2Q19 Results Wayfair reported 2Q19 revenues of $2.34 billion, up 41.6% year over year and above the $2.26 billion consensus estimate. The GAAP net loss was $181.9 million compared to the $100.7 million loss in the year ago quarter. While gross margin increased 62 bps, the gain was more than offset by a 217-bps increase in the SG&A/sales ratio, driving the operating margin down 155 bps. The main reasons for the rise in expenses were higher compensation costs and advertising spending. Adjusted EPS was $(1.35), marginally beating the consensus estimate of $(1.36). GAAP EPS was $(1.98), compared to $(1.13) in the year-ago quarter. US direct retail revenue grew 42.4% to $1.99 billion, accounting for 85% of total revenue. International direct retail revenue grew 40.5% to $342.7 million. Adjusted EBITDA was $(70) million, compared to $(34.8) million in the year-ago quarter. Details from the Quarter Management said the second annual Way Day was a success and stated that its investments across the business are driving greater value to suppliers and customers. Niraj Shah, CEO, Cofounder and Co-Chairman of Wayfair said:

As we continue to strengthen our global logistics network through the addition of Castlegate warehouses and last-mile delivery facilities, we are driving cost efficiencies and building an unparalleled experience for our customers with even faster delivery.

Other details:

• In the second quarter, the number of active customers reached 17.8 million, up 39% year over year. Net revenue per active customer increased to $447 from $440.
• During the quarter, the company opened its 13^th Castlegate warehouse building in Savannah, Georgia, where the company also established another last-mile delivery facility. Wayfair now operates 39 last-mile delivery facilities in North America.
• During the quarter, Wayfair spent $54 million in capital expenditure on property, plant and equipment. Capex was 3.8% of net revenues in the quarter and the company expects this to increase to 4-5% of net revenues in the third quarter.
• Wayfair is working with a base of over 11,000 suppliers to build technology in visualization and payment using in-house software capabilities.
• Advertising spend in the quarter grew 35 basis points to $259 million but was lower than the company’s guidance of a 75-basis point increase.
• At the end of the quarter, the company’s cash and cash equivalents stand at $714 million, compared to $585 million in 2Q18. The company’s total headcount stood at 14,548 at the end of the quarter after adding 1,200 net new employees.

Outlook The company provided the following guidance for 3Q19:

• Direct retail net revenue of $2.22-2.27 billion (up 31-34%), including US growth of 30-32% and international growth of 40-45%.
• Other revenue of $5-10 million.
• Total net revenue of $2.23-2.28 billion, below the consensus estimate of $2.29 billion.
• A US adjusted EBITDA margin of (2.75)-(3.0)%.
• A consolidated adjusted EBITDA margin of (6.0)-(6.5)% and expected negative EBITDA of $80-90 million in the international business.