Wayfair Inc. (W)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the company, our operations and our present business environment. 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.

All dollar and percentage comparisons made in our MD&A refer to the year ended December 31, 2024 financial results, compared with the year ended December 31, 2023 financial results, unless otherwise noted. 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, 2023 for a comparative discussion of our year ended December 31, 2023 financial results as compared to our year ended December 31, 2022 financial results filed with the SEC on February 22, 2024.

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.

Overview

Wayfair is the destination for all things 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.

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. Through increasing brand awareness as well as paid and unpaid advertising, we attract new and repeat customers to our family of sites. We aim to 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.

During the year ended December 31, 2024, net revenue decreased by 1.3% compared to the same period in 2023. As of December 31, 2024, we had 21 million active customers and during the year ended December 31, 2024, 80.1% of orders came from repeat buyers. The lower sales were due to lower order volume, which was driven by challenges in the category such as macroeconomic pressures, including consumer spending patterns and housing market conditions, compared to the same period in 2023. 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.

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Global Considerations

We closely monitor macroeconomic conditions, including, but not limited to, economic instability, changes in tax laws, regulations and new or increased tariffs, including based on the recent United States (“U.S.”) presidential election, sustained higher interest rates and inflationary pressures, on our business, results of operations and financial results. These developments have and may continue to negatively impact global economic activity and consumer behavior, which have and may continue to adversely affect our business and our results of operations. As our customers react to these global economic conditions, we may take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity.

While it is difficult to quantify and predict all of the impacts these global economic events, including fluctuating interest rates and inflationary pressures, 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.

We will continue to monitor economic conditions as we work to manage our business to meet the evolving needs of our customers, employees, suppliers, partners, stockholders and communities.

Germany Restructuring

On January 10, 2025, we announced our decision to exit the German market (the “Germany Restructuring”), including a workforce reduction impacting approximately 730 employees, although we expect approximately half of these positions to relocate to other corporate offices. As a result of the Germany Restructuring, we expect to incur aggregate charges of approximately $102 million to $111 million, consisting of (i) approximately $40 million to $44 million in employee-related costs, including severance, benefits, relocation and transition costs and (ii) approximately $62 million to $67 million of other primarily non-cash charges, including gross impairment charges related to facility closures and other wind-down activities and excluding any recoveries that may be recognized related to our leases.

During the year ended December 31, 2024, Wayfair recorded impairment charges of $34 million associated with weakened macroeconomic conditions in connection with our German operations. This is inclusive of $21 million related to ROU assets and $13 million related to property, plant and equipment. Wayfair expects to incur the remainder of the aggregate charges during the first quarter of 2025.

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, 2024.

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. See “Non-GAAP Financial Measures” below for more information regarding our use of Adjusted EBITDA, Free Cash Flow and Adjusted Diluted Earnings or Loss per Share and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure that is prepared in accordance with accounting principles generally accepted in the United States of America or “GAAP.”

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.

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We use the following metrics to assess the near and longer-term performance of our overall business:

(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. The change in active customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the last twelve months. We view the number of active customers as a key indicator of our growth.

(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.

(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. We recognize net revenue when an order is delivered, and therefore orders delivered, together with average order value, is an indicator of the net revenue we expect to recognize in a given period. We view orders delivered as a key indicator of our growth.

(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.

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Results of Consolidated Operations

Net revenue

During the year ended December 31, 2024, net revenue decreased by $152 million, or 1.3%, compared to the same period in 2023, which reflects continued macroeconomic pressures felt by consumers. The decrease in net revenue is due to lower order volume, which was driven by challenges in the category such as macroeconomic pressures, including consumer spending patterns and housing market conditions, compared to the same period in 2023.

During the year ended December 31, 2024, our U.S. net revenue decreased by 1.0% and International net revenue decreased by 2.8% compared to the same period in 2023. During the year ended December 31, 2024, International Net Revenue Constant Currency Growth was (2.7)% (see “Non-GAAP Financial Measures” below for more information regarding our use of Net Revenue Constant Currency Growth).

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.

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. During the year ended December 31, 2024, cost of goods sold decreased by $59 million, or 0.7%, compared to the same period in 2023. The decrease in cost of goods sold is driven by a combination of operational cost savings initiatives and lower order volume, which was driven by challenges in the category such as macroeconomic pressures, including consumer spending patterns and housing market conditions, compared to the same period in 2023.

As a percentage of net revenue, cost of goods sold increased to 69.8% for the year ended December 31, 2024, compared to 69.4% in the same period in 2023 due to mix shifts and lower net revenue.

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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. We disclose separately the equity-based compensation and related taxes that are included in customer service and merchant fees and selling, operations, technology and general and administrative expenses.

(1) Includes equity-based compensation and related taxes as follows:

During the year ended December 31, 2024, our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative decreased by $212 million, or 34.6%, compared to the same period in 2023, driven by a decrease in vested restricted stock units during the year ended December 31, 2024, compared to the same period in 2023.

The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes:

Customer Service and Merchant Fees

During the year ended December 31, 2024, excluding the impact of equity-based compensation, our expenses for customer service and merchant fees decreased by $77 million, or 14.6%, compared to the same period in 2023. The decrease in customer service and merchant fees is primarily due to decreased compensation costs during the year ended December 31, 2024, compared to the same period in 2023.

As a percentage of net revenue, total customer service and merchant fees decreased to 4.0% for the year ended December 31, 2024, compared to 4.6% in the same period in 2023 due to decreased compensation costs.

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Advertising

During the year ended December 31, 2024, our advertising expenses increased by $75 million, or 5.4%, compared to the same period in 2023. The increase reflects our response to changing market conditions and renewed investment opportunities, as we sought to maintain our return targets across various channels.

As a percentage of net revenue, advertising expenses increased to 12.4% for the year ended December 31, 2024 compared to 11.6% in the same period in 2023 due to changes in our advertising channel mix as we seek to maximize returns on advertising spend within our efficiency parameters.

Selling, operations, technology, general and administrative

During the year ended December 31, 2024, excluding the impact of equity-based compensation and related taxes, our expenses for selling, operations, technology, general and administrative activities decreased by $268 million, or 14.4% compared to the same period in 2023. The decrease is primarily due to decreased compensation costs.

As a percentage of net revenue, total selling, operations, technology, general and administrative expenses decreased to 16.7% for the year ended December 31, 2024, compared to 20.4% in the same period in 2023, primarily due to decreased compensation costs.

Impairment and other related net charges

During the year ended December 31, 2024, impairment and other related charges increased by $23 million, or 164.3% compared to the same period in 2023. As a percentage of net revenue, impairment and other related net charges increased to 0.3% from 0.1% in the same period in 2023.

During the year ended December 31, 2024, we recorded net charges of $37 million, inclusive of $34 million associated with weakened macroeconomic conditions in connection with our German operations, $2 million related to changes in sublease market conditions and $1 million related to construction in progress assets at 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.

Restructuring charges

During the year ended December 31, 2024, restructuring charges increased by $14 million, or 21.5%, compared to the same period in 2023. As a percentage of net revenue, restructuring charges increased to 0.7% from 0.5% in the same period in 2023.

During the year ended December 31, 2024, we incurred $79 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2024 workforce reductions. During the year ended December 31, 2023, we incurred $65 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2023 workforce reductions.

Interest expense, net

During the year ended December 31, 2024, interest expense, net increased to $29 million, compared to $17 million in the same period in 2023, primarily driven by the issuances of the 2029 Secured Notes and 2028 Notes (as defined below) in October 2024 and May 2023, respectively.

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Other (expense) income, net

During the year ended December 31, 2024, other (expense) income, net increased by $22 million, or 2,200.0%, compared to the same period in 2023, primarily driven by foreign currency rate fluctuations between the U.S. Dollar and the Canadian Dollar. Included in other (expense) income, net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

Gain on debt extinguishment

During the year ended December 31, 2024, gain on debt extinguishment decreased by $71 million, or 71.0%, compared to the same period in 2023.

During the year ended December 31, 2024, we recorded a $29 million gain on debt extinguishment, representing the difference between the cash paid for principal, plus accrued and unpaid interest and transaction fees of $741 million and the combined net carrying value of the 2025 Notes, 2026 Notes and 2025 Accreting Notes (as defined below) of $770 million.

During the year ended December 31, 2023, we recorded a $100 million gain on debt extinguishment, representing the difference between the cash paid for principal of $514 million and the combined net carrying value of the 2024 Notes and 2025 Notes (as defined below) of $614 million.

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.

Provision for income taxes, net

During the year ended December 31, 2024, our provision for income taxes, net increased by $1 million, or 11.1%, compared to the same period in 2023, primarily related to the level and mix of income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes. 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.

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Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2024, our principal source of liquidity was cash and cash equivalents and short-term investments totaling $1.4 billion. Additionally, we have a $600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”). As of December 31, 2024, there were no revolving loans outstanding under the Revolver. We had outstanding letters of credit, primarily as security for certain lease agreements, for $71 million as of December 31, 2024, which reduced the availability of credit under the Revolver. Excluding liquidity available through our Revolver, the following table shows sources of liquidity for the periods presented:

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. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. In addition, we may elect to raise additional funds at any time through equity, equity-linked or debt financing arrangements. Further, we may from time to time seek to retire, restructure, repurchase or redeem, or otherwise mitigate the equity dilution associated with our outstanding convertible debt through cash purchases, stock buybacks of some or all of the shares underlying convertible notes and/or exchanges for equity or debt in open-market purchases, privately negotiated transactions or otherwise. 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.

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. In addition, macroeconomic events have caused disruption in the capital markets, including increased inflation and interest rates, which could make obtaining financing more difficult and/or expensive. As a consequence, we may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt financing arrangements, those securities and instruments may have rights, preferences or privileges senior to the rights of our common stock, and the holders of our equity securities may experience dilution. We will continue to monitor our liquidity during this time of historic disruption and volatility in the global capital markets.

Credit Agreement and Debt Arrangements

As of December 31, 2024, we had $3.2 billion principal amount of indebtedness outstanding. Our indebtedness includes 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 2025 Notes, 2026 Notes and 2027 Notes, the “Non-Accreting Notes”), and 7.250% Senior Secured Notes due 2029 that mature on October 31, 2029 (the “2029 Secured Notes” and together with the Non-Accreting Notes, the “Notes”)

Under the terms of our Revolver, we may use proceeds to finance working capital, to refinance existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes. Any amounts outstanding under the Revolver are due at maturity.

On October 8, 2024, Wayfair LLC (the “Issuer”), a subsidiary of Wayfair, issued $800 million aggregate principal amount of the 2029 Secured Notes. The 2029 Secured Notes will mature on October 31, 2029, unless earlier redeemed, in accordance with their terms or repurchased. The indenture contains covenants that restrict the Issuer’s ability and the ability of its restricted subsidiaries to, among other things, incur additional indebtedness, declare or pay dividends, redeem stock or make other distributions or restricted payments, make certain investments, create certain liens, enter into certain transactions with affiliates,

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agree to certain restrictions on the ability of the Issuer’s restricted subsidiaries to make certain payments, sell or transfer certain assets and consolidate, merge, sell or otherwise dispose of all or substantially all of the Issuer’s or its restricted subsidiaries’ assets.

On November 1, 2024, our 1.125% Convertible Senior Notes due 2024 (the “2024 Notes”) matured and we paid in cash the remaining outstanding principal amount of $117 million to the holders of the 2024 Notes.

On November 11, 2024, we repurchased $518 million in aggregate principal amount of the 2025 Notes, $215 million in aggregate principal amount of the 2026 Notes and the remaining $39 million in aggregate principal amount of the 2025 Accreting Notes, in privately negotiated transactions. 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 additional information on debt and other financing transactions.

The conditional conversion features of the 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes were not triggered during the calendar quarter ended December 31, 2024, therefore, the 2025 Notes, 2026 Notes, 2027 Notes and 2028 Notes are not convertible during the calendar quarter ended March 31, 2025 pursuant to the applicable last reported sales price conditions.

Whether any of the Non-Accreting Notes will be convertible in future quarters will depend on the satisfaction of the applicable last reported sales price condition or another conversion condition in the future. If one or more holders elect to convert their Non-Accreting Notes at a time when any such Non-Accreting Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

The credit agreement and indentures governing our convertible notes contain restrictions and covenants that may limit our operating flexibility. Specifically, the Revolver contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict our ability, subject to negotiated exceptions, to incur additional indebtedness and additional liens on our assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, or change the nature of our businesses. 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. For information regarding our credit agreement and other 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. As of December 31, 2024, we were in compliance with all the terms and conditions of our debt agreements.

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”). On August 10, 2021, the Board authorized a new $1.0 billion share repurchase program on the same terms (the “2021 Repurchase Program” together with the 2020 Repurchase Program, the “Repurchase Programs”). There is no stated expiration date for the Share Repurchase Programs. We will begin repurchasing shares under the 2021 Repurchase Program upon the completion of the 2020 Repurchase Program.

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. 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. As of December 31, 2024, we have repurchased 2,354,491 shares of Class A common stock for approximately $612 million under the Repurchase Programs.

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Trends and Historical Cash Flows

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. Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net loss.

Cash flows provided by operating activities decreased by $32 million during the year ended December 31, 2024, compared to the same period in 2023, primarily due to a decrease of $135 million for cash changes in operating assets and liabilities partially offset by an increase in net loss adjusted for non-cash items of $103 million.

Investing Activities

Cash flows used in investing activities increased by $110 million during the year ended December 31, 2024, compared to the same period in 2023, primarily due to decreases in sales and maturities of short- and long-term investments of $194 million, increases in purchases of short- and long-term investments of $31 million and decreases of other investing activities of $2 million, partially offset by decreases in purchases of property and equipment and site and software development costs of $117 million.

Purchases of property and equipment and site and software development costs (collectively, “Capital Expenditures”) were 2.0% of net revenue for the year ended December 31, 2024 and related primarily to equipment purchases and improvements for leased warehouses within our expanding logistics network and ongoing investments, including our physical retail store expansion, proprietary technology and operational platform.

Financing Activities

Cash flows used in financing activities increased by $146 million during the year ended December 31, 2024, compared to the same period in 2023. The increase in cash used is primarily due to increases in payments for extinguishments of debt of $227 million and debt maturities of $117 million. These are partially offset by increases in proceeds from the issuance of debt of $108 million, decreases in premiums paid for capital call confirmations of $87 million and other financing inflows of $3 million.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet activities. We do not have any off-balance sheet interest in variable interest entities, which include special purpose entities and other structured finance entities.

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Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2024:

(1) Represents future interest and principal payments on the Notes. For information regarding the 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, in 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 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.

(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.

Non-GAAP Financial Measures

To provide investors with additional information regarding our financial results, we have disclosed in this Annual Report on Form 10-K the following non-GAAP financial measures: Adjusted EBITDA, Free Cash Flow, Adjusted Diluted Earnings or Loss per Share and Net Revenue Constant Currency Growth.

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 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. In particular, we believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis as these costs may vary independent of business performance. For instance, we exclude the impact of equity-based compensation and related taxes as we do not consider this item to be indicative of our core operating performance. Investors should, however, understand that equity-based compensation and related taxes will be a significant recurring expense in our business and an important part of the compensation provided to our employees. 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.

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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. Some of these limitations are:

•Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA does not reflect equity-based compensation and related taxes;

•Adjusted EBITDA does not reflect changes in our working capital;

•Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;

•Adjusted EBITDA does not reflect interest expenses associated with our borrowings;

•Adjusted EBITDA does not include other items not indicative of our ongoing operating performance; and

•Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.

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.

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

Free Cash Flow

We calculate Free Cash Flow as net cash provided by or used in operating activities less Capital Expenditures. 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. Accordingly, we believe that Free Cash Flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Free Cash Flow has limitations as an analytical tool because it omits certain components of the cash flow statement and does not represent the residual cash flow available for discretionary expenditures. Further, other companies, including companies in our industry, may calculate Free Cash Flow differently. Accordingly, you should not consider Free Cash Flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, you should consider Free Cash Flow

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alongside other financial performance measures, including net cash provided by or used in operating activities, Capital Expenditures, and our other GAAP results.

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:

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.

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.

Net Revenue Constant Currency Growth 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, Net Revenue Constant Currency Growth rates, by their nature, exclude the impact of foreign exchange, which may have a material impact on net revenue.

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. 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.

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. 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.

Because of these limitations, you should consider Adjusted Diluted Earnings or Loss per Share alongside other financial performance measures.

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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:

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, net revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. 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.

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. 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 recognize net revenue when the product has been delivered to the customer.

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. These estimates are based on historical rates of customer returns and allowances as well as the specific identification of outstanding returns that have not yet been received by us. The actual amount of customer returns and allowances are inherently uncertain and may differ from our estimates. If we determine that actual or expected returns or

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allowances are significantly higher or lower than the reserves established, we record a reduction or increase, as appropriate to net revenue in the period in which we make such a determination.

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. As most of our leases do not provide an implicit rate, we use an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date to determine the present value of future payments. The determination of the IBR requires judgment and is primarily based on publicly-available information for companies within the same industry and with similar credit profiles. We adjust the rate for the impact of collateralization, the lease term and other specific terms included in each lease arrangement. The IBR is determined at lease commencement and is subsequently reassessed upon a modification to the lease arrangement.

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.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the company, our operations and our present business environment. 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.

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. 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 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.

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.

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. 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.

During the year ended December 31, 2023, net revenue decreased by 1.8% compared to the same period in 2022. As of December 31, 2023, we had 22 million active customers and during the year ended December 31, 2023, 79.6% of orders came from repeat buyers. The lower sales were a function of normalization in average order value following a period of intense inflation in 2022, which were offset by a recovery in order volume, which showed positive growth year-over-year. 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.

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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. These developments have and may continue to negatively impact global economic activity and consumer behavior, which have and may continue to adversely affect our business and our results of operations. As our customers react to these global economic conditions, we may take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity.

While it is difficult to quantify and predict all of the impacts these global economic events, including rising and fluctuating 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.

We will continue to monitor economic conditions as we work to manage our business to meet the evolving needs of our customers, employees, suppliers, partners, stockholders and communities.

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.

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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. See “Non-GAAP Financial Measures” below for more information regarding our use of Adjusted EBITDA, Free Cash Flow and Adjusted Diluted Earnings or Loss per Share and a reconciliation of these non-U.S. generally accepted accounting principles (“GAAP’) financial measures to the most directly comparable GAAP financial measure.

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.

We use the following metrics to assess the near and longer-term performance of our overall business:

(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. The change in active customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the last twelve months. We view the number of active customers as a key indicator of our growth.

(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.

(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. We recognize net revenue when an order is delivered, and therefore orders delivered, together with average order value, is an indicator of the net revenue we expect to recognize in a given period. We view orders delivered as a key indicator of our growth.

(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.

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Results of Consolidated Operations

Net revenue

During the year ended December 31, 2023, net revenue decreased by $215 million, or 1.8%, compared to the same period in 2022, which reflects recent macroeconomic pressures felt by consumers. The decrease in net revenue was due to lower average order value due, in part, to normalization of inflationary pressures in the supply chain compared to the same period in 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. During the year ended December 31, 2023, International Net Revenue Constant Currency Growth was (11.6)% (see “Non-GAAP Financial Measures” below for more information regarding our use of Net Revenue Constant Currency Growth).

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.

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. During the year ended December 31, 2023, cost of goods sold decreased by $466 million, or 5.3%, compared to the same period in 2022. The decrease in cost of goods sold is primarily driven by operational cost savings initiatives.

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.

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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. We disclose separately the equity-based compensation and related taxes that are included in customer service and merchant fees and selling, operations, technology and general and administrative expenses.

(1) Includes equity-based compensation and related taxes as follows:

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.

The following table summarizes operating expenses as a percentage of net revenue, excluding equity-based compensation and related taxes:

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. The decrease in customer service and merchant fees is primarily due to decreased compensation costs in 2023 compared to the same period in 2022.

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.

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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. 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.

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. 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.

Impairment and other related net charges

During the year ended December 31, 2023, impairment and other related charges decreased by $25 million or 64.1% as compared to the same period in 2022. As a percentage of net revenue, impairment and other related net charges decreased to 0.1% from 0.3% in the same period in 2022.

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. 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.

Restructuring charges

During the year ended December 31, 2023, restructuring charges increased by $34 million or 109.7% as compared to the same period in 2022. As a percentage of net revenue, restructuring charges increased to 0.5% from 0.3% in the same period in 2022.

During the year ended December 31, 2023, we incurred $65 million of charges consisting primarily of one-time employee severance and benefit costs associated with the January 2023 workforce reductions. During the year ended December 31, 2022, we incurred $31 million of charges consisting primarily of one-time employee severance and benefit costs associated with the August 2022 workforce reductions.

Interest expense, net

During the year ended December 31, 2023, our interest expense, net decreased by $10 million, or 37.0%, compared to the same period in 2022, primarily driven by higher interest income.

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Other income (expense), net

During the year ended December 31, 2023, we recorded other income, net of $1 million, compared to other expense, net of $4 million in the same period in 2022, primarily driven by increases in foreign currency transaction gains. Included in other income (expense), net are changes in foreign currency transaction gains and losses and long-term investment income or losses.

Gain on debt extinguishment

During the year ended December 31, 2023, our gain on debt extinguishment increased by $4 million or 4.2% compared to the same period in 2022. In connection with the issuance of our 2028 Notes, we recorded a $100 million gain on debt extinguishment, representing the difference between the cash paid for principal of $514 million and the combined net carrying value of the 2024 Notes and 2025 Notes of $614 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.

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.

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. 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.

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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. 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. 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. Excluding liquidity available through our Revolver, the following table shows sources of liquidity for the periods presented:

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. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. In addition, we may elect to raise additional funds at any time through equity, equity-linked or debt financing arrangements. Further, we may from time to time seek to retire, restructure, repurchase or redeem, or otherwise mitigate the equity dilution associated with our outstanding convertible debt through cash purchases, stock buybacks of some or all of the shares underlying convertible notes and/or exchanges for equity or debt in open-market purchases, privately negotiated transactions or otherwise. 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.

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.

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. In addition, macroeconomic events have caused disruption in the capital markets, including increased inflation and interest rates, which could make obtaining financing more difficult and/or expensive. As a consequence, we may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt financing arrangements, those securities and instruments may have rights, preferences or privileges senior to the rights of our common stock, and the holders of our equity securities may experience dilution. 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.

Under the terms of our Revolver, we may use proceeds to finance working capital, to refinance existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes. Any amounts outstanding under the Revolver are due at maturity.

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. 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.

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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. 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.

Whether any of the Non-Accreting Notes will be convertible in future quarters will depend on the satisfaction of the applicable last reported sales price condition or another conversion condition in the future. If one or more holders elect to convert their Non-Accreting Notes at a time when any such Non-Accreting Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.

The credit agreement and indentures governing our convertible notes contain restrictions and covenants that may limit our operating flexibility. Specifically, the Revolver contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict our ability, subject to negotiated exceptions, to incur additional indebtedness and additional liens on our assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, or change the nature of our businesses. 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. 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. As of December 31, 2023, we were in compliance with all the terms and conditions of our debt agreements.

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”). On August 10, 2021, the Board authorized a new $1.0 billion share repurchase program on the same terms (the “2021 Repurchase Program” together with the 2020 Repurchase Program, the “Repurchase Programs”). There is no stated expiration date for the Share Repurchase Programs. We will begin repurchasing shares under the 2021 Repurchase Program upon the completion of the 2020 Repurchase Program.

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. 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. 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.

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Trends and Historical Cash Flows

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. Operating cash flows can be volatile and are sensitive to many factors, including changes in working capital and our net loss.

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.

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.

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.

Financing Activities

Cash flows provided by financing activities increased by $61 million during the year ended December 31, 2023 compared to the same period in 2022, primarily due to $75 million of repurchases of our Class A common stock and $3 million of principal payments upon maturity of convertible debt, both of which occurred during the year ended December 31, 2022. 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. We do not have any off-balance sheet interest in variable interest entities, which include special purpose entities and other structured finance entities.

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Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2023: