W - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wayfair Q2 2019 Earnings Release and Conference Call. [Operator Instructions]

I would now like to turn the call over to Jane Gelfand, Head of Investor Relations. ahead. go Please

Jane Gelfand

Conine, thank review and are joining Today, Co-Chairman; us. Shah, Fleisher, and Good Financial Chief second you quarter will Officer. Steve and Officer our Chief me and XXXX we Co-Chairman; Co-founder, Michael morning, Executive for Co-founder results. Niraj With

remarks. all be prepared Q&A following for will We today’s available

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

materially for could no in these a any from certain and XXXX Except statements SEC subsequent forward-looking factors statements XX-K made as any cause filings otherwise. required undertake events actual new that company’s or we today. by law, identify update revise or whether differ information, of future those Our the as obligation projected our to publicly to result results

non-GAAP Please to this be obtain results. contains that our be of our earnings the measures the non-GAAP the review certain measures descriptions please financial non-GAAP financial with note measures. Relations release, nearest GAAP together of and website refer measures to discuss will a section reconciliations of we and call, which Investor comparable to performance. for should measures replacements copy we should as considered of our These financial not read GAAP company’s Also, non-GAAP during

available IR webcast and being replay for on recorded website. is call be a This our will

the turn to over like Niraj. to would I Now call

Niraj Shah

joining for all you this us thank and morning. Jane, Thanks,

we Wayfair. report bullish a as what ever We are lies as remain ahead to QX about strong and for pleased

we’re move set expectations and and customers strong our Canada, the continue that us awareness driving the the are ourselves, of enabling experience. each and growth, in continues. investments seeing high to and suppliers sequential Germany acceleration terms our brand value both in UK quarter. and to the dollar we In momentum We reflecting the U.S. and for payoff, an Wayfair shopping dollars the and percentage capture tracking our both online with for share and appreciation In growing our line customers outsized see business to across

will Today, update of I’ll driver provide you our a with have share past and supplier consolidating differentiating online. events, variability share I our our as our suppliers. this highlight showcase Today, briefly And increasingly category with of quarterly another in major cost of growth and first quarter, network, which a underway seasonal was efficiencies. which is the where set for special our business a we in a on to the about focus the outdoor half I a we despite exciting want on of logistics we will yet example hosted us practice, the also XXXX, initiatives an be improved moves one which as partnership advantage of business, is the furniture categories. strong are source talk we true of

network. space logistics which with million track approximately exited square-feet to logistics million X our to we We with begin remain XXXX. XX square-feet of XXXX. me in let First, the on footprint on Building our add

North delivery CastleGate opened America. mile new established also warehouse in warehouse XXth additional the last operational we This in quarter, the of During an facility for year total the of second we XXth facility. XX Savannah, located where delivery our mile Georgia, building. is now marks a The last

to large the through the we We parcel network most move for prepared and well demand delivery and logistics U.S. a believe mile actual the major that presence meet as lower dollars CastleGate due in last have scales. port steadily architected Our cost great us year-over-year. coverage. trend means continent both continues and facilities of levels robust now warehouse and time to delivery CastleGate current in to pace, We faster this to towards penetration placed U.S. growth. are the the are we across flowing small giving locations upward it At have doubling increased our that strategically

we While continue moving will service continue the growing to facilities to we add investments should to efficiencies build already from the demand, forward. believe made

CastleGate expertise several into life where our brand, international into U.S. expansion further gains but naturally we continue years behind markets see the the our there, Unlike of introduced in we given was business earlier relative our to penetration by CastleGate the our established logistics Wayfair into as and is penetration markets launch. we scale. the international as we informed CastleGate the in maturity

we plan month to product are next rather be ourselves, reducing warehouse we duty inducting in more facility the million Germany for driving second from In it a Canada, the our States. prices. facility turn customers year. lower will new and costs than next benefit directly open This UK, sometime and cross form our in making progress and we’ll the adding is Mississauga the a CastleGate and X United into suppliers lower border of in having square-foot In paid

imagine, but down Pan-European as demand part road As you and is existing European this also of designed currently might future network. out leveraged may of handle markets a serve, the footprint we the to be

experience just of Our logistics also one infrastructure not us. enhancing, our suppliers’ our is working with but of customers component only

in our us annual than other these U.S. core partners further We event suppliers increasing have many which Wayfair gatherings, of Invite a and CEOs initiatives and designed their Berlin. To Xth drive more and business both in annual robust give our and exciting reconnect the Only format opportunity the to U.S. European view These true Europe, Supplier grow Xrd Wayfair family. partnership each we part showcase in and recently Boston event attendance year our reinforce events them hundreds leaders a forward. to and of we joined with in hosted with Summit strengthen relationships, the suppliers as XX,XXX and more in an

represents in of what XX and parts to Steve on forum functions our future top growth Wayfair summit our reaffirm various of success and NPS shared partnering to customer with partners optimize XX nearly the critical breakout guests that our for great valuable highlighting unique to score enabled sessions. Our Garnering them also our and with success. themselves the mind inspire Q&A a to important players educate both ways ensure It’s multiple mutual business, experienced. business an and from to stories The an opportunity keep peers myself, they’ve from opportunities to of and networking their suppliers the Wayfair. benefited presentations also commitment and

warmer suited as We as of to as attractive uniquely consumers the The is seems to as XXXX. moment and it great highlight and driven Today experiencing outdoor in being furniture year increasingly like an that dive are months see outdoor deeper marketplace. outdoor outdoor building strong to in a the in As category structures U.S. rooms viewing spas. an as billion at Last is to growth which business we talk we’re the you year, enjoy their extension decor an appropriate we’re place about large report the online area entertain. into we by furniture, living the growth pleased where $X the we we’ll of to furniture. in estimated patio

reaching reasons, and physical customer very Yet durability and retail in for They’re only of a invest but the with Wayfair are far purchase the year an as offers have for outdoor mortar willing better shoppers limited. choices the best limited of shopper decision. optimal and furniture. time for in selection presenting outdoor knowledge the world, time the sub-segment making retailers a displays, and options good, to assortment each money specialty choices well. few to aesthetic short in Brick not inform with just

has U.S. prices to X-person spanning over to feature from round. is decisions the in outdoor care category our sets enhanced next and in flexibility customers shop year the category budget. to we the educated fit guides At we great every when is weather strikes. merchandising, patio And with $X,XXX $XXX frequently less and less For dining the instance, Wayfair consistently swatch season style inspiration order over tools. make a Whether X,XXX than through planning or in buying help samples, outside for spatial that customer when the understood

imagery, Wayfair but accessible represents customer relatable we’re just also bulk and for mass focused merchandising, making traffic. that aspirational, not of visual In inspirational the and the on

on dynamic We’re the for also indoor showcase the shopping. they’re outdoor imagery, may shopper based even introducing season seeking that settings. island, specific they kitchen product what perched which both outdoor for designed what against not is barstool can or for context though the should most stools the be seeing products and be bar, searching that appropriate in When

more and swimming umbrellas. accessible The and in pools brand and fire In called our might To merchandising covers outdoor the our participating blankets fun mid category make even outdoor house first pits, and compliments the most brand shop, XX. is on be suggested enhanced to fall, focused sun and XXXX with more compelling and decor images skews the priced receive treatment. introduced we Sol furniture throw

very XX set for it getting has we to start off a internal just strong that We’re launch. the started benchmarks upon Sol and exceeded is ourselves

is zones with spend by the our efficiency increased unique a we driving algorithms have product optimal geographic those geographic that to be intent ad effective us allows and identify in to This dollars which furniture how and across invest leverages product ad the This spend customer identifying and also signals to based our to the classes. We methodology against, purchase. approach most data-driven more bidding improve customers to category. marketing in highest our areas in outdoor to

CastleGate, category higher. with penetration to from of reach in at logistics, potential strong our levels, in suppliers terms interest wide our there’s far is where the outdoor In participating already furniture but company

scale with on to and to and penetrate, the step for furniture up in product customer, touch logistics we network supplier of points delivery and eliminate along seek leverage our the time down further we categories the As plan outdoor Wayfair. to journey, our broader the speed cost all

with million of many very is track share built and in wayfair.com. at gross to XX% year gaining pleased year-over-year customers with discover revenue on momentum, This is shopping $XXX revenue the rich businesses exceed as move business we’ve a the near differentiated disproportionate in in growth on date furniture experience to and online outdoor We’re Wayfair, one the XXXX. and

late it a the take turn to want headlines I to to Steve, just over I in minute Before we made June. address

of have debate. group placed recent team exchange As core open our to a Transparency in and in between employees you a broader dialogue seen in of culture. leadership spotlight ideas midst of Wayfair been have our the the always and media the may political Wayfair’s

proud have is ongoing broader passionate an have terrific and to and communities. in are both and a at engaged dialogue our We their work employees team with that

matter that in that community And team, internally track causes long important may we navigate charitable Our Wayfair’s to with most employees to shape working in in we’re our this the to of together have always all to giving. and record played constructively committed arise world and over future. a helping other supporting topics believe significant role Wayfairians involvement the the

And to and with that, we’ll turn the remarks. to Steve’s results prepared back QX

Steve Conine

Thanks, is opportunity as This huge Niraj. goods everyone in wayfair.com. of we $XX Perigold, market With e-commerce U.S. I like measuring Perigold. have e-commerce. with customer brand end minutes market home newest high an also with luxury our underpenetrated disrupt to the would to few by the mass the billion estimate expects, opportunity the and with market north the and on just customer in a home take update luxury marketplace a to our that our is

luxury. Perigold an of mission world Our at to is reveal undiscovered

online professionals and luxury on to has incremental who nascent They transacting we to digital underserved is also serve largely Perigold a of but are reticent that customers universe targeting the been wayfair.com. the somewhat to platforms are home. ecommerce currently are customers world increasingly comfortable challenge initially supplier for participate. and those We’re in Part

to them team additional we model of over of could rapidly onboard the first e-commerce represent benefit Perigold XXX convey XX one revenue growing rich suppliers launched had a Perigold convince a join. than for still people Today pipeline that When our channel. suppliers, the to large features and fewer with and

and Currey already and include, prominent Some Arteriors, Century the August, Furniture home luxury JANUS brands Company, et Perigold Lillian Cie. that of called Schumacher,

to established with design key a more than the present number XX among level to attendance Mobile for continue that on ago, recognition we With the A of and really and show, team we’ve months over are traveled products amongst impressed our meet few opportunity had the legitimacy now since traction, have Fashion a been Week. by of the I launch. del I and There both to community. luxury the trade site people, trust was and suppliers placing to able event more in our draws and reputation Salone the the suppliers us suppliers perspective triple of dedicated Milan gain than

are in and are with peers, to are conversations we of spreading shows mass case, Perigold’s making. we inflection the develop success Wayfair.com keeping flywheel oriented several turn partner in historically, no digital the Point like enthusiasm because trade Suppliers word to The and visiting partnering uniquely High with the luxury the tailored e-commerce. me and Perigold have in remind inroads point very and or We turning our suppliers their furthering assets having the and witnessed have to merchandising with exposure In suppliers XD strategies. visualization tools in U.S. both XD little closely years

already many and we’ll second to the formula the and success, this end share our two for years. be hosting relationships There, more strong we will will new of summit we’ve practices. online. onto welcome Building year last customer shopping reinforce established even best the home experience suppliers high on respective Together, built our later for elevate over Perigold existing goods Perigold platform supplier for we the

We are learning luxury more every shopper about day. the

Our country. a the value They right customers of are quality represent look for the and enables and households aesthetic income that terms their source highly to in top on their They to as U.S. X% across focused content Perigold them homes. and all spaces. of finding live the look find also uniqueness the but high product, perfect just end not for living of for

inspiring Perigold the delay. imagery center shoppers without and home design materials achieve tools service brings backed so, It bringing them about exceptional enables To through then in experiences. to engages and those are concept options educate purchase visualization and All help life do the our and them these by delivery options. customers to looks customer the we online. at design to goods

We service touch guide out is them expectation and part customer and at reach choose, as done establish Wayfair.com. competitive the where customer core customer a we’ve or they service, approach, of a can is they if consistent with a in Perigold project are concierge their DNA. shoppers will because contemplating. Perigold of is high designed The our team just advantage quality through with here clear Perigold to service our purchase

in well their from specialized is luxury team therefore customer of aid Our to knowledge journey and equipped to start finish. the home,

well. any well with experience future shoppers on projects has person their point resonating concierge professional or For purchases Perigold, as been becomes the very for customers. This our

that high Promoter average to notable how of as our improve at is minimal with Perigold’s continues values it time. transact large Now these customers we portion order best iterate aid. higher customers a Score also over Net and serve to trend

philosophy our approach. in oriented Perigold is quantitative is marketing brands Our returns deeply for no rooted all of different. And

most to ever insights identify target see. to effectively its that browse marketing to types dollars of explore target Perigold customer to begun helps strategies. and that continuously returning We while advertising convert our venues market, for have shoppers of the incorporate to the the methods best successfully experimental team penetrate recipe the many audiences This tweaking we portion new evolving a the channels and to reserves high site. the

with updating thresholds time. in luxury look to to this revenue online. shopping bringing could we spend. for team Perigold, As payback as year over forward are double our not future Perigold role to further than our more its its looks home the success eager brands, to XX-month track on is gross you on consistent more criterion and disruptive ad be optimize We all

I’ll that, to With Michael. turn over call the

Michael Fleisher

highlights presentation good and information our more the our IR our I provide detailed Thanks, earnings key the available will in release financial morning in on site. information for quarter investor Steve, and everyone. some of with

$XXX business to dollar year-over-year increased growth Retail Direct representing approximately $X,XXX,XXX,XXX, million. XX% of our QX, year-over-year In

increased Direct also the $X,XXX,XXX,XXX revenue $X,XXX,XXX,XXX. U.S., million. net $XXX Retail revenue year-over-year year-over-year, total QX, in of net XX% the up XX% to quarter in to growth In representing increased dollar approximately Our year-over-year

Direct a XX% Germany year-over-year up segment, million, international UK approximately revenue up and Canada, on basis. our Retail to which the net and from increased currency includes year-over-year, XX% constant $XXX

in As In experienced we to into U.S. a due border revenue a of from crossing Canada. before first and Canada UK into either growth we than product macro cost is and or our temporary disadvantage larger recent today. a external coming the currency reminder, headwinds the from significantly the as quarters, revenue revenue headwinds combination our Germany Canada sourced

lift we second We and facility factor more into Canadian Mississauga business, impacts expect directly the Canadian the year-on-year relative our to the as in QX. induct gradually product accelerate sequentially did growth to QX in

hitting rate outpace growth key are milestones. German overall UK our continued Our to internal and revenue and businesses company

In we both higher repeat countries. with to significantly UK which purchases year-over-year driving penetration and Germany in advertising, both levels European the We’ve year-over-year. come. and higher continues also grown markets, CastleGate in to increased more in is march sophisticated the have more merchandising selections of skew also

speak LTM consolidated now per see Both base We net KPIs our QX, $XXX sequential per active U.S., customer U.S., orders were active million I’ll in and LTM revenue while was modestly global were another per and strong international. an XX% in net basis. per customer small customer revenue to reaching active quarter-over-quarter $XX.X pleased basis. quarter customer a both customer higher of active driven was with new year-over-year. a orders on our to LTM increase the by were increases QX. X.XX experienced for on KPIs up in customer active the acquisition LTM

and the totals will I which financials a on $XX non-GAAP taxes, impact XXXX. remaining of million share the basis, compensation QX equity-based related excluding in

earnings reporting, release GAAP of IR to reconciliation on site. our to please our For non-GAAP refer

year-over-year XX% and unchanged. to margins profits product near-term fulfillment for revenue. gross in was for of points delivery which in range, expectation XX margins the remains is our higher XX% net line of gross Our with expenses costs, XX.X% $XXX or Gross million, and net the quarter, all basis which were

XX than and or higher points net revenue, million, point last $XXX a of approximately of was spend our guidance QX basis advertising XX.X% increase. basis than better QX, In year XX

or you we payback our margin to invest threshold continue and spend ad As recall, to one-year are governed advertising by within contribution decisions opportunities dollars attractive framework. this approximately see

success evident by orders driven LTM time the approach repeat quarter. is this customers of in active believe of reaching both We percentage and that all customers highs

ad us make purchases returning technology proprietary to invest customer which the spend year-after-year. tend behind Our to cohorts, allows highest repeat

QX. this expect teams larger basis continue our mix net on A to building approach, As as brand ramp business as as increase Europe component marketing a to execute of part our of year-over-year of revenue becomes to XX XX roughly drag we percent in our and this continue advertising is to investments there. a points we

and selling, second XX,XXX technology and driven G&A non-GAAP mainly Our of XX, employees totaled in In in and are a primarily total the employees quarter, approximately business, it X,XXX logistics XXX of operation. $XXX expenses of customer June operations, QX, we costs service added compensation Approximately, variable XXXX. in are for new our by as net in our costs million. areas

As logistics hires operations leadership we continue engineering, by third-party marketing, merchandising, including XXX such providers. technology. OpEx done to and product, of in-source where as the Approximately, logistics, work previously new in net areas,

show As will pick a hiring. of to this pace a XXXX up QX reminder,

we we As through welcome the tremendous campus new on talent efforts. our attracted recruiting

the graduate levels business closer we is In and we campus on in again and QX. employer almost very we schools. of part from down universities top our to saw hiring to in able fill step Our with positions the every to QX, strong plan recruits brand were

QX EBITDA for million. Adjusted profitability, X% adjusted $XXX,XXX business negative the adjusted $XX for to in negative of a to EBITDA QX or was roughly net for the was revenue. business million, as percent of U.S. was international turning negative net $XX And Now rounding revenue. breakeven EBITDA negative

net revenue approximately X.X% $XX expect flow capital to $X based negative was activities negative from in Non-GAAP CapEx and X% QX million for revenue. X% million million, net total expenditures. free QX of $XX CapEx we of in in cash operating cash and on was quarter the to net

data flexible we continue the for most for cost business effective our scales, infrastructure. our As to look solution and

long of large a we our customers. term serve with are plans ambitious to growth the in process partnering best support so our cloud And and provider

million of $XX In reflect related this to line incremental QX, our to million OpEx $XX expenses initiative. will

to able So we area this meaningfully expect the to our spend CapEx over coming in quarters. reduce be

XX, As XXXX, long cash, of approximately June term had of $XXX we million investments. short equivalents and cash and

transparency far guidance running On Retail within variability than like I’d rate XXXX. a our I while to quarter, growth normal growth thus into somewhat to revenue our is gross quarter. give to this in With mid-XXs to the turn growth for have QX. year-over-year QX with month-to-month that, when It is for performance. our uncommon lower we not Direct to a on the update exited is us start basis, quarter-to-date in want our

consider Our full to the our guidance setting prudently quarter for discipline then our quarter-to-date as is guide. as performance well and expectations

in lot As every customer there’s me has day every almost go. say, business, and show quarter market you’ve quarter heard of our up consumer still the mass to the to a

our our setting performance. for approach, guidance we quarter-to-date current typical are revenue growth overall Given our below just

XX% Retail Direct forecast $X.XX of to growth of We Direct billion million net billion, to revenue or $XXX million of approximately $XXX a rate XX%. growth approximately year-over-year, Retail representing to $X.XX dollar

U.S. XX% growth the revenue of the XX% Retail year-over-year Retail expect to XX% year-over-year. we forecast up XX% be and business, net range revenues Direct international to For net to in Direct

On to billion in billion the year-over-year. net other for a revenue $X million XX% be quarter. to of the XX% of international $X.XX between currency revenue forecasting net $XX We range we’re third growth to of total forecast constant basis, and $X.XX million

level are our based our adjusting investments of We not on current revenue guide.

quarter. will to such, coming a the swing business As loss this U.S.

us are of year will quarter. to one EBITDA business, any in a our current can even path we breakeven or continue a not to small believe We the to but be levels loss the it easily adjusted in line. sustained straight adjusted swing gain for the on EBITDA U.S. U.S., profitability changes repeat, And

of in the are U.S., QX. XXXX, in X.X% adjusted advertising, campus we reflecting margins to we X% negative Wayfair negative EBITDA network. consolidated international, range investments negative recruits in of expect out negative build The of forecast timing further the joining million delivering returns EBITDA, spend X.XX% million ongoing the for our continued of the EBITDA margins of our international expect we For to our where $XX X% In threshold. $XX QX an global and loss in and adjusted to logistics on U.S.,

North the in timing higher us tells greater Europe, is our investments over and levels intended working scale repeat strategy America the form our investments long In off not increasingly to our any are which of and over particular of in term. of paying time, quarter as

We stick any not this investments long we our particular to ROI philosophy expect to to will and more alter profitable. term quarter make positive

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

your call like back turn to before questions. now I’d take we to Niraj the

Niraj Shah

Steve opportunities in we Thanks, very competitive still of advantages mass us and continue business about this Michael. in The I our on U.S., to both excited and of luxury. in and and ahead the growth year. immense and the internationally build are the

hard secular remarkable worked strong which platform achieve, we we the experience to from have representative of is as as and tailwinds growth Our well the benefit.

We’re extremely the team the experience when as on and initiatives of the home the of working to online. make customer they’re shopping proud possible over people as for XX,XXX delightful all of

goods dollars hard thank strive home to employees as of the for and to offline secular work, an to shift want passion capture engagement, our share out-sized we moving from online. their of We collectively

now open to I operator the up lines. ask will the

you. So answer questions. your we may of Thank some

Operator

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

open. is line Your

Peter Keith

QX thanks. the and improving Good congrats on solid KPIs. everyone with Hi, morning,

obviously year. have bit of asking risk off of guys provided at coming the advertising and move term growth recent seeing Wondering, a businesses just a provide some you half might perception and It’s the heels of type some of caused the short in could are down any used forward. to since the question, months a turned metrics. of lower of you the quarter-to-date You’re this reacceleration you strong of trend shares de-sell that what and of if investors first Michael, what’s if expect

Niraj Shah

question. Niraj. Hey Peter, your for it’s Thanks

– first turn thoughts in and he obviously Let of of over watching can quarter, thoughts you in at chime or any our Yes, out would the see some I has you me when month look provide if the highly those so and all, and premarket well. with very then time, additional say, like stock are short mentioned as Michael what measures term we this it’s in you first were and stock growth volatile. the both jump

at, success. business, our run outcome our is look dozens mind, of what grow grow of doing outcome way If volatility. we choose ambitious which yields, the rate when and we an things, in sort which of – really you to at the the is inherent of it, at dozens That’s there’s we incredible

actually And frankly, we can the map have with it metrics we internally.

of a when do, quarters you sort of So the XX% what outcome. mid-XXs, example, four for you’re all three thing dozens is we in we do the had which the you for reality year, example. volatility in some that the growing had reality last is grew in that’s doing mid-XXs, inject it And the things, that just we each had that, month quarter-to-date you for a said been, over in and good them was business, of

redesign quarter that this excited a customer the really app new reset you some customers. a consideration cycle But about. for that, when you portion of launched your we example, do great we’re of For

you’re Well, if really but move you doing get worry actually it, business about that the you for don’t actually things obsess you when great about you quite forward. customers, aggressively, But space, outcomes. you and do the

tariffs. some frankly, the Here, us, that’s we on also of in have imposed sense volatility

by traditional than being platform. is more retailer a model that Our of business resilient

to suppliers to that. choose suppliers who have not do who But who We choose will suppliers shares, will that take will suppliers run who lose, win, will creates volatility. and lower margin

we it. at look way the So

there’s I that exactly out we know. the acceleration? And had of foresee And our we outcomes huge periods. we Like out And – highly years, are now you at history up and now going do right a we’re we’re highly, big we’ve That’s we’re our come a doing just That over to question, We did. flowed way little frankly, the and gains. your a thing answer come confident usually it. of logistics kick To big into is that. these They in, great. years don’t little, When of network. the will things going over look at I actually if picked up of look period were do. that that grew it’s one dividends keeping periods. it’s exactly those on

that’s well actually some what the volume network. more FX of get will We’re but through that. yield. headwind, expense seeing and another frankly is that about We flow that through more providing worry is big that and Europe great we them don’t we know as gains

We’re the investing free of flows. aggressively. That’s part cash negative

aggressively an European place our putting business. in investing infrastructure, We’re logistics, in

I’ll keep going. So

So to in and weeks, it it. about speak volatility think about you I have the the few I but know, measured way doesn’t that’s question specifically it’s

Michael, do anything you have want? you

Michael Fleisher

quite back. a not we dollars, only one-year The everyone, spend. to that performance would thing you payback I getting it we know our from margin margin ad contribution I’d just on ad of and we those the payback remind mentioned on No. spend this Peter, sort basis. know a If ratchet quickly basis we’re have, that other a it I contribution dollars on based of want one-year

a there’s we ROI every clear dollar spend. investment So on

in as performance that the our where We’re to seeing – payback, of it cohorts customers. continuing cohort see

put we investment we’re a and of metric working. and You year perform, chart that really continued saw that ad is and confidence last cohorts end of the cohort the in to lot making that the gives the the us in at out ROI dollars have the those

Peter Keith

term Maybe question you, coming if helpful. asked heels your one very supplier just longer That’s off QX get and the of I Okay. Thank guys. events. other

many has ROI commentary upfront But friendly to there justify some analysis of to is the thought proper that the or terrible a optimization? new comment interface allow supplier a any to very do keeping for making of that so investment. Is some programs from started time slowing about Wayfair to up data user-friendly? hear some suppliers suppliers. in and doing maybe hard the continue one that the have turn we So some Or resonate for analysis of programs user Wayfair

Niraj Shah

reduce the that’s more website to look technology you the very at astute even if very, a adding the friction have. intuitive And tremendous of the app, recognized if easy in and and amount platform, feature and we and that’s we you functionality. internally while made you for customers Peter, way have our more to look end and it which comment use, years, give at platform. We of

If you’d man look really been that, that’s amazing. quite at

ways with more where recently, made I’m You technology in some at store, we the powerful, where partner if used and we more historically to call is looked address, And time. branded complicated the we the our that we’ve suppliers home. it at it extranet going tool then easier and step you yet which same

a well say, And like really set hundred the seems a good there really be compare a clunky over tools. wouldn’t You’d comparison. you that of if two,

connecting we’re a business, platform customers. suppliers these these with our In

You’d and make equally want of friction equally totally more and free, each elegant you’d different more set more powerful, powerful but want still equally and more to tools easy. one while making

that’s into going that up And scaling great. recognized we’ve specifically so to – it’s guidance are investment. in ago the nine a the And you team we’ve plans about but the out, months something headcount. called for that It’s after given We quite not quite it. we that’s while been six we’re where

standpoint. captured our technology easier So to because them are think think of it’s and answer them less supplier less is biggest the don’t costs we to programs. for make of the less – opportunities from the and the key is tool and to of suppliers regardless sophistication that and tools adopt The have the one actually less a in we there

team is, size one for over – recognize the We and a enthusiasm terms of friction of today ROI. them eroding. platforms and the to making one opportunity. that today to six, be to opt-in sources involved by seeing easier XX we’ve hoping And to can better been the to in in tools. easier what other but regardless the I workload that we’re supplier next, lot the today, a viewed of we’re from XX, that huge them it lighter we’re than of platform we there’s that supplier of still months, way on of think on for as What And have the complexity easy is think that the lighter transform huge part there’s a from a increasingly, frankly, the But participate. standpoint, program, has their

what elegance it offer that compare We we going to from to are consumers standpoint.

Michael Fleisher

Peter, there it’s thing would is. Michael. add The I only

time of a spend at markets. You lot

there’s manage about that recognize and sophistication businesses. you they own continuum so long level how think their very a run suppliers of And around and

founding so extent, very And right? take therefore sort some suppliers back advantage this them goes beginning, Niraj the building. the how that to teach advantage business, to their about ability of of of investments But we’re making company, from make easier been partners to side and working by our educating all side with the to take what our as But was of just easier. very and we’ve the to as we’re talking

it of it’s in our think And whether to hand sort a advantage there’s the with sponsored to order suppliers them of to dialogue so of all day, they sort on sort or to what right, be, how or in just along, have inventory has might uses CastleGate every to help any manage whatever business moment at also constant take to at opportunity. our of their both with bring tools time, them about of become need but it

Peter Keith

a half. feedback. luck Good Okay. That’s great the back Thanks with lot guys.

Niraj Shah

Peter. Thanks

Operator

comes Ripps question from [Operator Your Instructions] next from Canaccord. Maria

is line open. Your

Maria Ripps

Good appreciate morning and business. color for on taking I question. thanks the international my

potential you can existing a maybe So outside talking few of minutes spend the about international market. expansion

international maybe like geographies your and it to for you existing operational of is around So you see expanding priority adjacent markets for get to of the kind comfort some within what more to company? near a milestones term would the

Niraj Shah

Maria. question, your for Thanks

focused of become leader think despite with started think the in about UK America we brand close. ago, but quite launched started there, It’s we on it’s the Canada the status. mind In and lot not Schöneberger and quite awareness a built top reaching We it. now is of is the we’ve in over television earlier referenced focusing we’re building this the way years well started there, brand we’re that In Barbara Germany. still fact we couple today, the year, a business German room we in very advertising So year household and U.S., we we of we known. Europe, organically on but brand the a And brand is UK. that here awareness the And spokesperson. there’s North the our time the where then this and earlier and

next, we term a to happening know outcome. Well, in the index want these further that drive German expand same able the want want is don’t and we business the to long footsteps do what what in we is still happen are we’re many all which in that countries markets see time along to at The different following make we that when to way and is Europe And early have want stage of we sure the we plan methodical make performance where satisfaction. it distracts time. us. do the to to metrics types a it do milestones is very we What in over but the further same will KPIs we’re seeing way the to the expand start way, that see marketing that in Europe we sure repeat different same customer all

going right is focus now quite the is And Germany. But well. on Germany

the of of success. It’s sort on this we next would out in adjacent we’re we a not would distant what be have if point so European tackle of kind be, the market we obvious there’ll will fixed in future, timeframe continues continued focus based to expect, rush well, don’t a is a but kind going figure too and it rather And what for not and continued which or quite it.

With about of and the address Europe. Germany, GDP we in half UK the

So it’s a meaningful though only the of even it’s two portion market. countries,

cost, part in or I is outcome. it because would And the planning investment out we’re logistics, talk then is the when in big, that term the about of we the that for point long the thing investment Europe they’re really

like doing the side logistics and ocean expensive. the It’s we’re what Asia doing adds delivery up. what we’re warehouse doing in in we’re drayage consolidation, home of than freight the On things, and quite and it what with all

a Well, because Networks. Europe similar built we is Pan European

we from UK otherwise. just handle but then built the there’s them throughout today, items, would a service, will actually the today dozen transportation sourced that far be enter and over do infrastructure which where So markets. network are the to handle complexity, there’s customer additional to to but into Europe difficult It’s it handle we handle and not zero countries as less for than home delivery, pulls not taxation, us transportation, brings Germany, markets we translation to to we that have the a that language make there those

Italy our language based on Berlin, or or that’s native that are and of category focused speakers are Poland, but have management of in office markets native teams out Spain We countries. in specifically that those

we’re right the actually an already with we were our for so advantage on plan we UK think going building the and incurred. And to focus long and But of European term just – in business cost we’ve now, position it’s terms where Germany.

Maria Ripps

That’s Thank you. very helpful.

Operator

comes question from Oppenheimer. next Nagel The Brian from

Your line open. is

Brian Nagel

the guidance back your in and you want could your I’ve thus to that your now, your consumers followed but consumers Michael I of and way go company, know the just than seen having far nature sales here while QX. But if forever seen. anyone ability kind I Hi, the shorter slowdown modest question, for ever we’ve better and we track good is morning. sales to of apologize term slowdown, to the

what us that is, there the KPIs transitory you of nature frame, type understand some versus I to longer can in this? we short looking could us So term so what term And genesis the understand indeed then look the as this of color the is help metrics, seems better a can whether better slowdown? to question real a that on more maybe at deceleration at is QX, be QX any give from you’re have sales you

Michael Fleisher

the Yes. substantive results, see in QX basically the you that hit on place, in the we changed in set every customer the by I a KPI is way, Thanks, you, a high. broad QX, clearly Brian. think new right in Nothing and way pretty KPIs metric

way all that the remains And are performing, that the of their purchases, that cohorts performing, customers way quite so strong. are

thing kind you the of first I it. it’s to think the a introducing right, iOS detest do app, Niraj factors that well this to a there’s in that pieces of be no could month new sort couple way pointed quarter, of

it do You customers news right it’s because over long-term. the for the

our is every it through of customers quarter, we a as now app substantive more last But group – pointed right. have out our day, running

going their path, impact. changed so near-term that’s And purchase have to some you if

As the to that’s prices, process customer. going we into change take a timeline the price and increases put for purchase supplier customer them tariff and

we there’s had couple first this out so up of certainly short-term a a before as kinds think I out, clearly at think month of the impacting I quarters And that place. the ended in sort higher that Niraj mid-XXs quarter. could factors pointed And there of be of months those with

and rate, is piece level other about we’re talked this earlier scale, volatility of this the Niraj right. at this making, growth the level be think volatility I this it, should number expected, of investments level of But this of volatility of

is going to or and to to are I are slightly are a going slower growth, months points quarters be couple to have slightly really that And higher XXX We think hard. basis quarters or months growth. call that that trying

Niraj Shah

inject that that just the app we’re It’s in about last illustrative be That’s an to of add I’d that meant example. thing to – things the only app. the did quarter excited volatility. The is, we dozens of one

numbers. can those example things out Then external could which these macro, for tariffs, have so could And be you could be be and volatility, net that things some it volatility. create like you

month three So we have quarter. we’re guide, X, months data we here it’s of the one August so when of need literally guiding or

we we have. just used whatever so And

and We we what’s it far use so tell project you just happened forward. to that going

on well don’t months? is the that happen is in So what challenge next think these two do actually never timing Because precise. we things will we exactly with the say, that the

last seeing tell. it’s very hard things XXX days, XX today, days, to days, certain XX we’re so, days, And XX

that. fact have which we you how you nature But a very that with we X%, We you than is, a the getting X%, the of reality as would to sort decisions. we we have, we’re you’ve seen is that. that inject good tell X%, we base current But what just short so has up only like the let guidance that that’s have don’t which just because why term sort because do don’t lower sort X% we or volatility, ambitious business outcomes. it long-term is let then is build we affect inherent if date and year great of business, volatility we of the of some And make around in higher something, grew

Brian Nagel

I it. subjects. separate you. on follow-up If Got Thank may

is So power Niraj, obviously you proprietary infrastructure, of component a distribution Wayfair time lot spent of which the your key a talking the about model. of

happening or out pertains and growth, at the investments we that How And for portion far As of lot infrastructure? directly particularly we Michael, think duration? distribution far build out into investment should a there’s the look obviously how at with this build out, the spend at this the But then we are look of about relates Wayfair. maybe market, expense ongoing the build-out? the what with of domestic how to build we

Niraj Shah

cost structure Sure. an Cincinnati, we our Kentucky infrastructure have Jersey, of Ohio, New we by a up piece have a out campus I and have because in is expensive as distribution locations we today the campus we in mean coming then the LA. buildings and Northern in Savannah future building too and more Atlanta we’ve we But added, in in just in Jacksonville. outside in and in two we have Dallas distant California a of added not built campus and

out. We’ve network this footprint capacity. been largely built And today utilization not we the up full the near so the of building anywhere is but the have corporate,

example, shift multiple a cost day it. that you And shifts as We you seven moved you more the get so you the and what makes utilization is that’s three happens But staffing increases to level. a advantage through work and basically really create does do to speed rises shifts. in what certain a at basically can three So it unit model opportunity the a our as cost the get throughput you the base, shifts is model and for never recently, into basically of with that, you buildings. per gains week actually can a utilization take that building drop day the

through – up we fantastic really recently, So it example speeds – just your actually we did an the be. it’s of and something actually just delivery, throughput increases can that’s from it’s what building online

to happens timeframe back buildings the you’re existing you volume it, over adding – next it’s years footprint than hard is over think the next but of more on through couple coverage. broadly buildings what per So driving take so really

for are it. costs adding and you’re needs costs older buildings reducing your do aren’t buildings you is per and unit your transportation mass generally You maximize throughput, as your volume which drop more and making also

much of build a timeline terms in from answer answer and yes, be building won’t profitability to of be is, buildings the building Will yes. until it sort future be higher, dramatically we we them space we So a of we need your is it where in be will space when today. the will because build more the actually utilized out, shrinks buildings, the question

Michael Fleisher

add thoughts Let sort that of on couple me of cost just the of set a investment.

think about perspective network the and CapEx out cost think like an try logistics to just build lines, as and – gross on you I on a having from OpEx both impact dimensionalize. all three right, margin,

see operate less gross going model On example day you’re place efficiently, period that sort a of moving to seven operate are then right? the short these the of of to a margin we to use going – just model. time, right so The that for is side, operating

the the so as in of piece you the And terms the through delivery place that’s we’re a goods sort of of costs. cost Because is right? sold running that in that line, see COGS

business this portion big that unutilized is on then this million the CapEx year CapEx we’ve investments the last first there’s see warehouse million quarter you right? the On that our network, $XX half. rent warehouses in sort spend And two cash right, that of the a the think there, And And $XX A we you big into to flow quarter. side, fully year, number barely CapEx. free we made range $XX can OpEx to not of has going first about how half utilized. – when PP&E in And is that today, line million of changed, of we right, of spent right. that built this today are

head growth international The the in, then we of that Niraj put One second CapEx on continue cost is advance in the and we the the are the would out it. logistics it right? volume, have losses business. of to where top or the of the to network. you sort is I And in capital logistics of the of dollars particularly network right? and that mentioned, the But in stay And the investment network. think coming the cost, going business So that’s investment build places that the I build at how dimensionalize to continuous as

Brian Nagel

Great. Thank you I much very it. the for all color. appreciate

Michael Fleisher

Thanks, Yes. Brian.

Operator

Evercore. question Wintermantel Oliver next from The comes from

open. is line Your

Oliver Wintermantel

higher what to guided Could growth? is revenue in you slightly line not to, give some you blow. guys. EBITDA I order a and helps had repeat customers, than which orders margin probably – thanks your so continue from faster to us the revenues the regarding also the than EBITDA but grow that a the faster customers is from basically why U.S. details, or reflecting the Yes, new due grows question lot

Michael Fleisher

Michael. it’s Oli, Hey

our the is – thing that think in to try almost this We say line remember making we investments every spend to right? So the quarter of I on any to one are every quarter, continue we’re I in based items. and long-term

we and ROI, customers. as marketing get And spend spend we’re ROI threshold, they’re year’s team know can previous better and those so, perform our hard the cohort. right if Because advertising cohort continuing going finds that to the to opportunities new dollars this new within a those last payback than our thresholds, those

when and we’re those the as our make hire to open time Same to in we’re going quarter we or thing long-term about sort when a determinations a person, make to build customer answer more is to we not. what think new going right this of go you are opposed new business or serve facility to, going our to think

we our we’ve ROIs, markets spend in to what start long-term. so little in a and looks what planned ad think – going is know I what we’re it making move for do we what going quarter this lower, And higher, will we as as any can and based of sort we our not to change to get the like. see little on It we the we’re just QX investments revenues quarter a to if But described described guidance, performance we’re except those got the do.

Niraj Shah

same inform Couple you running Oli, sort you comments, Niraj we’ve look just stronger. if cost at staying are how acquisition it because customer in you chime still look repeat hovering One getting on. at the repeat if here. of in the I paybacks that see is way you’ll economics that calculation, actually tight that X% the are can see and the at range $XX-ish very

in very line disciplined that a And so done the couple the ad drive cost on EBITDA other you the near-term. But have way. is that things in

some have the is the example, in logistics Michael could but like seven I in for infrastructure running a yield of days the week. a where costs, some then And reference on One benefit current did in the we’re things movement mentioned side, the Like those things investing cloud. we’re increasing not again, quarter. that like

money so trade good into is, at a moving actually very OpEx. going But us. of depreciation flow standpoint, out be for be the a And that’s if reality you cash it’s look from what would in to

for, at But what is to that. that’s it’s why that’s to so going become not reality we’ve that’s weigh if a we’re free that. a cash to the about And the flow – how good the what of going is company on trade. will focused on reality going basis. always That’s looking the so But you’re we’re worry wanted incredibly optics positive on is adjusted EBITDA,

things there. So number there’s in of a

Oliver Wintermantel

think from difference guys? it. has Got quickly, avenues that today to you weaker bit away to any or ever this there the than And just Day nothing do that you a longer Is it be Have you and with has July little your do from trade it? seen Thanks. as year been. Prime quota could why was well customers,

Niraj Shah

don’t we with holidays for things in to become for like there. see all out Day days as become retail think everybody. much Because it. We do They retailers fact, Prime has that good

Day. there’s fact, Prime did Walmart, number showing data of target In some public others on

retailers Day Day because ran Prime is boon major obviously like events on of a of very Way we can us You that Wayfair the period. this Way actually half saw see day named number Day, after shopping We were But a similar Day it. that and leading a on became a like is other marker Way – for everyone. home were

good sort that Cyber way net, Monday a some Black retail of holidays major in and these they’re that I in that or I they’re Friday. on the So everyone become think just actually things China. for think of Day way Singles’ has has And

Oliver Wintermantel

Thanks very much. Good luck.

Niraj Shah

Oli. Thanks,

Operator

our John come And will final today question from Cowen. for Blackledge from

Your line is open.

John Blackledge

revenue point? nicely Great, And thanks. being some customer a that Two on percent questions. the way it value you of point similar shipping to what just build speed this Amazon’s in increase at running recent can a And it it quarter. move is through expanded built of on next logistics prop Prime moat? also to day CastleGate to then One-Day. growth the and margins invest On in does And drive competitive this you units out, the or are curious as at how

and the it advertising kind this back year. quarter of should of the think Thanks. wondering ramping the then about the Just half about business impact how of we in

Steve Conine

Thanks, John.

a I’m Let of that to defer of me parts going couple on Mike one to and then part. answer

two one the the it, running network if logistics and and think as way day operations day and time, nice same even shifts. consolidation more day the which customer. and as you lot the what goods that to ahead a the days And are goods the network actually, with week, is becomes than it’s We the – less the And more seven actually Asia and like scale that benefit a that more On more because of doing a that. close speed, network real into multiple expensive very thing, automatically basically about positioned of in have we’re it’s frankly, positioning places you’re basically we enables in network, facilities. a and we’re we’re

your and you’re same, transportation leg smaller using that and that’s shorter basically so is reduces it you So a but get total net it last costs. closer leg the so mile the of

been for is speed every category vision important time. long in something of We a the believe that’s so critically that of And that’s very we’re – part goods.

want gross I still the quite I do advertising, to on advertising, On it, just margin and the quite on the bullish highlight, to just it’s it’s question very want but – we’re early still small. and

focus the wouldn’t major being I So businesses at driver really a on all today. advertising of financials the

offers that on However, for we will do not great think it’s out that something upside. And time. that switch. opportunity the play future think not to cautious in a because very And over light put the it we’ve been of we timeframe

so On the don’t answer the public I last one. gave, going recall Michael CastleGate numbers penetration, to we that let I’m

Michael Fleisher

was in through small that parcel through U.S. parcel about we large last then gave CastleGate. The CastleGate. QX, was running of of in running we XX% numbers Yes. QX was XX% back talked And

going there. we enhanced. think a giving quarter. forecasts, that ability of with good more do It’s We efficient they’re them from run more But really continue to as adopt I get not to I update is adopting, this own suppliers, to through more sort of know your sort make and their they in every number we’re and network conversations, progress continue to

fast business And penetration always inventory I is is, other on the those that means sort growing of in that then so growing that point notion hand. we’re of thing on growing this a whole our penetration the out

piece that. And is important that so recognize really to

small it. stunning the gone to of about last few the that this we’ve you And having running path into our growth sheet inventory program think through XX% years now not of for having off really are amazing And all from sort putting us, inventory that’s Over without It’s very actually parcel suppliers of building. really an basically your get amount our capital. to having you that it will, and to if deploy with your because business of of customers of but quickly, that market you it underpinning model. have to to get your ability balance

John Blackledge

Thank you.

Michael Fleisher

John. Thanks, Great.

Niraj Shah

Thanks, Yes. everyone. We time. appreciate your

Operator

for us everyone conference Thanks today’s joining concludes call. This today.

disconnect. now may You

Wayfair (W) 1 Aug 192019 Q2 Earnings call transcript