Wayfair Inc. · NYSE:W
Wayfair — Investor Presentation (May 2019)
41 slides from Wayfair's investor presentation, May 2019
Slide 1: Investor Presentation
INVESTOR PRESENTATION 05.19
Slide 2: Safe Harbor
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, bu
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS ·· ~$600B total addressable market rapidly moving from brick and mortar to online ·· Utilizing in-house software development capability to build and leverage proprietary technology as key enabler ·· Partnering with fragmented and largely unbranded supplier base of over 11,000 s
Slide 4: Overview
OVERVIEW 01. Our Business 02. Strategic Priorities 03. KPIs & Financial Metrics 04. Appendix 4
Slide 5: Our Business
01. OUR BUSINESS 5
Slide 6: Billions in revenue up for grabs with secular shift from brick and mortar to online
OUR BUSINESS: INDUSTRY BACKDROP BILLIONS IN REVENUE IS UP FOR GRABS WITH SECULAR SHIFT FROM BRICK AND MORTAR TO ONLINE Large, Addressable Market …with Further Headroom for Transitioning Away from Brick and Mortar… Online Penetration… U.S. Home Market by Channel ($B) Estimated U.S. Online Penetration
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 Breakdow
Slide 8: Home category has specific challenges when shopped online
OUR BUSINESS: BUILT FOR THE HOME CATEGORY HOME CATEGORY HAS SPECIFIC CHALLENGES WHEN SHOPPED ONLINE Problem Solution 1 Confidence To Buy: 3 Inspiration and 4 Customer Service and Delivery: We have purpose- In the absence of being able Product Discovery: Home is characterized by heavy, built our busi
Slide 9: Experience that enables customers to confidently shop for 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 ·· Customer reviews ·· Design Services ·· Specialized sales team ·· Swatches and samples ·· In-depth product
Slide 10: Helping shoppers visualize their purchase through 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 Resu
Slide 11: 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 Recommended for You ·· Product recommendations ·· Personalization ·· Visual filters ·· Idea Boards ·· Plus more... My Dre
Slide 12: 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 m
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. 80% 70% House Brands as a % of Wayfair.c
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 3,000 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 Marquis Brand 1. 3. 89% US aided brand Unparalleled selection of awareness since Wayfair.com over 14 million products launch in 2011¹. across styles and price points appealing to the mass market custom
Slide 16: Wayfair focuses on the mass market customer
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 to Classic home. discover daily. Comfortable cost. The best of The widest-ever modern, priced selection of luxury for real life. home furnishings. 17
Slide 18: Increasing engagement from repeat customers
OUR BUSINESS: BRANDS AND CUSTOMERS INCREASING ENGAGEMENT FROM REPEAT CUSTOMERS Repeating Customers Our knowledge of returning Loyalty Is Growing customers is higher than that ·· Our base of loyal for new visitors, which means customers is growing. that we can target our ·· In December 2017, 31% mark
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. Online Paid Reaching shoppers through display, social, and transactional ad channels Brand Integrations Partnering with Discovery/Scripps and oth
Slide 20: Strategic Priorities
02. STRATEGIC PRIORITIES 20
Slide 21: Taking a long-term approach to growth
STRATEGIC PRIORITES 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 Average Wayfair Small Parcel Item 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 services
STRATEGIC PRIORITIES INVESTING IN CASTLEGATE AND SUPPLY CHAIN SERVICES United Kingdom Canada Germany United States CastleGate Warehouses 1 Logistics: CastleGate CastleGate warehouses forward-position supplier Penetration of sales via CastleGate We are building end-to-end, fully inventory to create f
Slide 24: Taking control of large parcel transportation with 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 deliv
Slide 25: Scaling our business in Canada, the UK, and Germany
STRATEGIC PRIORITIES SCALING OUR BUSINESS IN CANADA, THE UK, AND GERMANY 2 International International competitive landscape is similar to the U.S., with a fragmented base of brick-and-mortar retailers that is typically regionalized with no dominant online player. Our U.S. playbook positions us well
Slide 26: Investing in dozens of product categories and services
STRATEGIC PRIORITIES INVESTING IN DOZENS OF PRODUCT CATEGORIES AND SERVICES TO FULLY 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 cr
Slide 27: KPIs & Financial Metrics
03. KPIs & FINANCIAL METRICS 27
Slide 28: Robust growth at scale
KPIs & FINANCIAL METRICS ROBUST GROWTH AT SCALE $7,320 $6,779 $4,721 $3,380 $2,250 $1,319 $916 $517 $601 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 '19 LTM 240+ Niche Websites; Wayfair Brand Wayfair U.S. Platform Development Launched Brand Building U.S. N
Slide 29: Strong customer acquisition and growing share of wallet
KPIs & FINANCIAL METRICS STRONG CUSTOMER ACQUISITION AND GROWING SHARE OF WALLET 16.41 15.15 13.86 12.79 11.80 10.99 10.25 9.55 8.85 8.25 7.36 6.67 6.07 5.36 4.59 $443 $443 $442 $432 $440 4.04 $422 $408 3.60 $404 $406 $395 $402 $392 $394 3.22 2.86 $381 2.64 $371 2.41 $357 $342 $342 $346 $323 $332 Q1
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 9 80% 75% 8 7 70% 6 65% Orders (Millions) 5 60% 4 55% 3 50% 2 45% 1 0 40% Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q
Slide 31: Customers are ordering more frequently
KPIs & FINANCIAL METRICS CUSTOMERS ARE ORDERING MORE FREQUENTLY LTM Orders per Active Customer 1.90 1.85 1.80 1.75 1.70 1.65 1.60 1.55 1.50 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 31
Slide 32: U.S. hovering breakeven despite significant investment; international earlier in lifecycle
KPIs & FINANCIAL METRICS U.S. HOVERING +/- BREAKEVEN DESPITE SIGNIFICANT INVESTMENT; INTERNATIONAL EARLIER IN ITS LIFECYCLE FY 2016 FY 2017 Q1 ’18 Q2 ’18 Q3 ’18 Q4 ’18 FY 2018 Q1 ’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 $1,644.1 Direct Growth 53.9% 3
Slide 33: Long-term target model
KPIs & FINANCIAL METRICS LONG-TERM TARGET MODEL Long-Term 2015 2016 2017 2018 Q1 2019 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% 24.6% 25–27% Logistics cost efficiency gains Scale in international regions Cus
Slide 34: Capital-efficient business model
KPIs & FINANCIAL METRICS CAPITAL-EFFICIENT BUSINESS MODEL Net Revenue and Inventory Receivable and Payable Days1 $7,320 $6,779 40.1 $4,721 $3,380 $2,250 $1,319 $916 2.3 $46 $44 $15 $20 $20 $19 $28 2013 2014 2015 2016 2017 2018 Q1 '19 Days Days $ Millions (Net Revenue Receivable Payable is LTM) Net R
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 $768.7 Active Customers 15.15 Total Orders 28.08 % of Orders from Repeat Customers 65.8% Implied New Customers 9.60 Im
Slide 37: Adding variable headcount to keep up with growth
APPENDIX WE ARE ADDING VARIABLE HEADCOUNT TO KEEP UP WITH GROWTH & INVESTING IN OPEX HEADCOUNT TO STAFF OUR STRATEGIC INVESTMENTS Global Headcount by Functional Group 14,000 13,344 13,000 12,124 12,000 11,000 10,908 10,000 9,713 6,767 8,753 9,000 6,485 8,000 7,751 6,122 6,890 7,000 5,271 6,049 4,730
Slide 38: CastleGate warehouses enable next-day and 2-day delivery for small parcel
APPENDIX CASTLEGATE WAREHOUSES ENABLE NEXT-DAY AND 2-DAY DELIVERY FOR SMALL PARCEL¹ Traditional Drop Ship Model for Small Parcel Example Supplier End customer warehouse in FedEx / UPS in New York southern California 6–8 total touches, 4–5 day delivery time CastleGate for Small Parcel Example¹ Castle
Slide 39: Wayfair Delivery Network for large parcel deliveries
APPENDIX WAYFAIR DELIVERY NETWORK (WDN) FOR LARGE PARCEL DELIVERIES Traditional Drop Ship Model for Large Parcel Example Supplier Third-party carriers traveling less Third-party End warehouse in than truckload (multiple stops and last mile customer in southern California carrying non-Wayfair product
Slide 40: Reconciliation of Adjusted EBITDA
APPENDIX RECONCILIATION OF ADJUSTED EBITDA ($ IN MILLIONS) 2014 2015 2016 2017 2018 Q1 2018 Q1 2019 Net Income ($148.1) ($77.4) ($194.4) ($244.6) ($504.1) ($107.8) ($200.4) Depreciation and Amortization1 $22.0 $32.4 $55.6 $87.0 $123.5 $26.0 $39.6 Equity-Based Compensation 2 $63.2 $33.0 $52.0 $72.6 $
Slide 41: Reconciliation of Free Cash Flow
APPENDIX RECONCILIATION OF FREE CASH FLOW ($ IN MILLIONS) 2014 2015 2016 2017 2018 Q1 ’18 Q1 ’19 Net Cash Provided by Operating Activities $4.1 $135.1 $62.8 $33.6 $84.9 ($13.1) ($81.3) Purchase of Property and Equipment ($31.9) ($44.6) ($96.7) ($100.4) ($159.2) ($21.4) ($60.6) Site and Software Deve