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What changed in Wayfair Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Wayfair Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+333 added−321 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Wayfair Inc.'s 2023 10-K

333 paragraphs added · 321 removed · 245 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe are focused on bringing our customers an experience that is at the forefront of shopping for the home online. Wayfair customers span a wide range of demographics, with annual household income ranging from $25,000 to over $250,000, and also include business professionals.
Biggest changeOur customers span a wide range of demographics, with annual household incomes ranging from $25,000 to over $250,000, and also include business professionals, from small startups to global enterprises. Our selections of furniture, décor, housewares and home improvement products appeal to our customers’ different tastes, styles, purchasing goals and budgets when shopping for their homes and businesses.
We provide our suppliers with access to our large customer base, with 22.1 million active customers over the last twelve months, enabling our suppliers to increase their sales and access the growing e-commerce market. Suppliers can leverage our technological expertise to enhance their success on our platform.
We provide our suppliers with access to our large customer base, with 22 million active customers over the last twelve months, enabling our suppliers to increase their sales and access the growing e-commerce market. Suppliers can leverage our technological expertise to enhance their success on our platform.
We believe our technological and operational expertise allows us to provide our customers with a vast selection of goods, attractive price points, reliable and timely fulfillment, plus superior customer service and that the combination of these capabilities is what provides us with a sustainable competitive advantage. Human Capital At Wayfair, we believe strongly in our people.
We believe our technological and operational expertise allows us to provide our customers with a vast selection of goods, attractive price points, reliable and timely fulfillment, plus superior customer service and that the combination of these capabilities is what provides us with a sustainable competitive advantage. Human Capital and Corporate Responsibility At Wayfair, we believe strongly in our people.
As used herein, “Wayfair,” “the company,” “we,” “us,” “our” and similar terms refer to Wayfair Inc. and its subsidiaries, unless the context indicates otherwise. Segments Our operating and reportable segments are the U.S. and International, which includes our businesses in Canada, the United Kingdom, Germany and Ireland.
As used herein, “Wayfair,” “the company,” “we,” “us,” “our” and similar terms refer to Wayfair Inc. and its subsidiaries, unless the context indicates otherwise. Segments Our operating and reportable segments are the United States (“U.S.”) and International, which includes our businesses in Canada, the United Kingdom, Germany and Ireland.
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements 9 Table of Contents and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Upon acquiring a 6 Table of Contents customer or a potential customer's email address, we seek to increase their engagement with our sites and drive repeat purchases. This effort to increase engagement and repeat purchasing is driven by all of our marketing tools, including personalized email marketing efforts and customer retargeting.
Upon acquiring a customer or a potential customer's email address, we seek to increase their engagement with our sites and drive repeat purchases. This effort to increase engagement and repeat purchasing is driven by all of our marketing tools, including personalized email marketing efforts and customer retargeting.
Suppliers are also 5 Table of Contents able to enhance their media and merchandising by using additional services provided by Wayfair, including through sponsored content. We believe many of our suppliers have increased their sales through our technology platform, which has strengthened their loyalty to us.
Suppliers are also able to enhance their media and merchandising by using additional services provided by Wayfair, including through sponsored content. We believe many of our suppliers have increased their sales through our technology platform, which has strengthened their loyalty to us.
Our competition includes furniture stores, big box retailers, department stores, specialty retailers and online retailers and marketplaces in the U.S., Canada, the United Kingdom, Germany and Ireland, including: • Furniture Stores: American Freight, Ashley Furniture, Bob's Discount Furniture, Havertys, Raymour & Flanigan and Rooms To Go; • Big Box Retailers: Bed Bath & Beyond, Home Depot, IKEA, Lowe's, Target and Walmart; • Department Stores: JCPenney, Macy's and Neiman Marcus; • Specialty Retailers: Arhaus, At Home, Container Store, Crate and Barrel, Design Within Reach, Ethan Allen, Floor & Decor, LL Flooring, Mitchell Gold + Bob Williams, Restoration Hardware, Room & Board, Serena & Lily, TJX Companies and Williams Sonoma; • Online Retailers and Marketplaces: Amazon, Build.com, Houzz, eBay, Etsy and Overstock; • International: Argos, Canadian Tire, John Lewis, Leon's, Next, Otto, Westwing, and XXXLutz, in addition to several of the companies listed above who also compete with us internationally.
Our competition includes furniture stores, big box retailers, department stores, specialty retailers and online retailers and marketplaces in the U.S., Canada, the United Kingdom, Germany and Ireland, including: • Furniture Stores: American Freight, Ashley Furniture, Bob's Discount Furniture, Havertys, Raymour & Flanigan and Rooms To Go; 10 T a ble of Contents • Big Box Retailers: Home Depot, IKEA, Lowe's, Target and Walmart; • Department Stores: JCPenney, Macy's and Neiman Marcus; • Specialty Retailers: Arhaus, At Home, Container Store, Crate and Barrel, Design Within Reach, Ethan Allen, Floor & Decor, LL Flooring, Restoration Hardware, Room & Board, Serena & Lily, TJX Companies and Williams Sonoma; • Online Retailers and Marketplaces: Amazon, Build.com, Houzz, eBay, Etsy and Bed Bath & Beyond; • International: Argos, Canadian Tire, John Lewis, Leon's, Next, Otto, Westwing, and XXXLutz, in addition to several of the companies listed above who also compete with us internationally.
See Note 13, Segment and Geographic Information, in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K. Net revenue of the U.S. segment represented 86% of consolidated net revenue for the year ended December 31, 2022.
See Note 13, Segment and Geographic Information, in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K. Net revenue of the U.S. segment represented 87% of consolidated net revenue for the year ended December 31, 2023.
In addition to threading DEI through the employee lifecycle, we have partnered with groups across the business to leverage DEI principles in support of our broader company goals –– not only for our people, but for our customers, our suppliers and our partners.
Additionally, we have partnered with groups across the business to leverage DEI principles in support of our broader company goals –– not only for our people, but for our customers, our suppliers and our partners .
Our full-time employees are eligible to receive, subject to the satisfaction of certain eligibility requirements, our comprehensive benefits package including life and health (medical, dental and vision) insurance, a 401(k) retirement plan, where we provide matching contributions competitive with those provided by our peers, paid parental leave, paid time off, and a discount off of purchases made through our family of sites. 8 Table of Contents Health, Safety and Well-Being Wayfair is committed to protecting our team members’ health and wellness.
Our full-time employees are eligible to receive, subject to the satisfaction of certain eligibility requirements, our comprehensive benefits package including life and health (medical, dental and vision) insurance, a 401(k) retirement plan, where we provide matching contributions competitive with those provided by our peers, paid parental leave, paid time off, and a discount off of purchases made through our family of sites.
Our Solution - Key Benefits for Our Suppliers We give suppliers cost-effective access to our large customer base. We sell products from over 20 thousand suppliers, many of which are small, family-run operations without well-known product brands and without easy retail access to a large customer base.
We sell products from over 20 thousand suppliers, many of which are small, family-run operations without well-known product brands and without easy retail access to a large customer base.
Our Growth Strategy Our goal is to further increase our leadership in the home goods market by pursuing the following key strategies: • continue building our brands by delighting our customers; • increase repeat purchases from existing customers and acquire new customers; • invest in technology to further improve our customer and supplier experiences; • grow certain categories where we under-index the broader home goods market today; • increase delivery speed and improve the delivery experience for our customers through the continued build-out of our proprietary logistics network; • continue to expand internationally; • continue to execute our omni-channel strategy with the launch of physical retail stores across our family of brands; and • opportunistically pursue strategic acquisitions. 7 Table of Contents Competition The market for online home goods and furniture is highly competitive, fragmented and rapidly changing.
Our global customer service locations are staffed with over 3,100 full-time highly-trained sales and service employees. 7 T a ble of Contents Our Growth Strategy Our goal is to further increase our leadership in the home goods market by pursuing the following key strategies: • continue to build our brands by delighting our customers; • increase repeat purchases from existing customers and acquire new customers; • invest in technology to further improve our customer and supplier experiences; • grow certain categories where we under-index the broader home goods market today; • increase delivery speed and improve the delivery experience for our customers through the continued build-out of our proprietary logistics network; • continue to expand internationally and; • continue to execute our omni-channel strategy with the launch of physical retail stores across our family of brands; and opportunistically pursue strategic acquisitions.
Available Information We encourage investors to use our investor relations website, investor.wayfair.com, to find information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission (“SEC”), as well as corporate governance information (including our Code of Business Conduct and Ethics).
We promptly make available on this website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission (“SEC”), as well as corporate governance information (including our Code of Business Conduct and Ethics).
Wayfair represents a significant majority of our net revenue and is currently the only one of our sites that also operates internationally, operating as Wayfair.ca in Canada, Wayfair.co.uk in the United Kingdom, Wayfair.de in Germany and Wayfair.ie in Ireland.
Wayfair represents a significant majority of our net revenue and is currently the only one of our sites that also operates internationally, operating as Wayfair.ca in Canada, Wayfair.co.uk in the United Kingdom, Wayfair.de in Germany and Wayfair.ie in Ireland. On our sites, we also feature certain products under our house brands, such as Three Posts® and Mercury Row®.
Our reported headcount includes a substantial majority of the approximately 1,750 employees impacted by the workforce reduction we announced in January 2023, who will no longer be reflected in our headcount by the end of the first quarter of 2023. Additionally, we rely on independent contractors and temporary personnel to supplement our workforce, primarily in our logistics network.
The workforce reduction included approximately 1,650 employees, of which 1,200 are corporate employees, who will no longer be reflected in our headcount by the end of the first quarter of 2024. Additionally, we rely on independent contractors and temporary personnel to supplement our workforce, primarily in our logistics network.
Item 1. Business Overview Wayfair is one of the world's largest online destinations for the home. Through our e-commerce platform, we offer customers visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 40 million products from over 20 thousand suppliers.
Item 1. Business Overview Wayfair is one of the world's largest destinations for the home. Through our e-commerce platform, we offer customers visually inspired browsing, compelling merchandising, easy product discovery and attractive prices. We are focused on bringing our customers an experience that is at the forefront of shopping for the home online.
To help her find the right products for her home, we offer a family of sites, each with a unique brand identity that offers a tailored shopping experience and rich product selection to a different target audience. • Wayfair: Everything home — for a space that's all you. • Joss & Main: The ultimate style edit for home. • AllModern: All of modern, made simple. • Birch Lane: A fresh take on the classics. • Perigold: An undiscovered world of luxury design. • Wayfair Professional: Just right for Pros.
To meet our customers where they are, we offer a family of sites, each with a unique brand identity that offers a tailored shopping experience and rich product selection to a different target audience. • Wayfair: The destination for all things home. • Joss & Main: The ultimate style edit for home. • AllModern: All of modern, made simple. • Birch Lane: Classic style for joyful living.. • Perigold: The destination for luxury home. • Wayfair Professional: Just right for Pros.
Supporting our employees has always been central to our work and we believe that it is important that all employees feel welcome and are able to bring their full selves to work every day. We believe we have a good relationship with our employees, which includes 15,745 full-time equivalent employees as of December 31, 2022.
Supporting our employees has always been central to our work and we believe that it is important that all employees feel welcome and are able to bring their full selves to work every day.
None of our employees are represented by a labor union or covered by a collective bargaining agreement.
None of our employees are represented by a labor union or covered by a collective bargaining agreement. Diversity, Equity and Inclusion Wayfair is strongly dedicated to Diversity, Equity and Inclusion (“DEI”).
While we are primarily focused on the mass market, we compete across all segments of the home goods market.
Competition The market for online home goods and furniture is highly competitive, fragmented and rapidly changing. While we are primarily focused on the mass market, we compete across all segments of the home goods market.
In addition to logistics, we offer a range of supplemental media services in support of a seamless selling experience for suppliers. We also believe providing superior customer service is key to delighting our customers. Our customer service locations are staffed with over 4,200 highly-trained sales and service employees located in the United States (“U.S.”) and Europe.
In addition to logistics, we offer a range of supplemental media services in support of a seamless selling experience for suppliers. We also believe providing superior customer service is key to delighting our customers.
We are a one-stop shop for consumers in the home goods category, with competitive pricing reflecting the many supplier participants on our platform and a differentiated and robust merchandising experience. For items shipped from our CastleGate warehouses, we are able to deliver many products to a majority of the U.S. population in two days or less.
Convenience and value are central to our offering. We are a one-stop shop for consumers in the home goods category, with competitive pricing reflecting the many supplier participants on our platform and a differentiated and robust merchandising experience.
We have built a portfolio of over one hundred house brands, which offer curated brand experience, making it easier for customers to discover styles, products and price points that appeal to them. Convenience and value are central to our offering.
We have one of the largest online selections of furniture, décor, housewares and home improvement products, with over 30 million products from over 20 thousand suppliers. We have built a portfolio of over one hundred house brands, which offer curated brand experience, making it easier for customers to discover styles, products and price points that appeal to them.
On our sites, we also feature certain products under our house brands, such as Three Posts ® and Mercury Row ® . Through these house brands, which feature curated selections refined by style and price point, we help our customers navigate our vast product assortment to find items that uniquely match their needs.
Through these house brands, which feature curated selections refined by style and price point, we help our customers navigate our vast product assortment to find items that uniquely match their needs. The delivery experience and overall customer service we offer our shoppers are central to our business.
We believe that our internal control of our technology systems, which gives us the ability to update them often, is a competitive advantage. Our team of engineers and data scientists has built a full set of technology solutions specific to the home goods market.
Our team of engineers and data scientists has built a full set of technology solutions specific to the home goods market.
We seek to protect our intellectual property by relying on federal, state and common law rights in the United States and other countries, as well as contractual restrictions.
Intellectual Property We believe our intellectual property, including any trademarks, service marks, copyrights, domain names, patents, trade dress, trade secrets and proprietary technologies, is an important part of our business. We seek to protect our intellectual property by relying on federal, state and common law rights in the United States and other countries, as well as contractual restrictions.
Over time we believe this network will also lower our costs per order by reducing damage rates and leveraging economies of scale in transportation.
We believe that our proprietary logistics network has and will continue to help drive incremental sales by delighting our customers with faster delivery times and a better home delivery experience. Over time we believe this network will also lower our costs per order by reducing damage rates and leveraging economies of scale in transportation.
This is facilitated by our CastleGate Forwarding services, offering inbound freight, drayage and ocean services for suppliers sending products from Asia with direct delivery to CastleGate locations. The majority of large parcel items are delivered to the customer through our Wayfair Delivery Network, which includes consolidation centers, cross docks and last mile delivery facilities.
We have also been growing the percentage of our customer orders that are shipped from our CastleGate warehouses over the last several years. This is facilitated by our CastleGate Forwarding services, offering inbound freight, drayage and ocean services for suppliers sending products from Asia with direct delivery to CastleGate locations.
Many consumers also seek first-rate customer service so they are not burdened with managing delivery, shipping and return logistics on their own. However, we believe big box retailers that serve the mass market for home goods are often unable or unwilling to provide this level of service.
Many consumers also seek first-rate customer service so they are not burdened with managing delivery, shipping and return logistics on their own.
More than half of the traffic coming to Wayfair.com is from mobile devices and our investment in mobile allows us to deliver value, convenience and inspiration to consumers anytime and anywhere. Our mobile app also offers customers a powerful way to shop for their home from their home using our “View in Room 3D” augmented reality tool.
We use personalization to create a more engaging consumer experience and we allow customers to create looks they love with tools such as our Room Ideas. More than half of the traffic coming to Wayfair.com is from mobile devices and our investment in mobile allows us to deliver value, convenience and inspiration to consumers anytime and anywhere.
In addition to these contractual arrangements, we also rely on a combination of trademarks, trade dress, domain names, copyrights, trade secrets and patents to help protect our other intellectual property. Company Information We began operating as Smart Tech Toys, Inc., a Massachusetts corporation, in May 2002 and changed our name to CSN Stores, Inc. in February 2003.
In addition to these contractual arrangements, we also rely on a combination of trademarks, trade dress, domain names, copyrights, trade secrets and patents to help protect our other intellectual property. Available Information We encourage investors to use our investor relations website, investor.wayfair.com, to find information about us.
Our Industry The home goods market is large and characterized by specific consumer trends, structural challenges and market dynamics that are shaping the future of our industry. Addressable Market Size and Growth We estimate that the annual U.S. market for home goods is over $450 billion, of which, by our estimate, more than a fifth is sold online.
Our Industry The home goods market is large and characterized by specific consumer trends, structural challenges and market dynamics that are shaping the future of our industry. Why Home is Different Home is shopped differently than other retail verticals .
Technology We have custom-built large portions of our technology and operational platform to deliver the best experience for both our customers and suppliers. Our success has been built on a culture of data-driven decision-making, operational discipline and an unwavering focus on the customer.
Our success has been built on a culture of data-driven decision-making, operational discipline and an unwavering focus on the customer. We believe that our internal control of our technology systems, which gives us the ability to update them often, is a competitive advantage.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding Wayfair and other issuers that file electronically with the SEC. Our telephone number is (617) 532-6100 and our website address is www.wayfair.com.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding Wayfair and other issuers that file electronically with the SEC. Investors should note that we currently announce material information to our investors and others using filings with the SEC, press releases, public conference calls, webcasts, or our investor relations website (investor.wayfair.com).
More Information Additional information about our human capital management efforts, including our latest Diversity, Equity & Inclusion, can be found on our investor website at investor.wayfair.com. Global Considerations As a company with a global business, we are continuing to closely monitor macroeconomic impacts on our business, results of operations and financial results.
More Information Additional information about our human capital management efforts, including our latest efforts related to DEI, can be found on our investor website at investor.wayfair.com.
We support our customers' shopping journey from start to finish through everything from financing solutions to customer support. Our private label and co-branded credit cards build loyalty and encourage repeat shopping with cash back rewards. Superior customer service is a core part of the experience we offer shoppers.
Our private label and co-branded credit cards build loyalty and encourage repeat shopping with cash back rewards. Superior customer service is a core part of the experience we offer shoppers. Our customer service organization has over 3,100 full-time employees who help consumers navigate our sites, answer questions and complete orders, and offers specialists focused on specific product classes.
Depending on the size of the package, the delivery is made either through carriers such as FedEx, UPS, DHL, the U.S. Postal Service or third-party line haul trucking companies and third-party last mile home delivery agents. We have also been growing the percentage of our customer orders that are shipped from our CastleGate warehouses over the last several years.
Depending on the size of the package, the delivery is made either primarily through FedEx, for our small parcel products, or third-party line haul trucking companies for our large parcel products and third-party last mile home delivery agents.
The information contained in our website or connected thereto is not a part of, or incorporated into, this Annual Report on Form 10-K. Further, our references to website URLs are intended to be inactive textual references only. 10 Table of Contents
The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC, and the reference to our website is intended to be an inactive textual reference only.
We give customers inspirational content and an engaging shopping journey . To inspire customers, we produce beautiful imagery and highly-tailored editorial content both in house and through third parties. We use personalization to create a more engaging consumer experience and we allow customers to create looks they love with tools such as our Room Ideas.
For items shipped from our CastleGate warehouses, we are able to deliver many products to a majority of the U.S. population in two days or less. We give customers inspirational content and an engaging shopping journey . To inspire customers, we produce beautiful imagery and highly-tailored editorial content both in house and through third parties.
Our logistics infrastructure allows us to ship directly to our customers from our suppliers or from our CastleGate warehouses. This fulfillment network is a key component of our custom-built and seamlessly integrated technology and operational platform. Sites and Brands Each of our customers has a different taste, style, purchasing goal and budget when shopping for her home.
This fulfillment network is a key component of our custom-built and seamlessly integrated technology and operational platform. 9 T a ble of Contents Technology We have custom-built large portions of our technology and operational platform to deliver the best experience for both our customers and suppliers.
Additional information regarding these global impacts on our business is set forth within this Part I, Item 1A, Risk Factors and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
Additional information regarding laws and regulations applicable to our business is set forth in Part I, Item 1A, Risk Factors , in this Annual Report on Form 10-K. Seasonality Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter, which ends December 31 and includes the November and December holiday sales period.
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We have built one of the largest online selections of furniture, décor, housewares and home improvement products in order to appeal to our customers’ different tastes, styles, purchasing goals and budgets when shopping for their home. We are able to offer this vast selection of products because we hold minimal inventory.
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However, we believe big box retailers that serve the mass market for home goods are often unable or unwilling to provide this level of service. 8 T a ble of Contents Key Benefits for Our Customers We offer a broad selection and choice.
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We specialize in the home category and this has enabled us to build a shopping experience and logistics infrastructure that is tailored to the unique characteristics of our market. The delivery experience and overall customer service we offer our shoppers are central to our business.
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Our mobile app also offers customers a powerful way to shop for their home from their home using our “View in Room 3D” augmented reality tool. We support our customers' shopping journey from start to finish through everything from financing solutions to customer support.
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Our co-founders are lifetime tech innovators who have worked together in the commercial Internet sector since 1995. As engineers themselves, they have created a company culture deeply rooted in technology and data, and their significant equity ownership in Wayfair has informed their leadership and allowed them to take a long-term view when building the company.
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This team helps us build trust with consumers, build our brand awareness, enhance our reputation and drive sales. Key Benefits for Our Suppliers We give suppliers cost-effective access to our large customer base.
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According to data released by the U.S. Census Bureau, there are more than 100 million households in the U.S. with annual incomes over $25,000. Moreover, we believe there are more than 200 million individuals between the ages of 20 and 70 in the U.S., many of whom are accustomed to purchasing goods online.
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Our logistics infrastructure allows us to ship directly to our customers from our suppliers or from our CastleGate warehouses.
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As younger generations age, start new families and move into new homes, we expect online sales of home goods to increase. In addition, we believe the online home goods market will further grow as older generations of consumers become increasingly comfortable purchasing online.
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The majority of large parcel items are delivered to the customer through our WDN, which includes consolidation centers, cross docks and last mile delivery facilities. For smaller items, we partner with carriers to handle the delivery to the customer.
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Including our presence in Canada and Western Europe, we believe our total addressable market is more than $800 billion. 4 Table of Contents Why Home is Different Home is shopped differently than other retail verticals .
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We believe we have a good relationship with our employees, which includes approximately 14,400 employees, of which approximately 12,800 are full-time equivalents, as of December 31, 2023. Our reported headcount includes a substantial majority of employees impacted by the workforce reduction we announced in January 2024.
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Our Solution - Key Benefits for Our Customers We offer a broad selection and choice. We have one of the largest online selections of furniture, décor, housewares and home improvement products, with over 40 million products from over 20 thousand suppliers.
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Through cross-functional partnerships, our Head of DEI creates a center of excellence for our DEI strategy, aiming to ensure that all of our employees feel supported and can maximize their contributions and development opportunities. Through these cross-functional partnerships, the DEI team creates the strategy and identifies initiatives aimed at embedding a lens of inclusivity into all aspects of the business.
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Our customer service organization has over 4,200 employees who help consumers navigate our sites, answer questions and complete orders, as well as specialists focused on specific product classes. This team helps us build trust with consumers, build our brand awareness, enhance our reputation and drive sales.
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We have worked to provide an equitable employee journey for all employees by giving them actionable feedback and training managers to lead with empathy and without bias.
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For smaller items, we partner with carriers to handle the delivery to the customer. We believe that our proprietary logistics network has and will continue to help drive incremental sales by delighting our customers with faster delivery times and a better home delivery experience.
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Health, Well-Being and Safety Wayfair is committed to protecting our team members’ health and wellness. We continue to evolve our programs to support our employees’ health and wellness needs. We also provide benefits and resources to employees aimed at addressing stress, burnout and mental health and the promotion of self-care.
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Customer Service Our customer service team consists of over 4,200 highly-trained sales and service employees located across North America and Europe who are available to assist our customers with sales and service via phone, email or online chat. Providing our customers with superior customer service is one of our key values.
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Maintaining a safe work environment is also important to us, and our management team reaffirms our objectives each year to our frontline employees through our annual Commitment to Safety 11 T a ble of Contents Statement.
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As part of our commitment to providing superior customer service, our sales and service employees receive extensive training as well as competitive compensation and benefit packages.
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Our efforts include incident and hazard reporting, standard operating procedures aimed at reducing risk of injury, training, promotion of best practices, and measurement of key safety metrics.
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Our customer service team consists of employees focused on general sales and service matters, as well as specialists who have deeper expertise and training in select areas of our catalog, such as lighting, flooring and upholstery.
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Environmental, Social and Governance As a multinational retailer with a global supply chain, Wayfair is committed to responsible practices across our business—from showcasing more sustainable products through our Shop Sustainably program, to implementing waste reduction initiatives, lowering emissions and adopting sustainable business practices where practicable.
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Diversity, Equity and Inclusion Wayfair has a dedicated Diversity, Equity and Inclusion (“DEI”) team that serves as our internal compass in promoting a global community, ensuring an inclusive culture and growing market penetration through innovation that only a sense of belonging across a diverse workforce can provide.
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We have established and publicly announced our goal to reduce our Scope 1 and 2 greenhouse gas, or GHG, emissions by 63% by 2035 in comparison to the 2020 baseline. This past year, Wayfair made progress toward this goal by signing agreements to install on-site solar panels at several fulfillment centers and by joining an aggregated virtual power purchase agreement.
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Through cross-functional partnerships, the DEI team creates the strategy and identifies initiatives to embed a lens of inclusivity into all aspects of the business with a keen focus on increasing diverse representation internally and externally. We have worked to include DEI best practices into several parts of the employee lifecycle, including hiring, performance management and career and leadership development.
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As part of this agreement, Wayfair is contracted to offtake 15 MW of power from the solar project annually. Wayfair also continues to evaluate and incorporate energy efficiency features across its global facilities.
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Since the onset of the COVID-19 pandemic we have continued to follow the guidance and recommendations from the Center for Disease Control (CDC) and all local public health authorities. We strongly encourage all employees to become fully vaccinated. We also provide benefits and resources to employees to address stress, burnout and mental health and promote self-care.
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Building on the initial success of our Shop Sustainably program, we have expanded the number of suppliers’ products that meet the standards for one or more of the third-party certifications included in the program, including energy or water efficiency, sustainably sourced wood, organic textile use, or Fair Trade Certified™.
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Our focus remains on promoting the health, safety and financial security of our employees and serving our customers. We are also closely monitoring the recent volatility in the global markets and the rise in inflation and interest rates.
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Government Regulation We are subject to domestic and foreign laws and regulations regarding general business, as well as laws and regulations governing the Internet and e-commerce, many of which are still evolving. Adverse legal or regulatory developments could substantially harm our business.
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These developments could continue to negatively impact global economic activity and consumer behavior, which may adversely affect our business and results of operations.
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Information that we post on our investor relations website could be deemed material to investors. We encourage investors, the media, and others interested in us to review the information we post on these channels.
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While it is difficult to predict all of the impacts these global economic events, including rising inflation and interest rates, will have on our business and to predict consumer spending in the near term, we believe the long-term opportunity that we see for shopping for the home online remains unchanged.
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The information on our website is not, and shall not be 12 T a ble of Contents deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC, and any reference to our website is intended to be an inactive textual reference only.
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Seasonality Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter, which ends December 31. Intellectual Property We believe our intellectual property, including any trademarks, service marks, copyrights, domain names, patents, trade dress, trade secrets and proprietary technologies, is an important part of our business.
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From 2002 through 2011, the company was bootstrapped by our co-founders and operated as hundreds of niche websites, such as bedroomfurniture.com and allbarstools.com. In March 2008, we formed, and contributed all of the assets and liabilities of CSN Stores, Inc. to a subsidiary, CSN Stores LLC, and we continued operating our business through this Delaware limited liability company.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.
Biggest changeWe may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. 32 T a ble of Contents If the use of “cookie” tracking technologies is further restricted, regulated, or blocked, or if changes in technology cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, the amount or accuracy of Internet user information we collect would decrease, which could harm our business and operating results.
Such negative publicity also could have an adverse effect on the size, engagement and loyalty of our customer base and result in decreased net revenue, which could adversely affect our business and financial results.
Such negative publicity could also have an adverse effect on the size, engagement and loyalty of our customer base and result in decreased net revenue, which could adversely affect our business and financial results.
In addition to data loss and compromise, cybersecurity incidents or breaches of our security measures or those of our third-party service providers could result in interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment or training of additional personnel and protection technologies, responses to governmental investigations and media inquiries and coverage; engagement of third party experts and consultants; litigation, regulatory action and other potential liabilities.
In addition to data loss and compromise, cybersecurity incidents or breaches of our security measures or those of our third-party service providers could result in interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment or training of additional personnel and protection technologies, responses to governmental investigations and media inquiries and coverage; engagement of third party experts and consultants; loss, litigation or regulatory action and other potential liabilities.
Our net revenue depends on the number of visitors who shop on our sites and the volume of orders we can handle. Unavailability of our sites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially adversely affect consumer perception of our brand. We may experience periodic system interruptions from time to time.
Our net revenue primarily depends on the number of visitors who shop on our sites and the volume of orders we can handle. Unavailability of our sites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially adversely affect consumer perception of our brand. We may experience periodic system interruptions from time to time.
If the value or liquidity of our common stock declines significantly and remains depressed, that may prevent us from recruiting and retaining qualified employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and operating results may be materially adversely affected.
If the value or liquidity of our common stock declines or remains depressed, that may prevent us from recruiting and retaining qualified employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and operating results may be materially adversely affected.
Like many businesses, despite all of our efforts to defend against cyber threats and respond to incidents, we, and our third party service providers, have in the past and will in the future continue to be subject to cyber-attacks, cyber security threats and attempts to compromise and penetrate our data security systems and disrupt our operations.
Like many businesses, despite all of our efforts to defend against cyber threats and respond to incidents, we, and our third party service providers, have in the past and will in the future continue to be subject to cyber-attacks, cybersecurity threats and attempts to compromise and penetrate our data security systems and disrupt our operations.
As part of offering our suppliers’ products for sale on our sites, suppliers are often responsible for conducting a number of traditional retail operations with respect to their respective products, including maintaining inventory, preparing merchandise for shipment to our customers, and, in some cases, delivering products on our behalf.
As part of offering our suppliers’ products for sale, suppliers are often responsible for conducting a number of traditional retail operations with respect to their respective products, including maintaining inventory, preparing merchandise for shipment to our customers, and, in some cases, delivering products on our behalf.
We pay interest semiannually in arrears at fixed rates per annum of 1.125% for the 2024 Notes, 0.625% for the 2025 Notes, 1.00% for the 2026 Notes and 3.25% for the 2027 Notes. The 2025 Accreting Notes accrue interest at a rate of 2.50% per annum, which accretes semiannually to the principal amount.
We pay interest semiannually in arrears at fixed rates per annum of 1.125% for the 2024 Notes, 0.625% for the 2025 Notes, 1.00% for the 2026 Notes, 3.25% for the 2027 Notes and 3.50% for the 2028 Notes. The 2025 Accreting Notes accrue interest at a rate of 2.50% per annum, which accretes semiannually to the principal amount.
A failure to implement our expansion initiatives properly, or the adverse impact of political or economic risks in our current or new international markets, could have a material adverse effect on our results of operations and financial condition. In all international markets we face established local and international competitors.
Further, a failure to implement our expansion initiatives properly, or the adverse impact of political or economic risks in our current or new international markets, could have a material adverse effect on our results of operations and financial condition. In all international markets we face established local and international competitors.
We believe our success has depended, and continues to depend, on the efforts and talents of Niraj Shah, one of our co-founders, co-chairman of the board of directors (the "Board") and our Chief Executive Officer, Steven Conine, one of our co-founders and co-chairman of the Board, and the other members of our senior management team.
We believe our success has depended, and continues to depend, on the efforts and talents of Niraj Shah, one of our co-founders, co-chairman of the board of directors (the “Board”) and our Chief Executive Officer, Steven Conine, one of our co-founders and co-chairman of the Board, and the other members of our senior management team.
Our management generally has broad discretion over the use of our cash resources, and you will be relying on the judgment of our management regarding the application of these resources. Our management might not apply these resources in ways that increase the value of your investment.
Further, our management generally has broad discretion over the use of our cash resources, and you will be relying on the judgment of our management regarding the application of these resources. Our management might not apply these resources in ways that increase the value of your investment.
Changes in the legal or regulatory environment affecting ESG and sustainability disclosure, responsible sourcing, supply chain transparency, or environmental protection, among others, including regulations to limit carbon dioxide and other greenhouse gas emissions, to discourage the use of plastic or to limit or to impose additional costs on commercial water use may result in increased compliance costs for us and our business partners, all of which may negatively impact our results of operations, financial condition and cash flows.
Changes in the legal or regulatory environment affecting ESG, climate change, and sustainability disclosure, responsible sourcing, supply chain transparency, or environmental protection, among others, including regulations to limit carbon dioxide and other greenhouse gas emissions, to discourage the use of plastic or to limit or to impose additional costs on commercial water use may result in increased compliance costs for us and our business partners, all of which may negatively impact our results of operations, financial condition and cash flows.
Specific factors that could impact consumers' willingness to purchase home goods from us online, especially in markets where we do not have physical stores, include: • concerns about buying products, and in particular larger products, without a physical storefront, face-to-face interaction with sales personnel and the inability to physically handle, examine and compare products; • delivery time associated with online orders; • actual or perceived lack of security of online transactions and concerns regarding the privacy or protection of personal information; • delayed shipments or shipments of incorrect or damaged products; • inconvenience associated with returning or exchanging items purchased online; • usability, functionality and features of our sites; and 18 Table of Contents • our reputation and brand strength.
Specific factors that could impact consumers’ willingness to purchase home goods from us online, especially in markets where we do not have physical stores, include: • concerns about buying products, and in particular larger products, without a physical storefront, face-to-face interaction with sales personnel and the inability to physically handle, examine and compare products; • delivery time associated with online orders; • actual or perceived lack of security of online transactions and concerns regarding the privacy or protection of personal information; • delayed shipments or shipments of incorrect or damaged products; • inconvenience associated with returning or exchanging items purchased online; • usability, functionality and features of our sites; and • our reputation and brand strength.
In addition, consumer confidence and spending can be materially adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, including home equity loans and consumer credit, changes in net worth based on market changes and uncertainty, energy shortages and cost increases, labor and healthcare costs, government actions and general uncertainty regarding the overall future economic environment.
In addition, consumer confidence and spending can be materially adversely affected in response to financial market volatility, inflationary pressures, negative financial news, conditions in the real estate and mortgage markets, including home equity loans and consumer credit, changes in net worth based on market changes and uncertainty, energy shortages and cost increases, labor and healthcare costs, government actions and general uncertainty regarding the overall future economic environment.
For example, we typically launch hundreds of promotional events across thousands of products each month on our sites via emails, "push" notifications and personalized displays. These events require us to produce updates of our sites and emails to our customers on a daily basis with different products, photos and text.
For example, we typically launch hundreds of promotional events across thousands of products each month on our sites via emails, “push” notifications and personalized displays. These events require us to produce updates of our sites and emails to our customers on a daily basis with different products, photos and text.
If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers, reactivate prior customers or retain our existing customers and our financial condition would suffer. Further, some of our new customers originate from word of mouth or other non-paid referrals from existing customers.
If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers, reactivate prior customers or retain our existing customers and our financial condition may suffer. Further, some of our new customers originate from word of mouth or other non-paid referrals from existing customers.
Additionally, we have expanded our use of third-party services, including third-party "cloud" computing services, and as a result our technology infrastructure may be subject to slowdowns or interruptions as a result of integration with such services and/or failures by such third-parties, which are out of our control.
Additionally, we have expanded our use of third-party services, including third-party “cloud” computing services, and as a result, our technology infrastructure may be subject to slowdowns or interruptions as a result of integration with such services and/or failures by such third-parties, which are out of our control.
Our ability to open stores in a timely and successful manner depends in part on the following factors: the availability of desirable store locations; the availability and costs of construction labor and materials; local permitting timelines; the ability to negotiate acceptable lease and development terms at reasonable rates, including the length of rental periods and renewal options and the ability to obtain termination rights; our ability to obtain all required approvals and comply with other regulatory requirements; our relationships with current and prospective landlords; the ability to secure and manage the inventory necessary for the launch and operation of new stores; the availability of capital funding for expansion; and general economic conditions.
Our ability to open stores in a timely and successful manner depends on a number of factors, including: the availability of desirable store locations; the availability and costs of construction labor and materials; local permitting timelines; the ability to negotiate acceptable lease terms at reasonable rates, including the length of rental periods and renewal options and the ability to obtain termination rights; our ability to obtain all required approvals and comply with other regulatory requirements; our relationships with current and prospective landlords; the ability to secure and manage the inventory necessary for the launch and operation of new stores; the availability of capital funding for expansion; and general economic conditions.
We rely on third parties to provide many of these payment methods and payment processing services, including certain Wayfair-branded programs and promotional financing. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud.
We rely on third parties to provide many of these payment methods and payment processing services, including certain Wayfair-branded programs and promotional financing. If we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud.
Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer protection, Internet neutrality and gift cards.
Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, artificial intelligence, electronic contracts and communications, consumer protection, Internet neutrality and gift cards.
In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product quality or availability, poor customer service, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation.
In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, employment matters, product quality or availability, poor customer service, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation.
From time to time our products are damaged in transit, which can increase return rates and harm our brand. 22 Table of Contents Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our net revenue and business.
From time to time our products are damaged in transit, which can increase return rates and harm our brand. Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our net revenue and business.
Any reduction in force may yield unintended consequences and costs, such as attrition beyond the intended reduction in force, the distraction of employees, reduced employee morale and adverse effects to our reputation as an employer, which could make it more difficult for us to hire new employees in the future and to retain and motivate key employees, and there is a risk that we may not achieve the anticipated benefits from the reduction in force.
Any reduction in force may yield unintended consequences and costs, such as attrition beyond the intended reduction in force, the distraction of employees, reduced employee morale and adverse effects to our reputation as both an employer and with respect to customers, which could make it more difficult for us to hire new employees in the future and to retain and motivate key employees, and there is a risk that we may not achieve the anticipated benefits from the reduction in force.
The capped calls are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of 31 Table of Contents converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
The capped calls are expected generally to reduce the potential dilution upon conversion of the Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
Declines in consumer spending have and, in the future, may result in decreased demand for our products and services which may have an adverse effect on our results of operations.
Declines in consumer spending have in the past resulted, and in the future may result, in decreased demand for our products and services which may have an adverse effect on our results of operations.
In addition, market participants with disclosed short positions in our stock have published, and may in the future continue to publish, negative information regarding us that we believe is inaccurate and misleading. We believe that the publication of this negative information may in the future lead to downward pressure on the price of our stock.
In addition, market participants with disclosed short positions in our stock have published, and may in the future continue to publish, negative information regarding us. We believe that the publication of this negative information may in the future lead to downward pressure on the price of our stock.
Volatility in our stock price could adversely affect our business and financing opportunities and expose us to litigation. Securities litigation can subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect our business, financial condition and operating results. Short selling could increase the volatility of our stock price.
Volatility in our stock price could adversely affect our business and financing opportunities and expose us to litigation. Securities litigation can subject us to substantial costs, divert resources and the attention of management from our business and materially adversely affect our business, financial condition and operating results.
To do this, we must continue to provide our customers and potential customers with a unified, convenient, efficient and differentiated shopping experience by: • providing imagery, tools and technology that attract customers who historically would have bought elsewhere; • maintaining a high-quality and diverse portfolio of products and services; • providing adequate customer service; • delivering products on time and without damage; and 13 Table of Contents • maintaining and further developing our mobile platforms.
To do this, we must continue to provide our customers and potential customers with a unified, convenient, efficient and differentiated shopping experience by: • providing imagery, tools and technology that attract customers who historically would have bought elsewhere; • maintaining a high-quality and diverse portfolio of products and services; • providing adequate customer service; 15 T a ble of Contents • delivering products on time and without damage; and • maintaining and further developing our mobile platforms.
Political and economic instability, global or regional adverse conditions, such as military conflicts, pandemics or other disease outbreaks or natural disasters, the financial stability or insolvency of suppliers, suppliers' ability to meet our code of conduct and other business standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, labor inflation and other factors relating to our suppliers are beyond our control.
Political and economic instability, global or regional adverse conditions, such as military conflicts, pandemics or other disease outbreaks or natural disasters, the financial stability or insolvency of our suppliers, our suppliers’ ability to meet our code of conduct and other business standards, labor problems experienced by our suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, imposition of anti-dumping and countervailing duties or other trade-related sanctions, transport availability and cost, including import-related taxes, transport security, labor inflation and other factors relating to our suppliers are beyond our control.
Our indebtedness included unsecured 1.125% Convertible Senior Notes due 2024 that mature on November 1, 2024 (the “2024 Notes”), unsecured 0.625% Convertible Senior Notes due 2025 that mature on October 1, 2025 (the “2025 Notes”), unsecured 1.00% Convertible Senior Notes due 2026 that mature on August 15, 2026 (the “2026 Notes”), unsecured 3.25% Convertible Senior Notes due 2027 that mature on September 15, 2027 (the “2027 Notes” and together with the 2024 Notes, 2025 Notes and the 2026 Notes, the “Non-Accreting Notes”), and unsecured 2.50% Accreting Convertible Senior Notes due 2025 that mature on April 1, 2025 (the “2025 Accreting Notes” and together with the Non-Accreting Notes, the “Notes”).
Our indebtedness includes unsecured 1.125% Convertible Senior Notes due 2024 that mature on November 1, 2024 (the “2024 Notes”), unsecured 0.625% Convertible Senior Notes due 2025 that mature on October 1, 2025 (the “2025 Notes”), unsecured 1.00% Convertible Senior Notes due 2026 that mature on August 15, 2026 (the “2026 Notes”), unsecured 3.25% Convertible Senior Notes due 2027 that mature on September 15, 2027 (the “2027 Notes”), unsecured 3.50% Convertible Senior Notes due 2028 that mature on November 15, 2028 (the “2028 Notes” and together with the 2024 Notes, 2025 Notes, 2026 Notes and the 2027 Notes, the “Non-Accreting Notes”), and unsecured 2.50% Accreting Convertible Senior Notes due 2025 that mature on April 1, 2025 (the “2025 Accreting Notes” and together with the Non-Accreting Notes, the “Notes”).
In the U.S., online tracking technologies are regulated by state privacy laws, such as the CCPA, federal laws, and self-regulatory frameworks that may be binding on companies that provide online advertising technology services. These laws and frameworks may require companies to offer consumers the right to opt out of many of these activities.
In the U.S., online tracking technologies are regulated by state privacy laws, such as the California Consumer Privacy Act, federal laws, and self-regulatory frameworks that may be binding on companies that provide online advertising technology services. These laws and frameworks may require companies to offer consumers the right to opt out of many of these activities.
This control may materially adversely affect the market price of our Class A common stock. Additionally, holders of our Class B common stock may cause us to make strategic decisions or pursue acquisitions that could involve risks to you or may not be aligned with your interests.
This control may materially adversely affect the market price of our Class A common stock. Additionally, holders of our Class B common stock may cause us to make strategic decisions or pursue acquisitions that could involve risks to you or may not 34 T a ble of Contents be aligned with your interests.
Alternatively, we may be required to develop non-infringing technology or intellectual property, which could require significant effort and expense and may ultimately not be successful. 25 Table of Contents We have received in the past, and we may receive in the future, communications alleging that certain items posted on or sold through our sites violate third-party copyrights, designs, marks and trade names or other intellectual property rights or other proprietary rights.
Alternatively, we may be required to develop non-infringing technology or intellectual property, which could require significant effort and expense and may ultimately not be successful. 28 T a ble of Contents We have received in the past, and we may receive in the future, communications alleging that certain items posted on or sold through our sites violate third-party copyrights, designs, marks and trade names or other intellectual property rights or other proprietary rights.
We have in the past, and may in the future, suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the orders. Under current credit card practices, we may be liable for fraudulent credit card transactions.
We have in the past, and may in the future, suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of 26 T a ble of Contents the orders. Under current credit card practices, we may be liable for fraudulent credit card transactions.
If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected. 12 Table of Contents If we fail to acquire new customers, reactivate prior customers or retain existing customers, or fail to do so in a cost-effective manner, our business, financial condition and operating results could be harmed.
If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected. 14 T a ble of Contents If we fail to acquire new customers, reactivate prior customers or retain existing customers, or fail to do so in a cost-effective manner, our business, financial condition and operating results could be harmed.
As a result, we may not be successful enough in these newer areas to recoup our investments in them. If this occurs, our business, financial condition and operating results may be materially adversely affected. Our international operations subject us to various additional legal, regulatory, financial and other risks.
As a result, we may not be successful enough in these newer areas to recoup our investments in them. If this occurs, our business, financial condition and operating results may be materially adversely affected. 17 T a ble of Contents Our international operations subject us to various additional legal, regulatory, financial and other risks.
Other new or revised taxes, such as digital taxes, sales taxes, VAT and similar taxes could increase the cost of doing business online and decrease the attractiveness of selling products over the Internet. New taxes and rulings could also create significant increases in internal costs necessary to capture data and collect and remit taxes.
Other new or revised taxes, such as digital taxes, sales taxes, VAT and similar taxes could increase the cost of doing business online and decrease the attractiveness of selling products over the Internet. New taxes and rulings could also 33 T a ble of Contents create significant increases in internal costs necessary to capture data and collect and remit taxes.
For example, failures by our telecommunications providers have in the past and may in the future interrupt our ability to provide phone support to our customers. Third parties may in the future 20 Table of Contents determine they no longer wish to do business with us or may decide to take other actions that could harm our business.
For example, failures by our telecommunications providers have in the past and may in the future interrupt our ability to provide phone support to our customers. Third parties may 23 T a ble of Contents in the future determine they no longer wish to do business with us or may decide to take other actions that could harm our business.
Furthermore, 21 Table of Contents analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance.
Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance.
Our certificate of incorporation and bylaws include provisions that: • permit the Board to establish the number of directors and fill any vacancies and newly created directorships; • when the outstanding shares of our Class B common stock represent less than 10% of the then outstanding shares of Class A common stock and Class B common stock, provide that the Board will be classified into three classes with staggered, three year terms and that directors may only be removed for cause; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that the Board could use to implement a stockholder rights plan; • eliminate the ability of our stockholders to call special meetings of stockholders; • when the outstanding shares of our Class B common stock represent less than 10% of the then outstanding shares of Class A common stock and Class B common stock, prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; • reflect the dual class structure of our common stock, as discussed above; and • establish advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. 32 Table of Contents These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of the Board, which is responsible for appointing the members of our management.
Our certificate of incorporation and bylaws include provisions that: • permit the Board to establish the number of directors and fill any vacancies and newly created directorships; • when the outstanding shares of our Class B common stock represent less than 10% of the then outstanding shares of Class A common stock and Class B common stock, provide that the Board will be classified into three classes with staggered, three year terms and that directors may only be removed for cause; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that the Board could use to implement a stockholder rights plan; • eliminate the ability of our stockholders to call special meetings of stockholders; • when the outstanding shares of our Class B common stock represent less than 10% of the then outstanding shares of Class A common stock and Class B common stock, prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; • reflect the dual class structure of our common stock, as discussed above; and • establish advance notice requirements for nominations for election to the Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
During 2022, our international net revenue accounted for approximately 14% of our total net revenue. Expanding our international operations to grow our business will require significant management attention and resources and expose us to additional risks.
During 2023, our international net revenue accounted for approximately 13% of our total net revenue. Expanding our international operations to grow our business will require significant management attention and resources and expose us to additional risks.
However, Internet users 29 Table of Contents can easily disable, delete and block cookies directly through browser settings or through other software, browser extensions or hardware platforms that physically block cookies from being created and stored.
However, Internet users can easily disable, delete and block cookies directly through browser settings or through other software, browser extensions or hardware platforms that physically block cookies from being created and stored.
In addition, if we do not have a clear and relevant promotional calendar to engage our customers, especially in the current macroeconomic environment, our customers may purchase fewer goods from us or we may have to increase our promotional activities.
In addition, if we do not have a clear and relevant promotional calendar to engage our customers, especially in the current macroeconomic environment, our customers may purchase fewer goods from us or we may have to increase our promotional 21 T a ble of Contents activities.
We are subject to risks related to online transactions and payment methods. We accept payments using a variety of methods, including credit card, debit card, electronic and mobile payment technologies, credit accounts (including promotional financing), gift cards and customer invoicing.
We are subject to risks related to online transactions and payment methods. We accept payments using a variety of methods, including credit card, debit card, electronic and mobile payment technologies, credit accounts (including promotional financing), installment loans, lease to own plans, gift cards and customer invoicing.
The amounts involved may be material. 27 Table of Contents Current capital market conditions, including the impact of inflation, have increased borrowing rates and can be expected to significantly increase our cost of capital as compared to prior periods should we seek additional funding. Recent quantitative tightening by the U.S.
The amounts involved may be material. 30 T a ble of Contents Current capital market conditions, including the impact of inflation, have increased borrowing rates and can be expected to significantly increase our cost of capital as compared to prior periods should we seek additional funding. Quantitative tightening by the U.S.
Although we believe that we currently collect sales taxes in all states that require us to do so, a successful assertion by one or more states requiring us to collect sales taxes where we currently do not, or to collect additional sales taxes in a state in which we currently collect them, could result in substantial tax liabilities (including penalties and interest).
A successful assertion by one or more states requiring us to collect sales taxes where we currently do not, or to collect additional sales taxes in a state in which we currently collect them, could result in substantial tax liabilities (including penalties and interest).
In addition, if hosting costs increase over time, or we are unable to optimize our applications for a cloud environment, or we require more computing or storage capacity, our costs could increase disproportionately.
In addition, if hosting costs increase over time, or we are unable to optimize our applications for a cloud environment, or we require more computing or 19 T a ble of Contents storage capacity, our costs could increase disproportionately.
Our ability to efficiently ship products to customers may be negatively affected by factors beyond our and our carriers' control, including inclement weather, natural disasters, system interruptions and technology failures, labor activism, supply chain issues, including congestion and delays, labor inflation and increased costs, military conflicts, health pandemics and epidemics (such as the COVID-19 pandemic) or bioterrorism.
Our ability to efficiently ship products to customers may be negatively affected by factors beyond our and our carriers’ control, including inclement weather, natural disasters, system interruptions and technology failures, labor activism, supply chain issues, including congestion and delays, labor inflation and increased costs, political instability, military conflicts, health pandemics and epidemics or bioterrorism.
New stores, particularly those in new markets, build their brand recognition and customer base over time and, as a result, may have lower margins and incur higher operating expenses. We may not anticipate all of the challenges imposed by the expansion of our operations into new geographic markets.
New stores, particularly those in new markets, build their brand recognition and customer base over time and, as a result, may have lower margins and incur higher operating expenses relative to generated revenue. We may not anticipate all of the challenges posed by the expansion of our operations into new asset classes and geographic markets.
As of December 31, 2022, our co-founders and th eir affiliates owned shares representing approximately 23.6% of the economic interest and 76.1% of the voting power of our outstanding capital stock. This concentrated control limits your ability to influence corporate matters for the foreseeable future.
As of December 31, 2023, our co-founders and th eir affiliates owned shares representing approximately 23.3% of the economic interest and 74.0% of the voting power of our outstanding capital stock. This concentrated control limits your ability to influence corporate matters for the foreseeable future.
In certain instances, we leverage and rely on third-party service providers to collect, maintain, transmit and store certain proprietary, personal and confidential information on our behalf, such as credit card data. To protect such data and other information from being breached, compromised or lost, we maintain and regularly assess against industry standard cybersecurity safeguards and best practices.
In certain instances, we leverage and rely on third-party service providers to collect, maintain, transmit and store certain proprietary, personal and confidential information on our behalf, such as credit card data. To protect such data and other information from unauthorized acquisition or access, compromise or loss, we maintain and regularly assess against industry standard cybersecurity safeguards and best practices.
Further, we rely on our suppliers’ representations of product quality, safety and compliance with applicable laws and standards. If our suppliers or other vendors violate our agreements, applicable laws or regulations, or implement practices regarded as unethical, unsafe, or hazardous to the environment, it could damage our reputation and negatively affect our operating results.
Further, we rely on our suppliers’ representations of product quality, safety and compliance with applicable laws and standards. If our suppliers or other vendors violate our agreements, applicable laws or regulations, or implement practices regarded as fraudulent, unethical, unsafe, or hazardous to the environment, it could harm our business, reputation and brands and our operating results may be negatively affected.
Our business success depends to some extent on our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographic markets from time to time. For example, we launched Wayfair.ie in Ireland in 2022, the Kelly Clarkson Home Collection in 2020 and Hykkon, a European Union flagship brand in 2019.
Our business success depends to some extent on our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographic markets from time to time. For example, we launched Decorify in 2023, Wayfair.ie in Ireland in 2022 and the Kelly Clarkson Home Collection in 2020.
Additionally, global events as well as geopolitical developments, including regional conflicts in Europe, fluctuating commodity prices, trade tariff developments and inflation have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which has 15 Table of Contents recently and could continue to amplify the volatility of currency fluctuations.
Additionally, global events as well as geopolitical developments, including military conflicts in Ukraine and the Middle East, fluctuating commodity prices, trade tariff developments and inflation have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest rate environment, which has recently and could continue to amplify the volatility of currency fluctuations.
We continually upgrade existing technologies and business applications to keep pace with these rapidly changing and continuously evolving technologies, and we may be required to implement new technologies or business applications in the future.
We continually upgrade existing technologies and business applications to keep pace with these rapidly changing and continuously evolving technologies, and we may be required to implement new technologies, such as those related to artificial intelligence, or business applications in the future.
Any of these events may materially adversely affect our business, financial condition and operating results. 24 Table of Contents We may not be able to adequately protect our intellectual property rights.
Any of these events may materially adversely affect our business, financial condition and operating results. 27 T a ble of Contents We may not be able to adequately protect our intellectual property rights.
In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our sites, which is particularly challenging given the rapid rate at which new technologies, customer preferences and expectations, and industry 16 Table of Contents standards and practices are evolving in the e-commerce industry.
In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our sites, which is particularly challenging given the rapid rate at which new technologies, such as those related to artificial intelligence, customer preferences and expectations, and industry standards and practices are evolving in the e-commerce industry.
We depend on our suppliers and other third parties, including our suppliers and logistics carriers, to perform certain services regarding the products that we offer online.
We depend on our suppliers and other third parties, including logistics service providers, customs brokers and carriers, to perform certain services regarding the products that we offer.
The market participant is then obligated to replace the security borrowed by purchasing the security at the market price at the time of required replacement. If the price at the time of replacement is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction.
If the price at the time of replacement is lower than the price at which the security was originally sold by the market participant, then the market participant will realize a gain on the transaction.
The price of our Class A common stock has been and may in the future be volatile. This volatility may affect the price at which you could sell your Class A common stock, and the sale of substantial amounts of our Class A common stock could adversely affect the price of our Class A common stock.
This volatility may affect the price at which you could sell your Class A common stock, and the sale of substantial amounts of our Class A common stock could adversely affect the price of our Class A common stock.
We will incur additional costs complying with these additional obligations and any failure or perceived failure to comply would adversely affect our business and reputation. 28 Table of Contents In addition, there is also uncertainty regarding potential laws, regulations and policies related to Environmental, Social, Governance (“ESG”) and global environmental sustainability matters, including disclosure obligations and reporting on such matters.
We will incur additional costs complying with these additional obligations and any failure or perceived failure to comply would adversely affect our business and reputation. 31 T a ble of Contents In addition, there is also uncertainty regarding potential laws, regulations and policies related to ESG, climate change laws and regulations, and global environmental sustainability matters, including disclosure obligations and reporting on such matters.
Any or all of these factors and conditions could materially adversely affect our growth and profitability. New store openings may negatively impact our financial results due to the effect of store opening costs and lower sales during the initial period following opening.
Any or all of these factors and conditions could materially adversely affect our business, financial condition and results of operations. New store openings may negatively impact our financial results due to the costs of acquiring new store locations and opening new stores and lower sales during the initial period following opening.
These adverse economic conditions include inflation, slower growth or recession, new or increased tariffs and other, changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the economy, armed hostilities, such as the ongoing military conflict between Russia and Ukraine, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell, and other matters that influence consumer spending and preferences.
These adverse economic conditions include the impacts of the COVID-19 pandemic, inflation, slower growth or recession, new or increased tariffs and other changes to fiscal and monetary policy, higher interest rates, high unemployment, decreased consumer confidence in the economy, armed hostilities, such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, foreign currency exchange rate fluctuations, conditions affecting the retail environment for products we sell, other matters that influence consumer spending and preferences, and other unexpected events, including public health crises.
We have had a history of losses and we may be unable to achieve or sustain profitability and positive cash flow in the future as we continue to expand our business. We have had a history of losses and negative cash flow and a resulting accumulated deficit of $3.3 billion as of December 31, 2022.
We have had a history of losses and we may be unable to achieve or sustain profitability and positive cash flow in the future as we continue to expand our business. We have had a history of losses and negative cash flow.
As such, any issue, or perceived issue, regarding the quality and safety of any items we sell, regardless of the cause, could adversely affect our brand, reputation, operations and financial results. We are also subject to risks of fraud from our suppliers.
As such, any issue, or perceived issue, regarding the quality and safety of any items we sell, regardless of the cause, could adversely affect our brand, reputation, operations and financial results.
Also, our operating expenses may increase if we continue to expand internationally, add additional physical retail locations, grow our proprietary logistics network, experiment with paid marketing channels, hire more employees and continue to develop new brands, features and services.
As a result, we may incur future losses that may be larger than anticipated. Also, our operating expenses may increase if we continue to expand internationally, add additional physical retail locations, grow our proprietary logistics network, experiment with paid marketing channels, hire more employees and continue to develop new brands, features and services.
We have recently implemented workforce reductions and may in the future implement other reductions in force. For example, in January 2023, as part of our cost efficiency plan, we reduced our workforce by approximately 1,750 employees, representing approximately 10% of our global workforce as of December 31, 2022.
We have recently implemented workforce reductions and may in the future implement other reductions in force. For example, in January 2024, as part of our cost efficiency plan, we reduced our workforce by approximately 1,650 employees.
We have the ability to borrow up to $600 million under our senior secured revolving credit facility (the “Revolver”) to finance working capital and provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes. The Revolver replaced our previous $200 million senior secured revolving credit facility which was set to mature on February 21, 2022.
We have the ability to borrow up to $600 million under our senior secured revolving credit facility (the “Revolver”) to finance working capital and provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes.
Due to optional conversions of Class B common stock into Class A common stock following the IPO, our Class B common stock is currently held primarily by our co-founders and their affiliates.
Following our initial public offering (the “IPO”), our Class B common stock was held primarily by our co-founders, other executive officers, directors and their affiliates. Due to optional conversions of Class B common stock into Class A common stock following the IPO, our Class B common stock is currently held primarily by our co-founders and their affiliates.
We believe our Class A common stock has been the subject of significant short selling efforts by certain market participants. Short sales are transactions in which a market participant sells a security that it does not own. To complete the transaction, the market participant must borrow the security to make delivery to the buyer.
Short selling could increase the volatility of our stock price. We believe our Class A common stock has been the subject of significant short selling efforts by certain market participants. Short sales are transactions in which a market participant sells a security that it does not own.
A significant portion of our customers' brand experience also depends on third parties outside our control, including suppliers, assembly and installation service providers and logistics providers such as FedEx, UPS, DHL, the U.S. Postal Service and other third-party delivery agents. If these third parties do not meet our or our customers' expectations, our brands may suffer irreparable damage.
A significant portion of our customers' brand experience also depends on third parties outside our control, including our suppliers, assembly and installation service providers and logistics providers. If these third parties do not meet our or our customers' expectations, our brands may suffer irreparable damage.
Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of product returns. Many of our products are large and require special handling and delivery.
If merchandise returns are significant, our business, prospects, financial condition and results of operations could be harmed. Further, we modify our policies relating to returns from time to time, which may result in customer dissatisfaction or an increase in the number of product returns. Many of our products are large and require special handling and delivery.
We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges.
These assumptions are inherently difficult to predict, particularly in the long term. 24 T a ble of Contents We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges.
Some of those key assumptions include broader macroeconomic conditions and the resulting impact of these factors on future consumer spending patterns and our business. These assumptions are inherently difficult to predict, particularly in the long term.
Some of those key assumptions include broader macroeconomic conditions and the resulting impact of these factors on future consumer spending patterns and our business.
Further, we are subject to various state privacy laws, several of which will go into effect in 2023 ( i.e . California, Virginia, Colorado, and Connecticut), all of which give new data privacy rights to their respective residents and impose significant obligations on controllers and processors of consumer data.
California, Virginia, Colorado, Connecticut and Utah), and new state privacy laws will come into effect in 2024 ( i.e ., Montana, Oregon and Texas) all of which give new data privacy rights to their respective residents and impose significant obligations on controllers and processors of consumer data.
We cannot be certain that we will be able to obtain new financing on favorable terms, or at all. Significant merchandise returns could harm our business. We allow our customers to return products, subject to our return policy. If merchandise returns are significant, our business, prospects, financial condition and results of operations could be harmed.
We cannot be certain that we will be able to obtain new financing on favorable terms, or at all. 25 T a ble of Contents Significant merchandise returns could harm our business. We allow our customers to return products, subject to our return policy.
Furthermore, some or all of our suppliers' foreign operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.
Furthermore, some or all of our suppliers’ foreign operations may be adversely affected by political and financial instability, including, without limitation, the military conflicts in Ukraine and the Middle East, as well as other unexpected events, including public health crises resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.
If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected.
If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. Additionally, we primarily rely on a single delivery carrier, FedEx, for the delivery of our small parcel products.
We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched and techniques used to obtain unauthorized access may change frequently and may not be known in the market. Security incidents such as ransomware attacks are becoming increasingly prevalent and severe, as well as increasingly difficult to detect.
We and our service providers may not anticipate, detect, or prevent all types of attacks until after they have already been launched particularly because the techniques used to obtain unauthorized access are increasingly sophisticated, constantly evolving and may not be known in the market.
To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and expand, train and manage our employee base.
Our historical growth rates may not be sustainable or indicative of future growth. To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and appropriately manage our employee base.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties As of December 31, 2022, we operated the following facilities: Leased Square Footage (1) Reportable Segment (square footage in thousands) Description of Use: Logistics 17,115 United States Logistics 3,075 International Customer service 481 United States Retail 200 United States Boston headquarters 1,460 United States Office space 87 United States Office space 228 International Total 22,646 (1) Represents the total leased space excluding sub-leased space.
Biggest changeProperties As of December 31, 2023, we operated the following facilities: Leased Square Footage (1) Reportable Segment (square footage in thousands) Description of Use: Logistics 18,099 United States Logistics 3,502 International Customer service 329 United States Retail 271 United States Boston headquarters 1,402 United States Office space 87 United States Office space 222 International Total 23,912 (1) Represents the total leased space excluding subleases and leases that have not yet commenced.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings Information for this item may be found in Note 7, Commitments and Contingencies , in the notes to the consolidated financial statements included Part II, Item 8, Financial Statements and Supplementary Data , which is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 33 Table of Contents PART II
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Item 3. Legal Proceedings From time to time, we are involved in litigation matters and other legal claims that arise during the ordinary course of business. Litigation and legal claims are inherently unpredictable and cannot be predicted with certainty.
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An unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations or financial condition, and regardless of the outcome, these matters can be costly and time consuming, as they can divert management's attention from important business matters and initiatives, negatively impacting our overall operations.
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In addition, we may be at greater risk to outside party claims as we increase our operations in jurisdictions where the laws with respect to the potential liability of online retailers are uncertain, unfavorable or unclear.
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We do not believe that the outcome of any legal matters to which we are presently a party will have a material adverse effect on our results of operations or financial condition. Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans and securities authorized for issuance thereunder is set forth under Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , of this Annual Report on Form 10-K.
Biggest changeDividends We have never declared or paid any cash dividends on our capital stock, and we do not currently anticipate paying any cash dividends in the foreseeable future. 38 T a ble of Contents Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans and securities authorized for issuance thereunder is set forth under Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters , in this Annual Report on Form 10-K.
Recent Purchases of Equity Securities On August 21, 2020, the Board authorized the repurchase of up to $700 million of Wayfair’s Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan (the “2020 Repurchase Program”).
Recent Purchases of Equity Securities On August 21, 2020, the board of directors (the “Board”) authorized the repurchase of up to $700 million of Wayfair’s Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan (the “2020 Repurchase Program”).
As of December 31, 2022, the approximate dollar value of shares that may yet be purchased under the authorized share repurchase programs is $1.1 billion. There were no repurchases made during the three months ended December 31, 2022. Item 6. Reserved Not applicable.
As of December 31, 2023, the approximate aggregate dollar value of shares that may yet be purchased under the authorized Repurchase Programs is $1.1 billion. There were no repurchases made during the three months ended December 31, 2023. Item 6. Reserved Not applicable.
Holders of Our Common Stock As of February 13, 2023, there were 224 holders of record of shares of our Class A common stock and 259 holders of record of shares of our Class B common stock.
Holders of Our Common Stock As of February 15, 2024, there were 229 holders of record of shares of our Class A common stock and 252 holders of record of shares of our Class B common stock.
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Dividends We have never declared or paid any cash dividends on our capital stock, and we do not currently anticipate paying any cash dividends in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(1) Total operating expenses $ 4,800 $ 3,989 20.3 % As a percentage of net revenue: Customer service and merchant fees (2) 5.2 % 4.3 % Advertising 12.1 % 10.1 % Selling, operations, technology, general and administrative (2) 21.5 % 14.7 % Impairment and other related net charges 0.3 % 0.1 % Restructuring charges 0.3 % — % 39.4 % 29.2 % (1) Not meaningful (n.m.) year-over-year comparison (2) Includes equity-based compensation and related taxes as follows: Year Ended December 31, 2022 2021 (in millions) Customer service and merchant fees $ 34 $ 27 Selling, operations, technology, general and administrative $ 482 $ 335 Our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative increased by $154 million, or 42.5% in 2022 compared to 2021 as a result of increased restricted stock units granted in 2022 compared to the same period in 2021.
Biggest changeYear Ended December 31, 2023 2022 % Change (in millions) Customer service and merchant fees (1) $ 557 $ 632 (11.9) % Advertising 1,397 1,473 (5.2) % Selling, operations, technology, general and administrative (1) 2,447 2,625 (6.8) % Impairment and other related net charges 14 39 (64.1) % Restructuring charges 65 31 109.7 % Total operating expenses $ 4,480 $ 4,800 (6.7) % As a percentage of net revenue: Customer service and merchant fees (1) 4.6 % 5.2 % Advertising 11.6 % 12.1 % Selling, operations, technology, general and administrative (1) 20.4 % 21.5 % Impairment and other related net charges 0.1 % 0.3 % Restructuring charges 0.5 % 0.3 % 37.2 % 39.4 % (1) Includes equity-based compensation and related taxes as follows: Year Ended December 31, 2023 2022 (in millions) Customer service and merchant fees $ 29 $ 34 Selling, operations, technology, general and administrative $ 584 $ 482 During the year ended December 31, 2023, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative increased by $97 million, or 18.8% compared to the same period in 2022, driven by an increase in vested restricted stock units in 2023 compared to the same period in 2022.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those described herein and in our other filings with the SEC, including those set forth in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those described herein and in our other filings with the SEC, including those set forth in Part I, Item 1A, Risk Factors, in this Annual Report on Form 10-K.
Adjusted Diluted (Loss) Earnings per Share has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Adjusted Diluted Earnings or Loss per Share has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
See Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for information about these critical accounting policies, as well as a description of our other significant accounting policies.
See Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K for information about these critical accounting policies, as well as a description of our other significant accounting policies.
Recent Accounting Pronouncements For information about recent accounting pronouncements, see Note 1, Summary of Significant Accounting Policies , in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Recent Accounting Pronouncements For information about recent accounting pronouncements, see Note 1, Summary of Significant Accounting Policies , in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K.
(4) Represents the future minimum lease payments for additional, non-cancellable operating leases, primarily related to warehouse and retail leases that have not yet commenced. For more information see Note 5, Leases , in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
(4) Represents the future minimum lease payments for additional, non-cancellable operating leases, primarily related to warehouse and retail leases that have not yet commenced. For more information see Note 5, Leases , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
For information regarding our convertible notes, see Note 6, Debt and Other Financing , in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. (2) Represents the future minimum lease payments under non-cancellable leases.
For information regarding our convertible notes, see Note 6, Debt and Other Financing , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K. (2) Represents the future minimum lease payments under non-cancellable leases.
For information regarding our lease obligations, see Note 5, Leases , in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. (3) Represents the future payments for enforceable and legally binding software license and freight commitments.
For information regarding our lease obligations, see Note 5, Leases , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K. (3) Represents the future payments for enforceable and legally binding software license and freight commitments.
(2) LTM net revenue per active customer represents our total net revenue in the last twelve months divided by our total number of active customers for the same preceding twelve-month period. We view LTM net revenue per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior.
(2) Last twelve months (“LTM”) net revenue per active customer represents our total net revenue in the last twelve months divided by our total number of active customers for the same preceding twelve-month period. We view LTM net revenue per active customer as a key indicator of our customers’ purchasing patterns, including their initial and repeat purchase behavior.
The Revolver also requires us to maintain certain levels of performance in order to maintain our access to the Revolver. For instance, we are required to maintain a Consolidated Senior Secured Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) of 4.0 to 1.0, subject to a 0.5 step-up following certain permitted acquisitions.
The Revolver also requires us to maintain certain levels of performance in order to maintain our access to the Revolver. For instance, we are required to maintain a Consolidated Senior Secured Debt to Consolidated EBITDA Ratio (as defined in the credit agreement governing the Revolver) of 4.0 to 1.0, subject to a 0.5 step-up following certain permitted acquisitions.
The actual timing, number and value of shares repurchased under the Repurchase Programs in the future will be determined by us in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs and whether there is a better alternative use of capital.
The actual timing, number and value of shares repurchased under the Repurchase Programs in the future will be determined by us in our discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs and whether there is a better alternative use of capital.
For information regarding our credit agreement and convertible notes, see Note 6, Debt and Other Financing in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
For information regarding our credit agreement and convertible notes, see Note 6, Debt and Other Financing , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K.
For information regarding our purchase obligations, see Note 7, Commitments and Contingencies, in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.
For information regarding our purchase obligations, see Note 7, Commitments and Contingencies, in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K.
The Repurchase Programs do not obligate us to purchase any shares of Class A common stock and have no expiration but may be suspended or terminated by the Board at any time.
The Repurchase Programs do not obligate us to purchase any shares of our Class A common stock and have no expiration but may be suspended or terminated by the Board at any time.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net (loss) income and our other GAAP results.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income or loss and our other GAAP results.
Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net (loss) income.
Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net loss.
(3) Orders delivered represents the total orders delivered in any period, inclusive of orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data.
(3) Orders delivered represent the total orders delivered in any period, inclusive of orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and as such we estimate delivery dates based on historical data.
Our Free Cash Flow and Adjusted Diluted (Loss) Earnings per share are measured on a consolidated basis, while our Adjusted EBITDA is measured on a consolidated and reportable segment basis. All other key financial and operating metrics are derived and reported from our consolidated net revenue.
Our Free Cash Flow and Adjusted Diluted Earnings or Loss per Share are measured on a consolidated basis, while our Adjusted EBITDA is measured on a consolidated and reportable segment basis. All other key financial statement and operating metrics are derived and reported from our consolidated net revenue.
Additionally, we have a $600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”). As of December 31, 2022, there were no revolving loans outstanding under the Revolver.
Additionally, we have a $600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”). As of December 31, 2023, there were no revolving loans outstanding under the Revolver.
Wayfair controls products when it is the entity 47 Table of Contents responsible for fulfilling the promise to the customer and takes responsibility for the acceptability of the goods, assumes inventory risk from shipment through the delivery date, has discretion in establishing prices and selects the suppliers of products sold.
Wayfair controls products when it is the entity responsible for fulfilling the promise to the customer and takes responsibility for the acceptability of the goods, assumes inventory risk from shipment through the delivery date, has discretion in establishing prices and selects the suppliers of products sold.
We will continue to monitor our liquidity during this time of historic disruption and volatility in the global capital markets. Credit Agreement and Convertible Debt As of December 31, 2022, we had $3.2 billion principal of indebtedness outstanding.
We will continue to monitor our liquidity during this time of historic disruption and volatility in the global capital markets. Credit Agreement and Convertible Debt As of December 31, 2023, we had $3.2 billion principal amount of indebtedness outstanding.
Accordingly, we believe that these adjustments to our adjusted diluted net loss (income) before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.
Accordingly, we believe that these adjustments to our adjusted diluted net income or loss before calculating per share amounts for all periods presented provide a more meaningful comparison between our operating results from period to period.
Accordingly, we believe 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 the Board. 44 Table of Contents Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Accordingly, we believe 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 the Board. 49 T a ble of Contents Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
For example, Adjusted Diluted (Loss) Earnings per Share, by their nature, excludes equity-based compensation and related taxes, provision for income taxes, net, non-recurring items, other 46 Table of Contents items not indicative of our ongoing operating performance, and, if dilutive, interest expense associated with convertible debt instruments under the if-converted method.
For example, Adjusted Diluted Earnings or Loss per Share, by their nature, excludes equity-based compensation and related taxes, provision or benefit for income taxes, net, non-recurring items, other items not indicative of our ongoing operating performance, and, if dilutive, interest expense associated with convertible debt instruments under the if-converted method.
Such repurchases, exchanges or liability management exercises, if any, will be upon such terms and at such prices and sizes as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Such repurchases, exchanges or liability management exercises, if any, will be upon such terms and at such prices and sizes as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Revenue Recognition We generate net revenue primarily through product sales on our family of sites. We recognize revenue using the gross method for product sales generated through our family of sites only when we have concluded that Wayfair controls the product before it is transferred to the customer.
Revenue Recognition We recognize revenue using the gross method for product sales generated through our family of sites only when we have concluded that Wayfair controls the product before it is transferred to the customer.
Purchases of property and equipment and site and software development costs (collectively, “Capital Expenditures”) were 3.7% of net revenue for the year ended December 31, 2022 and related primarily to equipment purchases and improvements for leased warehouses within our expanding logistics network and ongoing investments in our proprietary technology and operational platform.
Purchases of property and equipment and site and software development costs (collectively, “Capital Expenditures”) were 2.9% of net revenue for the year ended December 31, 2023 and related primarily to equipment purchases and improvements for leased warehouses within our expanding logistics network and ongoing investments, including in our proprietary technology and operational platform.
Excluding liquidity available through our Revolver, the following table shows sources of liquidity as of December 31, 2022 and 2021: December 31, 2022 2021 (in millions) Cash and cash equivalents $ 1,050 $ 1,706 Short-term investments 228 693 Total liquidity $ 1,278 $ 2,399 We believe that our existing cash and cash equivalents and investments, cash generated from operations and the borrowing availability under our Revolver will be sufficient to meet our anticipated cash needs for at least the foreseeable future including planned capital expenditures, contractual obligations and other such requirements.
Excluding liquidity available through our Revolver, the following table shows sources of liquidity for the periods presented: December 31, 2023 2022 (in millions) Cash and cash equivalents $ 1,322 $ 1,050 Short-term investments 29 228 Total liquidity $ 1,351 $ 1,278 We believe that our existing cash and cash equivalents and investments, cash generated from operations and the borrowing availability under our Revolver will be sufficient to meet our anticipated cash needs for at least the foreseeable future including planned capital expenditures, contractual obligations and other such requirements.
We had outstanding letters of credit, primarily as security for certain lease agreements, for approximately $68 million as of December 31, 2022, which reduced the availability of credit under the Revolver.
We had outstanding letters of credit, primarily as security for certain lease agreements, for $76 million as of December 31, 2023, which reduced the availability of credit under the Revolver.
The 2025 Accreting Notes are convertible at any time prior to the close of business on the second business day immediately preceding the maturity date. During 2022, there were no conversions of the Notes.
The 2025 Accreting Notes are convertible at any time prior to the close of business on the second business day immediately preceding the maturity date. During the year ended December 31, 2023, there were no conversions of the Notes.
We have provided a reconciliation below of Free Cash Flow to net cash provided by or used in operating activities, the most directly comparable GAAP financial measure. We have included Free Cash Flow in this Annual Report on Form 10-K because it is an important indicator of our business performance as it measures the amount of cash we generate.
We have provided a reconciliation below of Free Cash Flow to net cash provided by or used in operating activities, the most directly comparable GAAP financial measure. We disclose Free Cash Flow because it is an important indicator of our business performance as it measures the amount of cash we generate.
Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term at the lease commencement date.
Leases Lease liabilities and their corresponding right-of-use (“ROU”) assets are recorded based on the present value of lease payments over the expected lease term at the lease commencement date.
Net Revenue Constant Currency Growth is included in this Annual Report on Form 10-K because it is an important indicator of our operating results. Accordingly, we believe that Net Revenue Constant Currency Growth provides useful information to investors and others in understanding and evaluating trends in our operating results in the same manner as our management.
We disclose Net Revenue Constant Currency Growth because it is an important indicator of our operating results. Accordingly, we believe that Net Revenue Constant Currency Growth provides useful information to investors and others in understanding and evaluating trends in our operating results in the same manner as our management.
We use the following metrics to assess the near and longer-term performance of our overall business: Year Ended December 31, 2022 2021 2020 (in millions, except LTM Net Revenue per Active Customer, Average Order Value and per share data) Key Financial Statement Metrics: Net revenue $ 12,218 $ 13,708 $ 14,145 Gross profit $ 3,416 $ 3,895 $ 4,112 (Loss) income from operations $ (1,384) $ (94) $ 360 Net (loss) income $ (1,331) $ (131) $ 185 (Loss) earnings per share: Basic $ (12.54) $ (1.26) $ 1.93 Diluted $ (12.54) $ (1.26) $ 1.86 Net cash (used in) provided by operating activities $ (674) $ 410 $ 1,417 Key Operating Metrics: Active customers (1) 22 27 31 LTM net revenue per active customer (2) $ 553 $ 501 $ 453 Orders delivered (3) 40 52 61 Average order value (4) $ 305 $ 265 $ 232 Non-GAAP Financial Measures: Adjusted EBITDA $ (416) $ 614 $ 947 Free Cash Flow $ (1,132) $ 130 $ 1,082 Adjusted Diluted (Loss) Earnings per share (5) $ (7.71) $ 2.32 $ 5.04 (1) The number of active customers represents the total number of individual customers who have purchased at least once directly from our sites during the preceding twelve-month period.
We use the following metrics to assess the near and longer-term performance of our overall business: Year Ended December 31, 2023 2022 2021 (in millions, except LTM net revenue per active customer, average order value and per share data) Key Financial Statement Metrics: Net revenue $ 12,003 $ 12,218 $ 13,708 Gross profit $ 3,667 $ 3,416 $ 3,895 Loss from operations $ (813) $ (1,384) $ (94) Net loss $ (738) $ (1,331) $ (131) Loss per share: Basic $ (6.47) $ (12.54) $ (1.26) Diluted $ (6.47) $ (12.54) $ (1.26) Net cash provided by (used in) operating activities $ 349 $ (674) $ 410 Key Operating Metrics: Active customers (1) 22 22 27 LTM net revenue per active customer (2) $ 537 $ 553 $ 501 Orders delivered (3) 41 40 52 Average order value (4) $ 292 $ 305 $ 265 Non-GAAP Financial Measures: Adjusted EBITDA $ 306 $ (416) $ 614 Free Cash Flow $ (2) $ (1,132) $ 130 Adjusted Diluted (Loss) Earnings per share $ (1.13) $ (7.71) $ 2.32 (1) The number of active customers represents the total number of individual customers who have purchased at least once directly from our sites during the preceding twelve-month period.
Year Ended December 31, 2022 2021 % Change (in millions) U.S. net revenue $ 10,464 $ 11,249 (7.0) % International net revenue 1,754 2,459 (28.7) % Net revenue $ 12,218 $ 13,708 (10.9) % For more information on our segments, see Note 13, Segment and Geographic Information, in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Year Ended December 31, 2023 2022 % Change (in millions) U.S. net revenue $ 10,482 $ 10,464 0.2 % International net revenue 1,521 1,754 (13.3) % Net revenue $ 12,003 $ 12,218 (1.8) % For more information on our segments, see Note 13 Segment and Geographic Information , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K.
Refer to Note 6, Debt and Other Financing , included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Refer to Note 6, Debt and Other Financing , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K for additional information.
Refer to Note 11, Income Taxes , included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Refer to Note 11, Income Taxes , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data, in this Annual Report on Form 10-K for additional information.
The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes: Year Ended December 31, 2022 2021 Customer service and merchant fees 4.9 % 4.1 % Selling, operations, technology, general and administrative 17.5 % 12.3 % Customer Service and Merchant Fees Excluding the impact of equity-based compensation, our expenses for customer service and merchant fees, increased by $41 million, or 7.4% in 2022 compared to 2021.
The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes: Year Ended December 31, 2023 2022 Customer service and merchant fees 4.4 % 4.9 % Selling, operations, technology, general and administrative 15.5 % 17.5 % Customer Service and Merchant Fees During the year ended December 31, 2023, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $70 million, or 11.7% compared to the same period in 2022.
In accounting for the repurchases of the 2024 Notes and 2025 Notes, Wayfair recorded a $96 million gain on debt extinguishment, representing the difference between the cash paid for principal of $504 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $600 million.
In connection with the issuance of our 2027 Notes, we recorded a $96 million gain on debt extinguishment, representing the difference between the cash paid for principal of $504 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $600 million.
Year Ended December 31, 2022 2021 % Change (in millions) Provision for income taxes, net $ 12 $ 1 1,100.0 % Liquidity and Capital Resources Sources of Liquidity At December 31, 2022, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $1.3 billion.
Year Ended December 31, 2023 2022 % Change (in millions) Provision for income taxes, net $ 9 $ 12 (25.0) % 45 T a ble of Contents Liquidity and Capital Resources Sources of Liquidity At December 31, 2023, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $1.4 billion.
Year Ended December 31, 2022 2021 % Change (in millions) Cost of goods sold $ 8,802 $ 9,813 (10.3) % As a percentage of net revenue 72.0 % 71.6 % 38 Table of Contents Operating expenses Operating expenses are comprised of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses, impairment and other related net charges and restructuring charges.
Year Ended December 31, 2023 2022 % Change (in millions) Cost of goods sold $ 8,336 $ 8,802 (5.3) % As a percentage of net revenue 69.4 % 72.0 % 42 T a ble of Contents Operating expenses Operating expenses are comprised of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses, impairment and other related net charges and restructuring charges.
A reconciliation of the numerator and denominator for diluted (loss) earnings per share, the most directly comparable GAAP financial measure, and the numerator and denominator for Adjusted Diluted (Loss) Earnings per Share, is as follows: Year Ended December 31, 2022 2021 2020 (in millions, except per share data) Numerator: Numerator for diluted (loss) earnings per share - net (loss) income available to common stockholders after the effect of dilutive securities $ (1,331) $ (131) $ 185 Adjustments to net (loss) income Interest expense associated with convertible debt instruments — 20 9 Equity-based compensation and related taxes 527 374 297 Provision for income taxes, net 12 1 20 Other: Impairment and other related net charges 39 12 — Restructuring charges 31 — 4 Gain on debt extinguishment (96) — — Numerator for Adjusted Diluted (Loss) Earnings per Share - Adjusted net loss (income) $ (818) $ 276 $ 515 Denominator: Denominator for diluted (loss) earnings per share - weighted-average number of shares of common stock outstanding after the effect of dilutive securities 106 104 99 Adjustments to effect of dilutive securities: Restricted stock units — 3 — Convertible debt instruments — 12 3 Denominator for Adjusted Diluted (Loss) Earnings per Share - Adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities 106 119 102 Diluted (Loss) Earnings per Share $ (12.54) $ (1.26) $ 1.86 Adjusted Diluted (Loss) Earnings per Share $ (7.71) $ 2.32 $ 5.04 Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the U.S.
Because of these limitations, you should consider Adjusted Diluted Earnings or Loss per Share alongside other financial performance measures. 51 T a ble of Contents A reconciliation of the numerator and denominator for diluted earnings or loss per share, the most directly comparable GAAP financial measure, to the numerator and denominator for Adjusted Diluted Earnings or Loss per Share in order to calculate Adjusted Diluted Earnings or Loss per Share, is as follows: Year Ended December 31, 2023 2022 2021 (in millions, except per share data) Numerator: Numerator for basic and diluted loss per share - net loss $ (738) $ (1,331) $ (131) Adjustments to net loss Interest expense associated with convertible debt instruments — — 20 Equity-based compensation and related taxes 623 527 374 Provision for income taxes, net 9 12 1 Other: Impairment and other related net charges 14 39 12 Restructuring charges 65 31 — Gain on debt extinguishment (100) (96) — Numerator for Adjusted Diluted (Loss) Earnings per Share - Adjusted net (loss) income $ (127) $ (818) $ 276 Denominator: Denominator for basic and diluted loss per share - weighted-average number of shares of common stock outstanding after the effect of dilutive securities 114 106 104 Adjustments to effect of dilutive securities: Restricted stock units — — 3 Convertible debt instruments — — 12 Denominator for Adjusted Diluted (Loss) Earnings per Share - Adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities 114 106 119 Diluted Loss per Share $ (6.47) $ (12.54) $ (1.26) Adjusted Diluted (Loss) Earnings per Share $ (1.13) $ (7.71) $ 2.32 Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the U.S.
Impairment and other related net charges During the year ended December 31, 2022, we recorded $39 million of lease impairment and other related net charges primarily related to changes in market conditions around future sublease income for one of our office locations in the U.S.
During the year ended December 31, 2022, we recorded net charges of $31 million of lease impairment and other charges related to changes in market conditions around future sublease income for one office location in the U.S. and charges of $8 million related to construction in progress assets at an International warehouse.
Adjusted Diluted (Loss) Earnings per Share To provide investors with additional information regarding our financial results, we have disclosed in this Annual Report on Form 10-K Adjusted Diluted (Loss) Earnings per Share, a non-GAAP financial measure that we calculate as net (loss) income plus equity-based compensation and related taxes, provision for income taxes, net, non-recurring items, other items not indicative of our ongoing operating performance, and, if dilutive, interest expense associated with convertible debt instruments under the if-converted method divided by the weighted-average number of shares of common stock used in the computation of diluted (loss) earnings per share.
Adjusted Diluted Earnings or Loss per Share We calculate Adjusted Diluted Earnings or Loss per Share as net income or loss plus equity-based compensation and related taxes, provision or benefit for income taxes, net, non-recurring items, other items not indicative of our ongoing operating performance, and, if dilutive, interest expense associated with convertible debt instruments under the if-converted method divided by the weighted-average number of shares of common stock used in the computation of diluted earnings or loss per share.
The following table presents a reconciliation of net cash (used in) provided by operating activities to Free Cash Flow for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in millions) Net cash (used in) provided by operating activities $ (674) $ 410 $ 1,417 Purchase of property and equipment (186) (101) (186) Site and software development costs (272) (179) (149) Free Cash Flow $ (1,132) $ 130 $ 1,082 Net Revenue Constant Currency Growth To provide investors with additional information regarding our financial results, we have disclosed in this Annual Report on Form 10-K Net Revenue Constant Currency Growth, a non-GAAP financial measure that we calculate by translating the current period local currency net revenue by the currency exchange rates used to translate our financial statements in the comparable prior-year period.
The following table presents a reconciliation of net cash provided by or used in operating activities to Free Cash Flow for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in millions) Net cash provided by (used in) operating activities $ 349 $ (674) $ 410 Purchase of property and equipment (148) (186) (101) Site and software development costs (203) (272) (179) Free Cash Flow $ (2) $ (1,132) $ 130 Net Revenue Constant Currency Growth We calculate Net Revenue Constant Currency Growth by translating the current period local currency net revenue by the currency exchange rates used to translate our financial statements in the comparable prior-year period.
In the year ended December 31, 2021, we recorded $12 million of customer service center impairment and other related charges related to our plan to consolidate customer service centers in identified U.S. locations. (2) In the year ended December 31, 2022, we recorded a $31 million charge to restructuring charges for severance costs associated with the August 2022 workforce reductions.
During the year ended December 31, 2021, we recorded $12 million of customer service center impairment and other related charges related to our plan to consolidate customer service centers in identified U.S. locations.
Cost of goods sold Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs and fees earned for supplier services rendered. In 2022, cost of goods sold decreased by $1.0 billion, or 10.3%, compared to 2021.
Cost of goods sold Cost of goods sold is sensitive to many factors, including quarter-to-quarter variability in product mix, pricing strategies, changes in wholesale, shipping and fulfillment costs, including associated applicable customs duties and fees earned for supplier services rendered.
Cash flows used in operating activities increased by $1.1 billion in 2022 compared to 2021 primarily due to the increase in net loss adjusted for non-cash items of $1.0 billion and an increase of $69 million for cash used in operating assets and liabilities.
Cash flows provided by operating activities increased by $1.0 billion during the year ended December 31, 2023 compared to the same period in 2022, primarily due to an increase in net cash adjusted for non-cash items of $658 million and an increase of $365 million for cash provided by changes in operating assets and liabilities.
Factors Affecting our Performance We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed in Part I, Item 1A, Risk Factors of this Annual Report on Form 10-K. 36 Table of Contents Key Financial and Operating Metrics We measure our business using key financial and operating metrics, as well as Adjusted EBITDA, Free Cash Flow and Adjusted Diluted (Loss) Earnings per share, see “Non-GAAP Financial Measures” below.
Factors Affecting our Performance We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed in Part I, Item 1A, Risk Factors, in this Annual Report on Form 10-K for the year ended December 31, 2023. 40 T a ble of Contents Key Financial Statement and Operating Metrics We measure our business using the key financial statement and operating metrics that are reflected in the below table.
During the year ended December 31, 2022, we were in compliance with all the terms and conditions of our debt agreements. 42 Table of Contents Stock Repurchase Program On August 21, 2020, the Board authorized the repurchase of up to $700 million of our Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan (the “2020 Repurchase Program”).
Stock Repurchase Program On August 21, 2020, the board of directors (the “Board”) authorized the repurchase of up to $700 million of our Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan (the “2020 Repurchase Program”).
Trends and Historical Cash Flows Year Ended December 31, 2022 2021 2020 (in millions) Net (loss) income $ (1,331) $ (131) $ 185 Net cash (used in) provided by operating activities $ (674) $ 410 $ 1,417 Net cash provided by (used in) investing activities $ 1 $ (515) $ (236) Net cash provided by (used in) financing activities $ 16 $ (303) $ 353 Operating Activities Cash flows in connection with operating activities consisted of net (loss) income adjusted for certain non-cash items including depreciation and amortization, equity-based compensation and certain other non-cash expenses, as well as the effect of changes in working capital and other activities.
As of December 31, 2023, we have repurchased 2,354,491 shares of Class A common stock for approximately $612 million under the Repurchase Programs. 47 T a ble of Contents Trends and Historical Cash Flows Year Ended December 31, 2023 2022 2021 (in millions) Net loss $ (738) $ (1,331) $ (131) Net cash provided by (used in) operating activities $ 349 $ (674) $ 410 Net cash (used in) provided by investing activities $ (152) $ 1 $ (515) Net cash provided by (used in) financing activities $ 77 $ 16 $ (303) Operating Activities Cash flows in connection with operating activities consisted of net loss adjusted for certain non-cash items including depreciation and amortization, equity-based compensation and certain other non-cash expenses, as well as the effect of changes in working capital and other activities.
The following table reflects the reconciliation of net (loss) income to Adjusted EBITDA for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in millions) Reconciliation of Adjusted EBITDA: Net (loss) income $ (1,331) $ (131) $ 185 Depreciation and amortization 371 322 286 Equity-based compensation and related taxes 527 374 297 Interest expense, net 27 32 146 Other expense, net 4 4 9 Provision for income taxes, net 12 1 20 Other: Impairment and other related net charges (1) 39 12 — Restructuring charges (2) 31 — 4 Gain on debt extinguishment (3) (96) — — Adjusted EBITDA $ (416) $ 614 $ 947 (1) In the year ended December 31, 2022, we recorded $40 million of lease impairment and other related charges related to changes in market conditions around future sublease income for one of our office locations in the U.S.
The following table reflects the reconciliation of net income or loss to Adjusted EBITDA for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in millions) Reconciliation of Adjusted EBITDA: Net loss $ (738) $ (1,331) $ (131) Depreciation and amortization 417 371 322 Equity-based compensation and related taxes 623 527 374 Interest expense, net 17 27 32 Other (income) expense, net (1) 4 4 Provision for income taxes, net 9 12 1 Other: Impairment and other related net charges (1) 14 39 12 Restructuring charges (2) 65 31 — Gain on debt extinguishment (3) (100) (96) — Adjusted EBITDA $ 306 $ (416) $ 614 (1) During the year ended December 31, 2023, we recorded net charges of $14 million, inclusive of $5 million related to consolidation of certain customer service centers and $9 million related to construction in progress assets at identified U.S. locations.
Year Ended December 31, 2022 2021 % Change (in millions) Gain on debt extinguishment $ (96) $ — 100.0 % Provision for income taxes, net Our provision for income taxes, net increased by $11 million in 2022 compared to 2021, primarily related to the level and mix of income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes, as well as the recognition of a lower discrete tax benefit related to excess tax benefits on equity awards for U.S. employees.
Year Ended December 31, 2023 2022 % Change (in millions) Gain on debt extinguishment $ 100 $ 96 4.2 % Provision for income taxes, net During the year ended December 31, 2023, our provision for income taxes, net decreased by $3 million or 25.0% compared to the same period in 2022, primarily related to the level and mix of income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes.
During the year ended December 31, 2022, we used approximately $506 million of the net proceeds from the issuance of the 2027 Notes to repurchase for cash approximately $375 million aggregate principal amount of the 2024 Notes and approximately $229 million aggregate principal amount of the 2025 Notes, as well as aggregate accrued interest of $2 million for both the 2024 Notes and 2025 Notes, in privately negotiated repurchase transactions.
During the year ended December 31, 2023, we used $514 million of the net transaction amount from the issuance of the 2028 Notes to repurchase for cash $83 million aggregate principal amount of the 2024 Notes and $535 million aggregate principal amount of the 2025 Notes in privately negotiated repurchase transactions.
The increase reflects our response to changing market conditions as we sought to maintain our return targets across various channels. As a percentage of net revenue, advertising expenses increased to 12.1% in 2022 compared to 10.1% in 2021 due in part to changes in advertising channel mix as well as lower direct traffic.
The decrease reflects our response to changing market conditions as we sought to maintain our return targets across various channels. As a percentage of net revenue, advertising expenses decreased to 11.6% for the year ended December 31, 2023 compared to 12.1% in the same period in 2022 due in part to maintaining efficiencies in our advertising channel mix.
As a percentage of net revenue, total customer service and merchant fees increased to 5.2% in 2022 compared to 4.3% in 2021 due to a decrease in net revenue. 39 Table of Contents Advertising In 2022, our advertising expenses increased by $95 million or 6.9% as compared to the same period in 2021.
As a percentage of net revenue, total customer service and merchant fees decreased to 4.6% for the year ended December 31, 2023 compared to 5.2% in the same period in 2022 due to decreased compensation costs. 43 T a ble of Contents Advertising During the year ended December 31, 2023, our advertising expenses decreased by $76 million or 5.2% as compared to the same period in 2022.
We have included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measure used by our management and the Board to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.
We have provided a reconciliation below of Adjusted EBITDA to net income or loss, the most directly comparable GAAP financial measure. We disclose Adjusted EBITDA because it is a key measure used by our management and the Board to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.
As a result, we expect to incur between approximately $68 million and $78 million of costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2023.
Further, on January 19, 2024, we announced a workforce realignment plan, including a workforce reduction involving approximately 1,650 employees. As a result, we expect to incur between approximately $70 million and $80 million of costs, consisting primarily of employee severance and benefit costs, most of which are expected to be incurred in the first quarter of 2024.
(3) In the year ended December 31, 2022, we recorded a $96 million gain on debt extinguishment upon repurchase of $375 million aggregate principal amount of our 2024 Notes and $229 million aggregate principal amount of our 2025 Notes. 45 Table of Contents Free Cash Flow To provide investors with additional information regarding our financial results, we have also disclosed here and elsewhere in this Annual Report on Form 10-K Free Cash Flow, a non-GAAP financial measure that we calculate as net cash provided by or used in operating activities less Capital Expenditures.
During the year ended December 31, 2022, we recorded a $96 million gain on debt extinguishment upon repurchase of $375 million in aggregate principal amount of the 2024 Notes and $229 million in aggregate principal amount of the 2025 Notes. 50 T a ble of Contents Free Cash Flow We calculate Free Cash Flow as net cash provided by or used in operating activities less Capital Expenditures.
(4) We define average order value as total net revenue in a given period divided by the orders delivered in that period. We view average order value as a key indicator of the mix of products on our sites, the mix of offers and promotions and the purchasing behavior of our customers.
(4) We define average order value as total net revenue in a given period divided by the orders delivered in that period.
Investing Activities Cash flows provided by investing activities increased by $516 million in 2022 compared to 2021 primarily due to the decrease in purchases of short- and long-term investments of $559 million and increases in sales and maturities of short- and long-term investments of $140 million, partially offset by increases of cash used in site and software development costs of $93 million and purchases of property and equipment of $85 million.
Investing Activities Cash flows used in investing activities increased by $153 million during the year ended December 31, 2023 compared to the same period in 2022, primarily due to decreases in sales and maturities of short- and long-term investments of $656 million, partially offset by decreases in purchases of short- and long-term investments of $394 million, decreases in purchases of property and equipment and site and software development costs of $107 million, and decreases in other investing activities of $2 million.
Through our e-commerce business model, we offer visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 40 million products from over 20 thousand suppliers. We believe an increasing portion of the dollars spent on home goods will be spent online and that there is an opportunity for acquiring more market share.
Overview Wayfair is one of the world’s largest online destinations for the home. Through our e-commerce business model, we offer visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 30 million products from over 20 thousand suppliers.
Refer to Part II, Item 7 of our Annual Report on Form 10-K for fiscal 2021 for a comparative discussion of our fiscal 2021 financial results as compared to fiscal 2020 filed with the SEC on February 24, 2022. Overview Wayfair is one of the world’s largest online destinations for the home.
Refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , in our Annual Report on Form 10-K for the year ended December 31, 2022 for a comparative discussion of our year ended December 31, 2022 financial results as compared to our year ended December 31, 2021 financial results filed with the SEC on February 23, 2023.
The increase in customer service and merchant fees is due to increased compensation costs.
The decrease in customer service and merchant fees is primarily due to decreased compensation costs in 2023 compared to the same period in 2022.
We qualify all of our forward-looking statements by these cautionary statements. All dollar and percentage comparisons made herein refer to the year ended December 31, 2022, compared with the year ended December 31, 2021, unless otherwise noted.
All dollar and percentage comparisons made in our MD&A refer to the year ended December 31, 2023 financial results, compared with the year ended December 31, 2022 financial results, unless otherwise noted.
Non-GAAP Financial Measures Adjusted EBITDA To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this Annual Report on Form 10-K Adjusted EBITDA, a non-GAAP financial measure that we calculate as net (loss) income before depreciation and amortization, equity-based compensation and related taxes, interest expense, net, other expense, net, provision for income taxes, net, non-recurring items and other items not indicative of our ongoing operating performance.
Adjusted EBITDA We calculate Adjusted EBITDA as net income or loss before depreciation and amortization, equity-based compensation and related taxes, interest income or expense, net, other income or expense, net, provision or benefit for income taxes, net, non-recurring items and other items not indicative of our ongoing operating performance.
We also continued to manage our advertising spend according to a return on investment-oriented approach that carefully tracks and monitors the results of advertising campaigns as we seek to maintain appropriate return targets.
We also continued to manage our advertising spend according to a return on investment-oriented approach that carefully tracks and monitors the results of advertising campaigns as we seek to maintain appropriate return targets. 39 T a ble of Contents Global Considerations We are continuing to closely monitor macroeconomic impacts, including, but not limited to, geopolitical events and rising and fluctuating interest rates and inflation on our business, results of operations and financial results.
We turn these customers into recurring shoppers by creating a seamless shopping experience across their entire journey — offering best-in-class product discovery, purchasing, fulfillment and customer service. 35 Table of Contents In fiscal year 2022, our business generated lower sales volumes compared to the previous year.
Through increasing brand awareness as well as paid and unpaid advertising, we attract new and repeat customers to our family of sites. We turn these customers into recurring shoppers by creating a seamless shopping experience across their entire journey — offering best-in-class product discovery, purchasing, fulfillment and customer service.
Allowances for sales returns are estimated and recorded based on prior returns history, recent trends and projections for returns on sales in the current period. We recognize revenue from gift cards and site credits in the period they are redeemed.
We recognize net revenue when the product has been delivered to the customer. 52 T a ble of Contents Allowances for sales returns are estimated and recorded based on prior returns history, recent trends and projections for returns on sales in the current period.
As a percentage of net revenue, total selling, operations, technology, general and administrative expenses increased to 21.5% in 2022 compared to 14.7% in 2021, primarily due to the decrease in net revenue.
The decrease is primarily due to decreased personnel and information technology costs, partially offset by increased depreciation and amortization. As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 20.4% for the year ended December 31, 2023 compared to 21.5% in the same period in 2022, primarily due to decreased compensation costs.
During the year ended December 31, 2021, we recorded a charge of $12 million as a result of enacting a plan to consolidate certain customer service centers in identified U.S. locations.
During the year ended December 31, 2023, we recorded net charges of $14 million, inclusive of $5 million related to consolidation of certain customer service centers and $9 million related to construction in progress assets at identified U.S. locations.
Selling, operations, technology, general and administrative Excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities increased by $463 million, or 27.6% in 2022 compared to 2021. The increase is primarily attributable to higher personnel costs, and to a lesser extent higher information technology costs and depreciation and amortization.
Selling, operations, technology, general and administrative During the year ended December 31, 2023, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $280 million, or 13.1% compared to the same period in 2022.
Our business model is designed to grow our net revenue by acquiring new customers as well as stimulating repeat purchases from our existing customers. Through increasing brand awareness as well as paid and unpaid advertising, we attract new and repeat customers to our family of sites.
We believe an increasing portion of the dollars spent on home goods will be spent online and that there is an opportunity for acquiring more market share. Our business model is designed to grow our net revenue by acquiring new customers as well as stimulating repeat purchases from our existing customers.
For additional information regarding our lease arrangements, see Note 5, Leases , in the notes to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.
Our MD&A is provided as a supplement to — and should be read in conjunction with — our consolidated financial statements and the accompanying Notes thereto contained in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K.
Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2022: Payment Due by Period Total Less than 1 year 1 - 3 Years 3 - 5 Years More than 5 Years (in millions) Long-term debt (1) $ 3,345 $ 42 $ 1,610 $ 1,693 $ — Operating leases (2) $ 1,345 $ 188 $ 392 $ 328 $ 437 Purchase obligations (3) $ 583 $ 210 $ 369 $ 4 $ — Other commitments (4) $ 279 $ 6 $ 39 $ 47 $ 187 (1) Represents future interest and principal payments on the Notes.
We do not have any off-balance sheet interest in variable interest entities, which include special purpose entities and other structured finance entities. 48 T a ble of Contents Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2023: Payment Due by Period Total Less than 1 year 1 - 3 Years 3 - 5 Years More than 5 Years (in millions) Short-term and long-term debt (1) $ 3,450 $ 179 $ 1,820 $ 1,451 $ — Operating leases (2) $ 1,331 $ 205 $ 417 $ 295 $ 414 Purchase obligations (3) $ 460 $ 206 $ 245 $ 9 $ — Other commitments (4) $ 144 $ 4 $ 21 $ 22 $ 97 (1) Represents future interest and principal payments on the Notes.
The decrease in cost of goods sold on an absolute dollar basis is primarily driven by a decrease in the number of orders delivered. As a percentage of net revenue, cost of goods sold increased to 72.0% in 2022 as compared to 71.6% in 2021, partially due to mix shifts, lower operational efficiencies from fewer orders and rising logistics costs.
As a percentage of net revenue, cost of goods sold decreased to 69.4% for the year ended December 31, 2023 compared to 72.0% in the same period in 2022 due to mix shifts, operational efficiencies and decreased logistics costs.
Financing Activities Cash flows provided by financing activities increased by $319 million in 2022 compared to 2021, primarily due to $678 million of proceeds from the issuance of convertible notes, net of issuance costs and lower repurchases of our Class A common stock of $225 million, partially offset by an aggregate payment of $504 million to extinguish convertible debt and $80 million of premiums paid for capped call confirmations. 43 Table of Contents Off-Balance Sheet Arrangements We do not engage in any off-balance sheet activities.
These are partially offset by increased payments to extinguish convertible debt of $10 million and increased premiums paid for capped call confirmations of $7 million. Off-Balance Sheet Arrangements We do not engage in any off-balance sheet activities.
See Note 6, Debt and Other Financing in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for more information regarding the repurchase of the 2024 Notes and the 2025 Notes.
See Note 6, Debt and Other Financing , in the notes to the consolidated financial statements, included in Part II, Item 8, Financial Statements and Supplementary Data , in this Annual Report on Form 10-K. 46 T a ble of Contents The conditional conversion features of the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes (collectively, the “Non-Accreting Notes” and together with the 2025 Accreting Notes, the “Notes”) were not triggered during the calendar quarter ended December 31, 2023, therefore, the 2024 Notes, 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes are not convertible during the calendar quarter ended March 31, 2024 pursuant to the applicable last reported sales price conditions.
In 2022, our United States (“U.S.”) net revenue decreased by $785 million, or 7.0% while our International net revenue decreased by $705 million, or 28.7% compared to 2021. International Net Revenue Constant Currency Growth (see “Non-GAAP Financial Measures” below) was (23.8)% for the year ended December 31, 2022.
During the year ended December 31, 2023, our United States (“U.S.”) net revenue increased by 0.2% and International net revenue decreased by 13.3% compared to the same period in 2022.
A further list and description of risks, uncertainties and other factors that could cause or contribute to differences in our future results include the cautionary statements herein and in our other filings with the Securities and Exchange Commission, including those set forth under Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K.
The following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ from those referred to herein due to a number of factors, including but not limited to risks described in Part I, Item 1A, Risk Factors in this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf our costs were to be subject to more significant inflationary pressures, we may not be able to fully offset such higher costs through price increases or other cost efficiency measures. Our inability or failure to do so could harm our business, financial condition and results of operations. 49 Table of Contents
Biggest changeWe continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to be subject to more significant inflationary pressures, we may not be able to fully offset such higher costs through price increases or other cost efficiency measures.
Our 2024 Notes, which were issued in November 2018, carry a fixed interest rate of 1.125% per year, our 2025 Notes, which were issued in August 2020, carry a fixed interest rate of 0.625% per year, our 2026 Notes, which were issued in August 2019, carry a fixed interest rate of 1.00% per year, our 2027 Notes, which were issued in September 2022, carry a fixed interest rate of 3.250% and our 2025 Accreting Notes, which were issued in April 2020, carry a fixed interest rate of 2.50% per year.
Our 2024 Notes, which were issued in November 2018, carry a fixed interest rate of 1.125% per year, our 2025 Notes, which were issued in August 2020, carry a fixed interest rate of 0.625% per year, our 2026 Notes, which were issued in August 2019, carry a fixed interest rate of 1.00% per year, our 2027 Notes, which were issued in September 2022, carry a fixed interest rate of 3.250%, our 2028 Notes, which were issued in May 2023, carry a fixed interest rate of 3.500% and our 2025 Accreting Notes, which were issued in April 2020, carry a fixed interest rate of 2.50% per year.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk We have operations both within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes, foreign currency fluctuations and inflation.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk We have operations both within the United States (“U.S.”) and internationally, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes, foreign currency fluctuations and inflation. Information relating to quantitative and qualitative disclosures about these market risks is below.
Information relating to quantitative and qualitative disclosures about these market risks is below. 48 Table of Contents Interest Rate Sensitivity Cash and cash equivalents and short-term investments were held primarily in cash deposits, certificates of deposit, money market funds and investment grade corporate debt.
Interest Rate Sensitivity Cash and cash equivalents and short-term investments were held primarily in cash deposits, certificates of deposit, money market funds and investment grade corporate debt.
The effect of foreign currency exchange on our business historically has varied from quarter to quarter and may continue to do so, potentially materially. In addition, global economic conditions may result in changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our net revenue as expressed in U.S. dollars.
In addition, global economic conditions may result in changes in exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our net revenue as expressed in U.S. dollars. Inflation In fiscal 2023, we began to see normalization of inflationary pressures in the supply chain.
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Inflation In fiscal year 2022, we saw inflationary pressures across various parts of our business and operations, including, but not limited to, wholesale cost inflation and rising costs across our supply chain. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions.
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The effect of foreign currency exchange on our business historically has varied from quarter to quarter and may continue to do so, potentially 53 T a ble of Contents materially.
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Our inability or failure to do so could harm our business, financial condition and results of operations. 54 T a ble of Contents

Other W 10-K year-over-year comparisons