Earnings call transcript Q2 2023

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Operator

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wayfair Second Quarter 2023 Earnings Release and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question-and-answer session. Instructions]. [Operator

like Investor conference Relations. now Lamb, to turn of Head Please to would over the James I go ahead.

James Lamb

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

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

of date. All on our would been prospects, any on call that including, assumptions. forward-looking quarter like available and consist accurate, We to forward-looking forward-looking statements including today I third those business based future for XXXX. will today's our we in performance, guidance are have trends statements, cannot today's we made that not believe our call to, you industry that be guarantee limited to our but financial statements of the and will information remind regarding expectations although reasonable of us as strategies,

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

together nearest Investor of measures to results. available adjusted will recorded, website discuss margin should call, financial GAAP replacements website. this performance, call will during section refer the our non-GAAP for our a non-GAAP certain financial our GAAP flow. EBITDA, which a IR to that we financial the Please descriptions contain the be earnings and webcast note measures. should be release and considered cash be These and we Relations on measures EBITDA is of please and to measures company's read for measures, being non-GAAP Also, with and including not adjusted comparable of This free non-GAAP investor as presentation, reconciliations our copy replay of obtain review

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

Niraj Shah

good and today everyone. a year, growing of key strengthen a included to quarter profitability plan details and share second our we you reconnect to our Last the business with several results. laid James, sustainable Thanks, excited path morning, out We're with milestones. to to that

you've performance For earn the basics our us to you've quarters, past few of the the plan seen as this our lower And and impact against seen focus more that and to improve. on execute tangible customer loyalty. plan supplier continued costs, has

today This flow. I'm reporting all growth. return of while momentum investing passed our future pleased is and are positive to and EBITDA year-over-year with higher top-line initiatives customer order growth our in key into positive with positive share and sequentially adjusted to in milestones one free for combination that we've active a cash count,

a very entrepreneurial. ambitious decade going in having This how while to continue for think we exciting our for so take we'll business We place, while to this. do growth. ran of we are remaining We investing and first plan forward, full and is how advantage profitable, the now scale,

adjusted with our cost in drive than EBITDA our our $X see structure of the rate tandem to to more over in return savings playing top efforts our KPIs. accelerated past to enabling P&L, billion work improvement entire comes in run Our year and across our level out is positive

in active order sequentially. to positive even as is year-over-year see towards as levels the climb major continues third due net other customer deflation, values average KPIs. quarter to revenue growth And leading the our to our indicator to Order we growth normalize pre-COVID of expect count return

Eastern members to our into you to results remarks core this turn know, XX:XX we're you we that investors at lens, our format for different concise We're and through leadership ahead. first to keep of Thursday, our the more business will more for in major take of Time which We'll many this will of introduce pillars hosting of about our to call team, you and Investor tune Through Day. deeper earnings quarter's be that to dive stream, our begin growth the live than full into drivers encourage because, our this next August key we on next years We'd long-term time going initiatives an prepared slightly to growth all today, week, can questions a the the strategy leave week. using attention going handle as XXth. as to our p.m. opportunity usual be

spring the let share capture business and cost be give speak the continues proved quarter XX% XX% net of you revenue X% this the data. for view where compared in Now QX widely that down with the piece really QX we category for Wayfair Wayfair, our estimates continuing with as tracked capture card in a credit meaningfully move receipt outperformed be summer. e-mail to a two themselves. stands competition through me results a year-over-year I'll themes to and to of to down for share start and efficiency.

few logistics want reach, trade platform suppliers. Benefits have of proprietary Wayfair. lean time suppliers Wayfair our unparalleled they past we and significant enormous resounding partner merchandising at to capabilities, over considerable our Our from is make to and into heard team an investments various months, shows feedback our the that spent the marketing

have broad the delivery Board, to strong a speed both continue our across we cost powerful new a on these savings benchmarks consistently operational climb engagement. And in capture as with metrics. share see and customer be and as our pricing flywheel efforts, combination sharp Availability items. Since across QX. now badging setting cost And market last fall, to continues normalization we're the core drive to price wholesale popular fast back supplier ourselves as well further most leader our we on and of of The seen availability, recipe.

recipe back Our intact. is

the class broad-based in count. customer improvement important it's customer data customer encouraged validation shopping across of shoppers, to and life strategy, in across It's seeing of a success both recent in a of crucial we're or order our a to upswing catalog. behavior but habits. of point an active extremely time isolated a sequential part with core and cohorts our been acquisition is that see momentum all customer our build particular make as their any our shoppers specific our this know on customer of noticeable Wayfair not function by been file which looks group We this We've with to for growth

many loyalty through We customer vectors. approach earning

example. they promotions great our promotional non-promoted Once is activity and curiosity a around of In promoted that this them the a site, customer lever draws environment, a products. is on variety purchase visit. work and to marketing Our piques

in our In two-thirds it's that fact, events the of quarter, sale. work, revenue. no only worth that would customer a Wayfair during indicated sale share we've in noting during shop they of shoppers gross drove the change seen items And survey second over our non-featured to

these As do and we across business, measuring testing the of iterating. we're levers, every results the facet continuously

in share, saw this Mobile largest we series app, and remarkable encourage ran highest growing and app, exciting significant earlier our to app engagement summer, way saw This downloads. Store rankings engagement. a loyalty just to since App ever the example, we free free we're the a and reach driver. is of use been promotions pandemic had our with For have we revenue shoppers they one due lifts traffic to its

share cost length efficiency. touch the about I before through and we've on passing capture outset, Kate, I mentioned cost will this briefly themes And detail. talked efficiency this for At major the it two capture to to at more who in driving over factors. quarter, share and talk theme want

team about durable, we've previously execute is driven period talked exceed done of in and to accomplished we've recent work impact during gross XX%, the in quarters. than Unlike a margin saw savings more quarter the considerable years cost XXXX. pandemic economics unit by initiatives only ago, our its second of gross on that set the the milestone The XX operational margins three improvement across our has peak

growth, highlights quarter were key from at of achieve stage into also over EBITDA to This profitability. a while margins QX X%, Wayfair shareholder letter. we started. improving for was we point able we demonstrating and leading where where to invest adjusted while our a back the growth both where can Moving is considerable initiatives.

I'm Investor next ongoing our excited at Day growth more opportunities our to talk about week.

a continue including technologies lean physical to opening our to pursue AI We name areas. to into invest few to retail, into two and this international just like Generative summer stores new business

leadership focus there commitment you. operational to will and well the every a on expanding directly from driving opportunity Thank the continued team as as growth a that's hear to profitability ahead discipline us day. senior You

financials our with a it over And let for quarter. for of turn to review the Kate me that,

Kate Gulliver

report you, exciting from the got Niraj, $X.X QX, X.X% in a morning, let's year-over-year, and quarter billion, good a for from at lot to revenue following this XX.X% seasonal so We've quarter, more into pattern. down jump of Thank came up everyone. but it. Net traditional progress

the a into move both the season picked to weather, the suppliers promotional saw start as several and had customers events. outdoor and the well-received through spring of rapidly shopping we part leaning we While up slow back quarter, we

QX The spoke periods AOV the last length in driven was some in year-over-year the we came both large growth as by revenue volume, in in QX. with saw lap at quarter-over-quarter, net in continued success we peak top-line higher come which order inflation U.S. Niraj in XX.X% and the deflation about saw which year. saw than conjunction part we of segment, of

the I'll down now move further P&L.

include that as remaining will related I basis and other outlook equity-based discussing As note financials use do, compensation, and but please when the amortization, same the depreciation our adjustments. taxes well. exclude I

this pleased printed results period. an been so And but margin had savings across We're surge to want discussed as but demand, quarter comes business. initiatives is from have an unusual at coming expectations with cost with timing margin we've from ever This the flowing operations. driving we've own structural the improvements not far, that our highest even through produced our some outstanding Gross XX.X%. in do note gross in Niraj our a operational benefits in as exceeded quarter, the

and this XXXX. the that a dynamic have It's the we been very savings share tactical take balancing consumer worth and to and environment of about reinvest as in these remainder thoughtful continue we'll to the of line through mix navigate approach we the reiterating top

merchant in advertising, customer and of X.X% for moving Advertising revenue, from had I'll earlier service reflection revenue the of nice in at coming Before this quickly leverage strong of efforts cost which showed quarter our year. quarter net reduction XX.X% a to period. the at net fees, mention another

from free depressed and at of As we direct higher over we've prudent efficiency are our the driving paid length about face traffic. in quarters, many being discussed channels

some the in leave of quarter. One second channel on provide areas perfect during can we for several to the former improve focus tests, third forward. segments. is quarter the will back as advertising, advertising is efficiency drove held through we our example and ways going QX our we and table the one spending of Investor the a and Day line in sophistication of on insights which the mix They we is These the channel correspondingly also next various tests This outperformance ran bring revenue in on channel we'll key week.

You to our of we efficiency a part managing and into channel think much deeper look can how that targets forward event. about as dive mix

administrative operations, the general and expenses our million selling, period. technology, totaled $XXX in Finally,

the of and to our are result we as this line area XX this cost in months, past item reduction we progress seeing continue cost monitor quarter-on-quarter closely. significant While a over nice actions year-over-year

attrition. we quarter, some see did This lower-than-anticipated

months While with. the success our team among we've resonate this considerable whole, are and the business. had We've seen our the the is members pleased few we're as customers headwinds in past excitement on some there suppliers throughout near-term with something

of total, with EBITDA in cost to revenue. a entire X% second margin the million considerable across In quarter, we've led for the taken $XXX net the P&L, our strength on revenue conjunction actions adjusted

$XX in further Our adjusted adjusted U.S. saw margin million while showed EBITDA. to compression come segment losses negative $XXX million X.X% at of EBITDA international for a

of our for on our quarter revolving the cash capacity. of cash which $X.X quarter. when We're progress. $XXX operations investments including resulted $XXX Net highly ended this in expenditures, with thrilled credit free by offset $X.X over We of million sheet, million, was liquidity and billion and the balance facility of cash total from $XX billion flow million capital with liquid

cash free X components: working by our is know, and you driven EBITDA, As adjusted capital flow CapEx.

the flow this lens into flow I'll cash expect quarter contributor get conversion revenue saw in is quarter. Adjusted but a EBITDA we to healthy strong would capital, the negative was driver was third which contribute meaningfully of capital we a momentarily, guidance sequential to business in working growth, cycle. not given of as to typical our our a working cash cash seasonality,

for QX. revenue low single quarter, the turn revenue now digits been channel weighed and would has full the test we to expect net the gross previously. the digits Let's advertising positive guidance of trending Quarter-to-date for by in in part, year-over-year, mid-single growth I mentioned impact

before, as we improvements XX.X% shared we to investment in we dollars. optimize maximize profit for to and expect our into gross to for XX.X% cost gross experience. customer experience margins the some we've ongoing customer we quarter as As Therefore, of continue margin the between invest the intend savings the structural balance in gross multi-quarter

above and mentioned of bit fees, in given our once net service I merchant X% the summer continued revenue. to around drive should this line testing mix. QX to would between XX.X% be advertising XX.X% Moving early of our customer We efforts before expect revenue, factors on net across to and and and a efficiency our X% again the between channel be cadence

We compensation and rates of million, between excluding OpEx, $XXX adjusted last SOTG&A for this the $XXX in second forecast impact related out quarter, attrition largely timing quarter. we or follows in to lower trajectory laid and the the equity-based the taxes million come

This positive free we've above, QX, figure in and If outlined margin point, clear in compression net revenue you flow we have given the that free is shows last a should QX for modest breakeven, the more that roughly in low gross margin and sustainable adjusted expect the on towards cash cash sequential range quarter, a minus. in expect guidance EBITDA EBITDA To outlined implies the margin slightly follow margin single-digit a past. EBITDA mid flow plus you advertising the dollars translates on or QX. to the some positive than adjusted trajectory quarter lower single-digit third which overperformance the to would

related a expense Now approximately in million $XXX of $XXX million million approximately million. the of of following: interest me equity-based let million amortization roughly on average and to $XXX to outstanding $X shares touch Please items and assume $XXX range. for million the to $XXX to compensation and housekeeping million CapEx few third quarter. of net taxes million, an $XX weighted million, $XX $X approximately Depreciation

months the year the by adjusted Last of profitability would $X.X and As up, EBITDA million. wrap come. a of recognize $XXX Today, loss what an the to we've end we plan first EBITDA I reach of shape path moment to of achieved a goal reported I that want we've profitability ago, August, take XXXX. driving over our like A billion than message planned. cost to how breakeven milestone to business we actions our discussed earlier far for adjusted across look

of smaller, This that a X% we've quarter, on basis, driven million EBITDA. is $XXX revenue positive approximately adjusted

our Wayfair the on course, commitment Of be progress without the tremendous of everyone possible team. wouldn't dedication and

showcase special. everything We're Day, and at the week Investor thrilled makes that to that next introduce you team leaders to our of Wayfair

profitability excited before, free generation committed meaningful Thank and to future. about flow outlined remain improving cash we've growth, while you. driving are and we the As

and And now take I your questions. Niraj, Steve, will

Operator

the [Operator the Instructions]. ahead. first with And of Horvers from Please question JPMorgan. line is Christopher go

Christopher Horvers

morning and everybody. Thanks good

you're gains. of in that thinking investment the Can of that, So saw share think any question of first of had a especially margin outperformance market about about that unsustainable promotionality versus is, quarter? my in on first driving you the questions promotionality gross you some year, second of the about sort in that as is we whether the context talk you lot how the the the get you half balancing

Niraj Shah

morning. promotions really question are a marketing like that comment a think than I Sure, about being On the when and message like as promotions, think Thanks more pricing about unsustainable. the it think way Chris. you strategy good for about your

the more on like in the little So marketing have this difference a frequency promotions I little think where a to more the needing the less been occurrence. is where is to the discount is bulk volume, not way the a promotion, in about think volume strong the cadence time of resonate and items with The frequent less normal is messages the in customers. just it drive promotional about is promotions about of still period it a the

So prices sustainable. inflation in we business very when momentum they the a environment think little still about be think of the have ways as actually that's will has the out we you to think that coming because fully get And before are go also we is to sustainability, today, out. we than kind normal fully it's a lower

a that kind question that's to think from we you are don't about your able prices the you when in gets standpoint, think hey, not be think so like, And I future, customer going offer proposition to value of the you're case. and offering

about So we quite feel it. good

the from would the we're The I Board. share, gains just other pretty point on market across to market thing is are share getting much

This supply what's that in the chain what seeing strain inflation here. period So that's particular under shows we're think lot they're that very is back years, And the fast compound selection, driving that there, is of not we our XX or of coming And delivery, just breadth was And these business the customer were is or as back on broad-based. any the in category things it is to congestion is that particular you intact, there. it's is the recipe a the of used the was recipe fully segment, our of the bestsellers. COVID intact. what over kind cycle success any that I which of where availability and are product the

Christopher Horvers

you in about flow use my and how about the to longer-term structure us of here as then debt the cash follow-up quarter, question and cash think sheet you of second is, a the sort flip about balance think can structure over how Kate, think basis? And early help free you you

Kate Gulliver

you. Thank Chris. Yes. Good morning,

thoughts we this we and a a generation sort cash very to few generation going forward. Obviously, are intend continue free quarter, So of there. by flow free flow cash be place at sustainable the excited to

capital have aware, we the a far think structure, as As of as overall you're I number converts.

of convert manage ability feel first We very through our The convert that. good is to million $XXX about that XXXX about remaining.

go next that of $XXX convert The multiple there'll be we And structures to about as XXXX as convert at us manage for remaining. million forward, well. we think is convert

about sheet, and balance that generative flow good the at our keep today, to look we adding free when and intend we cash being feel very So we back. position

Operator

of is Canaccord. go ahead. next question Our from the line with Ripps Maria Please

Maria Ripps

morning. Great. Good my much questions. taking And thanks so for

you maybe some just the this all can are First, sort of the market share. dynamics about clearly space, seems like happening of talk recent developments, it competitive gaining been given you've in that

see So do going sort here forward? you developing competitive how landscape of the

Niraj Shah

Yes. Maria. Thanks,

So the past, I we've have competitors. many to referred in think we as

have So different whether a you this different even that subcategories fragmented set category. you're you will competitors is a something lighting plumbing, like through inside different to categories. go there's would a looking come those And mind segment of furniture of at home, at very many or as or competitors, look

share we're We're taking we're very excited and share that taking broadly.

are So I able landscape it's see of thing not in is in the particular you platforms to coming compete. big primarily the But the it's from of e-commerce that really are -- that competitors. ones set larger any the what think

million because ones. they and to Walmart we States, and scale offering the Home operations the or watch so Lowe's, the scale to you're competitors have different X,XXX a at the logistics we scientists participate larger And competitors product smaller the folks would those if are our have the The talked the much when logistics, run, are Target, these space own about about around main reach look closest Amazon, customers. large things we Costco types delivery. and having have talking as specialized And square feet advanced the in of including in engineers, we United you Depot about proprietary all of parcel XX-ish we've data managers, that,

desire do customer that the and that without And offer are require buy scale. to in the order from. I that things to just increasingly can't getting are or they think you are these experience accustomed These things

than we home take they're do business, the sites of scale they consumers, job type that watch their delivering on our we focus so groceries use And each focus to different segments to and on that rather competitor of advantage scale of so delivering building that, whether for we specialized to materials capabilities.

way you assets think smaller of be going a to are ones e-commerce it's have just I the if provide folks kinds don't the in are referenced. the ongoing, I share that losing value that think that's I to harder because in prop

Maria Ripps

just the reinvested about savings operational That's how Got very talk just you reinvested sort into of top-line may gross should influenced have how percent back quarter? -- Could then it. go-forward much basis? of on the of margin. price? being that think very, have you And And this on how a helpful. And achieved kind of how outperformance we that maybe sort the about

Niraj Shah

Yes.

quick that share just Kate to plan. go asked numerics an is a specifics as couple then thoughts I it. adding keep more we we we me Let to highlight thing The the plan, would out on into ambitious to the and get one over laid for. along you of pass And it just

also we're is cost offer. doing we would are more So items the want still reason have because price to the the to really on And that standpoint, I where we But add? you we're we're come. savings back from normal well of very Kate, lot that say of that that. been part we strength a that maybe operational the tremendous. There's anything a And is competitive have to a environment key -- do to

Kate Gulliver

Yes.

Niraj it our philosophy think here. covered I of most on

that of on margin last improvements an fact, last know, and out that of referenced quarter, gross you saw coming that million Obviously, quarter. or you of originally by outlined, as $XXX that of we sort already that achieved we said line. Maria, had we acceleration we'd in quarter So half ongoing

had in that from I can than infer bit you savings we So we and, think operational fact, picked a to. faster that cost intended up continued little

improvements that that's we're you, on to what in a through bottom-line about designed And balancing little and experience how customer that's margin, with really really think of that profit obviously, up reinvestment, we're ongoing gross bit see investment. the thinking in that investment. guide generate to into that but gross account the is And which As overall, dollars. multi-quarter on is about takes of the the some flow we course,

Operator

is Your John of the Please TD line from ahead. Blackledge with next question Cowen. go

John Blackledge

Great. Thanks. questions. Two

First, is could biz you just the the Thank on several Gen general growth? talk over about quarters? order consumer And the of home just drive key sustainable uses demand you. the color the that AI drivers of on for And question going Gen next AI, potential to any category. forward? And second just

Niraj Shah

Thanks, John. I'll order start the growth. with

in repeat the position delivery, selection, engagement think the there, the their to is in of was the offering than a So what order, recipe we're customers exciting flywheel I again, breath And it's order, that's that intact the competitive prices. metrics, seeing then post is are we're it. it order about dynamic, being coming the seeing is That that availability, in-stock even growth referring post buying back the -- more reacting cycle us in earlier fast where compounds. back the I And to a the what's they're working.

prices was you should compounding that's in in I the as engaged imply would because standpoint, that And a the in customers. something be come as was factor a future to come freight more over grows more back, sharper mentioned that inflation And on move ocean the business the has of that time, everything pricing peak. add customers the at able where as pre-COVID, what are the out, cost, to the suppliers et to is fully not it like kind much It's cetera. even get what can the it

in that's we the order growing. you'd the the you sort on So see why growth, Kate don't see it of want and I know, and the that's business, momentum dynamic, to... anything

Kate Gulliver

Yes.

ultimately reengage able that those we key better, of foreshadowed of are seeing continues in got to speed and deflation mean, think prices a the ago, quarters category. out offset availability come which pieces. we I be dynamic the some growth really the few is as as deflation that the our customers would as and believe I were order it's to I

think I was... question next your

Niraj Shah

AI. Gen

Kate Gulliver

Gen on yes. Was AI,

Niraj Shah

couple Yes. on that. thoughts of Yes, a

already use of number advantage Gen workload a honing actually capabilities on more efficient. and of there's of to work we're with which much lot reducing So that taking do cases and or a AI building have of making

piloted our of our An customer we already with something example you customers, of know, have that also -- who service customers but with via talk and questions will chat as is thousands on e-mail. actually agents engage have we answer

be. something chat the things the software one that basically e-mail, where answer it and what that pilot a creates is believes So done run like have we of we've to

an And it they back. edit then think sent and is with that answer, it review agent can very quickly, it needed as

given cost, that So increases that's answer the a the found cost actually down. question fact, We savings a the quality go cost customer to method of the actually for that the goes the answers. satisfaction, aggregate response up in while

we or like there's underway. four use that, already like five And cases that have

to ones the Some with descriptions, of draft how other do product tagging. we we do have product how

amounts Gen how of things and that do accuracy. cost customer it improving that sort a we there's of that the there's set tremendous of so can efficiency and a activism AI to on revolver we that of And variety future. people have could while or reduce change Then the get experience we in

taste to So just ones one would R&D that the announced on is more just of a you because a are and you things involved. available the other clarify just things so which there's a feel you're what's encourage on just gives pilot that it -- a headed. more I working check We and little are and is to of available about you day, can say try the little that, that to stage, link are those out curious And if where and a it yourself. we're

sort things think some we type out to more quickly, play what that that I very for of we've that, take think the of this we savings ramp where And we data is that but do using very AI can had. of will plays science our is actively strength think with power we the it the years, that strength a to longer cost we've plays significant. Gen it could been in of think you but incarnation to And latest and

we And in technology. very leader position a adopter to good we're continue like to feel and of so a aggressive be technology

John Blackledge

Thank you.

Operator

question of the Goldman go line next Please with ahead. Steiger Your from Alexandra is Sachs.

Alexandra Steiger

taking questions. thank international. you do for want my about I ask to Great,

U.S. obviously is you a improvement international saw while nice in lagging. the So still growth

the if of international international this efforts a wondering lower calling more whether you weakening in anything do led you. out, consumer growth? is demand a sign initiatives some versus U.S.? refocused prioritize there's that So you're or to your you the Thank revenue Or

Niraj Shah

Thanks, international, there's on certainly different a of markets parts And would the that in United two country. in, I some our weaker What to macro certainly question. I macro States. say, the is is segment, the One International in than we're answer that would so are, there Alexandra. sort of in say by

I that's a think of piece So it.

when being other back. some and advertising was kept laid things think we I like of And the out paybacks we example, some were we the on though, the we're is around the we is in piece we of one advertising and tight the about, make the things of -- going we talked doing billion sure other where unit actions, it, buckets it the inside of that about talked of how we really more cut speculative did, $X.X one advertising cost economics. for to tight

fundamentally EBITDA you sets longer And say the you revenue, dramatically. segments, the at up in unit comes near-term much of look to segment, but that the of in which be think to improved taken businesses that we've so see our International a would those stronger. that And International I the can it's cost you economics, term when see the strengthen of at position some we

while revenue, And quite profit would they things, outcome. those a better creates so would take longer-term view, good and it a some you of be much if a on hurt from they so standpoint,

macro. need I make you It's the And other the to so just not story keep that's mind. the in sure think thing you of

Alexandra Steiger

thank helpful. Great, Very you.

Operator

go question of Please America. Nagle Your with the of Curtis next is line Bank ahead. from

Curtis Nagle

for question. Thanks morning. Good taking the

pace growth. one, So be customer the of would active the first guess, I on

of growth coming how Is through quarter-over-quarter like the pace we instance of And in first it it about should the two think from? year? rest new? I where some going Is think you saw years, the reactivated? is the it

Niraj Shah

I'd about growth coming. and say think significant, are some getting if who Curtis, thanks to there's the of lot customers But And not for reengaged. think question. that very sure and excited order about Yes, see are them we're a you I you orders the new is momentum. point, some your are

metrics what something and that is we're see then earlier is can't the which metrics, repeat addressing in is was And happening, you excited, very underneath. I but the

of days. what where good buys kind it's in of them that's business XX next And quite headed. types who a of of someone are buy leading rates. days or again really These indicator strengthening and nicely, reasons. So for XX Those two is actually the percentage repeat the

One is that creates the cycle. compounding

if you Because that's other in great impressing strong, also how the mathematically, great how So doing buy. they'll a of really merchandising you customer? delivery, in get shows strong selection, it words, are pricing, have the growth great stay kind But great increases. well we

then But delivered buy it's if buy, what They the once at the their didn't to been then get again. product they they happy using they they're they're house, have them. really product product the ultimately, and only

And so the that, strengthening. and they is if are of then repeat happy of are of they? seeing on And I those don't show it voting, you kind how have take kind we're know Kate, everything anything? you rates kind that customer acting where and -- then

Kate Gulliver

well. it speaks think to active number. add Yes. that a is that LTM I active would an would number the reminder, just as add, I customer -- I very

to you're so customer see number. the improve active of as that seeing number ahead we are orders And going

of this underlying to we're those get and sequential take saw will first, come the sort to that number. we behavior. But it point, through repeat encouraged by will customer and Niraj then particularly a see And growth, as to quarter, which, of very grow active indicators sort volume. your positive of around and trends, bit that You'll little overall, time said, order

Curtis Nagle

Got it.

just a And then Okay. follow-up. as quick

of So helpful. evidence Or some quarter, end gains to a the in you're XQ? we're a really of driver the the primary At pickup terms maybe outperforming. of of you going of the definitely in is relative XQ, commentary That's this continuation guys sort XQ, for seeing of that the the share category? any

Niraj Shah

would I thoughts. -- say Yes. a few

days, category, overall it the kind talked was the we're what suppliers, based demand We a we Vegas what see the broad-based. We're in both picking them it We market particularly we So up from -- standpoint credit and we at on see I from we're of see market. lot see for strengthening. access but really seeing believe I that last and in Las share of them. hearing also, card to from we're we don't along. to, It's kind a what it's bumping have category of that data see hearing share. few we example, that

flavor It's will And some consistent credit overall the We're about broad-based. be And And data. then then demand it's competitors. be demand specific us stand in what what which we consistent, relatively named trends us taking is hearing would very telling along. share, seeing named what will bumping they're their we're weak. and given believe supplier any card about with give we're is and out

Curtis Nagle

very helpful. That's Okay.

Operator

Your next Guggenheim Please of Steven ahead. line the from question Securities. with is go Forbes

Steven Forbes

Good morning, Niraj, Kate.

Niraj Shah

morning. Good

Steven Forbes

I wanted start to -- maybe with start wanted penetration. with to CastleGate

large and end you we us to curious expect out where you the give of to year small are So CastleGate as color current capacity the any around can and 'XX? And terms on penetration of parcel? 'XX thoughts in what look if for

Niraj Shah

in would goods as based will excited I what time, interest that to flow as quite it the hearing where new say through we out What flow they increasingly penetration is Yes. goods question. go Thanks suppliers' about think we of from go for Asia. we're CastleGate on we're

of working of So stock. kind a are where excess we've through their at way been period time suppliers

the point the now their sellers, getting bringing years. substantial and the time mentioned product recently. I new they're bringing to first Las But they're are in suppliers large in introductions best three a where a Vegas now for in say number of I'd market

going exciting, which particularly in fresh is Asia, but increasing CastleGate business, from strengths, sort forward flowing the thing like a of out penetration. the So of to standpoint on will it's also of moving that our speak I think, goods to plays

we've more we very of good over footprint, have had to have case situation now. then say network not constraints, wanted a be From volume which need to And the we it, a I out when years but as right through new it get which space to a the add we'll that would we will last is locations where road built have is standpoint, down will footprint. capacity is unutilized the with then a then capacity what the get utilized because idea lot the we few only

Kate Gulliver

our play more multiple our overall add in can Yes. customers CastleGate metric the and are at And is to network see the Investor important one seeing value that. there, the you ongoing to and component, the CastleGate is that at we're and efficiency here. within in broadly drives and gross and that piece week for factors a efficiency shared We've penetration on an I we'll margin line would logistics course, Day of CastleGate, certainly our past logistics clearly is our there supplier. that. obviously the improvements but our penetration stat that speak which next of

Steven Forbes

Maybe next thinking I origin the right? I we'll just cost, follow-up. quick think back you've past But that. the this the I Maybe week. get every a of to $X.XX in dollar. around keep logistics referenced total in appreciate

of logistic -- them the normalize talk here? supply and So as to going if curious you where the today costs where can total aspects that chain where sort various are see you of of sort

Niraj Shah

Yes.

think way if So about have to the and think -- in penetration like about don't factors from XX it. logistics come I a it wherever we've that. is, or a cost, it would get-go. crisp is from to the optimize guess, that But I directly like manufactured, optimizing anything tell position on is don't goods get focusing The number not -- or been forward CastleGate they're that the biggest basically, when you I

biggest That's really expensive taking that leg logistics happen get excess cost would final the the mile to leg. destination the of need driver because is out miles single the in minimized. That's most the country all

also is can that around How miles. most it is you final on optimize expensive second The -- thing past just the mile.

some could take what into touches, where ourselves, things this get we around out do buildings the is we so we of hub do for in levels large optimize and parcel our where that. how can also we that like And deliver you you sortation

something big do like XX you or in could XX deliveries whether again, a then that, a that So of day cost. be of instead very driver

we efficient activities the fulfillment doing very abroad and footprint things and have doing where mile we're costs. tackling the around network, with we're the those one freight up about begin the to add what today. facilitates last to loading of have capacity think we what is things of you center be ocean to around delivery the we then these the then I consolidation on pass our things that if kind at So And use mentioned

volumes that network So in proprietary as tremendous increase, and down will on as the And happen costing. volume grows. grow a to there's volumes the basis opportunity that drive a

Operator

Jonathan Matuszewski with the question next Please from of is line Your Jefferies. go ahead.

Jonathan Matuszewski

Good thanks morning and my questions. taking for

over much did to who relative sign more XQ highlighting was couple with SKUs, competitors And better would of SKUs, elevated to good XQ? trade how this your AOV is months quarter? online the used customers One down pronounced down trade of in your more last impact Thanks. say buy that you

Niraj Shah

Trade that see kind play to little that out. also It's freight, ocean Thanks, would down. materials XXXX, I we Yes. common. it's It's the and in to -- driving deflation. back in of of trade bulk in bit that production Jon. of -- the a we're cycle, is a that that kind trade saw that very down, what's There's actually very say definitely recessionary definitely of the out That we cycle easy and relatively said, down cycle XXXX. And do AOV had costs. inflation raw a is particular, quantify track with it. some coming

that's not the a piece AOV, of vast majority is it. Trade down on the so driver it's of but the primary And AOV, bulk the of it.

Kate Gulliver

also add trade Yes. selection an just down benefits I I is that where us. think our broad would area

out play as that And behavior product can certainly period is saw the she customer with us. shopping find that with us. well. continue We tighter, in so the XXXX, can if still XXXX budget And our

Jonathan Matuszewski

experience That's and enhancements expect to on to returns margin to follow-up alluded contributing XQ my just to the helpful. a in them? Kate, lower of elaborate I think gross relative Can you investments you those from And some some customer XQ. see question. you

Kate Gulliver

Yes. question. Great

delivery I in talk experience, delivery that that important management, we component right? returns efforts but often, folks So customer of So a et mile to is last just spoke multiple so across experience, incident cetera. investing about it's the price think delivery price, is speed, when we factors, go the the to about note some will experience, made,

behavior. we and of customer experience, drive repeat All better to ongoing think leads that overall those, an

So as think ongoing value growth in of at, we're customer looking that experience. this and gross about driving I investments, mentioned the previously, multi-quarter there dollars those when quantifying we improvement profit from

We've to previously The throughout improvements a year that yes, to going mid-XXs we and that with of of there. result, but going are XX.X%. path the We're the ongoing margin. that you'll gross think pleased guide making in very about sort at we're a see progress margin. forward margin. gross to be outlined gross we up XX%, some quarter And is I we've midpoint landed reinvesting our step As this continued

Operator

is question next Andreeva Needham. Please line the of go ahead. with from Anna Your

Anna Andreeva

so momentum Great. and Good on business. nice congrats morning in the Thank much. you

Kate Gulliver

Good morning, Anna.

Anna Andreeva

the We had quick to second a of wanted monthly during cadence couple follow-up ones. I the quarter. on

mid-single. So early down in business June you update guys an to be the for provided

help quarter? June anything to is lot that to about you're great. currently can third that make to singles how So a think correct. And that But the I sure bridge just getting overall positive should working, company? improvement which for math was for of specific obviously, And you drove are mid-single running? low the wanted we initiatives is

Niraj Shah

is quick compounding, right? the you you to just back. one they -- I'll happy, interested, it So then it's thing just of pass but -- I are they come buy, mind sure the would answer your and to Kate want then get thing thought make question, they concept over they're Anna. keep customers, Thanks, and in to to

engaged. and of compounding, That's that repeat you used increased seen people that is downloads And the there can app bunch typically, and example, things for you see Wayfair loyal by up, are there's you ticking see usage. who app, show a has increasingly the

of me specific. there's to concept access compounding so for that. different over your how the metrics that pass I have And is where really but let Kate think bunch growth of a see you And you'd occurs, to

Kate Gulliver

Yes.

I Obviously, covers think provide don't think quarter. about second you that we how can month-on-month breakouts. the

you how As One seeing to get think digit. question factor of into you sort we move straddled the mid-single test, your low that from point that do single-digits quarters. is I'd I to was, quarter, that third that that we're today two marketing

second in So test the occurred itself quarter. the

pulled third that quarter. on in revenue part early would back the That on table hit the dollars second some means we've spend have some the in left quarter of the and

future that those to beget that's growth, So Niraj factors would a ongoing of to and continue we'll course, why obviously see of order as we volume seen that orders customers improve. we've little And bit because how momentum orders. that might that of we future mentioned then, see that. of And you will expect see some underlying

Anna Andreeva

quarter helpful Terrific. thank the Okay. margin, the guys just again. second super Kate, And was helpful. as and very quantify That's timing on the gross in benefit you but This you did follow-up. a

Kate Gulliver

not. the did anticipated, Yes, bit did about things team excited than faster hit tight there. we We a say originally the ongoing execution and from we're

Operator

line with the from Ygal of is question ahead. next Your go Arounian Citigroup. Please

Ygal Arounian

everyone. Good morning

points. these to So couple dig maybe of just in a

see kind to the and the of on First gross takes puts with and reinvestment. margin, great understand

to what in than in which and what coming Like pieces just expected? largest general, what's better expecting were this contributors you to drove or been quarter that? upside strength, the the you're On talk the can upside about

back again of was, really Can how you the to as saw testing. share forward? about you're see Thanks. then what a about And of kind on we think move that to that little the and the led that to you kind you things about the the for some hear what bit looking on interesting pull and advertising, pullbacks there of more

Niraj Shah

Thanks, Ygal.

that one is to gross Kate it the to plan. to you able $X.X margin be before if back just probably to the improvement, I action I will but Kate over think answer make go pass your cost of point questions, I want a billion lot

of through a We to of talked were what do. we components kind of bunch planning

to of of done, the in we lot you're the and I data seeing the to been data driving we of that guess the results do is we performance. spend models on ROI get we know a an to a hone point getting. that where the kind we would have I what that science outcome lot way is think the improved use going a things confidence then what drive make in that advertising, were are testing the do high really is lot I we we're said of a since that we've of then there And

And in much is a something behavior quite last that COVID, normal need them we time XXXX, the kind which to run last were but unusual kind set because more period of do hone than so models. just sort ago, to would a long had. we the these And run you frequently it's the typically four-year of of regularly period, tests that's of during of

so And we're models. what doing sure hone is we these make

the hurted to bunch that performance spending that productive. data back in a get you're you a the model. standpoint though not is It's believe the hones of even way because So advertising that revenue only QX from

advertise. just kind Kate? you to sure you're to and so specific of able of more be And in it's very do how would you thing kind an accurate ongoing that make

Kate Gulliver

Yes.

XX sort to anticipated. that really you're gross initiatives cost that was those is what seeing and are outlined back the circling QX of we efficiency. hitting faster what operational And the different on we a than initiatives on of there. savings that's question driver drove margin. what So your combination pursuing before operational We've there's margin gross And over largest the bit

I'd point improvements made. those are we've that of structural thing many One is out that

ongoing. savings because light sort the in midpoint of those guide just XX% the really And and be the hit versus is at experience. of are so XX% we customer reinvestment that at That will enduring being that

We expect the improvements to hold.

we able things about test channel-by-channel that spend us you've as about on speak in and ongoing basis, to conviction us heard advertising these I'd said efficiency a now do how spend. to think Niraj everything echo be and the the before On conviction gives We for just testing have -- to and cadence. are And into traditional thing that and sort on a those is for offensive channels us the excited of going forward. normal to able to a do. in appropriate back do effectively be actually to us We're to those spend important tests

little is result tests. do revenue table the lose when the course, that bit of Of a you run those on you

Operator

Atul from next the is question of Maheswari line with Your go UBS. ahead. Please

Michael Lasser

an Good you morning, Maheswari. the that this we've some give much from is to Michael questions. pushback hearing. Niraj, to Lasser for been opportunity skeptics of Atul the to taking Thank I you our so want respond for

One still of of inventory. really vendors on the arguments are their globally is heavy many

So then they're as size right channel a marketplaces excess using of third-party inventory. and inventory their still dispose to

bit of freight improvement. you costs, would to is from respond benefiting allowing In a which addition, they're to promotional, be driving that? more lower which is How the some them

Niraj Shah

do think is that are think happening, Well, costs in I type happening. prices pandemic I of were that freight revert to terms the to that's not the those of deflation there. likely kind

think don't So a I that's don't I really thing. promotional. And temporal that's think

being, everybody, will for -- kind phenomenon don't that's retailer. of to think more reflecting items think that's So like that kind cost continue. normal think particular of that I I specific normalized any true is And I a a that's market right? that's

inventory, have who inventory have levels. a back are we then, suppliers have who excess Since some the summer of that through say that peak very of stock. I'd was of of excess number trying still been stock the excess down XXXX, healthy terms work and are inventory. suppliers In to working to And we

they general not what on an ongoing price really suppliers past at in price basis. have We the seen goods discounting of can

goods. they that a get higher down would to that even as in level from that suppliers more flow they have all level if flow you other brought still there's words, seeing the cost a down they in be item or the if cost? with to that So that cost can perhaps Asia, what today way fresh more price that basis replacement And and we're level excess to above plan

of So And seeing What seeing is any to is behavior that anything normal. kind we're they're the think say we're very that's supplier something reverting what the different is experience folks of than win. excess very And XXXX, where provide not best little I a of There's stimulus just the I temporal. And that a would of during booming retailers spending. that's XXXX, competitive and think XXXX different There of there's There's a customer XXXX lot There's XXXX, demand. that's There's it's seeing different with in the now unusual a or lot market. a you're chain of a pricing, out a was lot that And field supply who things. the all of kinds congestion. we've in got doing rearview mirror. that, more behavior that like period. there. folks

Michael Lasser

market. purview two elements follow-up and you've now, of the our housing right got is which on is important And domestic a the question Okay. economy most wonderful consumer of the

starting to a provide So category there example, if where illuminate demand already you a purchase to what a are are in flooring are buying, seeing insight is as category normalizing? yet that cycles remains interested perspective under appliance signs stabilize. little For what pressure, from could consumers you're what

category that big what right trends consumer themes stands are So you the seeing from or perspective? where really a now indicate

Niraj Shah

Yes. is a Obviously, demand across other -- see that in question. categories seeing board. I some player Thanks than numbers, seeing That I our demand. pretty obviously, what what we're the larger can would in say, categories. you we're for nice mean in we're

focus flooring, something XXXX mentioned, a really with to over years these the of the in categories number So as opposed entered as you furniture. appliances, started into company newer last of like we entertainment are some on we our

we've by longest. far the in So been that's where

And varies market have. market of in so how position share much our we terms

categories, smaller newer And off a so a grow we base. in so think of some we're smaller as these and it result, I of can

because we have bigger much of position such these have. they're we share, but a can categories market still large So in, grow we

know of about our from performance hear don't alluding numbers, see overall the We that that in to. you're we some I it So could category our suppliers.

the it we would So same access data you to. anecdotally, but of kind hear it's have

Operator

Colin Baird. Please question will from go of final Sebastian Today's line ahead. come with the

Colin Sebastian

for Thanks in. me Good fitting Great. morning.

AI up general. happen with to deflation to a operating specifically say, follow-up the Niraj, for margins. what on the of profile and AOVs next there in wanted the to Just we little scenario Gen where do If but see bit Maybe a financial And following maybe understand impact gross in expect -- and margins reversion to from on you'd the more. or is a back this AI then question historical week, levels? of part maybe maybe business

crosscurrents also on from of impact mean, in should the the But the the we structure, those R&D expense higher efficiency and infrastructure gains given Thank about of think terms you maybe development some and with external AI. in but you. product the costs What around investments internal I facing mentioned, associated technology?

Niraj Shah

Colin. Thanks,

those back much of goods question sort their the and during are the deflation, get is AOV has costing of I've think of if on I thing than think that's primary did they pre-COVID suppliers, then mentioned levels really goods driver, like the goods which bringing the returned with to main kind work kind newer freight, through I COVID. On again pre-COVID it -- the happened to looking more the did it is over ocean

they're And the which retail prices. into reflected wholesale reflecting that in prices, then get the

competitive margins seeing You you're order offer gross seeing and in like take fine. number kind can see the active from our sequential really our increase customers. that in you're having customer drives what engagement, of of sort holding a that the is that's margin, effectively And seeing count our you're rate,

seen you see. in the one back. forward, that customers you that's times that's around of engaged compounding, happens piece described And if a coming And which metrics I've is couple for get that roll I then to that with think that effect repeat that hard you

it see play have but time wouldn't you it's we results, see repeat metrics, well. in working it out can that's You and over those but --

what's and So the it's market our what is margins you I unit growing volume seeing our is think And see that become really a can today. in tough margins, economics growing, are strong. -- you're

imagine And over it makes as time years, grow for you like then it to increases so and can out the market stabilizes roll even you over the as easier us faster.

Kate Gulliver

Yes.

the are compression. orders, our positive with thing And I flywheel. a on expect from would drag seeing margins offset even margin We're Our for and more is with growing compression. course, which AOV healthy the AOV not a that, of

Niraj Shah

AI Gen where your $X.X on we're cost savings. billion to We think then -- plan, that's if I different efficient a I think there of cost we And savings the obviously, you a that question, form lot back way said after. about it, can going cost think we of more become are talk actions

after obviously lets invest lets areas. all and different that another Gen can retail very of You sharper set productive. in help us using can us efficient, AI That's us prices, makes us that go create more activities offer

kind in and there you question the a spend. of infrastructure service. way. us those That I LLMs the wouldn't provide that think don't cost The about as same in really technology as -- folks about the big incurring had who have

by first-party layers So case, large a example, that work putting their a OpenAI capital use and they top make they very own it on letting a which with, investment design first-party your of the they well using own get depth you service, that is in then for why is the how Gen your the breadth in difference we two you back as would type and we benefit, data, other be which going large is then platforms AI Google a to the data, and of application. your have this reason don't, is models then smaller you're which really platforms or can

is usage But because high your you're amount. your again, not is cost particularly modest paying a for

in. our there's And software where lower and application so always over adding cost pieces we're optimizing then always there's pieces different of you're capability

point. think I our maybe So for guess, it. nothing But there's worry I know address clusters, on there, you Kate I don't to about that

Kate Gulliver

Yes.

in course, there the as mentioned nothing in be structure. I savings, think cost structure that cost Niraj cost should to worry time over about ongoing earlier. of in near-term the the And

you for there. remind this up, to As look we us just seeing our We forward Day you Thursday. wrap you morning. to of next Thank we want joining all Investor many of

Niraj Shah

Take to you Yes. next care. of hopefully Thank bunch seeing Look a forward Thursday. you.

Operator

conference all call. Thank today's your participation. joining for appreciate you We

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Wayfair (W) 3 Aug 232023 Q2 Earnings call transcript