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WI

Wayfair Inc. (W)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was broadly in line on revenue and above on profitability: Net revenue was $2.73B (flat YoY), GAAP diluted EPS was -$0.89, and non-GAAP Adjusted Diluted EPS was $0.10; Adjusted EBITDA was $106M (3.9% margin), aided by Canada Border Services Agency (CBSA) refund tailwinds and disciplined spend .
  • Against S&P Global consensus, Wayfair beat on revenue ($2.73B vs $2.71B*) and delivered a positive adjusted EPS ($0.10 vs -$0.20*); Adjusted EBITDA came in above revenue expectations but below EBITDA consensus due to mix and CastleGate timing effects ($106M vs $79M*; EBITDA consensus context), with mix/timing nuance explained on the call .
  • Guidance pivot: Management did not issue traditional top-line guidance for Q2 given timing noise (Easter/Way Day) and macro uncertainty, but bracketed the P&L at flat YoY revenue with gross margin 30–31% (low end likely), CS&M just below 4%, ads 12–13%, SOTG&A $360–370M, and Adjusted EBITDA margin 4–5% .
  • Strategic narrative: model resilience amid tariff uncertainty, supplier advertising ramp, CastleGate utilization, Germany exit, tech replatforming complete → reinvesting in growth. Liquidity remains strong ($1.8B total) after issuing $700M 7.75% secured notes and repurchasing 2026 converts at a ~5% discount .

What Went Well and What Went Wrong

  • What Went Well

    • U.S. segment outperformed the category: U.S. net revenue grew +1.6% YoY to $2.43B vs an estimated category decline; overall revenue flat with international headwinds, implying share gains .
    • Profitability improved: Adjusted EBITDA rose to $106M (3.9% margin) vs $75M (2.7%) in Q1’24, supported by CBSA refund and cost discipline; SOTG&A down ~$50M YoY on efficiency actions .
    • Strategic positioning for tariffs: CEO emphasized marketplace dynamics, diversified sourcing (100+ countries), and supplier competition as buffers; “Our platform…thrives in dynamic conditions” .

  • What Went Wrong

    • International revenue pressure: International net revenue fell 10.9% YoY (cc -7.1%), partly reflecting Germany exit and macro, dampening consolidated top-line growth .
    • Working capital seasonality and CastleGate timing: CFO flagged CastleGate inventory acceleration by suppliers as a near-term gross margin headwind, with benefits expected to accrue in subsequent quarters .
    • Active customers declined: Active customers fell 5.4% YoY to 21.1M, with orders delivered down 5.2% YoY; however, LTM revenue per active customer rose 4.7% and AOV rose to $301 .

Financial Results

  • Summary performance vs prior year, prior quarter, and estimates
MetricQ1 2024Q4 2024Q1 2025
Net Revenue ($B)$2.729 $3.121 $2.730
GAAP Diluted EPS-$2.06 -$1.02 -$0.89
Adjusted Diluted EPS-$0.32 -$0.25 $0.10
Gross Profit ($M)$819 $941 $837
Adjusted EBITDA ($M)$75 $96 $106
Adjusted EBITDA Margin %2.7% 3.1% 3.9%
Net Loss ($M)$(248) $(128) $(113)
  • Segment revenue and profitability
SegmentQ1 2024Q4 2024Q1 2025
U.S. Net Revenue ($M)$2,391 $2,740 $2,429
International Net Revenue ($M)$338 $381 $301
U.S. Adjusted EBITDA ($M)$121 $110 $95
International Adjusted EBITDA ($M)$(46) $(14) $11
  • KPIs
KPIQ1 2024Q4 2024Q1 2025
Active Customers (M)22.0 21.4 21.1
LTM Net Rev per Active Customer ($)537 555 562
Orders Delivered (M)10.0 10.7 9.1
Average Order Value ($)285 290 301
Repeat Orders (% of total)80.5% 79.4% 80.5%
Mobile Order Mix (%)63.1% 64.5% 63.4%
  • Results vs S&P Global consensus (Q1 2025)
MetricConsensusActual
Revenue ($B)$2.708*$2.730
Primary EPS-$0.20*$0.10 (Adj. Diluted EPS)
EBITDA ($M)$79*$106

Values with asterisk (*) are consensus estimates retrieved from S&P Global.

Drivers and notes:

  • Gross margin 30.7% benefited from the CBSA refund; CastleGate intake ahead of tariff changes weighed near term but is expected to drive price/availability and fee benefits later .
  • Equity-based comp and restructuring/impairment charges influenced GAAP results; there was a $25M gain on debt extinguishment (repurchase of 2026 notes) .

Guidance Changes

  • Q2 2025 (framework given flat YoY revenue assumption)
MetricPeriodPrevious GuidanceCurrent GuidanceChange
Gross Margin %Q2 2025n/a30%–31% (low end likely) New
CS&M Fees % of RevQ2 2025n/ajust below 4% New
Advertising % of RevQ2 2025n/a12%–13% (midpoint likely) New
SOTG&A ($M)Q2 2025n/a$360–$370 New
Adjusted EBITDA Margin %Q2 2025n/a4%–5% New
SBC + taxes ($M)Q2 2025n/a~$70–$90 New
D&A ($M)Q2 2025n/a~$75–$80 New
Net Interest Expense ($M)Q2 2025n/a~$30 New
Wtd Avg Shares (M)Q2 2025n/a~128 New
CapEx ($M)Q2 2025n/a$60–$70 New
  • Q1 2025 (as guided on 2/20/25 vs actual)
MetricPeriodPrevious Guidance (2/20)ActualOutcome
Revenue YoYQ1 2025Flat to down YoY (incl. ~100 bps Germany drag) Flat YoY ($2.730B vs $2.729B) In line
Gross Margin %Q1 202530%–31% (midpoint) 30.7% In line/high end
CS&M Fees %Q1 2025just below 4% 3.8% In line
Advertising %Q1 202512%–13% (upper end) 12.6% In line
SOTG&A ($M)Q1 2025$380–$390 $366 (ex-SBC framing in call) Better

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
Tariffs/MacroFocus on resilient profitability and share capture despite macro; gross margin range 30–31% held through 2024 .CEO: marketplace dynamics, diversified sourcing (100+ countries) insulate; suppliers reluctant to raise prices; CBSA refund tailwind highlighted .Resilience reiterated; stronger detail on tariff playbook and supplier behavior.
Supplier AdvertisingNoted as lever; 2024 investment in brand/creators -.Supplier ads >150 bps of revenue by 2024 year-end; roadmap to 300–400 bps; co-bidding for off-site ads in development -.Adoption accelerating; monetization opportunity rising.
CastleGate & LogisticsCastleGate fuels conversion/speed; utilization leverage highlighted in Q4’24 - .Suppliers accelerated imports into CastleGate ahead of tariff changes; near-term GM headwind, future fees/availability benefits .Short-term cost for longer-term margin/availability upside.
Tech ReplatformingReplatforming largely complete; capacity shifting back to growth features (Rewards, Verified, promo tooling) - -.Continued emphasis on putting tech against growth levers and supplier tools .Execution phase; growth initiatives scaling.
Loyalty & AppWayfair Rewards launched late 2024; app driving direct traffic .Early Rewards cohorts ahead of plan; more prominent marketing to come .Building loyalty; potential ad leverage over time.
International/GermanyIntl pressured; Germany exit announced (Jan/Feb 2025) .Intl -10.9% YoY; restructuring and Germany-specific charges itemized .Transition ongoing; profitability improved in Intl (Adj. EBITDA +$57M YoY).
Capital StructureIssued 2024 secured notes; deleveraging focus .Priced $700M 7.75% 2030 secured notes; repurchased ~$578M 2026 converts; RCF extended to 2030 .Lower near-term maturities; extended liquidity.

Management Commentary

  • “Despite persistent category volatility…we were able to once again outperform our peers and take healthy market share while driving meaningful improvements in profitability.” – Niraj Shah, CEO .
  • “Our platform…connects over 20,000 suppliers…there is intense competition amongst our suppliers to win each order…our wide breadth of products and supply base from around the globe continues to offer us a healthy degree of insulation against tariff headwinds.” – Niraj Shah -.
  • “Gross margin…had several moving pieces…CBSA refund tailwind…many suppliers accelerated inventory imports as tariff considerations rose…accelerated adoption [of CastleGate] increased upfront cost…will pay dividends…in the months ahead.” – Kate Gulliver, CFO .
  • “We now find ourselves in the strongest capital structure position in many years…just under $400 million of maturities coming due in the next 2 years…renewed $500 million revolver that extends to 2030.” – Niraj Shah .

Q&A Highlights

  • Timing effects and demand: Easter/Way Day/leap year distorted intra-quarter comps; demand remained “pretty good”; AOV increase driven more by mix (Perigold/specialty brands) than price hikes; suppliers hesitant to raise prices .
  • Tariffs burden and strategy: Suppliers bearing much of the cost; Wayfair supports with data and end-to-end logistics (ocean to last-mile) across US/Canada/UK; large non-China capacity exists to pivot production with limited disruption - .
  • CastleGate impact: Q1 gross margin headwind from inventory pull-forward; expected tailwinds include lower fulfillment cost retail pricing and CastleGate fee revenue as inventory ships .
  • Marketing and paybacks: Ad spend tightly payback-managed; Q4 was a high watermark, with paybacks spanning 60–90 days+; testing in emerging channels (YouTube, AppLovin, creators) continues, with ad % of revenue expected to normalize lower over time - - .
  • Pricing posture: Take rate optimization remains a continuous test; focus is maximizing profit dollars while staying price-competitive as supplier costs change .

Estimates Context

  • Q1 2025: Revenue beat ($2.73B vs $2.71B*), Adjusted EPS positive ($0.10 vs -$0.20*), EBITDA above revenue expectations ($106M vs $79M*). Mix/timing effects (CastleGate ramp, CBSA) and disciplined costs underpinned the beat, while near-term GM headwind from CastleGate intake explains EBITDA consensus gap compositionally .
  • Street modeling implications:
    • Gross margin trajectory: Management bracketed Q2 margin at 30–31% (low end), consistent with Q4 back-half levels, suggesting limited upside to GM near term while CastleGate benefits accrue .
    • Operating expense run-rate: SOTG&A $360–$370M guidance is lower than Q1 run-rate, supporting EBITDA margin lift to 4–5% at flat revenue .

Values with asterisk (*) are consensus estimates retrieved from S&P Global.

Key Takeaways for Investors

  • Share capture continues: U.S. +1.6% YoY against a declining category; Intl drag masks underlying gains; KPIs show stronger spend per customer and higher AOV .
  • Profitability inflection sustained: Adjusted EBITDA margin improved to 3.9%; CFO guides to 4–5% in Q2 at flat revenue, driven by lower SOTG&A and normalized ad spend .
  • Tariff uncertainty manageable: Marketplace dynamics, diversified supply base, and CastleGate logistics provide pricing/availability resilience; suppliers reluctant to raise prices broadly - .
  • CastleGate/retail media are medium-term levers: Near-term GM headwind sets up for later fee revenue and conversion gains; supplier advertising mix targeted to 300–400 bps of revenue over time - .
  • Balance sheet improved: $700M secured notes issuance and 2026 convert repurchase lowered near-term maturities; liquidity of ~$1.8B supports continued investment .
  • Watch list: Q2 gross margin delivery within 30–31% band; ad % normalization; SOTG&A discipline; Intl cadence post-Germany exit; continued Rewards adoption and physical retail expansion (Atlanta, Perigold stores) - .

Appendix: Additional Relevant Press Releases (Q1 2025)

  • $700M senior secured notes (7.75% due 2030), proceeds partly used to repurchase ~$580M 2026 converts; RCF extended to 2030 .
  • Wayfair Verified expansion (quality and editorial curation) .
  • AI “Muse” tool launch for inspiration-to-shopping journey (Feb 11, 2025) .
  • Way Day campaign timing (April 26–28) [8].

Citations:

  • Q1 2025 press release and financials: .
  • 8-K (Item 2.02) and exhibits: -.
  • Q1 2025 earnings call transcript: -.
  • Q4 2024 press release and quarterly metrics: -.
  • Q3 2024 press release and metrics: -.
  • Notes offering press release: -.
  • Way Day press release: [8].

Values with asterisk (*) are consensus estimates retrieved from S&P Global.