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Wayfair Announces Second Quarter 2018 Results

August 2, 2018

BOSTON--(BUSINESS WIRE)--Aug 2, 2018--Wayfair Inc. (NYSE: W), one of the world’s largest online destinations for the home, today reported financial results for its second quarter ended June 30, 2018.

Second Quarter 2018 Financial Highlights

Direct Retail net revenue, consisting of sales generated primarily through Wayfair’s sites, increased $538.5 million to $1.6 billion, up 48.8% year over year Gross profit was $385.0 million or 23.3% of total net revenue GAAP net loss was $100.7 million Adjusted EBITDA was $(34.8) million or (2.1)% of total net revenue GAAP basic and diluted net loss per share was $1.13 Non-GAAP diluted net loss per share was $0.77 Non-GAAP free cash flow was $(7.5) million At the end of the second quarter, cash, cash equivalents, and short-term and long-term investments totaled $585.2 million

“We are pleased to report a record second quarter and our largest yet year-over-year dollar growth in Direct Retail net revenue. This recent quarter included our biggest revenue day in the history of the company as we introduced Way Day, the first-ever retail holiday for home,” said Niraj Shah, CEO, co-founder and co-chairman, Wayfair. “Our long-term investments in further developing our logistics networks, international business, and in scaling headcount to improve our product and service offerings are resonating strongly with new and returning customers. By focusing on bringing customers the best possible experience in shopping for the home, from the home, we are leading the way in our category. We are delighted with the progress that we are making and the way in which we are positioned to keep taking market share as dollars shift online.”

Other Second Quarter Highlights

The number of active customers in our Direct Retail business reached 12.8 million as of June 30, 2018, an increase of 34.0% year over year LTM net revenue per active customer was $440 as of June 30, 2018, an increase of 9.5% year over year Orders per customer, measured as LTM orders divided by active customers, was 1.82 for the second quarter of 2018, compared to 1.74 for the second quarter of 2017 Repeat customers placed 66.0% of total orders in the second quarter of 2018, compared to 61.3% in the second quarter of 2017 Repeat customers placed 4.3 million orders in the second quarter of 2018, an increase of 62.3% year over year Orders delivered in the second quarter of 2018 were 6.5 million, an increase of 50.8% year over year Average order value was $254 for the second quarter of 2018, compared to $258 in the second quarter of 2017 In the second quarter of 2018, 49.2% of total orders delivered for our Direct Retail business were placed via a mobile device, compared to 44.1% in the second quarter of 2017

Webcast and Conference Call

Wayfair will host a conference call and webcast to discuss its second quarter 2018 financial results today at 8 a.m. (ET). Investors and participants can access the call by dialing (833) 286-5803 in the U.S. and (647) 689-4448 internationally. The passcode for the conference line is 6854609. The call will also be available via live webcast at investor.wayfair.com along with supporting slides. An archive of the webcast conference call will be available shortly after the call ends. The archived webcast will be available at investor.wayfair.com.

About Wayfair

Wayfair believes everyone should live in a home they love. Through technology and innovation, Wayfair makes it possible for shoppers to quickly and easily find exactly what they want from a selection of more than 10 million items across home furnishings, décor, home improvement, housewares and more. Committed to delighting its customers every step of the way, Wayfair is reinventing the way people shop for their homes - from product discovery to final delivery.

The Wayfair family of sites includes:

Wayfair - Everything home for every budget Joss & Main - Affordable discoveries for gorgeous living AllModern - Unbelievable prices on everything modern Birch Lane - Home of classic designs and fresh finds Perigold - The widest-ever selection of premium home

Wayfair generated $5.7 billion in net revenue for the twelve months ended June 30, 2018. Headquartered in Boston, Massachusetts with operations throughout North America and Europe, the company employs more than 9,700 people.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of federal and state securities laws. All statements other than statements of historical fact contained in this press release, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

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

A list and description of risks, uncertainties and other factors that could cause or contribute to differences in our results can be found under Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and the Company’s subsequent filings with the Securities and Exchange Commission. We qualify all of our forward-looking statements by these cautionary statements.

Non-GAAP Financial Measures

To supplement our unaudited consolidated and condensed financial statements presented in accordance with generally accepted accounting principles (“GAAP”), this earnings release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA as a percentage of total net revenue (“Adjusted EBITDA Margin”), free cash flow and non-GAAP net loss and diluted net loss per share. We use these non-GAAP financial measures internally in analyzing our financial results and believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure in this earnings release.

Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures that are calculated as income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest and other income and expense, (benefit from) provision for income taxes, and non-recurring items. We have included Adjusted EBITDA and Adjusted EBITDA Margin in this earnings release because they are key measures used by our management and our board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA Margin facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation and related taxes, excludes an item that we do not consider to be indicative of our core operating performance. Investors should, however, understand that equity-based compensation will be a significant recurring expense in our business and an important part of the compensation provided to our employees. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Free cash flow is a non-GAAP financial measure that is calculated as net cash (used in) provided by operating activities less net cash used to purchase property and equipment and site and software development costs. We believe free cash flow is an important indicator of our business performance, as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Non-GAAP diluted net loss per share is a non-GAAP financial measure that is calculated as GAAP net loss plus equity-based compensation and related taxes, (benefit from) provision for income taxes, and non-recurring items divided by weighted average shares. We believe that adding back equity-based compensation expense and related taxes and (benefit from) provision for income taxes, and non-recurring items as adjustments to our GAAP diluted net loss before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.

We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that the non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry.

The following table reflects the reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA Margin for each of the periods indicated (in thousands):

The following table presents Adjusted EBITDA attributable to our segments, and the reconciliation of net loss to consolidated Adjusted EBITDA is presented in the preceding table (in thousands):

A reconciliation of GAAP net loss to non-GAAP diluted net loss, the most directly comparable GAAP financial measure, in order to calculate non-GAAP diluted net loss per share, is as follows (in thousands, except per share data):

The following table presents a reconciliation of free cash flow to net cash used in operating activities for each of the periods indicated (in thousands):

Key Financial and Operating Metrics (in thousands, except LTM Net Revenue per Active Customer and Average Order Value)

The following table presents Direct Retail and Other net revenues attributable to the Company’s reportable segments for the periods presented (in thousands):

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