Niraj XX% revenue. great business with now mentioned our net rapidly a scale earlier, international represents of which

share continue rate rate, rate growth our overall The which at are headwinds grow a penetrating they are there slower their we the a to markets. in and feeling Some of international is have of excess impacting momentum the at Canada Germany gain taking total and far growing growth. as and UK

the in to have in and resonating with and investments our to business been the are continuing customers U.S. are make to-date. We central success that our internationally

As to in in the we we've not we mentioned in before, do revenue and best customers a over always way spending our invested have quarter link that long-term, quarter. a serves particular our that

and few the hiring substantial more revenue year the last we quarter taxes the done cost sequentially quarters. percentage new As in the in we've expect as a case years, has of over to for been of year first of as delever the the reset OpEx prior we bear payroll the full

we last continue quarters, the for adjusted U.S. with improve been this that The latter has of for business working We do U.S., our continue are of anticipate the term. will many the are U.S. U.S. that and expect from flow-through we nine revenue headcount for reminder, quarter. incremental see and growth year in a to over longer we leverage profitable of these be investments substantial producing our customers X% annualize see to year. to modest of the to new spend growth ad EBITDA EBITDA of in X.X% part opportunities time. seven negative our are expect team adjusted As line toward on to will initiatives the the deliver we members this to EBITDA as continue yet last this Combining the the year-over-year adjusted the over not negative

lowest that won't while historically we and sequential always, we any of costs. as EBITDA a is QX typically experience our quarter. normal So make spend to small investments happen decrease time particular quarter our in ad in employee increases as revenue seasonal having the year in

QX range of negative These margins to driven $XX negative primarily the EBITDA negative internationally. with forecast are international negative X.X% of to we X.X% business, million losses EBITDA, adjusted our $XX consolidated adjusted For by XXXX. for million in

with ourselves in here gains further business increasing extremely investment and we accordingly Steve successfully for market the internationally did earlier As are Niraj mentioned much position call, as like and U.S. our pleased making is we we're the penetration, the we our in

of and For $XX amortization to assume shares of XX.X million, compensation and modeling QX million million of equity-based please and million average for related depreciation expense million. $XX purposes $XX $XX weighted XXXX, tax to outstanding

over Now take Niraj your to we call questions. I'll turn before the

Niraj Shah

the proud opportunity take are of the I put have Julia. ourselves we Thanks, to that in the of see and I Steve advantage service. and we home and we like internationally. online, vast delivery what ahead keep and delivering in both continuing XXXX us, believe selection, position reiterate achieved business in how convenient to the would the an share fast we and customer inspiring in Dollars with world-class by category U.S. visual outsized the customer merchandising, can and are taking experience move of to best

will We turn delighted this are we of to behind With be us that, take seeing and can over call the to so that investing now your strength. we questions. the are dollars, some reward I operator increasingly with customers their

Operator

first [Operator comes Instructions] Your Peter Keith Jaffray. from from question Piper

Your line is open.

Peter Keith

impact did income that much. quarter? in launched, and Hey, want on of recent Congratulations again on advertising. revenue dig or the topic on Because you And it's reported site seeing that last show curious just up good up to have results in is it most is whether to the do advertising. this How on about on it had think where since offset you I one was nicely Thank the – overall that I any wasn't was as very sponsored overall an you that what will statement. we're your prepared here. ramp the brought morning, couple solid everyone. in the remarks, on quite months

Niraj Shah

and I'm where Thanks to on thing but just much actually how we're it's Peter. Julia want shows very days. to accounted the with P&L it's still going the one it's highlight, up early explain let I how But thrilled going, for. it

has incredibly small, and is where it impact So the of go, about volume we've dollar actual the – quite had the reaction optimistic suppliers but positive. been the from will we're very

fantastic, but address early. why it you think it don't Julia, we accounting? the So be is But can

Julia Donnelly

Yes.

where sponsored to on Peter, COGS appear report SKUs, it will so statement. the as contra item, that's we're line So that income required on a

Peter Keith

Okay, more And I actually, great. if sneak for Niraj. one in can

around the mentioned freight. have You Asia

then, to sales/revenue. I a to correspondingly, ramp something was show that the target that about inbound think that XX% will do it is operating the you over that And Or Was that plan think, where time? would year? CastleGate of metrics, be start on would, improvement? getting this you within

Niraj Shah

Yes.

So XX% I think, if is. I what can number the just explain

CastleGate the volume XX% in Asia. which from container facilities in of origin, So the comes generally direct is

the wholesale XX% is container facilities therefore, other attractive and efficient very direct cost their us is logistics more retail. and lower through lower obviously, is a coming supplier, a supplier have said to The to much into to that standpoint, that's a our ability CastleGate XX% in from I've pass from coming domestic That warehouses.

drayage it they who you with visibility, the us the and to they improve chance money, have the for or reason both. that And ocean using so If volume volume, piece or suppliers of inbound from half that the supply so is CastleGate, XX% of at of the container use XX% speed availability up it in-stock some look that us save to are chain, for helps that is chance the chain.

at we're where today. that's so And

suppliers half form inbound. So for the already some of basically, we today, that's coming us using have in volume

just have started are that take to really off. show we to a ago citing so now year we that piloted inbound the just services And which

Peter Keith

That’s very you luck. good much. helpful. and Thanks thank Okay,

Niraj Shah

Thank you.

Operator

John Blackledge Cowen and next Your comes question from Company. from

open. Your is line

John Blackledge

Thanks.

Just two questions.

think was gross quarter. I margin, the On in it XX% the

it at like XX%. commentary run Your would suggested

fulfillment. for how on and the head margin into So just the there. question for be, upside. opportunity, generally, thoughts any given upside The logistics color And on Thank inning CastleGate just we the will and versus you. more as conversion a long-term we good is where CastleGate levers thanks gross for programs? a the for are should Niraj, XXXX, on And in are color respective What we build-out? potential for CastleGate, product? WDN in non-CastleGate fulfillment about the what of these think we kind and And in difference

Niraj Shah

so Thanks about levers time. there's out we've is we XX%. the we straightforward path people John. mention margin, more a long-term is some talked over automatically I'm over gross lot ascribe went On how unchanged question, number three fourth. up, built have so which public actually in we've to that cite into it years the your than a things first business of we there margin We might a a much since we will margin basically and play that and model, what gross to that described the gross is going And XXXX. show – think And drive simple because XX%

is the in with a that, that's are to source So volume, and lower that margin mentioned more on and operate times, we one number of order basically, willing just three suppliers to drive gross a more a of benefit. throughput, margin

brands allows The value, that for gross we've price as margin second we expansion. dramatically. share The we is talked way, launched competition, that about by that haven't house way grown add dense the brands, referenced, the just the take we house

basis it's for a now. you at year look under run-rate the And on year. that, XX% than so It's last that just higher if

logistics logistics to and cost third plus the the amounts pays. the pay revenue the see piece and take can every the worked take if that to is supplier you of we So last $X.XX that's over that years, the and ability about margin. – three actually transportation pieces that leads And you efficiencies our to dollar transportation

are can basically So can add those as that accrue. and more savings efficiency, of more those and we address

The could XX% XX% we to things huge each simply close And there's one buckets of it reason and the of And number are a we keep it. because to don't wanted whole us. all three XX% times, the so we've ahead if is most we out, to XX% upside, show all of is playing of to those said of which of gap to. those expect

to to expect in the We savings. some pass of it customer back

Okay.

we category a geography new time, it's geography, Now or effort, starts new to buying the power, as it and – the just a player, better mention over rises. we fourth a shift mix there's to any meaningful a margin. have whether new I scales efficiencies margin gross lower Because effect. thing, And international we can become want a and add is

new have now, that things be place also time. Because if And Well, XX, talking the plays Slide look at bolstering other our either you with so all that's – investor right new category lower will in over the we're so emerging thing we're many geographies, newer out a where categories that we international categories the services, gross associated all or teams. about the generally, similarly. margin; presentation

more become but a margin. than more that's that anything up those mature, will other else, the effect So mix That's thing. as average the

So the is margin that to will the way rise. future about gross think

rise having that gross Now great to because more margin also these the something to But be natural drive offer on playing can your yes. see, focused continue through outcome – we're out. natural not going this and of second that a we greater trying to okay, prematurely. a while outcome. That's we things is outcome that customer value really And it's

So that question. the was margin

about question the WDN. CastleGate, The second was logistics,

our continue the to what more still innings. reason early would there, I So of of a gains inning the logistics whole more we operations, in, a innings. business the is The and in about the early know, that in would you But these on while we're we these think get built innings as is mature. come things we're number as lot the in early be say we've

finishing on but we a year talk example, we adds there's technology services, the build first ocean, for drayage So and full efficiency. that know lot of and about our can those, only inbound we're of offering we

locations that of that that now, so cost that forth. As Asian we with add couple more faster the so consumer online we're on coupled warehouse only efficiency a building come and there's lot more to more speed delivery will with consolidation and and operations and the

the to long right huge need cities it own the or unlock. number year. San On Antonio, you XX% value. volume one Las of City get or at you to last and we're we continue because open some there's Kansas list, to month, of small-enough to NPS rate a We're look some opened the of make a do them sense before of Milwaukee, we'll this At and their – point, we like lot a a working still facilities, jump, operation. cities we where add this that justifies would Phoenix, more Austin, jump Vegas, that the just Cincinnati. opening the hard one it markets mentioned that's yet these two now, quarter, But XX% at just list WDN doesn't And that very jump, a in when NPS is on, Columbus,

So gains, kinds when of very you can get these they're large.

So to operation we're in that gain. getting of the is think way early about the logistics innings the

in is And measure replicating to and to we've still in customer save gains. those what's And So enough know innings nice that's but prove it, this we're can it measure reaping we're money, how able that able we've internationally. what's been we of satisfaction far the exciting. early increases really we're works, we been

business talk unlock great going online we volume that double CastleGate to and northbound growth the over because year. warehouse have with have Canadian border. delivery you you and the is cost all United you the into scaling duty, on the of in Canadian sort then we move as that situation operation That's So lower business, last a comes huge this next-day when States transportation the double came that about to Canadian example the

gains. as So there's and there we're UK operations a large well. Germany, lot of building

John Blackledge

Thanks That's much. so great.

Niraj Shah

John. Thanks,

Operator

question from Maria next comes Canaccord. from Your Ripps

open. is line Your

Maria Ripps

just permanent can you question. maybe have you And the complements strategy over for strategy? how location physical and Kentucky, seems my Thank Great. with sort store holidays. brick-and-mortar like here your locations just of been in that with strategy you your this taking about the It talk experimenting online opened

Niraj Shah

Sure. Thanks, Maria.

few a me So stores. let think when things mention about we of kind

let about we me way we stores think about with marketing First, a just channels. think start in

about about how on we always we've a measure lot that our payback talked advertising we've and so spend, And basis. talked

budget and I to in we're is instead it the some percentage using to marketing, only So a the measure way measure we of rather that, allocate revenue that of it, be generates to might of ad is effort used pragmatic what prescribed quantitative we out measure about cover figured of that and on to think than margin actually TV contribution needs finite When or would doesn't going to it very which in do really forayed similarly spending time for in the that of direct online that mail, you on same to as that's we cost Well, example, I know, to all how say, television focus of know allow you're advertising. model the we only then, indirect framework. kind roughly, if, and period make into way mail we're that And only because wisely. we the a in order for to sure we so a physical now don't stores, fact, double drives a and that measure to way XX%, we way scale impact that use of spend having a these only think going same quantitative our each counting total payback. one kind that being, XX% of the

Now for in as spot an you that well, ad why television. Well, an can't. do Well, of a stores? way ad television in we about, online display have XX-second story online can't a the a interest text television, an value example, can think or that's tell add

few so then if certain stores breadth creating a coffee considering mail. on things you a you If interaction, of do, different you certain that it think payback can you There's do think for that get impact? different on you how you or sits direct a Well, with and in have. and a service that have a experience targeting Well, can trifold that a thing catalog there's ingenuity forth? we The same the can so sure you have or the didn't you and are So do in there do can things things a what way in-person postcard? we the can store. we and around while ingenuity, What table impact offer do. how the we makes an do catalog offer, months, high-touch can

investigating we why are that's it. So

three that but And certain and is items. Well, X%, so about of you up?" our so returns things returns and referring of you're I Like would in to there's you the is reroll, do. on we sort do store items yield forth. of investigating start that yield rebox there's at getting best a the half to things a The in can we what to a permanent – three rugs, liquidation-type ways. say, rebag year just is outlet yield to on we're on way put we're relative to of But get to, the that selling just can that gain to least a it amount. it we There's X% – which rugs different some we to can lot ago, run significant we a lot that so sell you the liquidator. what modest focused on relatively where stores had and a Now center, said, a relevant has an not been Starting store the area effort our "How I optimizing. an historically really, get simply the

and on store what returns can the Kentucky first to stores number other any get what significantly more up we a that sale So liquidation of we relative channel. the small yields focused would of the be of in the do is relatively in

meaningful on that's returns. use you at case, the so proposition, when a very of P&L focused very And look that narrow but

more I efforts of more to, two which think be alluding you're what of The I other would is would store reference permanent basis. a

effort we And so the stores. about talked the one pop-up are

which payback goal spend. of is at that have those about we it and a And think would about would two to proposition that a lot and of then which there's customer a it proposition, That but of acquisition per value store how as third look we we'll that. today, get any opportunities learned can of then us. we It's what had has a during very about something kind think make payback, our think revenue math of permanent increasing – Is on pop-ups first scale for was a per quantitative the And would thinking. foray. the year? it. were we'll and ad have customer time We that, to see would still lot I don't Wayfair that it be mile certain And about we it we But well. so sense seasonal we the that's meant to the of So have there makes we the stores it of holiday. like a year, think so if high ahead a forth? about of talk that and primary and iterate. of kind so thing? point and in you Is Is locations We would broad sense, from

Maria Ripps

That's very helpful. Thank you.

Operator

Your next from Brian Oppenheimer. comes question from Nagel

Your line is open.

Brian Nagel

morning. Hi. my quarter. for taking you Good Thank Nice question.

two that I maybe questions I'll So merge one. have into

the brought off, clearly there's I know, macro government And or First environment. had several a perspective, shutdown. of on, by there. out from the with been, Julia, choppiness the regard to just mentioned But some so, the last risks weeks part, you retail in

it of question, Wayfair? comments, your a way were to about, normal sort offset is but question – I the prepared with reported of the business? sort suppliers to And of, to we this in we better? I margin but you. relationship manage for Or your of a working question course business Niraj, Thank driving this So about you talked similar just in this your did the can't in in a margin have, with you're see say, act gross and that an second follow-up bit a able a promotion. you there Or terms this? clearly have, the – to of prior to paradigm – think results, gross Wayfair's is now respect from now and was or effect ways should to shift you Is

Niraj Shah

Brian. Thanks,

we've suppliers, always promotions So the managing that, me anything, go nothing just first I'll first, first, about only your On there's margin, question. if And it's there. and course talking not of second you're we question to to how self-service we new on then but normal with so business, answer focused done let gross suppliers year site. farther area better, on and for better tied we like do how example, our look one do planning, give plan things we of do ahead, it is better inventory how planning last we a availability, tools. launched clearance Like, to the easier make

by into them, they productive to more to inventory. through launch for their the liquidate. have just, the overstocked can suppliers for that's clearance So help ways through a than example, passing manage the And extranet, discount area items other

promotion things very be So major There's out these we multifaceted. which day in, could as types like event. think for planning There's events. of the about day

what's been so And that's a then I approach suppliers, I of unusual really things for the actually mention that's your very of we course retailer. And to normal different come think back just – part partner is – but – it's and I'll this, with And wanted to business. the one of a and questions.

And obviously, the letter. want On annual in minutes, shareholder today, a take what red accustomed letter, would our I press second; the we touch the everyone also, presentation, but that IR to the to; on just you're couple a website release, to encourage which I updated in which but if posted, about think are shareholder read about significant, and understands this. there's don't a talked about fully how the about it is business. – in that detail know we interested it, I talk And letter everyone if and because notion some tried you we've to we download

our between it platform the the – retailer, infrastructure creating So end ourselves of understand, a of I model to is allows talk we in traditional And don't though customers. and the we We role think think economic a end retailer, more where of even platform actually to think which the enables think easier and is suppliers that is of of a that it, the customer. suppliers for we we customer sit do reach a provide the our is what that need don't in great actually manufacturers a as you and about to ourselves experience. our method

– to able suppliers we things able that what to And we our own. products that them things in cases, some So offering, know better – is do suppliers the and in merchandise their that let to build that do. that areas, building some their for means them can't building them to for on then, customer be they basically, story? means and need tell that their offering do kind to directly we connect How to build platform be promote of for their tools than

we delivery, that example, delivery. damage something logistics we and consistently, offer so not need reduces that. and that. two-day are can capability thousands same-day who build service can eventually, we that's so So build, with not we something for that offers suppliers offer next-day delivery customer people, of to suppliers have amazing people the our our That's the Or offer

amount of And so think very is our creating with unlocked partnership that's a suppliers a it doing approach. a platform unusual We growth. and tremendous in

quarter, included would at we're to more – one that. find and future. we're because more mentioned last on And you it, that going I cohort does to the presentation think data investor update want try put a the year say that to to this job not at We, letter to We're XXXX. the update that letter year, every take of the so it back look interesting. course, going might going We in that? slide but we in. going data so you Because Well, quarter, I the but that's Every a that we this said, just is year, hey, discontinue there. summarizing in right keep to read looks to I we it this an put why thing whole used now, at update don't interesting. good really to won't to a just end on focusing we

who past, So in I you in XX that those Slide presentation. it's had slide for the followed think, the of

the have that the I insight going the that they updating What do intend don't enjoy future as grow to in the of areas to into. interesting and we insight material. is things to business you'll keep that keep seeing material think give talk you and the are perhaps We're that. new necessarily not to about you same changing same

or like back which the approach, to matter course supplier that of more. that's he gross then Steve's January out normal shows every lot with in think, something effort partnering of U.S. But about to And international major to of times, to there's we'll a couple something three that supplier up break into. of business, the of a since coming talk been been get with talked about a invest And I He Europe about trade margin, the normal question, Germany. that and we ones. on bunch business. so suppliers future, is couple a a June. I've European as as talked X call. more big well

at from is providing online and And tends that. is off-line, macro concentrated. much getting be grow seeing taking grow to growth Julia mentioned XX%, quarter the but important little not say is mean, mean, say a To not it'd the we much, wrap to be then, do And choppiness. lot we're with I taking is the reason the the no, So share XX% the I X%. reason X%, the for or XX%. not market crazy And And becomes there's taking rewarded macro total macro to taking though growing you're you best to We're less very date whether and share. is would share I does share lastly, significantly that. we're a to The is further is we – on affect can we're X% the that realize much. truth online incredible us? honest, atmosphere, because you it because choppiness over relevant momentum. experience be when what's it

the do the not estimates that we had based we've dollar online. categories a there's of newer seen, you share-taking If sure talked still geographies. And newer these and the have, that we in we you math of lot incremental XX% past, growth moved think upside based on dollars the on took about

So we're we thrilled where with sit. But you thank very much.

Brian Nagel

Thank you.

Operator

today’s concludes call. This conference

You may now disconnect.

Wayfair (W) 22 Feb 192018 Q4 Earnings call transcript