Wayfair Inc. · NYSE:W
Wayfair — 18th Annual ICR Conference (January 2016)
29 slides from Wayfair's conference presentation, Jan 12, 2016
Slide 1: Investor Presentation
Investor Presentation January 2016
Slide 2: Safe Harbor
SAFE HARBOR This presentation includes forward-looking statements. Wayfair Inc. (“Wayfair” or the “Company”) has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting its business. Forward-looking statements shou
Slide 3: Our Mission
OUR MISSION To transform the way people shop for their homes 3
Slide 4: A Clear Online Leader in Home Goods
A CLEAR ONLINE LEADER IN HOME GOODS • MASSIVE ONLINE CATALOG with over 7,000,000 home products • INVENTORY-LIGHT MODEL partnering with over 7,000 suppliers • FOUNDER-LED since inception $1,919 • $1,919 MILLION of LTM net revenue with minimal inventory • 91% Q3 YoY GROWTH in direct retail, 77% total
Slide 5: Five Distinct Home Brands
FIVE DISTINCT HOME BRANDS Typical customer: 35 to 65 year old woman with an annual household income of $50,000 to $250,000 comScore median HHI of $82,000 Est. 2011 Est. 2011 Est. 2006 Acq. 2013 Est. 2014 5
Slide 6: Large, Highly Fragmented Market Moving Online
LARGE, HIGHLY FRAGMENTED MARKET MOVING ONLINE Significant Upside in Home Market Growth by Channel Online Penetration CAGR 2013 Online Penetration of Selected $350 ‘15-’20 ‘20-25 Verticals $312 2.5% 2.4% $300 $277 $86 15.0% 15.0% $245 $250 $43 ($US in Billions) $21 54% $200 $150 $225 $234 $226 0.9% (
Slide 7: Home Shoppers Desire Uniqueness
HOME SHOPPERS DESIRE UNIQUENESS Home Category Example: Lighting CPG Category Example: Paper Towels INDUSTRY SIZE: $7B INDUSTRY SIZE: $7B Source: 2013 data from Freedonia, Fisher International, Euromonitor 7
Slide 8: Home Is Shopped Visually
HOME IS SHOPPED VISUALLY Most ecommerce shopping is done via branded search This is not possible in home where brands are not known… Leading Furniture and Home Décor Brands … And consumers can’t describe what they are looking for 8
Slide 9: Home Is Largely Browsed Not Searched
HOME IS LARGELY BROWSED NOT SEARCHED Inspiring Imagery Detailed Product Shots 9
Slide 10: Wayfair Is Well Positioned Relative to Other Retailers
WAYFAIR IS WELL POSITIONED RELATIVE TO OTHER RETAILERS… High End Design Centers ($175K+) Mass Market ($60K-$175K) Low End ($60K) 10
Slide 11: …And Therefore Gaining Market Share
…AND THEREFORE GAINING MARKET SHARE Estimated 2015 Online Home Décor and Furniture Sales 2015 Incremental Sales at W Market Share at Q3’15 15% Growth Rate YoY Annualized Run-rate $25B $20B $2.7B ($US in Millions) Others Based on Q3’15 $15B $1.7B YoY growth of ~$260M Wayfair $10B gained more than $18
Slide 12: Scale Enables Ongoing Investment: Headcount
SCALE ENABLES ONGOING INVESTMENT IN KEY AREAS: HEADCOUNT • ~900 net new FTEs added 2015 YTD and nearly 1,700 since the beginning of 2014 • These employees augment existing business areas (e.g., customer service) but also help us build new revenue streams (e.g., registry, better onsite personalizatio
Slide 13: Scale Enables Ongoing Investment: Private Label
SCALE ENABLES ONGOING INVESTMENT IN KEY AREAS: PRIVATE LABEL • Partnering with suppliers to develop proprietary brands with exclusive products and no inventory • Products are photographed and merchandized by Wayfair to create a curated brand experience across multiple aesthetics and price points 13
Slide 14: Scale Enables Ongoing Investment: Engineering
SCALE ENABLES ONGOING INVESTMENT IN KEY AREAS: ENGINEERING Over 380 Engineers Today Storefront Platform Business Platform Stability & Warehouse Transporta- Search Mgmt tion Performance Marketing Pricing Platform Mobile Growth Product Order Mgmt Catalog Trust & Frequency Financials Infrastructure Con
Slide 15: Scale Enables Ongoing Investment: Logistics
SCALE ENABLES ONGOING INVESTMENT IN KEY AREAS: LOGISTICS • Proprietary large parcel delivery network allows us to deliver products form thousands of suppliers quickly, safely and efficiently • End to end process management has reduce damage and delivery times - Cross Docks (3P owned) - Wayfair Distr
Slide 16: Scale Drives Powerful Network Effects
SCALE DRIVES POWERFUL NETWORKS EFFECTS 1 Active Customers Repeat Orders (in thousands) 1,282 4,591 96% 2,858 61% 654 More More Customers Repeat Purchases Q3 2014 Q3 2015 Q3 2014 Q3 2015 Advertising Spend Net Revenue ($M) ($M) Direct Retail 245 $1,919 41% Enables Fuels Other Strategic More 59% 173 In
Slide 17: Investing in Advertising Across Multiple Channels
INVESTING IN ADVERTISING ACROSS MULTIPLE CHANNELS • Three broad advertising channels - Online, TV and Direct Mail • Online is the largest channel followed by TV and Direct Mail • Strict adherence to channel derived ROIs Online TV • Display • Social • Transactional Direct Mail 17
Slide 18: Revenue/Customer/Month
Revenue/Customer/Month (includes all customers) 10x$ 12x$ 14x$ 16x$ 18x$ 20x$ 22x$ 2x$ 4x$ 6x$ 8x$ x$ 31-60 Days Days 31-60 61-90 Days 91-120 Days 121-150 Days 151-180 Days Days 151-180 181-210 Days 211-240 Days 241-270 Days 271-300 Days 301-330 Days Days 331-360 Days 331-360 361-390 Days 391-420 Da
Slide 19: …And Growing Awareness
…AND GROWING AWARENESS Brand awareness has grown to 72% since Wayfair launch in 20111 80.0% All TV buying 70.0% moved in- 72% house 60.0% Began Ramping 50.0% Launched first TV Ads magazine 40.0% partnership 30.0% with Coastal First HGTV Living integration launched 20.0% with “Brother vs. 10.0% Broth
Slide 20: Customer Economics Continue to Improve - Strong Customer Acquisition
CUSTOMER ECONOMICS CONTINUE TO IMPROVE- STRONG CUSTOMER ACQUISITION 4.59 4.04 3.60 3.22 2.86 2.64 2.41 2.09 1.77 1.51 $371 1.30 1.37 $357 $342 $342 $346 $332 $322 $323 $313 $315 $300 $305 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Net Revenue / Ac
Slide 21: Customer Economics Continue to Improve - Growing Repeat Orders
CUSTOMER ECONOMICS CONTINUE TO IMPROVE- GROWING REPEAT ORDERS Orders from repeat customers (’000s) Orders from new customers (’000s) 1,282 1,109 968 1,042 856 846 829 850 659 623 577 560 654 468 549 561 524 362 365 293 416 56.6% 337 55.2% 263 53.9% 243 51.6% 50.7% 50.3% 49.8% 47.3% 48.0% 47.1% 46.8%
Slide 22: Capital Efficient with Minimal Inventory
CAPITAL EFFICIENT WITH MINIMAL INVENTORY Minimal Inventory Capital Efficient1 38.5 $1,991 $1,319 $916 $15 $20 $23 1.5 2013 2014 LTM Days Receivable Days Payable ($M) Net Revenue Inventory FCF Performance Consistently Better than Adjusted EBITDA 1 Average of last four quarters. 22
Slide 23: Long Term Target Model
LONG TERM TARGET MODEL Long-Term 2013 2014 Q1 2014 Q3 2015 Target Net Revenue 100% 100% 100% 100% 100% Gross Margin 24.5% 23.6% 23.5% 23.8% 25 - 27% Customer Service + 3.9% 4.1% 3.9% 3.5% 4% Merchant Fees Advertising 11.8% 14.5% 15.9% 11.9% 6 - 8% Primarily headcount Merchandising, Marketing, 3.7% 3
Slide 24: Key Strategic Priorities
KEY STRATEGIC PRIORITIES CONTINUE BUILDING LEADING RETAIL HOME BRANDS • Grow active customer base • Increase repeat behavior • Invest in product/technology to further improve the customer experience • Enhance logistics infrastructure for faster and higher quality customer delivery experience • Inves
Slide 25: wayfaircom
* wayfalircom S & Main BIRCH LANE ‘Ste
Slide 26: Reconciliation of Adjusted EBITDA
RECONCILIATION OF ADJUSTED EBITDA ($ in millions) 2013 2014 Q3 2015 Net Loss ($15.526) ($148.098) ($15.478) Depreciation and Amortization $13.091 $22.003 $9.207 Equity-Based Compensation - $63.244 $7.985 Interest Income, net ($0.245) ($0.350) ($0.325) Other (Income) Expense, net ($0.294) $0.489 ($2.
Slide 27: Reconciliation of Free Cash Flow
RECONCILIATION OF FREE CASH FLOW ($ in millions) 2013 2014 Q3 2015 Net Cash Provided by Operating $34.413 $11.692 $51.504 Activities, Net of Acquisition Purchase of Property, Equipment and ($6.739) ($39.422) ($11.491) Leasehold Improvements Site and Software Development Costs ($9.040) ($14.130) ($4.
Slide 28: Revenue Growth Increasing While Ad Spend % Decreasing
REVENUE GROWTH INCREASING WHILE AD SPEND % DECREASING YoY Net Revenue Growth vs. Ad Spend % YoY Net Revenue Growth Ad Spend as a % of Net Revenue 80.0% 18.0% 70.0% 16.0% 14.0% 60.0% 12.0% 50.0% 10.0% 40.0% 8.0% 30.0% 6.0% 20.0% 4.0% 10.0% 2.0% 0.0% 0.0% Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 28
Slide 29: Illustrative Customer Acquisition Cost
Illustrative Customer Acquisition Cost (All units in 000s, except per customer figures) 2014 Total Advertising Spend $191,284 Assumed Partner Ad Spend (1) $24,300 Direct Retail Ad Spend $166,984 Active Customers 3,217 Total Orders 5,237 % of Orders from Repeat Customers 50.5% Implied "Gross" New Cus