Wayfair Inc. · NYSE:W
Wayfair — Q3 2019 Earnings Presentation
42 slides from Wayfair's earnings presentation, 2019
Slide 1: Investor Presentation Q3 2019
Investor Presentation Q3 2019
Slide 2: Safe Harbor
This presentation contains forward-looking statements within the meaning of federal and state securities laws. All statements other than statements of historical fact contained in this presentation—including statements regarding our future results of operations and financial position, business strat
Slide 3: Investment Highlights
Investment Highlights ● ~$600B total addressable market rapidly moving from brick and mortar to online ● Utilizing in-house software development capability to build and leverage proprietary technology as key enabler ● Partnering with fragmented and largely unbranded supplier base of over 11,000 supp
Slide 4: Overview
OVERVIEW 01. Our Business 02. Strategic Priorities 03. KPIs & Financial Metrics 04. Appendix 4
Slide 5: Our Business
01. OUR BUSINESS 5
Slide 6: Billions in Revenue Is Up For Grabs with Secular Shift from Brick-and-Mortar to Online
OUR BUSINESS: INDUSTRY BACKDROP Billions in Revenue Is Up For Grabs with Secular Shift from Brick-and-Mortar to Online Large, Addressable Market ...with Further Headroom for Transitioning Away from Brick and Mortar... Online Penetration... U.S. Home Market by Channel ($B) Estimated U.S. Online Penet
Slide 7: We Are Winning with Customers and Taking Market Share
OUR BUSINESS: INDUSTRY BACKDROP We Are Winning with Customers and Taking Market Share With the Home Category Online Growing by ...We Are Taking a Significant Share of Approximately 15% in the U.S. in 2018... Dollars as They Shift Online U.S. Home Online Market Size Forecast 2018 Online Growth Breakd
Slide 8: Home Category Has Specific Challenges When Shopped Online
OUR BUSINESS: BUILT FOR THE HOME CATEGORY Problem Home Category Has 1 Confidence To Buy: In the absence of being able to touch and feel a product, customers Specific Challenges typically require greater comfort and advice on the item they are buying. When Shopped Online Visualizing Products: 2 Under
Slide 9: We Have Built an Experience that Enables Customers to Confidently Shop for Their Home Online
OUR BUSINESS: BUILT FOR THE HOME CATEGORY We Have Built an Experience that Enables Customers to Confidently Shop for Their Home Online 1 Confidence To Buy: Inspires Confidence in the Purchase ● In-depth product information ● Customer reviews & specifications ● Design Services ● Customer Q&A ● Plus m
Slide 10: We Help Shoppers Visualize Their Purchase Through the Use of Technology
OUR BUSINESS: BUILT FOR THE HOME CATEGORY We Help Shoppers Visualize Their Purchase Through the Use of Technology 2 Visualizing Products: Customers “See” Before They Buy ● 3D View in Room ● Room Planner ● Room Ideas ● Search with Photo ● Customer-uploaded product photos ● Plus more... Tap Results! S
Slide 11: We Help Inspire Shoppers and Equip Them to Plan Their Perfect Room
OUR BUSINESS: BUILT FOR THE HOME CATEGORY We Help Inspire Shoppers and Equip Them to Plan Their Perfect Room... 3 Inspiration and Product Discovery: Find the Right Product Faster ● Product recommendations ● Personalization ● Visual filters ● Idea Boards ● Plus more... 11
Slide 12: Including 80+ Proprietary House Brands Across Styles and Price Points
OUR BUSINESS: BUILT FOR THE HOME CATEGORY ...Including 80+ Proprietary House Brands Across Styles and Price Points to Help Customers Find Products They Like 3 Inspiration and Product Discovery: Curated brand experience, enabling customers to more easily discover the items they love from our range of
Slide 13: House Brands Are Resonating with Shoppers
OUR BUSINESS: BUILT FOR THE HOME CATEGORY House Brands Are Resonating with Shoppers 3 Inspiration and Product Discovery: House Brands Account for the Majority of Wayfair.com Revenue House brands have grown from 6% of Wayfair.com revenue to 69% in three years. 13
Slide 14: Customer Service Built to be a Competitive Differentiator
OUR BUSINESS: BUILT FOR THE HOME CATEGORY Customer Service Built to be a Competitive Differentiator 4 Customer Service and Delivery: In-house customer service team of over 3,200 people in the U.S. and Europe. Support for customers throughout their shopping and delivery experience. Specialized custom
Slide 15: Wayfair is our Central Brand and the Driver of our Business
OUR BUSINESS: BRANDS AND CUSTOMERS Wayfair is our Central Brand and the Driver of our Business Our Marquee Brand 1. 2. 3. 89% US aided Customers attribute Wayfair to ‘the Unparalleled selection brand awareness rewarding feeling of turning my of over 14 million since Wayfair.com house into a home’ tw
Slide 16: Wayfair Focuses on the Mass Market Customer; Lifestyle Brands Serve Specific Segments
OUR BUSINESS: BRANDS AND CUSTOMERS Wayfair Focuses on the Mass Market Customer; Additionally Our Lifestyle Brands Serve Specific Customer Styles and Segments High End ($175K+ household income) Mass Market ($60K – $175K household income) Low End ($60K household income) 16
Slide 17: Our Four Distinct Home Sites Each Have a Unique Identity
OUR BUSINESS: BRANDS AND CUSTOMERS Our Four Distinct Home Sites Each Have a Unique Identity Stylish designs Classic home. The best of modern, The widest-ever selection to discover daily. Comfortable cost. priced for real life. of luxury home furnishings. 17
Slide 18: Increasing Engagement from Repeat Customers
OUR BUSINESS: BRANDS AND CUSTOMERS Increasing Engagement from Repeat Customers Loyalty is Growing ● Our base of loyal customers is growing. Repeating Customers ● In December 2017, 31% of Our knowledge of returning customers Wayfair.com orders came is higher than that for new visitors, from customers
Slide 19: Marketing to Customers Via Paid and Free Channels
OUR BUSINESS: BRANDS AND CUSTOMERS Marketing to Customers Via Paid and Free Channels People are consuming more content than ever, and in different places. Brand Integrations Online Paid Partnering with Reaching Discovery/Scripps and shoppers through other networks to reach display, social, our targe
Slide 20: Strategic Priorities
02. STRATEGIC PRIORITIES 20
Slide 21: Taking a Long-Term Approach to Growth
STRATEGIC PRIORITIES Taking a Long-Term Approach to Growth We are investing in three main areas of strategic importance: 1 Logistics Scaling our logistics capabilities in warehousing, supply services, transportation, and delivery to improve customer experience and drive efficiencies. 2 International
Slide 22: Home Category Characterized by Heavy, Bulky, and Damage-Prone Items
STRATEGIC PRIORITIES Home Category Characterized by Heavy, Bulky, and Damage-Prone Items Average Wayfair Small Parcel Item Average Wayfair Large Parcel Item 30 pounds | 3 cubic feet 80 pounds | 22 cubic feet 1 Logistics: Transportation Challenges Products in our category are challenging to transport
Slide 23: Investing in CastleGate and Supply Chain
United Kingdom Canada Germany United States CastleGate STRATEGIC PRIORITIES Warehouses Investing in 1 Logistics: CastleGate CastleGate and CastleGate warehouses forward-position supplier inventory to create fast delivery for small parcel (1–2 days) and large parcel (1 week+). Supply Chain We have bu
Slide 24: Taking Control of Large Parcel Transportation with the Wayfair Delivery Network
STRATEGIC PRIORITIES Taking Control of Large Parcel Transportation and Delivery with the Wayfair Delivery Network Logistics: Wayfair 1 WDN Locations Delivery Network (WDN) Over 90% of our U.S. large parcel orders flow through the Wayfair-controlled middle mile network, and today our last mile delive
Slide 25: Scaling our Business in Canada, the UK, and Germany
STRATEGIC PRIORITIES Scaling our Business in Canada, the UK, and Germany 2 International Canada International competitive United Kingdom landscape is similar to the U.S., with a fragmented Germany base of brick-and-mortar Europe retailers that is typically ~$300B regionalized with no dominant online
Slide 26: Investing in Dozens of Product Categories and Services
STRATEGIC PRIORITIES Investing in Dozens of Product Categories and Services to Further Penetrate our Total Addressable Market 3 Further Penetrating the TAM Growing share of wallet by deepening and broadening our value proposition to customers within the home category. Hiring new people to expand or
Slide 27: KPIs & Financial Metrics
03. KPIs & FINANCIAL METRICS 27
Slide 28: Robust Growth at Scale
KPIs & FINANCIAL METRICS Robust Growth at Scale $8,608 $6,779 $4,721 $3,380 $2,250 Q3 ‘19 LTM 240+ Niche Websites; Wayfair Brand Wayfair U.S. Platform Development Launched Brand Building Note: International net revenue not disclosed separately before 2012 U.S. Net Revenue ($M) International Net Reve
Slide 29: Strong Customer Acquisition and Growing Share of Wallet
KPIs & FINANCIAL METRICS Strong Customer Acquisition and Growing Share of Wallet 19.1 $449 2.4 $323 29
Slide 30: New and Repeat Orders Both Growing with Repeat Taking Share
KPIs & FINANCIAL METRICS New and Repeat Orders Both Growing with Repeat Taking Share 30
Slide 31: Customers are Ordering More Frequently
KPIs & FINANCIAL METRICS Customers are Ordering More Frequently 1.85 1.61 31
Slide 32: U.S. Hovering +/- Breakeven Despite Significant Investment; International Earlier in its Lifecycle
KPIs & FINANCIAL METRICS U.S. Hovering +/- Breakeven Despite Significant Investment; International Earlier in its Lifecycle ($ in Millions) FY 2016 FY 2017 Q1 ‘18 Q2 ‘18 Q3 ‘18 Q4 ‘18 FY 2018 Q1 ‘19 Q2 ‘19 Q3 ‘19 U.S. Direct Net Revenue $2,993.4 $4,075.4 $1,186.2 $1,397.0 $1,460.1 $1,708.7 $5,752.0
Slide 33: Long-Term Target Model
KPIs & FINANCIAL METRICS Long-Term Target Model Long-Term 2015 2016 2017 2018 Q3’19 Target Net Revenue 100% 100% 100% 100% 100% 100% Better wholesale economics with increasing scale Gross Margin 24.0% 24.0% 23.9% 23.7% 23.8% 25–27% Logistics cost efficiency gains Scale in international regions Custo
Slide 34: Capital-Efficient Business Model
KPIs & FINANCIAL METRICS Capital-Efficient Business Model Net Revenue and Inventory Receivable and Payable Days1 $8,608 40.6 $2,250 2.7 $20 $69 Q3 ‘19 (Net Revenue is LTM) 1 Average of last four quarters 34
Slide 35: Appendix
04. APPENDIX 35
Slide 36: Illustrative Customer Acquisition Cost
APPENDIX Illustrative Customer Acquisition Cost (All units in millions, except per-customer figures) 2018 Total Advertising Spend $774.2 Partner Ad Spend $5.5 Direct Retail Ad Spend $768.7 Active Customers 15.15 Total Orders 28.08 % of Orders from Repeat Customers 65.8% Implied New Customers 9.60 Im
Slide 37: Adding Variable Headcount to Keep Up with Growth and Investing in OpEx
APPENDIX We are Adding Variable Headcount to Keep Up with Growth and Investing in OpEx Headcount to Staff our Strategic Investments 16,084 7,833 8,251 1 1 These figures include interns and co-ops 37
Slide 38: CastleGate Warehouses Enable Next-Day And 2-Day Delivery for Small Parcel
APPENDIX CastleGate Warehouses Enable Next-Day And 2-Day Delivery for Small Parcel 1 Supplier Traditional Drop Ship Model for Small Parcel Example warehouse in End customer southern California FedEx / UPS in New York 6–8 total touches, 4–5 day delivery time CastleGate for Small Parcel Example1 Castl
Slide 39: Wayfair Delivery Network (WDN) for Large Parcel Deliveries
APPENDIX Wayfair Delivery Network (WDN) for Large Parcel Deliveries Supplier Traditional Drop Ship Model for Large Parcel Example Third-party warehouse in End customer last mile southern California Third-party carriers traveling less than truckload (multiple stops and carrying non-Wayfair products)
Slide 40: Reconciliation of Adjusted EBITDA
APPENDIX Reconciliation of Adjusted EBITDA ($ in Millions) 2014 2015 2016 2017 2018 Q3 2018 Q3 2019 Net Income ($148.1) ($77.4) ($194.4) ($244.6) ($504.1) ($151.7) ($272.0) Depreciation and Amortization1 $22.0 $32.4 $55.6 $87.0 $123.5 $32.5 $50.3 Equity-Based Compensation2 $63.2 $33.0 $52.0 $72.6 $1
Slide 41: Reconciliation of Free Cash Flow
APPENDIX Reconciliation of Free Cash Flow ($ in Millions) 2014 2015 2016 2017 2018 Q3’18 Q3’19 Net Cash Provided by Operating Activities $4.1 $135.1 $62.8 $33.6 $84.9 $7.8 ($76.4) Purchase of Property and Equipment ($31.9) ($44.6) ($96.7) ($100.4) ($159.2) ($49.4) ($68.6) Site and Software Developme
Slide 42: swaytair
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