
Delaware			36-4791999
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification Number)
4 Copley Place	Boston	MA	02116
(Address of principal executive offices)			(Zip Code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	W	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Class						Outstanding at ~~October 27, 2020~~April 29, 2021
Class A Common Stock, $0.001 par value per share						~~72,811,806~~77,635,388
Class B Common Stock, $0.001 par value per share						~~26,636,234~~26,563,909

~~This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),~~Item 1. Unaudited Consolidated and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our investment plans and anticipated returns on those investments, our future customer growth, our future results of operations and financial position, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, consumer activity and behaviors, developments in our technology and systems and anticipated results of those developments and the impact of the novel coronavirus (COVID-19) pandemic and our response to it, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions.

Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

~~Factors that could cause or contribute to differences in our future results include, without limitation, the following:~~

•~~our ability to acquire new customers and sustain and/or manage our growth;~~

•~~our ability to increase our net revenue per active customer;~~

•~~our ability to build and maintain strong brands;~~

•~~our ability to manage our global growth and expansion;~~

•~~our ability to compete successfully;~~

•~~the rate of growth of the Internet and e-commerce;~~

•~~economic factors, such as interest rates, the housing market, currency exchange fluctuations and changes in customer spending;~~

•~~disruptions or inefficiencies in our supply chain or logistics network, including any impact of the COVID-19 outbreak on our suppliers and third party carriers and delivery agents;~~

•~~potential impacts of the COVID-19 outbreak on our business, financial condition, and results of operations;~~

•~~world events (such as the 2020 U.S. presidential election), natural disasters, public health emergencies (such as the COVID-19 outbreak), civil disturbances, and terrorist attacks; and~~

•developments in, and the outcome of, legal and regulatory proceedings and investigations to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith.

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 II, Item 1A, ~~Risk Factors~~ ~~of this Quarterly Report on Form 10-Q and under Part I, Item 1A,~~ ~~Risk Factors~~ ~~in our Annual Report on Form 10-K for the year ended December 31, 2019. We qualify all of our forward-looking statements by these cautionary statements.~~Condensed Financial Statements

Accounts receivable, net of allowance for credit losses of $26,884 and $22,774 at September 30, 2020 and December 31, 2019, respectively

~~The accompanying~~See notes ~~are an integral part of these Unaudited Consolidated~~to unaudited consolidated and ~~Condensed Financial Statements.~~condensed financial statements.

Three Months Ended
Class A and Class B Common Stock
Shares Amount Additional
Paid-In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive Loss Total
Stockholders'
Deficit
(in thousands)
Balance at June 30, 2019 92,098 $ 93 $ 859,092 $ (1,463,166) $ (1,376) $ (605,357)
Net loss — — — (272,035) — (272,035)
Other comprehensive loss — — — — (80) (80)
Exercise of options to purchase common stock 3 — 10 — — 10
Issuance of common stock upon vesting of RSUs 781 — — — — 0
Shares withheld related to net settlement of RSUs (8) — (1,086) — — (1,086)
Equity-based compensation expense — — 65,553 — — 65,553
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15) — — 130,566 — — 130,566
Balance at September 30, 2019 92,874 93 1,054,135 (1,735,201) (1,456) $ (682,429)
Balance at June 30, 2020 95,065 $ 95 $ 1,295,971 $ (2,082,934) $ (524) $ (787,392)
Net income — — — 173,166 — 173,166
Other comprehensive loss — — — — (1,501) (1,501)
Exercise of options to purchase common stock 6 — 161 — — 161
Issuance of common stock upon vesting of RSUs 787 1 — — — 1
Equity-based compensation expense — — 74,425 — — 74,425
Repurchase of common stock (844) (1) (280,235) — — (280,236)
Shares issued upon conversion of convertible notes (Note 15) 583 1 151,419 — — 151,420
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes (Note 15) — — (829,004) — — (829,004)
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15) — — 39,374 — — 39,374
Balance at September 30, 2020 95,597 $ 96 $ 452,111 $ (1,909,768) $ (2,025) $ (1,459,586)

~~The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.~~

~~The accompanying~~See notes ~~are an integral part of these Unaudited Consolidated~~to unaudited consolidated and ~~Condensed Financial Statements.~~condensed financial statements.

1. ~~Description of Business~~

Wayfair Inc. (the "Company") is one of the world's largest online destinations for the home. Through its e-commerce business model, the Company offers visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over 18 million products from over 12,000 suppliers.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited ~~Consolidated~~consolidated and ~~Condensed Financial Statements~~condensed financial statements contained in this Quarterly Report on Form 10-Q are those of Wayfair Inc. and its wholly-owned subsidiaries. Unless the ~~Company~~context indicates otherwise, references to “we,” “us” and “our” refer to Wayfair Inc. and its subsidiaries. In our opinion, the accompanying unaudited consolidated and condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial ~~reporting.~~reporting and reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results of the interim periods presented. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. ~~As such, the~~The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~

The Consolidated and Condensed Balance Sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.

The accompanying unaudited Consolidated and Condensed Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the results of the2020. Furthermore, interim ~~periods presented. Interim~~ results are not necessarily indicative of the results for the full year ended December 31, 2020 or future periods.

Wayfair believes that other than the ~~implementation~~adoption of ~~Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"),~~new accounting pronouncements that follow, there have been no significant changes during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 to the items disclosed in Note 2,1, Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

~~Principles~~Adoption of ~~Consolidation~~New Accounting Pronouncements

~~The accompanying unaudited Consolidated and Condensed Financial Statements of Wayfair Inc. include its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.~~Convertible Debt

~~Use of Estimates~~

The preparation of the unaudited Consolidated and Condensed Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~Earnings (Loss) per Share~~

The Company follows the two-class method when computing earnings (loss) per share for its two issued classes of common stock - Class A and Class B. Basic earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, stock awards, including stock options and restricted stock units, as determined under the treasury stock method, and convertible debt instruments, as determined under the if-converted method. In periods when we have a net loss, stock awards and convertible debt instruments are excluded from our calculations of earnings per share as their inclusion would have an antidilutive effect.

~~Credit Impairment~~

~~The Company~~Wayfair adopted ASU ~~No. 2016-13~~2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) ("ASU 2020-06") on January 1, ~~2020~~2021 using the modified retrospective ~~transition method. This ASU revises how entities account~~approach for ~~credit losses for most~~all financial ~~assets and certain other~~ instruments that are outstanding as of the adoption date. The new standard eliminates the cash conversion and beneficial conversion feature models that previously required separate accounting for conversion features. Entities that had those conversion features will report less interest expense as those conversion features were recorded as debt discounts which were amortized over the term of the debt. In addition, this ASU requires the application of the if-converted method when calculating diluted earnings per share. Under the new standard, the conversion of debt that is accounted for as a liability in its entirety will not ~~measured~~result in any gain or loss if the conversion feature is exercised according to the original conversion terms. If those terms allowed the issuer to include cash as part of the settlement of the conversion feature, the issuer will first reduce the carrying amount of the convertible debt, including any unamortized premium, discount or issuance costs, by the value of the cash or other assets transferred and then recognize the remaining carrying value of the debt in the capital accounts.

The adoption of ASU 2020-06 resulted in the following adjustments to the consolidated and condensed balance sheet:


	January 1, 2021		Adoption of ASU 2020-06		December 31, 2020
	(in thousands)
Balance sheet line item:
Long-term debt	$	3,310,065	$	650,822	$	2,659,243
Other non-current liabilities	$	46,413	$	(20,618)	$	67,031
Additional paid-in capital	$	0	$	(698,482)	$	698,482
Accumulated deficit	$	(1,817,671)	$	68,279	$	(1,885,950)

The adoption of ASU 2020-06 resulted in the following adjustments to our calculations of basic and diluted earnings per share for the three months ended March 31, 2021:


	Under ASU 2020-06		Difference		Under Legacy Accounting
Earnings (loss) per share:
Basic	$	0.18	$	0.49	$	(0.31)
Diluted	$	0.16	$	0.47	$	(0.31)

The adoption of ASU 2020-06 did not materially impact our cash flows or compliance with debt covenants.

~~at fair value through net income.~~ Wayfair adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) on January 1, 2021, using the modified retrospective approach. This ASU simplifies the accounting for income taxes, removes certain exceptions to the general principles in Topic 740, and clarifies and amends existing guidance to improve consistent application. The effect of adoption of the new guidance was not material to our consolidated financial statements.

2. Supplemental Financial Statement Disclosures

Accounts Receivables, Net

As of ~~January 1,~~March 31, 2021, we reported accounts receivable of $107.0 million, net of allowance for credit losses of $16.7 million. As of December 31, 2020, we reported accounts receivable of $110.3 million, net of allowance for credit losses of $21.4 million. The changes in the ~~adoption~~allowance for credit losses were not material for the three months ended March 31, 2021. Management believes credit risk is mitigated since approximately 99% of ~~ASU 2016-13~~ ~~resulted~~the net revenue recognized for the three months ended March 31, 2021 was collected in ~~a $5.5~~advance of recognition.

Contractual Liabilities

Contractual liabilities included in other current liabilities was $354.1 million ~~cumulative adjustment to accumulated deficit on our Consolidated~~at March 31, 2021 and ~~Condensed Balance Sheet.~~$298.1 million at December 31, 2020. During the three months ended March 31, 2021, Wayfair recognized $223.8 million of net revenue that was included in other current liabilities as of December 31, 2020.

Net revenue from contracts with customers is disaggregated by geographic region because this manner of disaggregation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors. Refer to Note 4,10, ~~Credit Losses~~Segment and Geographic Information, for additional detail.

Customer Service Center Impairment and Other Charges

During the first quarter of 2021, Wayfair enacted a plan to consolidate certain customer service centers in identified U.S. locations to transition toward virtual service models. Factors that influenced our decision were our ability to utilize a greater use of remote and home office applications and our ability to provide superior customer care, which we continued to evaluate through the beginning of the first quarter of 2021. As a result, we recorded a charge of $12.2 million during the first quarter of 2021, which included $6.3 million for the non-cash impairment of right-of-use (“ROU”) assets, $5.0 million for the non-cash accelerated depreciation of fixed assets and the remainder for other items. The impairment of ROU assets represents the excess of estimated future remaining call center lease commitments over expected future sublease income in certain affected facilities.

3. Cash and Cash Equivalents, Investments and Fair Value Measurements

As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, the Company's investments~~2020, all of Wayfair’s marketable securities, which primarily consisted of corporate bonds and other government obligations that are priced at fair ~~value. These investments~~value, were classified as available-for-sale ~~and their estimated fair values were $114.0 million and $559.9 million, respectively.~~

To the extent the amortized cost basis of the available-for-sale debt securities exceeds the fair value, management assesses the debt securities for credit loss, however management considers the risk of credit loss to be minimized by the Company's policy of investing in financial instruments issued by highly-rated financial institutions. When assessing the risk of credit loss, management considers factors such as the severity and the reason of the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management's intended holding period and time horizon for selling.investments. During the three ~~and nine~~ months ended ~~September 30, 2020 and 2019, the Company~~March 31, 2021, Wayfair did 0t ~~recognize~~have any credit losses related to its available-for-sale debt securities. Further, as of September 30, 2020 and December 31, 2019, the Company did 0t record an allowance for credit losses related to its available-for-sale debt securities.realized gains or losses. During the ~~nine~~three months ended ~~September 30,~~March 31, 2020, ~~the Company~~Wayfair collected $161.3 million of proceeds from the sale of long-term investments and recognized a realized gain of $0.8 million. ~~The Company~~During the three months ended March 31, 2021 and March 31, 2020, Wayfair did 0t recognize any ~~realized gains or~~credit losses ~~during the three months ended September 30, 2020 or during the three and nine months ended September 30, 2019.~~

~~The following tables present details of the Company’s investments~~related to its available-for-sale debt securities. Further, as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

September 30, 2020
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value
(in thousands)
Short-term:
Investment securities $ 113,886 $ 99 $ 0 $ 113,985
Total $ 113,886 $ 99 $ 0 $ 113,985

December 31, 2019
Amortized
Cost Gross Unrealized Gains Gross
Unrealized
Losses Estimated
Fair Value
(in thousands)
Short-term:
Investment securities $ 404,294 $ 20 $ (62) $ 404,252
Long-term:
Investment securities 155,616 92 (18) 155,690
Total $ 559,910 $ 112 $ (80) $ 559,942

2020, Wayfair did 0t record an allowance for credit losses related to its available-for-sale debt securities.

The following tables present details of Wayfair’s investment securities as of March 31, 2021 and December 31, 2020:


	March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	608,512	$	39	$	(27)	$	608,524


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	461,683	$	20	$	(5)	$	461,698

Fair Value Measurements

~~The Company's~~Wayfair's financial assets and liabilities are measured at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The three levels of inputs used to measure fair value are as follows:

▪Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities

▪Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability

▪Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability

This hierarchy requires ~~the Company~~Wayfair to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. ~~The Company measures its~~We classify our cash equivalents and ~~short- and long-term investments at fair value. The Company classifies its cash equivalents and certificates~~certificate of deposits within Level 1 because ~~the Company values~~we value these investments using quoted market prices. The fair value of ~~the Company's~~our Level 1 financial assets is based on quoted market prices of the identical underlying security. ~~The Company classifies short- and long-term~~We classify short-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active. None of our cash and cash equivalents or investments are classified as Level 3.

The following tables set forth the fair value of ~~the Company’s~~Wayfair’s financial assets measured at fair value on a recurring basis as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019 based on the three-tier value hierarchy:~~2020:

September 30, 2020
Level 1 Level 2 Level 3 Total
(in thousands)
Cash and cash equivalents:
Cash $ 538,767 $ 0 $ 0 $ 538,767
Cash equivalents 1,904,172 0 0 1,904,172
Total cash and cash equivalents 2,442,939 0 0 2,442,939
Short-term investments:
Investment securities 0 113,985 0 113,985
Other non-current assets:
Certificate of deposit 5,200 0 0 5,200
Total $ 2,448,139 $ 113,985 $ 0 $ 2,562,124


	December 31, 2020
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash and cash equivalents:
Cash	$	638,621	$	0	$	0	$	638,621
Cash equivalents	1,490,819		0		0		1,490,819
Total cash and cash equivalents	2,129,440		0		0		2,129,440
Short-term investments:
Investment securities	0		461,698		0		461,698
Other non-current assets:
Certificate of deposit	5,200		0		0		5,200


Total	$	2,134,640	$	461,698	$	0	$	2,596,338

4. ~~Credit Losses~~Debt and Other Financing

~~Accounts receivable are stated net~~The following table presents the outstanding principal amount and carrying value of debt and other financing as of the ~~allowance~~dates presented:


	March 31, 2021						December 31, 2020
Debt Instrument	Principal Amount		Unamortized Debt Discount		Net Carrying Amount		Principal Amount		Unamortized Debt Discount		Net Carrying Amount
	(in thousands)

2022 Notes	$	17,597	$	(115)	$	17,482	$	18,036	$	(1,596)	$	16,440
2024 Notes	575,000		(8,122)		566,878		575,000		(132,892)		442,108
2026 Notes	948,746		(10,500)		938,246		948,750		(242,911)		705,839
2025 Notes	1,518,000		(15,532)		1,502,468		1,518,000		(289,954)		1,228,046
2025 Accreting Notes	35,425		(408)		35,017		288,464		(21,654)		266,810
Total Debt					$	3,060,091					$	2,659,243
Short-term debt					$	0					$	0
Long-term debt					$	3,060,091					$	2,659,243

Revolving Credit Facility

On March 24, 2021, Wayfair and certain of its subsidiaries (together, the “Guarantors”) and Wayfair LLC, a wholly-owned subsidiary of Wayfair, as borrower (the “Borrower”), entered into a new credit agreement (the “Credit Agreement”) with the lending institutions from time to time parties thereto and Citibank, N.A., in its capacity as administrative agent, collateral agent, swingline lender and a letter of credit issuer. The Credit Agreement provides for a $600 million senior secured revolving credit ~~losses,~~facility that matures on March 24, 2026 (the “Revolver”). The Revolver replaced our previous $200 million senior secured revolving credit facility (the “Previous Revolver”), which was set to mature on February 21, 2022. Wayfair paid all amounts owed under the Previous Revolver and terminated all lending commitments thereunder. Debt issuance costs for the Revolver are ~~recorded based on historical losses~~included in other non-current assets and are amortized to interest expense over the Revolver’s term.

Under the Credit Agreement, the Borrower may from time to time request letters of credit, which reduce the availability of credit under the Revolver. Wayfair had approximately $56.2 million outstanding letters of credit as ~~well~~of March 31, 2021, primarily as ~~management's expectation~~security for lease agreements, which reduced the availability of ~~future collections. Uncollectible~~credit under the Revolver. Any amounts outstanding under the Revolver are ~~written off against~~due at maturity. In addition, subject to the ~~allowance after all collection efforts have been exhausted. The Company's exposure~~terms and conditions set forth in the Credit Agreement, the Borrower is required to ~~credit loss is minimized through fraud assessments performed~~make certain mandatory prepayments prior to ~~customer checkout~~maturity.

The proceeds of the Revolver may be used to finance working capital, to refinance existing indebtedness and to provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes. The Borrower’s obligations under the Revolver are guaranteed by the Guarantors. The obligations of the Borrower and the ~~Company's policy~~Guarantors are secured by first-priority liens on substantially all of ~~monitoring~~ the ~~creditworthiness~~assets of ~~its customers~~the Borrower and the Guarantors, including, with certain exceptions, all of the capital stock of Wayfair’s domestic subsidiaries and 65% of the capital stock of Wayfair’s first-tier foreign subsidiaries.

Revolver borrowings bear interest through maturity at a variable rate based upon, at the Borrower’s option, either the LIBOR rate or the base rate (which is the highest of (x) the prime rate, (y) one-half of 1.00% in excess of the federal funds effective rate and (z) 1.00% in excess of the one-month LIBOR rate), plus, in each case an applicable margin. As of March 31, 2021, the applicable margin for LIBOR loans is 1.25% per annum and the applicable margin for base rate loans is 0.25% per annum. The applicable margin is subject to ~~which it grants credit terms~~specified changes depending on Wayfair’s Consolidated Senior Secured Debt to Consolidated EBITDA Ratio, as defined in the ~~normal course of business. Further, management notes~~Credit Agreement.

The Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit ~~risk is mitigated as approximately 99%~~facilities, including covenants that, among other things, limit or restrict the ability of the ~~net revenue recognized for~~Borrower and the ~~three~~Guarantors, subject to negotiated exceptions, to incur additional indebtedness and ~~nine months ended September 30, 2020 was collected~~additional liens on their assets, engage in ~~advance~~mergers or acquisitions or dispose of ~~recognition.~~

assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, or change the nature of their businesses. The Revolver also contains customary events of default, subject to thresholds and grace periods, including, among others, payment default, covenant default, cross default to other material indebtedness and judgment default. In addition, the Credit Agreement requires Wayfair 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. We do not expect any of these restrictions to affect or limit our ability to conduct business in the ordinary course. As of ~~September 30, 2020, the Company reported $109.7 million~~March 31, 2021, we were in compliance with all covenants.

Table of ~~accounts receivable, net of allowance for credit losses of $26.9 million. Other than the adjustment related to the adoption of ASU 2016-13, as discussed in Note 2,~~ ~~Summary of Significant Accounting Policies, changes in the allowance for credit losses were not material for the three and nine months ended September 30, 2020.~~Contents

~~5. Intangible Assets and Goodwill~~

As of September 30, 2020 and December 31, 2019, the Company had $17.2 million and $18.4 million of intangible assets, respectively. Amortization expense related to intangible assets was $0.4 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $1.2 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively.

~~Goodwill was $0.4 million as of September 30, 2020 and December 31, 2019.~~

~~6. Property and Equipment, net~~Convertible Non-Accreting Notes

The following table summarizes ~~property~~certain terms related to our outstanding convertible notes, excluding the 2025 Accreting Notes:

Convertible Non-Accreting Notes

Maturity Date

Annual Coupon Rate

Annual Effective Interest Rate

Payment Dates for Semi-Annual Interest Payments in Arrears

2022 Notes

September 1, 2022

0.375%

0.9%

March 1 and September 1

2024 Notes

November 1, 2024

1.125%

1.5%

May 1 and November 1

2026 Notes

August 15, 2026

1.00%

1.2%

February 15 and August 15

2025 Notes

October 1, 2025

0.625%

0.9%

April 1 and October 1

Convertible Accreting Notes

Nocash interest is payable on the 2025 Accreting Notes. Instead, the 2025 Accreting Notes accrued interest at a rate of 2.50% per annum, which accretes to the principal amount on April 1 and ~~equipment, net as~~October 1 of ~~September 30, 2020~~each year. The 2025 Accreting Notes will mature on April 1, 2025, unless earlier purchased, redeemed or converted. The annual effective interest rate of the 2025 Accreting Notes is 2.7%.

Conversion and ~~December 31, 2019:~~Redemption Terms of the Notes

September 30,
2020 December 31,
2019
(in thousands)
Furniture and computer equipment $ 554,489 $ 509,120
Site and software development costs 397,027 297,252
Leasehold improvements 341,345 228,514
Construction in progress 23,667 45,503
1,316,528 1,080,389
Less accumulated depreciation and amortization (634,471) (455,845)
Property and equipment, net $ 682,057 $ 624,544
Wayfair's Notes will mature at their maturity date unless earlier purchased, redeemed or converted. The Notes’ initial conversion terms are summarized below:

Property and equipment depreciation and amortization expense was $72.2 million and $50.1 million for the three months ended September 30, 2020 and 2019, respectively, and $207.3 million and $133.8 million for the nine months ended September 30, 2020 and 2019, respectively.

~~7. Leases~~

Convertible Notes

Maturity Date

Free Convertibility Date

Initial Conversion Rate per $1,000 Principal

Initial Conversion Price

Redemption Date

2022 Notes

September 1, 2022

June 1, 2022

9.6100

$104.06

September 8, 2020

2024 Notes

November 1, 2024

August 1, 2024

8.5910

$116.40

May 8, 2022

2026 Notes

August 15, 2026

May 15, 2026

6.7349

$148.48

August 20, 2023

2025 Notes

October 1, 2025

July 1, 2025

2.3972

$417.15

October 4, 2022

2025 Accreting Notes

April 1, 2025

13.7931

$72.50

May 9, 2023

The ~~Company has lease arrangements~~conversion rate is subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of Wayfair’s Class A common stock, but will not be adjusted for ~~warehouse, fulfillment center, office,~~accrued and ~~data center spaces. These leases expire~~unpaid interest.

Wayfair will settle any conversions of the Non-Accreting Notes in cash, shares of Wayfair’s Class A common stock or a combination thereof, with the form of consideration determined at ~~various~~Wayfair’s election. The holders of the Non-Accreting Notes may convert all or a portion of the notes prior to certain conversion dates ~~through 2034. Operating lease expense was $38.6 million~~(the “Free Convertibility Date”) under the following circumstances (in each case, as applicable to each series of Non-Accreting Notes):

•during any calendar quarter (and only during such calendar quarter) after March 31, 2021, if the last reported sale price of Wayfair’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and ~~$31.8 million~~including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five business day period after any ten consecutive trading day period (the “measurement period") in which the trading price (as defined in the ~~three months ended September 30, 2020~~applicable indenture) per $1,000 principal amount of the notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of Wayfair’s Class A common stock and ~~2019, respectively, and $118.8 million and $86.8 million for~~ the ~~nine months ended September 30, 2020 and 2019, respectively.~~

~~The following table presents supplemental cash flow information related to leases:~~

Nine months ended September 30, 2020 Nine months ended September 30, 2019
(in thousands)
Cash payments included in operating cash flows from lease arrangements $ 105,416 $ 77,687
Right-of-use assets obtained in exchange for lease obligations $ 110,210 $ 281,006
conversion rate on each such trading day;

•if Wayfair calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; and

•upon the occurrence of specified corporate events (as set forth in the applicable indenture)

On or after the applicable Free Convertibility Date until the close of business on the second scheduled trading day immediately preceding the applicable maturity date, holders of the Non-Accreting Notes may convert their Non-Accreting Notes at any time.

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The following ~~table presents supplemental balance sheet information related to leases:~~

September 30, 2020 December 31, 2019
Additional lease information
Weighted average remaining lease term 8 years 10 years
Weighted average discount rate 6.5 % 6.7 %

Non-Accreting Notes are convertible during the calendar quarter ended June 30, 2021: the 2022 Notes, the 2024 Notes and the 2026 Notes. The 2025 Notes are not convertible during the second quarter of 2021.

The ~~following table presents future minimum lease payments under non-cancellable leases~~holders of the 2025 Accreting Notes may convert all or a portion of their 2025 Accreting Notes at any time prior to the second business day immediately preceding the maturity date. Wayfair will settle any conversion of 2025 Accreting Notes with a number of shares of Wayfair’s Class A common stock per $1,000 original principal amount of 2025 Accreting Notes equal to the accreted principal amount of such original principal amount of 2025 Accreting Notes divided by the conversion price.

Upon the occurrence of a fundamental change (as defined in the applicable indenture), holders of the Notes may require Wayfair to repurchase all or a portion of the Notes for cash at a price equal to 100% of the principal amount (or accreted principal amount) of the Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date (such interest to be included in the accreted principal amount for the 2025 Accreting Notes). Holders of the Non-Accreting Notes who convert their respective notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the indenture) may be entitled to a premium in the form of ~~September~~an increase in the conversion rate of the respective notes. Holders of the 2025 Accreting Notes who convert in connection with a make-whole fundamental change (as defined in the applicable indenture) may be entitled to a premium in the form of an increase in the conversion rate.

Wayfair may not redeem the Notes prior to certain dates (the “Redemption Date”). On or after the applicable Redemption Date, Wayfair may redeem for cash all or part of the applicable series of Notes if the last reported sale price of Wayfair’s Class A common stock equals or exceeds 130% (Non-Accreting Notes) or 276% (2025 Accreting Notes) of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which Wayfair provides notice of redemption, during any 30 ~~2020:~~consecutive trading days ending on, and including the trading day immediately preceding the date on which Wayfair provides notice of the redemption. The redemption price will be either 100% of the principal amount (or accreted principal amount) of the notes to be redeemed, plus accrued and unpaid interest, if any, or the if-converted value holder elects to convert their Notes upon receiving notice of redemption.

Amount
(in thousands)
2020 (excluding the nine months ended September 30, 2020) $ 33,793
2021 161,998
2022 162,800
2023 157,581
2024 155,062
Thereafter 602,837
Total future minimum lease payments 1,274,071
Less: Imputed interest (303,994)
Total $ 970,077
Conversions of Notes

In the three months ended March 31, 2021, holders of the 2022 Notes and 2026 Notes converted $0.4 million of aggregate principal and received 4,244 shares of Wayfair’s Class A common stock. During the same period, Great Hill converted $253.1 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of Wayfair's Class A common stock in the first quarter of 2021. In aggregate these conversions increased additional paid-in capital by $250.4 million. In April 2021, holders of the 2022 Notes converted $12.5 million of principal and received 120,278 shares of Wayfair’s Class A common stock.

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Interest Expense

The following table presents total ~~operating leases~~interest expense recognized for the Notes for the three months ended March 31, 2021 and 2020, which included the reversal of interest expense we recorded in 2020 for a portion of interest accretion for the 2025 Accreting Notes that was not realized in 2021:


	Three Months Ended March 31,
	2021						2020
Convertible Notes	Contractual Interest Expense		Debt Discount Amortization		Total Interest Expense		Contractual Interest Expense		Debt Discount Amortization		Total Interest Expense
	(in thousands)
2022 Notes	$	19	$	22	$	41	$	404	$	5,212	$	5,616
2024 Notes	1,617		539		2,156		1,617		6,887		8,504
2026 Notes	2,240		607		2,847		2,319		8,775		11,094
2025 Notes	2,372		851		3,223		0		0		0
2025 Accreting Notes	(1,380)		53		(1,327)		0		0		0
Total	$	4,868	$	2,072	$	6,940	$	4,340	$	20,874	$	25,214

Fair Value of Notes

The estimated fair value of the 2022 Notes, 2024 Notes, 2026 Notes, 2025 Notes and 2025 Accreting Notes was $52.4 million, $1.6 billion, $2.1 billion, $1.6 billion and $153.8 million, respectively, as of ~~September 30, 2020 and December~~March 31, ~~2019:~~

September 30,
2020 December 31,
2019
(in thousands)
Balance sheet line item
Other current liabilities $ 102,366 $ 91,104
Operating lease liabilities 867,711 822,602
Total operating leases $ 970,077 $ 913,706

As of September 30, 2020, the Company has entered into $149.4 million of additional operating leases, primarily related to build-to-suit warehouse leases that have not yet commenced. As the Company does not control the underlying assets during the construction period, the Company is not considered the owner2021. The estimated fair value of the ~~construction projects for accounting purposes. These operating leases will commence between 2020~~Non-Accreting Notes was determined through consideration of quoted market prices. The estimated fair value of the 2025 Accreting Notes was determined through an option pricing model using Level 3 inputs. The fair values of the Non-Accreting Notes and ~~2021 with lease~~the 2025 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, Cash and Cash Equivalents,Investments and Fair Value Measurements. The if-converted value of the 2022 Notes, 2024 Notes, 2026 Notes and 2025 Accreting Notes exceeded the principal value by $35.6 million, $979.8 million, $1.1 billion and $118.4 million, respectively, as of March 31, 2021. The if-converted value of the 2025 Notes did not exceed the principal value as of March 31, 2021.

Capped Calls

The 2022 Capped Calls, 2024 Capped Calls, 2026 Capped Calls and 2025 Capped Calls (collectively, the "Capped Calls") are expected generally to reduce the potential dilution and/or offset the cash payments Wayfair is required to make in excess of the principal amount of the Non-Accreting Notes upon conversion of the Non-Accreting Notes if the market price per share of Wayfair’s Class A common stock is greater than the strike price of the applicable Capped Call (which correspond to the initial conversion price of the applicable Non-Accreting Notes and is subject to certain adjustments under the terms of 2the applicable Capped Call), with such reduction and/or offset subject to a cap based on the cap price of the applicable Capped Calls (the "Initial Cap Price"). The Capped Calls can, at Wayfair’s option, remain outstanding until their maturity date, even if all or a portion of the Non-Accreting Notes are converted, repurchased or redeemed prior to such date.

Each of the Capped Calls has an initial cap price per share of Wayfair’s Class A common stock, which represented a premium over the last reported sale price (or, with respect to the 2025 Capped Calls, the volume-weighted average price) of Wayfair’s Class A common stock on the date the corresponding Non-Accreting Notes were priced (the "Cap Price Premium"), and is subject to certain adjustments under the terms of the corresponding agreements. Collectively, the Capped Calls cover, initially, the number of shares of Wayfair’s Class A common stock underlying the Non-Accreting Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Non-Accreting Notes.

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The initial terms for the Capped Calls are presented below:


Capped Calls	Maturity Date	Initial Cap Price	Cap Price Premium
2022 Capped Calls	September 1, 2022	$154.16	100%
2024 Capped Calls	November 1, 2024	$219.63	150%
2026 Capped Calls	August 15, 2026	$280.15	150%
2025 Capped Calls	October 1, 2025	$787.08	150%

The Capped Calls are separate transactions from the Non-Accreting Notes, are not subject to the terms of the Non-Accreting Notes and will not affect any holder’s rights under the Non-Accreting Notes. Similarly, holders of the Non-Accreting Notes do not have any rights with respect to the Capped Calls. The Capped Calls do not meet the criteria for separate accounting as a derivative as they are indexed to Wayfair's stock. The premiums paid for the Capped Calls were included as a net reduction to additional paid-in capital within shareholders’ deficit when they were entered.

15 ~~years.~~

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5. Commitments and Contingencies

~~Letters of Credit~~

The Company has issued letters of credit, primarily as security for certain lease agreements, for approximately $54.9 million and $46.7 million, as of September 30, 2020 and December 31, 2019, respectively.

Legal Matters

From time to time ~~the Company~~Wayfair is involved in claims that arise during the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, ~~the Company~~Wayfair does not currently believe that the outcome of any of these other legal matters will have a material adverse effect on ~~the Company's~~Wayfair's results of operation or financial condition. Regardless of the outcome, litigation can be costly and time consuming, as it can divert management's attention from important business matters and initiatives, negatively impacting ~~the Company's~~Wayfair's overall operations. In addition, ~~the Company~~Wayfair may also find itself at greater risk to outside party claims as it increases its operations in jurisdictions where the laws with respect to the potential liability of online retailers are uncertain, unfavorable, or unclear.

On ~~January 10, 2019~~November 18, 2020, certain of our present and ~~January 16, 2019, putative securities class action complaints~~former directors, along with Great Hill Partners, L.P., GHEP VII Aggregator, L.P. (“Great Hill”), Charlesbank Capital Partners, LLC and CBEP Investments, LLC (“Charlesbank”), were named as defendants in a shareholder derivative lawsuit filed ~~against the Company and 3 of its officers~~ in the ~~U.S. District~~ Court ~~for the District~~ of ~~Massachusetts. The 2 complaints alleged violations of Sections 10(b) and 20(a)~~Chancery of the ~~Securities Exchange Act~~State of ~~1934,~~Delaware by the Equity-League Pension Trust Fund. Wayfair is named as ~~amended, relating to certain prior disclosures of the~~

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~~Company. Each plaintiff was seeking to represent~~ a ~~class of shareholders who purchased or acquired stock of the Company between August 2, 2018 and October 31, 2018, and was seeking damages and other relief based on allegations~~nominal defendant. The derivative complaint primarily alleges that the ~~defendants' conduct affected the value of such stock. On July 8, 2020, the consolidated complaint was dismissed with prejudice.~~

~~9. Equity-Based Compensation~~

The board of directors of the Company (the "Board") adopted the 2014 Incentive Award Plan ("2014 Plan") to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent. The 2014 Plan is administered by the Boarddirector defendants breached their fiduciary duties with respect to ~~awards to non-employee directors and by the compensation committee~~Wayfair’s issuance of the ~~Board with respect to other participants~~2025 Accreting Notes, and ~~provides~~further alleges that the non-director defendants were unjustly enriched on the basis of the issuance. The complaint asserts causes of action for breach of fiduciary duty and unjust enrichment and seeks disgorgement of proceeds received as a result of the issuance, ~~of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance shares, stock payments, cash payments, dividend awards~~other equitable relief and ~~other incentives. Prior~~damages and attorneys’ fees and costs. On February 16, 2021, the named director defendants and Wayfair filed motions to dismiss the ~~adoption of~~complaint with prejudice and Great Hill and Charlesbank each filed separate motions to dismiss the 2014 Plan, Wayfair LLC issued certain equity awards pursuant to the Wayfair LLC Amended and Restated Common Unit Plan (the "2010 Plan"), which was administered by the board of directors of Wayfair LLC. Awards issued under the 2010 Plan that remain outstanding currently represent Class A or Class B common stock of the Company.

~~For awards granted pursuant to the 2014 Plan, 8,603,066 shares of Class A common stock were initially available for issuance.~~complaint. The ~~2014 Plan also contains an evergreen provision whereby the shares available for future grant~~motions are increased on the first day of each calendar year beginning January 1, 2016 and ending on and including January 1, 2024. As of January 1, 2020, 5,111,305 shares of Class A common stock were available for future grant under the 2014 Plan. Shares or RSUs forfeited, withheld for minimum statutory tax obligations, and unexercised stock option lapses from the 2010 and 2014 Plans are available for future grant under the 2014 Plan.

~~The following table presents activity relating to stock options for the nine months ended September 30, 2020:~~

Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years)
Outstanding at December 31, 2019 43,606 $ 3.00 1.5
Options exercised (23,660) $ 3.02
Outstanding and exercisable at September 30, 2020 19,946 $ 2.98 0.7

The intrinsic value of stock options exercised was $4.4 million and $4.2 million for the nine months ended September 30, 2020 and 2019, respectively. The aggregate intrinsic value of stock options outstanding and currently exercisable is $5.7 million as of September 30, 2020. All stock options were fully vested at September 30, 2020.

~~The following table presents activity relating to RSUs for the nine months ended September 30, 2020:~~

Shares Weighted-
Average Grant
Date Fair Value
Outstanding at December 31, 2019 8,112,736 $ 95.69
RSUs granted 1,688,442 $ 171.72
RSUs vested (2,233,708) $ 95.30
RSUs forfeited/canceled (1,343,119) $ 103.73
Outstanding as of September 30, 2020 6,224,351 $ 115.27

~~The intrinsic value of RSUs vested was $342.9 million and $290.5 million for the nine months ended September 30, 2020 and~~ ~~2019, respectively. The aggregate intrinsic value of RSUs unvested is $1.8 billion as of September 30, 2020. Unrecognized equity-based compensation expense related to outstanding RSUs is~~ ~~$649.7 million~~ ~~with a weighted average remaining vesting term of 1.2 years at September 30, 2020.~~

~~10. Unearned Revenue~~

The Company has three types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are initially recorded in unearned revenue, and are recognized as net revenue when the products are delivered, (ii) unredeemed gift cards and site and store credits, which are initially recorded in unearned revenue, and are recognized in the period they are redeemed, and (iii) membership rewards redeemable for future purchases, which are earned by customers on purchases made with the Company's Wayfair branded, private label credit card, and are initially recorded in other current liabilities, and are recognized as net revenue when redeemed. The portion of gift cards and site and store credits not expected to be ~~redeemed ("breakage") are recognized as net revenue~~fully briefed by May 11, 2021. At this time, based on ~~historical redemption patterns, which is substantially within~~

~~Table~~available information regarding this litigation, we are unable to reasonably assess the ultimate outcome of ~~Contents~~

~~twenty-four months from the date~~this case or determine an estimate, or a range of ~~issuance, to the extent there is no requirement for remitting balances to governmental agencies.~~

Contractual liabilities included in unearned revenue and other current liabilities in the Consolidated and Condensed Balance Sheet were $318.2 million and $5.3 million at September 30, 2020 and $167.6 million and $4.6 million at December 31, 2019, respectively. During the nine months ended September 30, 2020, the Company recognized $139.7 million and $2.8 millionestimates, of ~~net revenue that was included in unearned revenue and other current liabilities, respectively, at December 31, 2019.~~

Net revenue from contracts with customers is disaggregated by geographic region because this manner of disaggregation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors. Refer to Note 11, ~~Segment and Geographic Information, for additional detail.~~potential losses.

~~11. Segment and Geographic Information~~

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated on a regular basis by the Chief Operating Decision Maker ("CODM") in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its chief executive officer.

The Company's operating and reportable segments are the U.S. and International. These segments reflect the way the CODM allocates resources and evaluates financial performance, which is based upon each segment's Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest (expense), net, other (expense) income, net, (benefit) provision for income taxes, net, non-recurring items, and other items not indicative of our ongoing operating performance. These charges are excluded from evaluation of segment performance because it facilitates reportable segment performance comparisons on a period-to-period basis as these costs may vary independent of business performance.

The Company allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative based on the usage and relative contribution provided to the segments. It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, as well as interest (expense), net, other (expense) income, net, and (benefit) provision for income taxes, net. There are no net revenue transactions between the Company's reportable segments.

~~U.S.~~

The U.S. segment primarily consists of amounts earned through product sales through the Company's family of sites in the U.S. The U.S. net revenue for the three and nine months ended September 30, 2019 includes $5.8 million and $30.9 million, respectively of net revenue previously classified as other net revenue

~~International~~

~~The International segment primarily consists of amounts earned through product sales through the Company's international sites.~~

Net revenue from external customers for each group of similar products and services are not reported to the CODM. Separate identification of this information for purposes of segment disclosure is impractical, as it is not readily available and the cost to develop it would be excessive. No individual country outside of the U.S. provided greater than 10% of consolidated net revenue.

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~~The following tables present net revenues and Adjusted EBITDA attributable to the Company's reportable segments for the periods presented:~~

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(in thousands)
U.S. net revenue $ 3,274,872 $ 1,966,654 $ 8,901,559 $ 5,624,870
International net revenue 564,698 338,833 1,572,746 968,697
Total net revenue $ 3,839,570 $ 2,305,487 $ 10,474,305 $ 6,593,567

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(in thousands)
Adjusted EBITDA:
U.S. $ 377,007 $ (62,878) $ 766,486 $ (91,002)
International (5,895) (81,306) (82,838) (225,383)
Total reportable segments Adjusted EBITDA 371,112 (144,184) 683,648 (316,385)
Less: reconciling items (1) (197,946) (127,851) (522,470) (337,977)
Net income (loss) $ 173,166 $ (272,035) $ 161,178 $ (654,362)

~~(1) The following adjustments are made to reconcile total reportable segments Adjusted EBITDA to consolidated net income (loss):~~

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(in thousands)
Depreciation and amortization $ 72,575 $ 50,250 $ 208,532 $ 134,172
Equity-based compensation and related taxes 76,683 65,275 211,376 173,963
Interest expense, net 36,315 14,432 87,472 33,922
Other expense (income), net 13,584 (2,182) 10,720 (5,582)
(Benefit) provision for income taxes, net (1,211) 76 414 1,502
Other (1) 0 0 3,956 0
Total reconciling items $ 197,946 $ 127,851 $ 522,470 $ 337,977

(1) The Company recorded $4.0 million in the nine months ended September 30, 2020 in selling, operations, technology, general and administrative expenses in the Consolidated and Condensed Statements of Operations related to severance costs associated with February 2020 workforce reductions.

~~12. Income Taxes~~

The (benefit) provision for income taxes, net was $(1.2) million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.4 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively. The (benefit) provision for income taxes, net recorded in the three and nine months ended September 30, 2020 is primarily related to income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes, offset by a discrete tax benefit related to excess tax benefits on equity awards for U.S. employees. The (benefit) provision for income taxes, net recorded in the three and nine months ended September 30, 2019 is primarily related to income earned in certain foreign jurisdictions and U.S. state income taxes.

Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The Company has deferred tax assets related to its net operating loss carryforwards accumulated since the fourth quarter of 2014 and related to net operating loss carryforwards of certain of its foreign subsidiaries. A valuation allowance against net deferred tax assets is required if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company reassesses the

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~~valuation allowance on a quarterly basis and has provided a valuation allowance on substantially all of its worldwide net deferred tax assets.~~

The Company had 0 material unrecognized tax benefits as of September 30, 2020 and December 31, 2019. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of the (benefit) provision for income taxes, net.

~~13.~~6. Stockholders’ Deficit

Preferred Stock

~~The Company~~Wayfair authorized 10,000,000 shares of undesignated preferred stock, $0.001 par value per share, for future issuance. As of ~~September 30, 2020, the Company~~March 31, 2021, Wayfair had 0 shares of undesignated preferred stock issued or outstanding.

Common Stock

~~The Company~~Wayfair authorized 500,000,000 shares of Class A common stock, $0.001 par value per share, and 164,000,000 shares of Class B common stock, $0.001 par value per share, of which ~~68,959,957~~77,196,363 and ~~66,642,611~~72,980,490 shares of Class A common stock and ~~26,636,721~~26,563,909 and ~~26,957,815~~26,564,234 shares of Class B common stock were outstanding as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively.~~2020. The rights of the holders of Class A common stock and Class B common stock are identical, except ~~with respect to~~for voting and conversion rights. Each share of Class A common stock is entitled to 1 vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock may be converted into 1 share of Class A common stock at the option of its holder and will be automatically converted into 1 share of Class A common stock upon transfer thereof, subject to certain exceptions. In addition, upon the date on which the outstanding shares of Class B common stock represent less than 10% of the aggregate number of shares of the then outstanding Class A common stock and Class B common stock, or in the event of the affirmative vote or written consent of holders of at least 66 2/3% of the outstanding shares of Class B common stock, all outstanding shares of Class B common stock shall convert automatically into Class A common stock. Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of common stock are entitled to receive dividends out of funds legally available if the ~~Board,~~board of directors (the “Board”), in its discretion, determines to issue dividends and then only at the times and in the amounts that the Board may determine. Since ~~the Company's~~Wayfair's initial public offering through ~~September 30, 2020, 55,401,693~~March 31, 2021, 55,474,505 shares of Class B common stock were converted to Class A common stock.

Stock Repurchase Program

On August 21, 2020, the Board authorized the repurchase of up to $700 million of ~~the Company’s~~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”). ~~The~~During the three months ended March 31, 2021, Wayfair repurchased $0.2 million through the 2020 Repurchase Program ~~replaced the Company’s previous $200 million stock repurchase authorization approved by the Board in 2018 (the “2018 Repurchase Program”), which was terminated simultaneously.~~

~~During the three and nine months ended September 30, 2020, the Company repurchased $280.2 million through the stock repurchase programs~~ at an average price of ~~$331.65~~$223.63 per share of Class A common stock.

During the three ~~and nine~~ months ended ~~September 30, 2019, the Company~~March 31, 2020, Wayfair did not repurchase any shares of common stock.

~~14. Credit Agreement~~7. Equity-Based Compensation

The ~~Company has a credit agreement with certain lenders, which currently~~Board adopted the 2014 Incentive Award Plan ("2014 Plan") to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent. The 2014 Plan is administered by the Board for awards to non-employee directors and by the compensation committee of the Board for other participants and provides for ~~a $200~~the issuance of

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stock options, SARs, restricted common stock, restricted stock units ("RSUs"), performance shares, stock payments, cash payments, dividend awards and other incentives. Prior to the adoption of the 2014 Plan, Wayfair LLC issued certain equity awards pursuant to the Wayfair LLC Amended and Restated Common Unit Plan (the "2010 Plan"), which was administered by the Board of Wayfair LLC. Awards issued under the 2010 Plan that remain outstanding currently represent Class A or Class B common stock of Wayfair Inc.

The 2014 Plan initially made 8,603,066 shares of Class A common stock available for future award grants. The 2014 Plan also contains an evergreen provision whereby the shares available for future grants are increased on the first day of each calendar year from January 1, 2016 through and including January 1, 2024. As of January 1, 2021, 6,224,792 shares of Class A common stock were available for future grant under the 2014 Plan. Shares or RSUs forfeited, withheld for minimum statutory tax obligations, and unexercised stock option lapses from the 2010 and 2014 Plans are available for future grant under the 2014 Plan.

The following table presents activity relating to stock options for the three months ended March 31, 2021:


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)
Outstanding at December 31, 2020	19,046	$	2.99	0.5
Options exercised	(11,595)	$	2.91
Outstanding and exercisable at March 31, 2021	7,451	$	3.10	0.2

The intrinsic value of stock options exercised was $3.6 million ~~senior secured revolving credit facility maturing on February 21, 2022 (the “Revolver”)~~and $0.4 million for the three months ended March 31, 2021 and 2020. Aggregate intrinsic value of stock options outstanding and currently exercisable is $2.3 million as of March 31, 2021. All stock options were fully vested at March 31, 2021.

The following table presents activity relating to RSUs for the three months ended March 31, 2021:


	Shares	Weighted- Average Grant Date Fair Value
Unvested at December 31, 2020	5,975,299	$	134.03
RSUs granted	331,165	$	291.61
RSUs vested	(710,224)	$	109.87
RSUs forfeited/canceled	(185,233)	$	143.32
Outstanding as of March 31, 2021	5,411,007	$	146.53

The intrinsic value of RSUs vested was $194.7 million and $61.5 million for the three months ended March 31, 2021 and 2020. The ~~Revolver contains affirmative and negative covenants customarily applicable~~aggregate intrinsic value of RSUs unvested is $1.7 billion as of March 31, 2021. Unrecognized equity-based compensation expense related to ~~senior secured credit facilities, and also requires the Company~~RSUs expected to ~~maintain certain levels~~vest over time is $717.2 million with a weighted-average remaining vesting term of ~~Free Cash Flow (as defined~~1.2 years as of March 31, 2021.

8. Income Taxes

The (benefit) provision for income taxes, net recorded in the ~~credit agreement).~~

~~On August 21, 2020, in connection with the 2020 Repurchase Program, the Company amended the credit agreement for the Revolver~~three months ended March 31, 2021 is primarily related to ~~increase the Company’s stock repurchase basket~~income earned in the ~~negative covenant~~U.S. and certain foreign jurisdictions and U.S. state income taxes, as well as related changes in our valuation allowance on deferred tax assets, offset by a discrete tax benefit related to excess tax benefits on equity awards for restricted payments. The Company also increased the revolving loan commitment amount to $200 million on October 30, 2020 through an incremental commitment joinder. In the nine months ended September 30, 2020, the Company borrowed under the Revolver. All borrowings were repaidU.S. employees. Wayfair had 0 material unrecognized tax benefits as of ~~September 30, 2020. As a result, there were 0 amounts outstanding on the Revolver as of September 30,~~March 31, 2021 and December 31, 2020.

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~~15. Convertible Debt~~

~~2017 Notes and Capped Call Transactions~~

On September 15, 2017, the Company issued $431.25 million in aggregate principal amount of 0.375% Convertible Senior Notes due 2022 (the "2017 Notes"), which includes the exercise in full of a $56.25 million over-allotment option, to certain financial institutions as the initial purchasers of the 2017 Notes (the "2017 Initial Purchasers"). On September 11, 2017, in connection with the pricing of the 2017 Notes, the Company entered into privately negotiated capped call transactions (the "2017 Base Capped Call Transactions") with 2 of the 2017 Initial Purchasers and certain other financial institutions (the "2017 Option Counterparties") and, in connection with the exercise in full of the over-allotment option by the 2017 Initial Purchasers, on September 14, 2017, entered into additional capped call transactions (such additional capped call transactions, the "2017 Additional Capped Call Transactions” and, together with the 2017 Base Capped Call Transactions, the "2017 Capped Call Transactions") with the 2017 Option Counterparties. Collectively, the 2017 Capped Call Transactions covered, initially, the number of shares of the Company’s Class A common stock underlying the 2017 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2017 Notes.

The 2017 Notes were issued pursuant to an indenture, dated September 15, 2017 (the "2017 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company pays interest on the 2017 Notes semiannually in arrears at a rate of 0.375% per annum on March 1 and September 1 of each year. The 2017 Notes are convertible based upon an initial conversion rate of 9.6100 shares of the Company’s Class A common stock per $1,000 principal amount of 2017 Notes (equivalent to a conversion price of approximately $104.06 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2017 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2017 Notes will mature on September 1, 2022, unless earlier purchased, redeemed or converted. Prior to June 1, 2022, holders may convert all or a portion of their 2017 Notes only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the 5 business day period after any 10 consecutive trading day period (the "2017 Notes measurement period") in which the trading price per $1,000 principal amount of 2017 Notes for each trading day of the 2017 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2017 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after June 1, 2022 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2017 Notes at any time, regardless of the foregoing circumstances. Holders of 2017 Notes who convert their 2017 Notes in connection with a notice of a redemption or a make-whole fundamental change (each as defined in the 2017 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2017 Notes.

On November 15, 2018, the Company amended and restated the 2017 Capped Call Transactions (the "Restated 2017 Capped Call Transactions") with each of the 2017 Option Counterparties in order to, among other things, provide that the options underlying the Restated 2017 Capped Call Transactions can, at the Company’s option, remain outstanding until September 1, 2022, which is the maturity date for the 2017 Notes, even if all or a portion of the 2017 Notes are converted, repurchased or redeemed prior to such date.

The Company could not redeem the 2017 Notes prior to September 8, 2020. On or after September 8, 2020, the Company may redeem for cash all or part of the 2017 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least 1 of the 5 trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2017 Notes to be redeemed, plus accrued and unpaid interest, if any.

Upon the occurrence of a fundamental change (as defined in the 2017 Indenture), holders may require the Company to repurchase all or a portion of their 2017 Notes for cash at a price equal to 100% of the principal amount of the 2017 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

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The 2017 Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2017 Notes then outstanding may declare the entire principal amount of all the 2017 Notes plus accrued interest, if any, to be immediately due and payable.

~~2018 Notes and Capped Call Transactions~~

In November 2018, the Company issued $575.0 million in aggregate principal amount of 1.125% Convertible Senior Notes due 2024 (the "2018 Notes"), which includes the exercise in full of a $75.0 million option granted to the initial purchasers, to certain financial institutions as the initial purchasers of the 2018 Notes (the "2018 Initial Purchasers"). The issuance of $500.0 million of 2018 Notes closed on November 19, 2018 and the additional $75.0 million of additional 2018 Notes, which were issued pursuant to the exercise of the 2018 Initial Purchasers' option to purchase such additional 2018 Notes, closed on November 29, 2018. On November 14, 2018, in connection with the pricing of the 2018 Notes, the Company entered into privately negotiated capped call transactions (the "2018 Base Capped Call Transactions") with one of the 2018 Initial Purchasers and certain other financial institutions (the "2018 Option Counterparties") and, in connection with the exercise in full of the 2018 Initial Purchasers' option to purchase such additional 2018 Notes, on November 27, 2018, entered into additional capped call transactions (such additional capped call transactions, the "2018 Additional Capped Call Transactions" and, together with the 2018 Base Capped Call Transactions, the "2018 Capped Call Transactions") with the 2018 Option Counterparties. Collectively, the 2018 Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the 2018 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2018 Notes.

The 2018 Notes were issued pursuant to an indenture, dated November 19, 2018 (the "2018 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company will pay interest on the 2018 Notes semiannually in arrears at a rate of 1.125% per annum on May 1 and November 1 of each year commencing on May 1, 2019. The 2018 Notes are convertible based upon an initial conversion rate of 8.5910 shares of the Company’s Class A common stock per $1,000 principal amount of 2018 Notes (equivalent to a conversion price of approximately $116.40 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2018 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2018 Notes will mature on November 1, 2024, unless earlier purchased, redeemed or converted. Prior to August 1, 2024, holders may convert all or a portion of their 2018 Notes only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the ~~five~~ ~~business day period after any~~ ~~ten~~ consecutive trading day period (the "2018 Notes measurement period") in which the trading price per $1,000 principal amount of 2018 Notes for each trading day of the 2018 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2018 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after August 1, 2024 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2018 Notes at any time, regardless of the foregoing circumstances. Holders of 2018 Notes who convert their 2018 Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the 2018 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2018 Notes.

The Company may not redeem the 2018 Notes prior to May 8, 2022. On or after May 8, 2022, the Company may redeem for cash all or part of the 2018 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least 1 of the 5 trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2018 Notes to be redeemed, plus accrued and unpaid interest, if any.

Upon the occurrence of a fundamental change (as defined in the 2018 Indenture), holders may require the Company to repurchase all or a portion of their 2018 Notes for cash at a price equal to 100% of the principal amount of the 2018 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

~~Table of Contents~~

The 2018 Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2018 Notes then outstanding may declare the entire principal amount of all the 2018 Notes plus accrued interest, if any, to be immediately due and payable.

~~2019 Notes and Capped Call Transactions~~

On August 19, 2019, the Company issued $948.75 million in aggregate principal amount of 1.00% Convertible Senior Notes due 2026 (the "2019 Notes"), which includes the exercise in full of a $123.75 million option granted to the initial purchasers, to certain financial institutions as the initial purchasers of the 2019 Notes (the "2019 Initial Purchasers"). On August 14, 2019, in connection with the pricing of the 2019 Notes, the Company entered into privately negotiated capped call transactions (the "2019 Base Capped Call Transactions") with certain of the 2019 Initial Purchasers or their affiliates and another financial institution (the "2019 Option Counterparties") and, in connection with the exercise in full of the 2019 Initial Purchasers' option to purchase such additional 2019 Notes, on August 16, 2019, entered into additional capped call transactions (such additional capped call transactions, the "2019 Additional Capped Call Transactions" and, together with the 2019 Base Capped Call Transactions, the "2019 Capped Call Transactions") with the 2019 Option Counterparties. Collectively, the 2019 Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the 2019 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2019 Notes.

The 2019 Notes were issued pursuant to an indenture, dated August 19, 2019 (the "2019 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company will pay interest on the 2019 Notes semiannually in arrears at a rate of 1.00% per annum on February 15 and August 15 of each year commencing on February 15, 2020. The 2019 Notes are convertible based upon an initial conversion rate of 6.7349 shares of the Company’s Class A common stock per $1,000 principal amount of 2019 Notes (equivalent to a conversion price of approximately $148.48 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2019 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2019 Notes will mature on August 15, 2026, unless earlier purchased, redeemed or converted. Prior to May 15, 2026, holders may convert all or a portion of their 2019 Notes only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2019 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the ~~five~~ ~~business day period after any~~ ~~ten~~ consecutive trading day period (the “2019 Notes measurement period”) in which the trading price per $1,000 principal amount of 2019 Notes for each trading day of the 2019 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2019 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after May 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2019 Notes at any time, regardless of the foregoing circumstances. Holders of 2019 Notes who convert their 2019 Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the 2019 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2019 Notes.

The Company may not redeem the 2019 Notes prior to August 20, 2023. On or after August 20, 2023, the Company may redeem for cash all or part of the 2019 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2019 Notes to be redeemed, plus accrued and unpaid interest, if any.

Upon the occurrence of a fundamental change (as defined in the 2019 Indenture), holders may require the Company to repurchase all or a portion of their 2019 Notes for cash at a price equal to 100% of the principal amount of the 2019 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

The 2019 Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2019 Notes then

~~Table of Contents~~

~~outstanding may declare the entire principal amount of all the 2019 Notes plus accrued interest, if any, to be immediately due and payable.~~

~~2020 Notes and Capped Call Transactions~~

On August 14, 2020, the Company issued $1.518 billion in aggregate principal amount of 0.625% Convertible Senior Notes due 2025 (the “2020 Notes”, and together with the 2017 Notes, the 2018 Notes and the 2019 Notes, the “Non-Accreting Notes”), which includes the exercise in full of a $198.0 million option granted to the initial purchasers, to certain financial institutions as the initial purchasers of the 2020 Notes (the “2020 Initial Purchasers”). On August 11, 2020, in connection with the pricing of the 2020 Notes, the Company entered into privately negotiated capped call transactions (the “2020 Base Capped Call Transactions”) with certain of the 2020 Initial Purchasers or their respective affiliates and certain other financial institutions (the “2020 Option Counterparties”) and, in connection with the exercise in full of the 2020 Initial Purchasers’ option to purchase such additional 2020 Notes, on August 12, 2020, entered into additional capped call transactions (such additional capped call transactions, the “2020 Additional Capped Call Transactions” and together with the 2020 Base Capped Call Transactions, the “2020 Capped Call Transactions”) with the 2020 Option Counterparties. Collectively, the 2020 Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the 2020 Notes, subject to anti-dilution adjustments substantially similar to those applicable to the 2020 Notes.

The 2020 Notes were issued pursuant to an indenture, dated August 14, 2020 (the "2020 Indenture"), between the Company and U.S. Bank National Association, as trustee. The Company will pay interest on the 2020 Notes semiannually in arrears at a rate of 0.625% per annum on April 1 and October 1 of each year commencing on April 1, 2021. The 2020 Notes are convertible based upon an initial conversion rate of 2.3972 shares of the Company’s Class A common stock per $1,000 principal amount of 2020 Notes (equivalent to a conversion price of approximately $417.15 per share of the Company’s Class A common stock). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company’s Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversions of the 2020 Notes in cash, shares of the Company’s Class A common stock or a combination thereof, with the form of consideration determined at the Company’s election.

The 2020 Notes will mature on October 1, 2025, unless earlier purchased, redeemed or converted. Prior to July 1, 2025, holders may convert all or a portion of their 2020 Notes only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s Class A common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the ~~five~~ ~~business day period after any~~ ~~ten~~ consecutive trading day period (the “2020 Notes measurement period”) in which the trading price per $1,000 principal amount of 2020 Notes for each trading day of the 2020 Notes measurement period was less than 98% of the product of the last reported sale price of the Company’s Class A common stock and the conversion rate on each such trading day; (3) with respect to any 2020 Notes called for redemption by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On and after July 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2020 Notes at any time, regardless of the foregoing circumstances. Holders of 2020 Notes who convert their 2020 Notes in connection with a make-whole fundamental change or a notice of redemption (each as defined in the 2020 Indenture) may be entitled to a premium in the form of an increase in the conversion rate of the 2020 Notes.

The Company may not redeem the 2020 Notes prior to October 4, 2022. On or after October 4, 2022, the Company may redeem for cash all or part of the 2020 Notes if the last reported sale price of the Company’s Class A common stock equals or exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the principal amount of the 2020 Notes to be redeemed, plus accrued and unpaid interest, if any.

Upon the occurrence of a fundamental change (as defined in the 2020 Indenture), holders may require the Company to repurchase all or a portion of their 2020 Notes for cash at a price equal to 100% of the principal amount of the 2020 Notes to be repurchased plus any accrued but unpaid interest to, but excluding, the fundamental change repurchase date.

The 2020 Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2020 Notes then

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~~outstanding may declare the entire principal amount of all the 2020 Notes plus accrued interest, if any, to be immediately due and payable.~~

~~Proceeds from Non-Accreting Notes Transactions~~

The net proceeds from the sale of the 2017 Notes, 2018 Notes, 2019 Notes, and the 2020 Notes were approximately $420.4 million, $562.0 million, $935.1 million, and $1.5 billion. respectively, after deducting the initial purchasers’ discounts and the offering expenses payable by the Company. The Company used approximately $44.2 million, $93.4 million, $145.7 million, and $255.0 million, respectively, of the net proceeds from the 2017 Notes, 2018 Notes, 2019 Notes, and 2020 Notes to pay the cost of the 2017 Capped Call Transactions, the 2018 Capped Call Transactions, the 2019 Capped Call Transactions, and the 2020 Capped Call Transactions, respectively.

~~Accounting for Non-Accreting Notes~~

In accounting for the issuance of the Non-Accreting Notes, the Company separated the Non-Accreting Notes into liability and equity components. The carrying amount of the liability components were calculated by measuring the fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity components, representing the conversion option, which does not meet the criteria for separate accounting as a derivative as it is indexed to the Company's own stock, were determined by deducting the fair value of the liability components from the par value of the Non-Accreting Notes. The differences between the carrying amounts of the Non-Accreting Notes and the liability components represent the debt discounts for the corresponding Non-Accreting Notes, which is recorded as a direct deduction from the related debt liabilities in the Consolidated and Condensed Balance Sheet and amortized to interest expense using the effective interest method over the terms of the corresponding Non-Accreting Notes.

The effective interest rate of the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes is 6.0%, 8.1%, 6.4%, and 5.2%, respectively. The equity components of the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes of approximately $95.8 million, $181.5 million, $280.3 million, and $297.4 million, respectively, are included in additional paid-in capital in the Consolidated and Condensed Balance Sheet and are not remeasured as long as they continue to meet the conditions for equity classification. The Company allocated transaction costs related to the components of the Non-Accreting Notes using the same proportions as the proceeds from the corresponding Non-Accreting Notes. Transaction costs attributable to the liability components were recorded as direct deductions from the related debt liabilities in the Consolidated and Condensed Balance Sheet and amortized to interest expense over the terms of the corresponding Non-Accreting Notes, and transaction costs attributable to the equity components were netted with the corresponding equity components in shareholders’ deficit.

~~2020 Accreting Notes~~

On April 8, 2020, the Company issued $535.0 million in aggregate original principal amount of 2.50% Accreting Convertible Senior Notes due 2025 (the "2020 Accreting Notes", and collectively with the Non-Accreting Notes, the “Notes”) to GHEP VII Aggregator, L.P. ("Great Hill"), CBEP Investments, LLC ("Charlesbank") and The Spruce House Partnership LLC. The 2020 Accreting Notes are fully and unconditionally guaranteed on a senior unsecured basis by Wayfair LLC, a wholly-owned subsidiary of the Company, as guarantor.

The 2020 Accreting Notes were issued pursuant to an indenture, dated April 8, 2020 (the "2020 Accreting Indenture"), among the Company, Wayfair LLC, as guarantor, and U.S. Bank National Association, as trustee. The 2020 Accreting Notes are fully and unconditionally guaranteed on a senior unsecured basis by Wayfair LLC. No cash interest will be payable on the 2020 Accreting Notes. Instead, the 2020 Accreting Notes will accrue interest at a rate of 2.50% per annum which will accrete to the principal amount on April 1 and October 1 of each year, beginning on October 1, 2020. The 2020 Accreting Notes are convertible based upon an initial conversion price of $72.50 per share of the Company’s Class A common stock. The conversion price is subject to adjustment upon the occurrence of certain specified events, including certain distributions and dividends to all or substantially all of the holders of the Company's Class A common stock, but will not be adjusted for accrued and unpaid interest. The Company will settle any conversion of 2020 Accreting Notes with a number of shares of the Company's Class A common stock per $1,000 original principal amount of 2020 Accreting Notes equal to the accreted principal amount of such original principal amount of 2020 Accreting Notes divided by the conversion price.

The 2020 Accreting Notes will mature on April 1, 2025, unless earlier purchased, redeemed or converted. Holders may convert all or a portion of their 2020 Accreting Notes at any time prior to the second business day immediately preceding the maturity date. Holders of the 2020 Accreting Notes who convert in connection with a make-whole fundamental change (as defined in the 2020 Accreting Indenture) may be entitled to a premium in the form of additional shares of the Company's Class A common stock.

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The Company may not redeem the 2020 Accreting Notes prior to May 9, 2023. On or after May 9, 2023, the Company may redeem for cash all or part of the 2020 Accreting Notes if the last reported sale price of the Company's Class A common stock equals or exceeds 276% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including at least one of the five trading days immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading days ending on, and including the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be 100% of the accreted principal amount of the 2020 Accreting Notes to be redeemed, including accrued interest, if any, but excluding, the redemption date.

~~Upon the occurrence of a fundamental change (as defined in the 2020~~ ~~Accreting~~ Indenture), holders may require the Company to repurchase all or a portion of their 2020 Accreting Notes for cash at a price equal to 100% of the accreted principal amount of the 2020 Accreting Notes to be repurchased (which accreted principal amount upon repurchase will include interest, if any, accrued to, but excluding, the fundamental change repurchase date).

~~The 2020~~ ~~Accreting~~ Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2020 Accreting Notes then outstanding may declare the entire principal amount of all the 2020 Accreting Notes plus accrued interest, if any, to be immediately due and payable.

~~The net proceeds from the sale of the 2020 Accreting Notes was approximately $527.4 million, after deducting the offering expenses payable by the Company.~~

In accounting for the issuance of the 2020 Accreting Notes, the Company determined there was a beneficial conversion feature, which represents the excess of the fair value of the underlying common stock at the commitment date less the effective conversion price of the shares convertible at that time. The beneficial conversion feature of $39.4 million was recorded to additional paid-in capital in the Consolidated and Condensed Balance Sheet and represents a debt discount to the 2020 Accreting Notes, which was recorded as a direct deduction from the related debt liability in the Consolidated and Condensed Balance Sheet. It is amortized to interest expense using the effective interest method over the term of the 2020 Accreting Notes. All transaction costs incurred were recorded as a direct deduction from the related debt liability in the Consolidated and Condensed Balance Sheet and are amortized to interest expense using the effective interest method over the term of the 2020 Accreting Notes.

The 2020 Accreting Notes accrue interest at a rate of 2.50% per annum, which will accrete to the principal amount on April 1 and October 1 of each year, beginning on October 1, 2020. The interest is amortized to interest expense using the effective interest method over the term of the 2020 Accreting Notes and recorded to other long-term liabilities in the Consolidated and Condensed Balance Sheet. Upon accretion to the principal amount on April 1 and October 1 of each year, the Company will reclassify the interest accrued as of that date to long-term debt. The beneficial conversion feature for additional shares, which would be issued upon conversion of paid in kind interest, is recorded as additional interest expense and additional paid-in capital over the term of the 2020 Accreting Notes as such interest accrues. The effective interest rate of the 2020 Accreting Notes is 4.4%.

~~Capped Call Transactions~~

The Restated 2017 Capped Call Transactions, 2018 Capped Call Transactions, 2019 Capped Call Transactions, and 2020 Capped Call Transactions (collectively, the "Capped Call Transactions") are expected generally to reduce the potential dilution and/or offset the cash payments the Company is required to make in excess of the principal amount of the Non-Accreting Notes upon conversion of the Non-Accreting Notes in the event that the market price per share of the Company’s Class A common stock is greater than the strike price of the Capped Call Transactions (which initially corresponds to the initial conversion price of the Non-Accreting Notes and is subject to certain adjustments under the terms of the Capped Call Transactions), with such reduction and/or offset subject to a cap based on the cap price of the Capped Call Transactions. The Restated 2017 Capped Call Transactions have an initial cap price of $154.16 per share of the Company’s Class A common stock, which represents a premium of 100% over the last reported sale price of the Company’s Class A common stock on September 11, 2017, which is the date the 2017 Notes priced, and is subject to certain adjustments under the terms of the Restated 2017 Capped Call Transactions. The 2018 Capped Call Transactions have an initial cap price of $219.63 per share of the Company’s Class A common stock, which represents a premium of 150% over the last reported sale price of the Company’s Class A common stock on November 14, 2018, which is the day the 2018 Notes priced, and is subject to certain adjustments under the terms of the 2018 Capped Call Transactions. The 2019 Capped Call Transactions have an initial cap price of $280.15 per share of the Company's Class A common stock, which represents a premium of 150% over the last reported sale price of the Company's Class A common stock on August 14, 2019, which is the day the 2019 Notes priced, and is subject to certain adjustments under the terms of the 2019 Capped Call Transactions. The 2020 Capped Call Transactions have an initial cap price of $787.08 per share of the Company’s Class A common stock, which represents a premium of 150% over the U.S. composite volume weighted average price of the Company’s Class A common stock on August 11, 2020, which is the day the 2020 Notes priced,

~~Table of Contents~~

and is subject to certain adjustments under the terms of the 2020 Capped Call Transactions. Collectively, the Capped Call Transactions cover, initially, the number of shares of the Company’s Class A common stock underlying the Non-Accreting Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Non-Accreting Notes.

The Capped Call Transactions are separate transactions, in each case, entered into by the Company with the 2017 Option Counterparties, the 2018 Option Counterparties, the 2019 Option Counterparties, and the 2020 Option Counterparties, and are not part of the terms of the Non-Accreting Notes and will not affect any holder’s rights under the Non-Accreting Notes. Holders of the Non-Accreting Notes will not have any rights with respect to the Capped Call Transactions. The Capped Call Transactions do not meet the criteria for separate accounting as a derivative as they are indexed to the Company's stock. The premiums paid for the Capped Call Transactions have been included as a net reduction to additional paid-in capital within shareholders’ deficit.

~~Extinguishment, Conversions and Convertibility of the Notes~~

In August 2020, the Company used $1.0 billion of the net proceeds from the issuance of the 2020 Notes to repurchase for cash in privately negotiated repurchase transactions $343.4 million in aggregate principal amount of the 2017 Notes. Additionally, in the third quarter of 2020, $60.6 million aggregate principal of the 2017 Notes were settled upon conversion by the holders for 582,825 shares of the Company’s Class A common stock. Approximately $27.2 million aggregate principal amount of the ~~2017 Notes~~ ~~remained outstanding as of~~ ~~September 30, 2020~~.

~~In accounting for these transactions, t~~he Company allocated $371.8 million of the total fair value of the consideration received from the 2020 Notes to the debt component of the repurchased 2017 Notes by estimating the fair value of a similar liability that did not have an associated convertible feature. The $12.6 million loss on extinguishment of the 2017 Notes recorded to Other (expense) income, net in the Consolidated and Condensed Statements of Operations, primarily represents the difference between the total fair value of consideration allocated to the debt component and the $360.5 million carrying value, net of the remaining unamortized debt discount and debt issuance costs. The Company applied the $818.7 million residual value of the total fair value of the consideration to the equity component in additional paid-in capital in the Consolidated and Condensed Balance Sheet.

The following Non-Accreting Notes are convertible during the calendar quarter ended December 31, 2020: the 2017 Notes, the 2018 Notes and the 2019 Notes. The 2020 Notes are not convertible during the fourth quarter of 2020. None of the 2018 Notes, the 2019 Notes or the 2020 Notes have been converted to date.

~~The 2020 Accreting Notes are convertible~~ ~~at any time prior to the second business day immediately preceding the maturity date (April 1, 2025).~~ ~~As of~~ ~~September 30, 2020, none of the 2020 Accreting Notes had been converted. In October 2020,~~ ~~Charlesbank converted $253.1 million of accreted principal of the 2020 Accreting Notes and received 3,490,175 shares of the Company’s Class A common stock.~~

~~Use of Proceeds of the Notes~~

The Company intends to use the remainder of the net proceeds from the Notes for working capital and general corporate purposes, including, but not limited to, operating and capital expenditures. The Company may also use a portion of the net proceeds to finance acquisitions, strategic transactions, investments. repurchases of its Class A common stock or the repayment, redemption, purchase or exchange of indebtedness (including the Notes).

~~Seniority of Notes~~

The Notes are general senior unsecured obligations of the Company. The Notes rank senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes, rank equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated, and are effectively subordinated in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness. The Non-Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of the Company’s subsidiaries, including Wayfair LLC’s guaranty of the 2020 Accreting Notes, and the 2020 Accreting Notes are structurally subordinated to all existing and future indebtedness and liabilities of the Company’s subsidiaries (other than Wayfair LLC).

~~Table of Contents~~

~~The following table presents the outstanding principal amount and carrying value of the Notes as of the date presented:~~

September 30, 2020 December 31, 2019
2017 Notes 2018 Notes 2019 Notes 2020 Accreting Notes 2020 Notes 2017 Notes 2018 Notes 2019 Notes
(in thousands)
Principal amounts:
Principal $ 27,171 $ 575,000 $ 948,750 $ 535,000 $ 1,518,000 $ 431,250 $ 575,000 $ 948,750
Unamortized debt discount (2,764) (140,200) (251,548) (42,650) (304,624) (59,830) (161,275) (277,700)
Net carrying amount $ 24,407 $ 434,800 $ 697,202 $ 492,350 $ 1,213,376 $ 371,420 $ 413,725 $ 671,050

~~The following tables present total interest expense recognized related to the Notes:~~

Three Months Ended September 30,
2020 2019
2017 Notes 2018 Notes 2019 Notes 2020 Accreting Notes 2020 Notes 2017 Notes 2018 Notes 2019 Notes
(in thousands)
Contractual interest expense $ 224 $ 1,617 $ 2,372 $ 3,310 $ 1,239 $ 404 $ 1,617 $ 1,031
Interest cost related to amortization of the debt discount 2,970 7,172 8,759 2,632 6,937 5,058 6,613 3,799
Total interest expense $ 3,194 $ 8,789 $ 11,131 $ 5,942 $ 8,176 $ 5,462 $ 8,230 $ 4,830

Nine Months Ended September 30,
2020 2019
2017 Notes 2018 Notes 2019 Notes 2020 Accreting Notes 2020 Notes 2017 Notes 2018 Notes 2019 Notes
(in thousands)
Contractual interest expense $ 1,033 $ 4,852 $ 7,063 $ 6,502 $ 1,239 $ 1,213 $ 4,852 $ 1,031
Interest cost related to amortization of the debt discount 13,471 21,075 25,912 4,317 6,937 14,948 19,423 3,799
Total interest expense $ 14,504 $ 25,927 $ 32,975 $ 10,819 $ 8,176 $ 16,161 $ 24,275 $ 4,830

The estimated fair value of the 2017 Notes, 2018 Notes, 2019 Notes, 2020 Notes, and 2020 Accreting Notes was $75.6 million, $1.5 billion, $1.8 billion, $1.5 billion and $2.2 billion, respectively, as of September 30, 2020. The estimated fair value of the Non-Accreting Notes was determined through consideration of quoted market prices. The estimated fair value of the 2020 Accreting Notes was determined through an option pricing model using Level 3 inputs including volatility and credit spread. The fair values of the Non-Accreting Notes and the 2020 Accreting Notes are classified as Level 2 and Level 3, respectively, as defined in Note 3, ~~Investments and Fair Value Measurements~~. The if-converted value of the 2017 Notes, 2018 Notes, 2019 Notes, and 2020 Accreting Notes exceeded the principal value by $48.8 million, $862.5 million, $910.7 million, and $1.6 billion, respectively, as of September 30, 2020. The if-converted value of the 2020 Notes did not exceed the principal value as of September 30, 2020.

~~Table of Contents~~

~~16.~~9. Earnings (Loss) per Share

Basic and diluted earnings (loss) per share is presented using the two-class method required for participating securities: Class A and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. For more information on the rights of Class A and Class B common stockholders, see Note 13, ~~Stockholders’ Deficit~~.

Basic earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of shares of common stock plus, if dilutive, common stock equivalents outstanding during the period and stock issuable upon conversion of our convertible debt instruments. The Company's common stock equivalents consist of shares issuable upon the release of RSUs, and to a lesser extent, the incremental shares of common stock issuable upon the exercise of stock options and unvested restricted stock. The dilutive effect of these common stock equivalents is reflected in diluted earnings (loss) per share by application of the treasury stock method. The dilutive effect of shares issuable upon conversion of the Company's convertible debt instruments are included in the calculation of diluted net earnings (loss) per share under the if-converted method.

For periods in which the Company has generated a net loss, the Company's basic and diluted earnings (loss) per share are the same as basic earnings (loss) per share, as the effects of common stock equivalents outstanding and shares issuable upon conversion of convertible debt instruments are antidilutive and therefore excluded from the calculation of diluted earnings (loss) per share.

The Company allocates undistributed earnings between the classes on a 1-to-1 basis when computing earnings (loss) per share. As a result, basic and diluted earnings (loss) per Class A and Class B shares of common stock are equivalent.

The following table presents the calculation of basic and diluted earnings (loss) per share:


		Three months ended September 30,				Nine months ended September 30,					Three months ended March 31,
		2020		2019		2020		2019			2021		2020
		(in thousands, except per share data)									(in thousands, except per share data)
Numerator:	Numerator:									Numerator:
Numerator for basic EPS - Net income (loss)	Numerator for basic EPS - Net income (loss)	$	173,166	$	(272,035)	$	161,178	$	(654,362)	Numerator for basic EPS - Net income (loss)	$	18,234	$	(285,865)
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Interest expense associated with convertible debt instruments	Interest expense associated with convertible debt instruments	9,136		0		0		0		Interest expense associated with convertible debt instruments	(1,567)		0
Numerator for diluted EPS - net income (loss) available to common stockholders after the effect of dilutive securities	Numerator for diluted EPS - net income (loss) available to common stockholders after the effect of dilutive securities	$	182,302	$	(272,035)	$	161,178	$	(654,362)	Numerator for diluted EPS - net income (loss) available to common stockholders after the effect of dilutive securities	$	16,667	$	(285,865)
Denominator:	Denominator:									Denominator:
Denominator for basic EPS - weighted-average number of shares of common stock outstanding	Denominator for basic EPS - weighted-average number of shares of common stock outstanding	95,373		92,540		94,767		91,820		Denominator for basic EPS - weighted-average number of shares of common stock outstanding	102,840		94,089
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Employee stock options	Employee stock options	24		0		32		0		Employee stock options	15		0
Restricted stock units	Restricted stock units	4,123		0		3,222		0		Restricted stock units	3,128		0
Convertible debt instruments	Convertible debt instruments	9,680		0		0		0		Convertible debt instruments	699		0
Dilutive potential common shares	Dilutive potential common shares	13,827		0		3,254		0		Dilutive potential common shares	3,842		0
Denominator for diluted EPS - adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities	Denominator for diluted EPS - adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities	109,200		92,540		98,021		91,820		Denominator for diluted EPS - adjusted weighted-average number of shares of common stock outstanding after the effect of dilutive securities	106,682		94,089

Basic earnings (loss) per share		$	1.82	$	(2.94)	$	1.70	$	(7.13)
Diluted earnings (loss) per share		$	1.67	$	(2.94)	$	1.64	$	(7.13)

Earnings (Loss) per Share:										Earnings (Loss) per Share:
Basic										Basic	$	0.18	$	(3.04)
Diluted										Diluted	$	0.16	$	(3.04)

The potential common shares from anti-dilutive securities excluded from the weighted-average shares of common stock used to calculate diluted earnings (loss) per share were as follows:

~~The Company~~Wayfair may settle conversions of the Non-Accreting Notes in cash, shares of ~~the Company's~~Wayfair’s Class A common stock or any combination thereof at its election. ~~The Company~~Wayfair will settle conversions of the ~~2020~~2025 Accreting Notes in shares. The Capped ~~Call Transactions~~Calls are generally expected to reduce the potential dilution of ~~the Company's~~Wayfair's Class A common stock upon any conversion of the Notes and/or offset the cash payments ~~the Company~~Wayfair is required to make in excess of the principal amount of the ~~Notes.~~Notes upon conversion of the Notes if the market price per share of Wayfair’s Class A common stock is greater than the strike price of the Capped Calls (which corresponded to the initial conversion price of the Non-Accreting Notes and is subject to certain adjustments under the terms of the Capped Calls), with such reduction and/or offset subject to the Initial Cap Price. The number of shares of ~~the Company's~~Wayfair's Class A common stock potentially issuable and obtainable at the respective conversion prices of the Notes and the Capped Call, ~~Transactions,~~ respectively, ~~by year,~~as of March 31, 2021, are as follows:

For more information on the structure of the Notes and the Capped ~~Call Transactions,~~Calls, including potential adjustments to the conversion prices used to determine the shares presented in the preceding table, see Note ~~15,~~ 4,~~Convertible~~ Debt and Other Financing.

~~17.~~10. Segment and Geographic Information

Wayfair's operating and reportable segments are the U.S. and International. These segments reflect the way the CODM allocates resources and evaluates financial performance, which is based upon each segment's Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest (expense), net, other (expense), net, (benefit) provision for income taxes, net, non-recurring items, and other items not indicative of our ongoing operating performance. These charges are excluded from evaluation of segment performance because it facilitates reportable segment performance comparisons on a period-to-period basis as these costs may vary independent of business performance.

Wayfair allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative based on the usage and relative contribution provided to the segments. It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, as well as interest (expense), net, other (expense), net, and (benefit) provision for income taxes, net. There are no net revenue transactions between Wayfair's reportable segments.

The U.S. segment primarily consists of amounts earned through product sales through Wayfair's family of sites in the U.S.

The International segment primarily consists of amounts earned through product sales through Wayfair's international sites.

The following tables present net revenues and Adjusted EBITDA attributable to Wayfair's reportable segments for the periods presented:


	Three months ended March 31,
	2021		2020
	(in thousands)
U.S. net revenue	$	2,820,686	$	1,974,983
International net revenue	656,832		355,080
Total net revenue	$	3,477,518	$	2,330,063


	Three months ended March 31,
	2021		2020
	(in thousands)
Adjusted EBITDA:
U.S.	$	227,235	$	(45,095)
International	(21,468)		(82,182)
Total reportable segments Adjusted EBITDA	205,767		(127,277)
Less: reconciling items (1)	(187,533)		(158,588)
Net income (loss)	$	18,234	$	(285,865)

(1) The following adjustments are made to reconcile total reportable segments Adjusted EBITDA to consolidated net income (loss):


	Three months ended March 31,
	2021		2020
	(in thousands)
Depreciation and amortization	$	80,312	$	66,843
Equity-based compensation and related taxes	86,901		63,992
Interest expense, net	6,812		22,218
Other expense, net	3,298		246
(Benefit) provision for income taxes, net	(2,002)		1,333
Other (1)	12,212		3,956
Total reconciling items	$	187,533	$	158,588

(1) In the three months ended March 31, 2021, we recorded $12.2 million of customer service center impairment and other charges related to our plan to consolidate customer service centers. During the three months ended March 31, 2020, we recorded $4.0 million in selling, operations, technology, general and administrative expenses for severance costs associated with February 2020 workforce reductions.

As discussed in Note 6, ~~Note 15, Convertible~~ Debt and Other Financing,, included in Part II, Item 8, Financial Statements and Supplementary Data, of Wayfair’s Annual Report on Form 10-K for the year ended December 31, 2020, in April 8, 2020, pursuant to the terms of the amended and restated purchase agreement, dated April 7, 2020 (the "Purchase Agreement"), ~~the Company~~Wayfair issued $535.0 million in aggregate original principal amount of ~~2020~~2025 Accreting Notes. The issuance of the ~~2020~~2025 Accreting Notes constitutes a related

~~In August 2020, the FASB issued ASU No. 2020-06,~~ ~~Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)~~ (“ASU 2020-06”). This ASU simplifies the accounting for convertible instruments by removing the separation models for convertible debt with cash conversion features and convertible instruments with a beneficial conversion feature. Under ASU 2020-06, a convertible debt instrument with those features will generally be reported as a single liability at its amortized cost with no separate accounting for the embedded conversion features. We expect the elimination of these models will reduce reported interest expense and increase reported net income for the Company’s existing convertible instruments falling under the scope of those models before the adoption of ASU 2020-06. ASU 2020-06 requires the application of the if-converted method when calculating diluted earnings per share, eliminating the Company’s ability to use the treasury stock method when certain conditions are met. The ASU is effective for annual reporting periods beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years

~~beginning after December 15, 2020. Management is currently evaluating the impact of the adoption of this ASU on the Company’s consolidated financial statements.~~

~~ITEM~~Item 2. ~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

~~The following discussion~~Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of ~~our financial condition~~Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and ~~results~~Section 21E of ~~operations should be read in conjunction with~~ the ~~unaudited Consolidated and Condensed Financial Statements and the notes thereto included elsewhere~~Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our investment plans and anticipated returns on those investments, our future customer growth, our future results of operations and financial position, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, consumer activity and behaviors, developments in our technology and systems and anticipated results of those developments and the impact of the novel coronavirus (COVID-19) pandemic and our ~~audited Consolidated Financial Statements and related notes thereto included~~response to it, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions.

Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our ~~Annual Report~~expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from Wayfair’s expectations and projections. Investors are therefore cautioned not to place undue reliance on ~~Form 10-K for the year ended December 31, 2019. This discussion contains~~any forward-looking statements. These forward-looking statements ~~that involve risks and uncertainties. As a result~~speak only as of ~~many factors, such as those included in Part I, Item 1,~~ ~~Special Note Regarding Forward Looking Statements,~~ ~~and inPart II, Item 1A,~~ ~~Risk Factors~~,the date of this Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.

Factors that could cause or contribute to differences in our future results include, without limitation, the following:

•our ability to acquire new customers and sustain and/or manage our growth;

•our ability to increase our net revenue per active customer;

•our ability to build and maintain strong brands;

•our ability to manage our global growth and expansion;

•our ability to compete successfully;

•the rate of growth of the Internet and e-commerce;

•economic factors, such as interest rates, the housing market, currency exchange fluctuations and changes in customer spending;

•disruptions or inefficiencies in our supply chain or logistics network, including any impact of the COVID-19 outbreak on our suppliers and third party carriers and delivery agents;

•potential impacts of the COVID-19 outbreak on our business, financial condition, and results of operations;

•world events, natural disasters, public health emergencies (such as the COVID-19 outbreak), civil disturbances, and terrorist attacks; and

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 in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020. We qualify all of our ~~actual results may differ materially from those anticipated in~~forward-looking statements by these ~~forward-looking~~cautionary statements.

~~The following discussion includes financial information prepared in accordance with generally accepted accounting principles in the United States~~

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to "Wayfair," "the company," "we," "us," "our," and similar terms include Wayfair Inc. and its subsidiaries, unless the context indicates otherwise.

~~We are~~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 ~~eighteen~~twenty-two million products from over ~~12,000~~16,000 suppliers. ~~Because~~

We believe an increasing portion of the ~~large~~dollars spent on home goods will be spent online and that there is an opportunity for acquiring more market ~~opportunity we see in front of us, we are currently investing across~~share. Our business model is designed to grow our ~~business, including investments to expand our international business, to build our proprietary logistics network and to continue developing various product categories.~~

~~Our operating and reportable segments are the U.S. and International. The following table presents~~ net revenue ~~attributable~~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 ~~reportable segments for the periods presented:~~

~~For more information on our segments, see Note 11,~~ ~~Segment~~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 ~~Geographic Information, included in Part I, Item 1,~~ ~~Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q.~~customer service.

~~We are continuing to closely monitor the impact of the COVID-19 outbreak on our business, results of operations and financial results.~~ The situation surrounding the COVID-19 outbreak ~~remains~~continues to remain fluid and the full extent of the positive or negative impact of the COVID-19 outbreak on our business will depend on certain developments including the length of time that the outbreak continues, the impact on consumer activity and behaviors and the effect on our customers, employees, suppliers, partners, and stockholders, all of which are uncertain and cannot be predicted. See Part ~~II,~~I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2020 for additional details. Our focus remains on promoting the health, safety and financial security of our employees and serving our customers. As a result, we have taken a number of precautionary measures, including implementing social distancing and enhanced cleaning measures and COVID-19 testing in our facilities, suspending all non-essential travel, transitioning a large portion of our employees to working-from-home, reimbursing certain employee technology purchases, providing employee welfare programs, providing emergency paid time off and targeted hourly pay increases and developing no contact delivery methods.

In an effort to contain or slow the COVID-19 outbreak, authorities across the world have implemented various measures, some of which have been subsequently rescinded or modified, including travel bans, stay-at-home orders and shutdowns of certain businesses. We anticipate that these actions and the global health crisis caused by the COVID-19 outbreak, including any resurgences, will continue to negatively impact global economic activity. While the COVID-19 outbreak has not had a material adverse impact on our operations to date and we believe the long-term opportunity that we see for shopping for the home online remains unchanged, it is difficult to predict all of the positive or negative impacts the COVID-19 outbreak will have on our ~~business.~~business in the short- and long-term.

In the short term, we have continued to see increased sales and order activity in the market since the COVID-19 outbreak. ~~In order to keep up with~~To serve the increased orders, we have hired and are continuing to hire additional frontline and sales and service workers. However, much is unknown and accordingly the situation remains dynamic and subject to rapid and possibly material change. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests 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 our Annual Report on Form 10-K for the year ended December 31, 2020.

Key Financial and Operating Metrics

We measure our business using key financial and operating metrics, as well as ~~non-GAAP financial measures.~~Adjusted EBITDA, Free Cash Flow and Adjusted Diluted Earnings (Loss) per Share (see “Non-GAAP Financial Measures”). Our Free Cash Flow ~~non-GAAP financial measure is~~and Adjusted Diluted Earnings (Loss) per Share are measured on a consolidated basis, while our Adjusted EBITDA ~~non-GAAP financial measure~~ is measured on a consolidated and reportable segment basis. ~~See Note 11,~~ ~~Segment and Geographic Information, included in Part I, Item 1,~~ ~~Unaudited Consolidated and Condensed Financial Statements,~~ ~~of this Quarterly Report on Form 10-Q for additional information regarding our reportable segments.~~ All other key financial and operating metrics are derived and reported from our consolidated ~~Direct Retail~~ net revenue, which includes sales generated primarily through our family of sites. These metrics do not include net revenue derived from the websites operated by our retail partners and our media solutions business. We do not have access to certain customer level information on net revenue derived through our retail partners and therefore cannot measure or disclose it.revenue.

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
(in thousands, except LTM Net Revenue per Active Customer and Average Order Value)
Direct Retail Financial and Operating Metrics:
Direct Retail Net Revenue (1) $ 3,827,265 $ 2,299,680 $ 10,444,083 $ 6,562,620
Active Customers 28,783 19,071 28,783 19,071
LTM Net Revenue per Active Customer $ 451 $ 449 $ 451 $ 449
Orders Delivered 15,758 9,121 44,526 26,446
Average Order Value $ 243 $ 252 $ 235 $ 248
Non-GAAP Financial Measures:
Adjusted EBITDA $ 371,112 $ (144,184) $ 683,648 $ (316,385)
Free Cash Flow $ 255,028 $ (180,900) $ 954,007 $ (439,188)


	Three months ended March 31,
	2021		2020
	(in thousands, except LTM Net Revenue per Active Customer, Average Order Value and per share data)
Key Financial Statement Metrics:
Net revenue	$	3,477,518	$	2,330,063
Gross profit	$	1,003,027	$	579,123
Income (loss) from operations	$	26,342	$	(262,068)
Net income (loss)	$	18,234	$	(285,865)
Earnings (loss) per share:
Basic	$	0.18	$	(3.04)
Diluted	$	0.16	$	(3.04)
Key Operating Metrics:
Active customers (1)	33,193		21,108
LTM net revenue per active customer (2)	$	461	$	449
Orders delivered (3)	14,696		9,876
Average order value (4)	$	237	$	235
Non-GAAP Financial Measures:
Adjusted EBITDA	$	205,767	$	(127,277)
Free Cash Flow	$	111,190	$	(354,623)
Adjusted Diluted Earnings (Loss) per Share (5)	$	1.00	$	(2.30)

(1) ~~Direct Retail~~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) 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 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. 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.

(5) Adjusted Diluted Earnings (Loss) per Share reflects our January 1, 2021 adoption of ASU 2020-06, further discussed in Note 1, Summary of Significant Accounting Policies, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q. Prior periods have not been restated. Under legacy accounting, Adjusted Diluted Earnings (Loss) per share for the three months ended March 31, 2021 would have been $0.62.

Results of Consolidated Operations

Comparison of the three months ended March 31, 2021 and 2020

In the three months ended March 31, 2021, net revenue increased by $1.1 billion, or 49.2%, compared to the same period in 2020, primarily due to growth in our customer base, with the number of active customers increasing by 57.3% from the three months ended March 31, 2021 compared to the three months ended March 31, 2020. There was an increase in order frequency, with LTM orders per active customer increasing by 6.5% in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Additionally, we believe our merchandising investments encouraged active customers to spend, on average, more in the three months ended March 31, 2021, with LTM net revenue per active customer increasing 2.7% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Our U.S. net revenue increased 42.8%, while our International net revenue increased 85.0% in the first quarter of 2021 compared to same period in 2020. International Net Revenue Constant Currency Growth (see “Non-GAAP Measures” below) was 72.5% in the first quarter of 2021 over the same quarter of 2020.


	Three months ended March 31,
	2021		2020		% Change
	(in thousands)
U.S. net revenue	$	2,820,686	$	1,974,983	42.8	%
International net revenue	656,832		355,080		85.0	%
Net revenue	$	3,477,518	$	2,330,063	49.2	%

For more information on our segments, see Note 10 to the unaudited consolidated and condensed financial statements, Segment and Geographic Information, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q.

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 the three months ended March 31, 2021, cost of goods sold increased by $723.6 million, or 41.3%, compared to the same period in 2020.

The increase in cost of goods sold is primarily driven by an increase in the number of orders delivered, partially offset by operational efficiencies. The decrease in cost of goods sold as a percentage of net revenue is ~~calculated~~primarily a result of unlocking incremental margin from merchandising investments and operational efficiencies.


	Three months ended March 31,
	2021			2020			% Change
	(in thousands)
Cost of goods sold	$	2,474,491		$	1,750,940		41.3	%
As a percentage of net revenue	71.2		%	75.1		%

Operating expenses are comprised of customer service and merchant fees, advertising, selling, operations, technology, general and administrative expenses and customer service center impairment and other 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.


	Three months ended March 31,
	2021			2020			% Change
	(in thousands)
Customer service and merchant fees (1)	$	147,241		$	89,463		64.6	%
Advertising	365,863			275,760			32.7	%
Selling, operations, technology, general and administrative (1)	451,369			475,968			(5.2)	%
Customer service center impairment and other charges	12,212			—			—
Total operating expenses	$	976,685		$	841,191		16.1	%
As a percentage of net revenue:
Customer service and merchant fees (1)	4.2		%	3.8		%
Advertising	10.5		%	11.8		%
Selling, operations, technology, general and administrative (1)	13.0		%	20.4		%
Customer service center impairment and other charges	0.4		%	—		%
	28.1		%	36.0		%

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


	Three months ended March 31,
	2021		2020
	(in thousands)
Customer service and merchant fees	$	5,894	$	2,118
Selling, operations, technology, general and administrative	$	78,002	$	60,146

Our equity-based compensation and related taxes included in customer service and merchant fees and selling, operations, technology, general and administrative expenses increased by ~~taking consolidated~~$21.6 million in the three months ended March 31, 2021, compared to the same period in 2020, as a result of RSUs awarded in 2020 and the three months ended March 31, 2021.

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


	Three months ended March 31,
	2021		2020
Customer service and merchant fees	4.1	%	3.7	%
Selling, operations, technology, general and administrative	10.7	%	17.8	%

Customer Service and Merchant Fees

Excluding the impact of equity-based compensation and related taxes, our expenses for customer service and merchant fees increased by $54.0 million in three months ended March 31, 2021, compared to the same period in 2020, primarily due to the increase in net revenue during the three months ended March 31, 2021. Expenses for customer service and merchant fees, both including and excluding ~~U.S.~~equity-based compensation and related taxes, as a percentage of net revenues increased in the three months ended March 31, 2021, compared to the same period in 2020, primarily due to customer service hiring to serve the increased order volume.

Our advertising expenses increased by $90.1 million in the three months ended March 31, 2021, compared to the same period 2020, primarily as a result of an increase in online advertising. Advertising decreased as a percentage of net revenue ~~derived~~in

March 31, 2021, compared to the same period in 2020, primarily attributable to efficiencies in our advertising spend and partially offset by increased investment to generate future customer growth.

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 decreased by $42.5 million in three months ended March 31, 2021, compared to the same period in 2020, primarily attributable to decreases in personnel costs and unutilized rent, partially offset by increases in depreciation and amortization. As a percentage of net revenue, selling, operations, technology, general and administrative expenses decreased to 13.0% in three months ended March 31, 2021, compared to 20.4% in the same period in 2020, primarily due to the relatively slower pace of corporate headcount net hiring relative to the increase in net revenue.

Customer service center impairment and other charges

During the first quarter of 2021, we enacted a plan to consolidate certain customer service centers in identified U.S. locations. As a result, we recorded a charge of $12.2 million during the first quarter of 2021, which included $6.3 million for the non-cash impairment of ROU assets, $5.0 million for the non-cash accelerated depreciation of fixed assets and the remainder for other items.

Interest (expense), net

Our interest (expense), net decreased by $15.4 million in the three months ended March 31, 2021, compared to the same period in 2020, primarily attributable to the adoption of ASU 2020-06 on January 1, 2021, as well as a reversal of interest expense we recorded in 2020 for a portion of paid in kind interest accretion for the 2025 Accreting Notes that was not realized in 2021.


	Three months ended March 31,
	2021		2020		% Change
	(in thousands)
Interest (expense), net	$	(6,812)	$	(22,218)	(69.3)	%

Other (expense), net

Our other (expense), net increased by $3.1 million in the three months ended March 31, 2021, compared to the same period in 2020, primarily attributable to the net change in unrealized and realized gains (losses) from foreign currency transactions.


	Three months ended March 31,
	2021		2020		% Change
	(in thousands)
Other (expense), net	$	(3,298)	$	(246)	1,240.7	%

(Benefit) provision for income taxes, net

Our (benefit) provision for income taxes, net increased by $3.3 million in the ~~websites operated~~three months ended March 31, 2021 compared to the same period in 2020, primarily related to the recognition of a discrete tax benefit due to excess tax benefits on equity awards for U.S. employees, partially offset by taxes on income earned in the U.S. and certain foreign jurisdictions and U.S. state income taxes.


	Three months ended March 31,
	2021		2020		% Change
	(in thousands)
(Benefit) provision for income taxes, net	$	(2,002)	$	1,333	(250.2)	%

Liquidity and Capital Resources

Sources of Liquidity

At March 31, 2021, our ~~retail partners~~principal source of liquidity was cash and cash equivalents and short-term investments totaling $2.7 billion. In addition, on March 24, 2021, Wayfair and certain of its subsidiaries entered a new credit agreement and $600 million senior secured revolving credit facility that matures on March 24, 2026 (the “Revolver”). The Revolver replaced our previous $200 million senior secured revolving credit facility, which was set to mature on February 21, 2022. Wayfair had outstanding letters of credit, primarily as security for certain lease agreements, for approximately $56.2 million as of March 31, 2021, which reduced the availability of credit under the Revolver. Excluding liquidity available through our Revolver, the following table shows sources of liquidity as of March 31, 2021 and December 31, 2020:


	March 31, 2021		December 31, 2020
	(in thousands)
Cash and cash equivalents	$	2,086,484	$	2,129,440
Short-term investments	$	608,524	$	461,698
Working capital	$	996,853	$	880,208

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. 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 Securities and Exchange Commission, or SEC, including those set forth Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2020. In addition, the COVID-19 outbreak and related measures to contain its impact have caused disruption in the capital markets, 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 due to the COVID-19 outbreak.

Credit Agreement and Convertible 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.

As of March 31, 2021, we had $3.1 billion of indebtedness outstanding. The conditional conversion features of the 2022 Notes, 2024 Notes and 2026 Notes were triggered during the first quarter of 2021, and the 2022 Notes, 2024 Notes and 2026 Notes therefore became convertible in the second quarter of 2021 pursuant to the applicable last reported sales price conditions. The conditional conversion feature of the 2025 Notes was not triggered during the first quarter of 2021, and the 2025 Notes are therefore not convertible in the second quarter of 2021 pursuant to the applicable last reported sales price condition. The 2025 Accreting Notes are convertible at any time prior to the second business day immediately preceding the maturity date. In the three months ended March 31, 2021, holders of the 2022 Notes and 2026 Notes converted $0.4 million of aggregate principal and received 4,244 shares of Wayfair’s Class A common stock. During the same period Great Hill converted $253.1 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of Wayfair’s Class A common stock. In April 2021, holders of the 2022 Notes converted $12.5 million of principal and received 120,278 shares of Wayfair’s Class A common stock.

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. For information regarding our credit agreement and convertible notes, see Note 4, Debt and Other Financing, included in Part I, Item 1, Unaudited Consolidated and Condensed Financial Statements, of this Quarterly Report on Form 10-Q. We do not expect any of these restrictions to affect our ability to conduct our business in the ordinary course. During the first quarter of 2021, we were in compliance with all the terms and conditions of our debt agreements.

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”). The 2020 Repurchase Program does not obligate Wayfair to purchase any shares of Class A common stock and has no expiration but may be suspended or terminated by the Board at any time. The actual timing, number and value of shares repurchased in the future will be determined by Wayfair 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. As of March 31, 2021, Wayfair has repurchased 824,310 shares of Class A common stock for approximately $237.4 million under the 2020 Repurchase Program.

Trends and Historical Cash Flows


	Three months ended March 31,
	2021		2020
	(in thousands)
Net income (loss)	$	18,234	$	(285,865)
Net cash from (for) operating activities	$	176,596	$	(256,290)
Net cash (for) from investing activities	$	(212,331)	$	196,353
Net cash (for) from financing activities	$	(143)	$	100,125


		Page

Part I. FINANCIAL INFORMATION

Item 1.	Unaudited Consolidated and Condensed Financial Statements

	Consolidated and Condensed Balance Sheets as of ~~September 30, 2020~~March 3 1 , 202 1 and December 31, ~~2019~~20 20	32

	Consolidated and Condensed Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 3 1 , 202 1 and ~~2019~~20 20	43

	Consolidated and Condensed Statements of Comprehensive Income (Loss) for the Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 3 1 , 202 1 and ~~2019~~ 20 20	54

	Consolidated and Condensed Statements of Stockholders' Deficit for the Three ~~and Nine~~ Months Ended ~~September 30, 2020~~March 3 1 , 202 1 and ~~2019~~20 20	65

	Consolidated and Condensed Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2020~~ March 3 1 , 202 1 and ~~2019~~20 20	86

	Notes to the Unaudited Consolidated and Condensed Financial Statements	97

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2822

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4133

Item 4.	Controls and Procedures	4234

Part II. OTHER INFORMATION

Item 1.	Legal Proceedings	4335

Item 1A.	Risk Factors	4335

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4435

Item 3 .	Defaults Upon Senior Securities	35

Item 4 .	Mine Safety Disclosures	35

Item 5.	Other Information	4435

Item 6.	Exhibits	4636

Signatures		4938


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(in thousands, except share and per share data)					(in thousands, except share and per share data)
Assets:	Assets:					Assets:
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	2,442,939	$	582,753	Cash and cash equivalents	$	2,086,484	$	2,129,440
Short-term investments	Short-term investments	113,985		404,252		Short-term investments	608,524		461,698
Accounts receivable, net of allowance for credit losses of $26,884 and $22,774 at September 30, 2020 and December 31, 2019, respectively		109,652		99,720
Accounts receivable, net						Accounts receivable, net	107,043		110,299
Inventories	Inventories	54,241		61,692		Inventories	59,613		52,152
Prepaid expenses and other current assets	Prepaid expenses and other current assets	322,649		228,721		Prepaid expenses and other current assets	355,211		292,213
Total current assets	Total current assets	3,043,466		1,377,138		Total current assets	3,216,875		3,045,802
Operating lease right-of-use assets	Operating lease right-of-use assets	802,369		763,400		Operating lease right-of-use assets	858,297		808,375
Property and equipment, net	Property and equipment, net	682,057		624,544		Property and equipment, net	665,177		684,306
Goodwill and intangible assets, net		17,605		18,809
Long-term investments		0		155,690
Other noncurrent assets		12,943		13,467
Other non-current assets						Other non-current assets	34,584		31,446
Total assets	Total assets	$	4,558,440	$	2,953,048	Total assets	$	4,774,933	$	4,569,929
Liabilities and Stockholders' Deficit:	Liabilities and Stockholders' Deficit:					Liabilities and Stockholders' Deficit:
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	1,236,895	$	908,097	Accounts payable	$	1,174,208	$	1,156,624
Accrued expenses		328,694		298,918
Unearned revenue		318,175		167,641
Other current liabilities	Other current liabilities	333,589		236,863		Other current liabilities	1,045,814		1,008,970
Total current liabilities	Total current liabilities	2,217,353		1,611,519		Total current liabilities	2,220,022		2,165,594
Long-term debt	Long-term debt	2,862,135		1,456,195		Long-term debt	3,060,091		2,659,243
Operating lease liabilities	Operating lease liabilities	867,711		822,602		Operating lease liabilities	920,936		869,958
Other liabilities		70,827		6,940
Other non-current liabilities						Other non-current liabilities	43,593		67,031
Total liabilities	Total liabilities	6,018,026		3,897,256		Total liabilities	6,244,642		5,761,826
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 5)						Commitments and contingencies (Note 5)	0		0
Stockholders’ deficit:	Stockholders’ deficit:					Stockholders’ deficit:
Undesignated preferred stock, $0.001 par value per share: 10,000,000 shares authorized and NaN issued at September 30, 2020 and December 31, 2019		0		0
Class A common stock, par value $0.001 per share: 500,000,000 shares authorized, 68,959,957 and 66,642,611 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		69		67
Class B common stock, par value $0.001 per share: 164,000,000 shares authorized, 26,636,721 and 26,957,815 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		27		27
Convertible preferred stock, $0.001 par value per share: 10,000,000 shares authorized and NaN issued at March 31, 2021 and December 31, 2020						Convertible preferred stock, $0.001 par value per share: 10,000,000 shares authorized and NaN issued at March 31, 2021 and December 31, 2020	0		0
Class A common stock, par value $0.001 per share: 500,000,000 shares authorized, 77,196,363 and 72,980,490 shares issued and outstanding at March 31, 2021 and December 31, 2020.						Class A common stock, par value $0.001 per share: 500,000,000 shares authorized, 77,196,363 and 72,980,490 shares issued and outstanding at March 31, 2021 and December 31, 2020.	77		73
Class B common stock, par value $0.001 per share: 164,000,000 shares authorized, 26,563,909 and 26,564,234 shares issued and outstanding at March 31, 2021 and December 31, 2020.						Class B common stock, par value $0.001 per share: 164,000,000 shares authorized, 26,563,909 and 26,564,234 shares issued and outstanding at March 31, 2021 and December 31, 2020.	27		27
Additional paid-in capital	Additional paid-in capital	452,111		1,122,548		Additional paid-in capital	331,513		698,482
Accumulated deficit	Accumulated deficit	(1,909,768)		(2,065,423)		Accumulated deficit	(1,799,437)		(1,885,950)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,025)		(1,427)		Accumulated other comprehensive loss	(1,889)		(4,529)
Total stockholders’ deficit	Total stockholders’ deficit	(1,459,586)		(944,208)		Total stockholders’ deficit	(1,469,709)		(1,191,897)
Total liabilities and stockholders’ deficit	Total liabilities and stockholders’ deficit	$	4,558,440	$	2,953,048	Total liabilities and stockholders’ deficit	$	4,774,933	$	4,569,929


		Nine months ended September 30,					Three months ended March 31,
		2020		2019			2021		2020
		(in thousands)					(in thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	161,178	$	(654,362)	Net income (loss)	$	18,234	$	(285,865)
Adjustments used to reconcile net income (loss) to net cash used in operating activities
Adjustments used to reconcile net income (loss) to net cash from (for) operating activities:						Adjustments used to reconcile net income (loss) to net cash from (for) operating activities:
Depreciation and amortization	Depreciation and amortization	208,532		134,172		Depreciation and amortization	80,312		66,843
Equity-based compensation	Equity-based compensation	197,199		162,014		Equity-based compensation	74,524		59,449
Amortization of discount and issuance costs on convertible notes	Amortization of discount and issuance costs on convertible notes	78,225		40,737		Amortization of discount and issuance costs on convertible notes	2,072		19,527
Loss on impairment						Loss on impairment	12,212		0
Other non-cash adjustments	Other non-cash adjustments	12,065		(1,659)		Other non-cash adjustments	(1,700)		(633)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable, net	Accounts receivable, net	(14,891)		(25,309)		Accounts receivable, net	2,528		(16,216)
Inventories	Inventories	7,602		(22,716)		Inventories	(7,734)		5,023
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(93,055)		(29,648)		Prepaid expenses and other current assets	(64,270)		7,802
Accounts payable and accrued expenses		356,215		215,786
Unearned revenue and other liabilities		296,306		22,382
Other assets	Other assets	612		(1,920)		Other assets	(3,430)		24
Net cash provided by (used in) operating activities		1,209,988		(160,523)
Accounts payable and other current liabilities						Accounts payable and other current liabilities	58,416		(118,475)
Other liabilities						Other liabilities	5,432		6,231
Net cash from (for) operating activities						Net cash from (for) operating activities	176,596		(256,290)

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchase of short- and long-term investments	Purchase of short- and long-term investments	(19,994)		0		Purchase of short- and long-term investments	(340,328)		0
Sale and maturities of short- and long-term investments	Sale and maturities of short- and long-term investments	466,310		115,468		Sale and maturities of short- and long-term investments	193,403		294,810
Purchase of property and equipment	Purchase of property and equipment	(146,303)		(183,968)		Purchase of property and equipment	(24,448)		(59,964)
Site and software development costs	Site and software development costs	(109,678)		(94,697)		Site and software development costs	(40,958)		(38,369)
Other investing activities, net	Other investing activities, net	(124)		(15,977)		Other investing activities, net	0		(124)
Net cash provided by (used in) investing activities		190,211		(179,174)
Net cash (for) from investing activities						Net cash (for) from investing activities	(212,331)		196,353

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from borrowings	Proceeds from borrowings	200,000		0		Proceeds from borrowings	0		100,000
Repayment of borrowings		(200,000)		0
Proceeds from issuance of convertible notes, net of issuance costs		2,027,758		935,146
Premiums paid for capped call confirmations		(255,024)		(145,728)
Payments to extinguish convertible debt		(1,040,349)		0

Repurchase of common stock	Repurchase of common stock	(280,236)		0		Repurchase of common stock	(188)		0
Other financing activities, net	Other financing activities, net	380		(2,211)		Other financing activities, net	45		125

Net cash provided by financing activities		452,529		787,207
Net cash (for) from financing activities						Net cash (for) from financing activities	(143)		100,125
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	7,458		(1,586)		Effect of exchange rate changes on cash and cash equivalents	(7,078)		1,540
Net increase in cash and cash equivalents		1,860,186		445,924
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	(42,956)		41,728

Cash and cash equivalents:	Cash and cash equivalents:					Cash and cash equivalents:
Beginning of period	Beginning of period	582,753		849,461		Beginning of period	2,129,440		582,753
End of period	End of period	$	2,442,939	$	1,295,385	End of period	$	2,086,484	$	624,481

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid for interest on long-term debt	Cash paid for interest on long-term debt	$	14,173	$	4,528	Cash paid for interest on long-term debt	$	10,775	$	5,447
Issuance of common stock for conversion of convertible debt, net of taxes		$	45,447	$	0
Issuance of common stock for conversion of convertible debt						Issuance of common stock for conversion of convertible debt	$	250,428	$	0
Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities	Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities	$	38,391	$	34,028	Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities	$	25,986	$	45,495


		Three months ended September 30,		Nine months ended September 30,			Three months ended March 31,
		2020	2019	2020	2019		2021	2020
		(in thousands)					(in thousands)
Outstanding employee stock options	Outstanding employee stock options	0	51	0	51	Outstanding employee stock options	0	37
Unvested restricted common stock		0	20	0	20
Unvested restricted stock units	Unvested restricted stock units	116	7,823	510	7,823	Unvested restricted stock units	61	7,154
Shares related to convertible debt instruments	Shares related to convertible debt instruments	13,228	15,474	20,232	15,474	Shares related to convertible debt instruments	15,630	15,474
Total	Total	13,344	23,368	20,742	23,368	Total	15,691	22,665


		2017 Notes / Restated 2017 Capped Call Transactions	2018 Notes / 2018 Capped Call Transactions	2019 Notes / 2019 Capped Call Transactions	2020 Accreting Notes	2020 Notes / 2020 Capped Call Transactions		2022 Notes / 2022 Capped Calls	2024 Notes / 2024 Capped Calls	2026 Notes / 2026 Capped Calls	2025 Accreting Notes	2025 Notes / 2025 Capped Calls
		(in thousands)						(in thousands)
Shares potentially issuable from convertible debt instruments	Shares potentially issuable from convertible debt instruments	261	4,940	6,390	7,379	3,639	Shares potentially issuable from convertible debt instruments	169	4,940	6,390	489	3,639
Shares obtainable from the exercise of capped call transactions		(1,347)	(2,322)	(3,003)	—	(1,710)
Shares obtainable from the exercise of capped calls							Shares obtainable from the exercise of capped calls	(1,347)	(2,322)	(3,003)	0	(1,710)
Total	Total	(1,086)	2,618	3,387	7,379	1,929	Total	(1,178)	2,618	3,387	489	1,929


	Three Months Ended
	Class A and Class B Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit
		(in thousands)
Balance at June 30, 2019	92,098	$	93	$	859,092	$	(1,463,166)	$	(1,376)	$	(605,357)
Net loss	—	—		—		(272,035)		—		(272,035)
Other comprehensive loss	—	—		—		—		(80)		(80)
Exercise of options to purchase common stock	3	—		10		—		—		10
Issuance of common stock upon vesting of RSUs	781	—		—		—		—		0
Shares withheld related to net settlement of RSUs	(8)	—		(1,086)		—		—		(1,086)
Equity-based compensation expense	—	—		65,553		—		—		65,553
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)	—	—		130,566		—		—		130,566
Balance at September 30, 2019	92,874	93		1,054,135		(1,735,201)		(1,456)		$	(682,429)

Balance at June 30, 2020	95,065	$	95	$	1,295,971	$	(2,082,934)	$	(524)	$	(787,392)
Net income	—	—		—		173,166		—		173,166
Other comprehensive loss	—	—		—		—		(1,501)		(1,501)
Exercise of options to purchase common stock	6	—		161		—		—		161
Issuance of common stock upon vesting of RSUs	787	1		—		—		—		1
Equity-based compensation expense	—	—		74,425		—		—		74,425
Repurchase of common stock	(844)	(1)		(280,235)		—		—		(280,236)
Shares issued upon conversion of convertible notes (Note 15)	583	1		151,419		—		—		151,420
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes (Note 15)	—	—		(829,004)		—		—		(829,004)
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)	—	—		39,374		—		—		39,374
Balance at September 30, 2020	95,597	$	96	$	452,111	$	(1,909,768)	$	(2,025)	$	(1,459,586)


		Nine Months Ended												Three Months Ended
		Class A and Class B Common Stock												Class A and Class B Common Stock
		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Deficit			Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Stockholders' Deficit
			(in thousands)												(in thousands)
Balance at December 31, 2018		90,748	$	91	$	753,657	$	(1,082,689)	$	(1,780)	$	(330,721)
Balance at December 31, 2019													Balance at December 31, 2019	93,600	$	94	$	1,122,548	$	(2,065,423)	$	(1,427)	$	(944,208)
Net loss	Net loss	—	—		—		(654,362)		—		(654,362)		Net loss	—	—		—		(285,865)		—		(285,865)
Other comprehensive income	Other comprehensive income	—	—		—		—		324		324		Other comprehensive income	—	—		—		—		2,069		2,069
Exercise of options to purchase common stock	Exercise of options to purchase common stock	28	—		90		—		—		90		Exercise of options to purchase common stock	7	—		125		—		—		125
Issuance of common stock upon vesting of RSUs	Issuance of common stock upon vesting of RSUs	2,109	2		—		—		—		2		Issuance of common stock upon vesting of RSUs	756	—		—		—		—		0
Shares withheld related to net settlement of RSUs		(11)	—		(1,510)		—		—		(1,510)
Equity-based compensation expense	Equity-based compensation expense	—	—		171,332		—		—		171,332		Equity-based compensation expense	—	—		62,001		—		—		62,001
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)		—	—		130,566		—		—		130,566
Adoption of ASU No. 2016-02		—	—		—		1,850		—		1,850
Balance at September 30, 2019		92,874	$	93	$	1,054,135	$	(1,735,201)	$	(1,456)	$	(682,429)
Cumulative effect of adopting new credit allowance standard													Cumulative effect of adopting new credit allowance standard	—	—		—		(5,523)		—		(5,523)
Balance at March 31, 2020													Balance at March 31, 2020	94,363	$	94	$	1,184,674	$	(2,356,811)	$	642	$	(1,171,401)

Balance at December 31, 2019		93,600	$	94	$	1,122,548	$	(2,065,423)	$	(1,427)	$	(944,208)
Balance at December 31, 2020													Balance at December 31, 2020	99,545	$	100	$	698,482	$	(1,885,950)	$	(4,529)	$	(1,191,897)
Net income	Net income	—	—		—		161,178		—		161,178		Net income	—	—		—		18,234		—		18,234
Other comprehensive loss		—	—		—		—		(598)		(598)
Other comprehensive income													Other comprehensive income	—	—		—		—		2,640		2,640
Exercise of options to purchase common stock	Exercise of options to purchase common stock	24	—		380		—		—		380		Exercise of options to purchase common stock	12	—		45		—		—		45
Issuance of common stock upon vesting of RSUs	Issuance of common stock upon vesting of RSUs	2,234	2		—		—		—		2		Issuance of common stock upon vesting of RSUs	710	1		—		—		—		1
Equity-based compensation expense	Equity-based compensation expense	—	—		208,740		—		—		208,740		Equity-based compensation expense	—	—		81,228		—		—		81,228
Repurchase of common stock	Repurchase of common stock	(844)	(1)		(280,235)		—		—		(280,236)		Repurchase of common stock	(1)	—		(188)		—		—		(188)
Shares issued upon conversion of convertible notes (Note 15)		583	1		151,419		—		—		151,420
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes (Note 15)		—	—		(829,004)		—		—		(829,004)
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)		—	—		78,263		—		—		78,263
Adoption of ASU No. 2016-13		—	—		—		(5,523)		—		(5,523)
Balance at September 30, 2020		95,597	$	96	$	452,111	$	(1,909,768)	$	(2,025)	$	(1,459,586)
Shares issued upon conversion of convertible notes (Note 4)													Shares issued upon conversion of convertible notes (Note 4)	3,494	3		250,428		—		—		250,431
Cumulative effect of adopting new convertible debt standard													Cumulative effect of adopting new convertible debt standard	—	—		(698,482)		68,279		—		(630,203)
Balance at March 31, 2021													Balance at March 31, 2021	103,760	$	104	$	331,513	$	(1,799,437)	$	(1,889)	$	(1,469,709)


	September 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	113,886	$	99	$	0	$	113,985


Total	$	113,886	$	99	$	0	$	113,985


	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(in thousands)
Short-term:
Investment securities	$	404,294	$	20	$	(62)	$	404,252
Long-term:
Investment securities	155,616		92		(18)		155,690
Total	$	559,910	$	112	$	(80)	$	559,942


	Nine months ended September 30, 2020		Nine months ended September 30, 2019
	(in thousands)
Cash payments included in operating cash flows from lease arrangements	$	105,416	$	77,687
Right-of-use assets obtained in exchange for lease obligations	$	110,210	$	281,006


	Amount
	(in thousands)
2020 (excluding the nine months ended September 30, 2020)	$	33,793
2021	161,998
2022	162,800
2023	157,581
2024	155,062
Thereafter	602,837
Total future minimum lease payments	1,274,071
Less: Imputed interest	(303,994)
Total	$	970,077


	Shares	Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2019	8,112,736	$	95.69
RSUs granted	1,688,442	$	171.72
RSUs vested	(2,233,708)	$	95.30
RSUs forfeited/canceled	(1,343,119)	$	103.73
Outstanding as of September 30, 2020	6,224,351	$	115.27


	September 30, 2020										December 31, 2019
	2017 Notes		2018 Notes		2019 Notes		2020 Accreting Notes		2020 Notes		2017 Notes		2018 Notes		2019 Notes
	(in thousands)
Principal amounts:
Principal	$	27,171	$	575,000	$	948,750	$	535,000	$	1,518,000	$	431,250	$	575,000	$	948,750
Unamortized debt discount	(2,764)		(140,200)		(251,548)		(42,650)		(304,624)		(59,830)		(161,275)		(277,700)
Net carrying amount	$	24,407	$	434,800	$	697,202	$	492,350	$	1,213,376	$	371,420	$	413,725	$	671,050


Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities							Issuer Purchases of Equity Securities
		Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3) (in thousands)			Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) (3)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (4) (in thousands)
Period	Period							Period
July 1-31, 2020		—	$	—	—	$	—
August 1-31, 2020		843,941	$	331.65	843,941	$	562,800
September 1-30, 2020		—	$	—	—	$	—
January 1-31, 2021								January 1-31, 2021	840	$	223.63	840	$	462,600
February 1-28, 2021								February 1-28, 2021	—	$	—	—	$	—
March 1-31, 2021								March 1-31, 2021	—	$	—	—	$	—
Total	Total	843,941	$	331.65	843,941	$	562,800	Total	840	$	223.63	840	$	462,600


			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	File No.	Filing Date	Exhibit Number

4.1	Indenture, dated as of August 14, 2020, by and between Wayfair Inc. and U.S. Bank National Association, as trustee.		8-K	001-36666	8/17/2020	4.1

4.2	Form of 0.625% Convertible Senior Notes due 2025 (included in Exhibit 4.1).		8-K	001-36666	8/17/2020	4.2

10.1	Purchase Agreement, dated August 11, 2020, by and among Wayfair Inc. and Citigroup Global Markets Inc. and Goldman Sachs & Co. LLC, as representatives of the several Initial Purchasers.		8-K	001-36666	8/17/2020	10.1

10.2	Letter Agreement, dated August 11, 2020, between Barclays PLC and Wayfair Inc. regarding the Base Capped Call Transaction.		8-K	001-36666	8/17/2020	10.2

10.3	Letter Agreement, dated August 11, 2020, between Citibank, N.A. and Wayfair Inc. regarding the Base Capped Call Transaction.		8-K	001-36666	8/17/2020	10.3

10.4	Letter Agreement, dated August 11, 2020, between Morgan Stanley & Co. LLC and Wayfair Inc. regarding the Base Capped Call Transaction.		8-K	001-36666	8/17/2020	10.4

10.5	Letter Agreement, dated August 11, 2020, between Goldman Sachs & Co. LLC and Wayfair Inc. regarding the Base Capped Call Transaction.		8-K	001-36666	8/17/2020	10.5

10.6	Letter Agreement, dated August 11, 2020, between Nomura Global Financial Products Inc. and Wayfair Inc. regarding the Base Capped Call Transaction.		8-K	001-36666	8/17/2020	10.6

10.7	Letter Agreement, dated August 11, 2020, between Bank of Montreal and Wayfair Inc. regarding the Base Capped Call Transaction.		8-K	001-36666	8/17/2020	10.7

10.8	Letter Agreement, dated August 12, 2020, between Barclays Bank PLC and Wayfair Inc. regarding the Additional Capped Call Transaction.		8-K	001-36666	8/17/2020	10.8

10.9	Letter Agreement, dated August 12, 2020, between Citibank, N.A. and Wayfair Inc. regarding the Additional Capped Call Transaction.		8-K	001-36666	8/17/2020	10.9


+						Indicates a management contract or compensatory plan

#						This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.


		WAYFAIR INC.


Date: ~~November 3, 2020~~May 6, 2021	By:	/s/ NIRAJ SHAH
		Niraj Shah
		Chief Executive Officer and President
		(Principal Executive Officer)


Date: ~~November 3, 2020~~May 6, 2021	By:	/s/ MICHAEL FLEISHER
		Michael Fleisher
		Chief Financial Officer
		(Principal Financial and Accounting Officer)