Attached files

file filename
8-K - 8-K - Wayfair Inc.a15-5839_18k.htm

Exhibit 99.1

 

Wayfair Announces Fourth Quarter and Full Year 2014 Results

 

Q4 Direct Retail Revenue Growth of 55.2% Year over Year to $346.7 million

Full Year Direct Retail Revenue Growth of 63.6% Year over Year to $1.1billion

Total Revenue Growth of 44.0% Year over Year to $1.3 billion

3.2 Million Active Customers, up 53.8% Year over Year

 

BOSTON, MA — March 4, 2015 — Wayfair Inc. (NYSE:W), one of the world’s largest online destinations for home furnishings and décor, today reported financial results for its fourth quarter and full fiscal year ended December 31, 2014.

 

Fourth Quarter 2014 Financial Highlights

 

·                  Net revenue increased to $408.6 million, up 38.4% year over year

·                  Direct Retail revenue, consisting of sales generated primarily through the sites of Wayfair’s five brands, increased to $346.7 million, up 55.2 % year over year

·                  Gross profit was $98.4 million or 24.1% of revenue, compared to 23.9% of revenue in the same quarter last year

·                  Adjusted EBITDA was $(7.2) million

·                  GAAP basic and diluted net loss per share was $0.73

·                  Non GAAP diluted net loss per share was $0.18

·                  Non GAAP free cash flow was $50.8 million

·                  At the end of the Fourth Quarter, cash, cash equivalents, and short-term investments totaled $415.9 million

 

Full Year 2014 Financial Highlights

 

·                  Net revenue increased to $1.3 billion, up 44.0% year over year

·                  Direct Retail revenue increased to $1.1 billion, up 63.6% year over year

·                  Adjusted EBITDA was $(62.5) million

·                  Non GAAP diluted net loss per share was $1.02 for the year

·                  Non GAAP free cash flow for the year was $(41.9) million

 

“We’re very pleased with the fourth quarter and full year results and the company’s continued strong growth,” said Niraj Shah, co-founder, CEO and co-chairman of Wayfair. “We are particularly excited about the success of our holiday merchandising efforts and our ongoing customer growth. We remain committed to both building the market leading online home brands and to delivering long term value for investors.”

 

Other Highlights

 

·                  The number of active customers in our Direct Retail business reached 3.2 million as of December 31, 2014, up 53.8% year over year

·                  Aided brand awareness reached 55% in December 2014, up from 36% in December of 2013

·                  LTM Net revenue per active customer increased to $342, up 6.2% year over year

·                  Orders per customer, measured as LTM orders divided by active customers, increased to 1.63 for the Fourth Quarter, up from 1.58 year over year

·                  Repeat customers placed 50.3% of total orders in the Fourth Quarter of 2014, compared to 46.8% in the Fourth Quarter of 2013

·                  Orders delivered in the Fourth Quarter of 2014 were 1.7 million, a 45.1% increase year over year

·                  Total orders delivered in 2014 increased to 5.2 million, up from 3.3 million in 2013

·                  Average order value was $204 for the Fourth Quarter 2014, up from $191 year over year

 



 

·                  In 2014, approximately 29% of total orders delivered for our Direct Retail business were placed via a mobile device

 

Financial Guidance

 

The following forward-looking statements reflect Wayfair’s expectations as of March 4, 2015.

 

Expectations for the First Quarter of 2015 (Quarter Ending March 31, 2015):

 

·                  Total net revenue of $375 to $390 million, comprised of Direct Retail net revenue of $330 to $340 million and Other revenue of $45 to $50 million

·                  Adjusted EBITDA margin of negative 3.5% to 4.0%

 

Conference Call

 

Wayfair will host a conference call and webcast to discuss its Fourth Quarter and Full Year 2014 financial results today at 8 a.m. (ET). Investors and participants can access the call by dialing (877) 201-0168 in the U.S. and (647) 788-4901 internationally. The passcode for the conference line is 77723306. The call will also be available via live webcast at investor.wayfair.com. 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 Inc. offers an extensive selection of home furnishings and décor across all styles and price points. The Wayfair family of brands includes:

 

·                  Wayfair.com, an online destination for all things home

·                  Joss & Main, an online flash sales site offering inspiring home design daily

·                  AllModern, a go-to online source for modern design

·                  DwellStudio, a design house for fashion-forward modern furnishings

·                  Birch Lane, a collection of classic furnishings and timeless home décor

 

Wayfair is headquartered in Boston, Massachusetts, with additional locations in New York, Ogden, Utah, Hebron, Kentucky, Galway, Ireland, London, Berlin and Sydney.

 

Media Relations Contact:

Jane Carpenter, 617-502-7595

jcarpenter@wayfair.com

 

Investor Relations Contact:

Kate Gulliver, 617-880-8108

IR@wayfair.com

 

Forward-Looking Statements

 

This earnings release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to, statements regarding the objectives of management and the Company’s financial guidance for the first quarter of 2015.  These forward-looking statements are made as of the date they were first issued and were based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “project,” “goals,” “estimate,” “potential,” “predict,” “may,” “will,” “might,” “could,” “intend,” variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements are subject to a number of

 



 

risks and uncertainties, many of which involve factors or circumstances that are beyond the Company’s control. The Company’s actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to: our ability to acquire new customers, our ability to sustain and/or manage our growth, our ability to increase our net revenue per active customer, our ability to build and maintain strong brands and other risks detailed in the Company’s other publicly available filings with the Securities and Exchange Commission. The forward-looking statements included in this earnings release represent the Company’s views as of the date of this earnings release. The Company anticipates that subsequent events and developments will cause its views to change. The Company undertakes no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 



 

EXPLANATORY NOTE

 

The condensed consolidated financial statements and other disclosures contained in this earnings release are those of Wayfair Inc.  Prior to the effectiveness of Wayfair’s registration statement on Form S-1 related to its initial public offering in October 2014, Wayfair LLC was the principal operating entity. In connection with the initial public offering of Wayfair Inc., Wayfair LLC completed an internal restructuring pursuant to which Wayfair LLC became a wholly-owned subsidiary of Wayfair Inc., and the holders of equity interests in Wayfair LLC became stockholders of Wayfair Inc.

 

Non-GAAP Financial Measures

 

To supplement Wayfair’s condensed consolidated 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, free cash flow, non-GAAP diluted net loss per share and non-GAAP diluted net loss per share adjusted for shares issued and shares converted at the IPO.  Wayfair uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Wayfair’s ongoing operational performance. Wayfair has provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure in this earnings release.

 

Adjusted EBITDA is a non-GAAP financial measure that is calculated as earnings (loss) before depreciation and amortization, equity-based compensation and related taxes, interest and other income and expense and taxes. Wayfair has included Adjusted EBITDA in this earnings release because it is a key measure used by its management and its board of managers to evaluate its operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis 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, Wayfair believes that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of managers.

 

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 including leasehold improvements and site and software development costs.  Wayfair believes free cash flow is an important indicator of Wayfair’s business performance, as it measures the amount of cash it generates. Accordingly, Wayfair believes that free cash flow provides useful information to investors and others in understanding and evaluating its operating results in the same manner as its management.

 

Non-GAAP diluted net loss per share is a non-GAAP financial measure that is calculated as GAAP net loss attributable to common stockholders plus accretion of convertible redeemable preferred units, equity-based compensation and related taxes divided by non-GAAP weighted average shares.  Wayfair believes that adding back accretion of convertible redeemable preferred units, equity-based compensation expense and related tax adjustments to its 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. For the fourth quarter of 2014 and full year 2014, Wayfair has included non-GAAP diluted net loss per share on a pro forma basis and assumes the conversion of all outstanding preferred stock, the

 



 

issuance of common stock at its IPO in October 2014 along with the vesting of restricted shares and restricted share units, net of applicable taxes, as if these events all occurred at the beginning of the respective periods and presented as such only for three months and full year ended December 31, 2014.  As a result of significant changes to Wayfair’s capital structure in the most recent quarter, Wayfair believes that the presentation of the non-GAAP diluted net loss per share on a pro forma basis provides useful information to investors and others.

 

Wayfair does not itself, nor does it 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 used by Wayfair 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 its industry.

 

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

 

 

 

Three months ended December 31,

 

Year Ended December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in thousands)

 

Reconciliation of Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Net loss

 

$

(72,554

)

$

(4,157

)

$

(148,098

)

$

(15,526

)

Depreciation and amortization

 

7,565

 

3,739

 

22,003

 

13,091

 

Equity based compensation and related taxes

 

57,716

 

 

63,244

 

 

Interest income, net

 

(128

)

(60

)

(350

)

(245

)

Other (expenses) income, net

 

84

 

(219

)

489

 

(294

)

Taxes

 

99

 

50

 

175

 

46

 

Adjusted EBITDA

 

$

(7,218

)

$

(647

)

$

(62,537

)

$

(2,928

)

 



 

A reconciliation of GAAP net loss attributable to common stockholders to non-GAAP diluted net loss attributable to common stockholders, the most directly comparable GAAP financial measure, and GAAP diluted common shares to non-GAAP diluted shares, the most directly comparable GAAP financial measure, in order to calculate non-GAAP diluted net loss per share, is as follows:

 

 

 

Three months ended December 31,

 

Year Ended December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in thousands, except share and per share data)

 

 

 

Non GAAP (1)

 

 

 

Non GAAP (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(58,122

)

$

(8,924

)

$

(150,169

)

$

(40,914

)

Add: Accretion of convertible redeemable preferred units

 

(14,432

)

4,767

 

2,071

 

25,388

 

Add: Equity based compensation and related taxes

 

57,716

 

 

63,244

 

 

Add: Taxes

 

99

 

50

 

175

 

46

 

Non GAAP net loss attributable to common stockholders

 

$

(14,739

)

$

(4,107

)

$

(84,679

)

$

(15,480

)

 

 

 

 

 

 

 

 

 

 

Weighted average number of common units outstanding used in computing per share amounts - basic and diluted

 

80,078,304

 

41,413,142

 

50,641,601

 

41,331,546

 

Adjustment to reflect the issuance of shares in connection with the IPO, conversion of preferred stock and vesting of equity compensation

 

2,942,287

 

 

 

32,378,990

 

 

 

Non-GAAP Weighted average shares used to compute diluted net loss per share

 

83,020,591

 

41,413,142

 

83,020,591

 

41,331,546

 

Non GAAP diluted net loss per share

 

$

(0.18

)

$

(0.10

)

$

(1.02

)

$

(0.37

)

 


(1)  Weighted average shares used to compute non-GAAP diluted net loss per share for the three and twelve months ended December 31, 2014 includes the impact of share issuances and share converstions at its IPO and through December 31, 2014 as if they ocurred at the beginning of the 2014 periods presented.

 

The following table presents a reconciliation of free cash flow to net cash provided by operating activities for each of the periods indicated:

 

 

 

Three months ended December 31,

 

Year Ended December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities, net of acquisition

 

$

62,529

 

$

40,838

 

$

11,692

 

$

34,413

 

Purchase of property, equipment, and leasehold improvements

 

(8,254

)

(2,318

)

(39,422

)

(6,739

)

Site and software development costs

 

(3,487

)

(2,628

)

(14,130

)

(9,040

)

Free cash flow

 

$

50,788

 

$

35,892

 

$

(41,860

)

$

18,634

 

 

Key Financial and Operating Metrics

 

 

 

Three months ended December 31,

 

Year Ended December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

(in thousands, except Average Order Value and LTM Net Revenue Per Active Customer)

 

Consolidated Financial Metrics

 

 

 

 

 

 

 

 

 

Net Revenue

 

$

408,619

 

$

295,333

 

$

1,318,951

 

$

915,843

 

Adjusted EBITDA

 

$

(7,218

)

$

(647

)

$

(62,537

)

$

(2,928

)

Free Cash Flow

 

$

50,788

 

$

35,892

 

$

(41,860

)

$

18,634

 

Direct Retail Financial and Operating Metrics

 

 

 

 

 

 

 

 

 

Direct Retail Net Revenue

 

$

346,650

 

$

223,388

 

$

1,101,686

 

$

673,446

 

Active Customers

 

3,217

 

2,092

 

3,217

 

2,092

 

LTM Net Revenue Per Active Customer

 

$

342

 

$

322

 

$

342

 

$

322

 

Orders Delivered

 

1,701

 

1,173

 

5,237

 

3,314

 

Average Order Value

 

$

204

 

$

191

 

$

210

 

$

204

 

 



 

Wayfair Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

 

 

December 31,

 

 

 

2014

 

2013

 

 

 

(in thousands, except share and per share data)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

355,859

 

$

65,289

 

Short-term investments

 

60,000

 

50,019

 

Accounts receivable, net of allowance

 

5,949

 

7,689

 

Inventories

 

19,798

 

14,963

 

Prepaid expenses and other current assets

 

45,262

 

25,172

 

Total current assets

 

486,868

 

163,132

 

Property and equipment, net

 

60,639

 

22,088

 

Goodwill and intangible assets, net

 

6,478

 

9,084

 

Other noncurrent assets

 

1,538

 

2,001

 

Total assets

 

$

555,523

 

$

196,305

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

147,873

 

$

102,153

 

Accrued expenses

 

42,335

 

21,375

 

Deferred revenue

 

26,784

 

13,397

 

Other current liabilities

 

15,600

 

8,342

 

Total current liabilities

 

232,592

 

145,267

 

Other liabilities

 

17,392

 

1,030

 

Total liabilities

 

249,984

 

146,297

 

 

 

 

 

 

 

Series A convertible redeemable preferred units

 

 

 

241,186

 

Class A common stock; 37,002,874 and no shares issued and outstandinging at December 31, 2014 and 2013, respectively

 

37

 

 

Class B common stock, 46,179,192 and no shares issued and outstanding at December 31, 2014 and 2013, respectively

 

46

 

 

Additional paid-in capital

 

363,944

 

 

Accumulated deficit

 

(58,122

)

(190,850

)

Accumulated other comprehensive loss

 

(366

)

(328

)

Total stockholders’ equity

 

305,539

 

(191,178

)

Total liabilities and stockholders’ equity

 

$

555,523

 

$

196,305

 

 



 

Wayfair Inc.

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Non GAAP Income Statement

 

 

 

 

 

 

 

 

 

 

 

(Excludes equity based compensation and
related taxes)

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Year Ended

 

 

 

Three months ended December 31,

 

Year Ended December 31,

 

December 31,

 

December 31,

 

 

 

2014

 

2013

 

2014

 

2013

 

2014

 

2014

 

 

 

(in thousands, except share and per share data)

 

Consolidated Statements of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenue

 

$

408,619

 

$

295,333

 

$

1,318,951

 

$

915,843

 

$

408,619

 

$

1,318,951

 

Cost of goods sold

 

310,209

 

224,609

 

1,007,853

 

691,602

 

$

309,840

 

$

1,007,484

 

Gross profit

 

98,410

 

70,724

 

311,098

 

224,241

 

98,779

 

311,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service and merchant fees

 

18,483

 

10,823

 

55,804

 

35,500

 

16,471

 

53,539

 

Advertising

 

54,806

 

36,908

 

191,284

 

108,469

 

54,806

 

191,284

 

Merchandising, marketing and sales

 

38,245

 

10,428

 

80,113

 

33,506

 

13,785

 

51,599

 

Operations, technology, general and administrative

 

59,143

 

16,702

 

130,701

 

62,246

 

28,268

 

98,605

 

Amortization of acquired intangible assets

 

232

 

249

 

980

 

539

 

232

 

980

 

Total operating expenses

 

170,909

 

75,110

 

458,882

 

240,260

 

113,562

 

396,007

 

Loss from operations

 

(72,499

)

(4,386

)

(147,784

)

(16,019

)

(14,783

)

(84,540

)

Interest income, net

 

128

 

60

 

350

 

245

 

128

 

350

 

Other (expense) income, net

 

(84

)

219

 

(489

)

294

 

(84

)

(489

)

Loss before income taxes

 

(72,455

)

(4,107

)

(147,923

)

(15,480

)

(14,739

)

(84,679

)

Provision for income taxes

 

(99

)

(50

)

(175

)

(46

)

(99

)

(175

)

Net loss

 

$

(72,554

)

$

(4,157

)

$

(148,098

)

$

(15,526

)

$

(14,838

)

$

(84,854

)

Accretion of convertible redeemable preferred units

 

14,432

 

(4,767

)

(2,071

)

(25,388

)

14,432

 

(2,071

)

Net loss attributable to common stockholders

 

(58,122

)

(8,924

)

(150,169

)

(40,914

)

(406

)

(86,925

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders per share - basic and diluted

 

$

(0.73

)

$

(0.22

)

$

(2.97

)

$

(0.99

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common stock outstanding used in computing per share amounts - basic and diluted

 

80,078,304

 

41,413,142

 

50,641,601

 

41,331,546

 

 

 

 

 

 

 

 

Three months ended

 

Twelve months ended

 

 

 

December 31, 2014

 

December 31, 2014

 

Reconciliation of Non GAAP Income Statement:

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(58,122

)

$

(150,169

)

Excludes equity based compensation and related taxes:

 

 

 

 

 

Cost of goods sold

 

369

 

369

 

Customer service and merchant fees

 

2,012

 

2,265

 

Merchandising, marketing and sales

 

24,460

 

28,514

 

Operations, technology, general and administrative

 

30,875

 

32,096

 

Non GAAP Net loss attributable to common stockholders

 

$

(406

)

$

(86,925

)

 



 

Wayfair Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Year Ended December 31,

 

 

 

2014

 

2013

 

 

 

(in thousands)

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net loss

 

$

(148,098

)

$

(15,526

)

Adjustments to reconcile net loss to net cash provided by operating activities, net of acquisition:

 

 

 

 

 

Depreciation and amortization

 

22,003

 

13,091

 

Equity based compensation

 

60,809

 

 

Other non-cash adjustments

 

570

 

121

 

 

 

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable and customer refunds payable

 

1,741

 

8,112

 

Inventories

 

(4,835

)

(6,630

)

Prepaid expenses and other current assets

 

(20,143

)

(9,159

)

Accounts payable and accrued expenses

 

66,673

 

40,853

 

Deferred revenue and other liabilities

 

33,031

 

4,195

 

Other assets

 

(59

)

(644

)

Net cash provided by operating activities

 

11,692

 

34,413

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of short-term investments

 

(135,000

)

(93,000

)

Maturities of short-term investments

 

125,019

 

65,998

 

Purchase of property and equipment

 

(39,422

)

(6,739

)

Site and software development costs

 

(14,130

)

(9,040

)

Cash paid for acquisition

 

 

(3,741

)

Other investing activities, net

 

531

 

(469

)

Net cash used in investing activities

 

(63,002

)

(46,991

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from issuance of Series B convertible redeemable preferred units

 

154,774

 

 

Proceeds from initial public offering, net of underwriter fees

 

282,893

 

 

Proceeds from exercise of stock options

 

12

 

 

Taxes paid related to net share settlement of equity awards

 

(27,985

)

 

Repurchase of common units

 

(23,500

)

 

Dividends paid to Series A convertible redeemable preferred

 

(39,516

)

 

Repurchase of employee equity

 

(5,528

)

 

Net cash provided by financing activities

 

341,150

 

 

Effect of exchange rate changes on cash and cash equivalents

 

730

 

6

 

Net decrease in cash and cash equivalents

 

290,570

 

(12,572

)

Cash and cash equivalents

 

 

 

 

 

Beginning of period

 

65,289

 

77,861

 

End of period

 

$

355,859

 

$

65,289