Q4 2025 Wayfair Inc Earnings Call

February 19, 2026

Speaker #1: Our expectations and assumptions. Our 10-K for 2025 and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today.

Ryan Barney: Our expectations and assumptions. Our 10-K for 2025 and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today. Except as required by law, we undertake no obligation to publicly update or revise any of these statements, whether as a result of any new information, future events, or otherwise. Also, please note that during this call, we will discuss certain non-GAAP financial measures as we review the company's performance, including contribution profit, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and free cash flow. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results.

Speaker #1: Expect as Required by Law, we undertake no obligation to publicly update or revise any of these statements, whether as a result of any new information, future events, or otherwise.

Speaker #1: Also, please note that during this call we will discuss certain non-GAAP financial measures as we review the company's performance, including contribution profit, contribution margin, adjusted EBITDA, adjusted EBITDA margin, and free cash flow.

Speaker #1: These non-GAAP financial measures should not be considered replacements for and should be read together with GAAP results. Please refer to the investor relations section of our website to obtain a copy of our earnings release and investor presentation, which contain descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures.

Ryan Barney: Please refer to the Investor Relations section of our website to obtain a copy of our earnings release and investor presentation, which contain descriptions of our non-GAAP financial measures and reconciliations of non-GAAP measures to the nearest comparable GAAP measures. This call is being recorded, and a webcast will be available for replay on our IR website. I would like to now turn the call over to Niraj.

Speaker #1: This call is being recorded, and a webcast will be available for replay on our IR website. I would now like to turn the call over to Niraj.

Speaker #2: Thanks, Ryan. And good morning, everyone. We're pleased to talk with you this morning to discuss our fourth-quarter results. Q4 capped off a tremendous year for Wayfair, with revenue growing 7.8% year over year, excluding the impact of Germany.

Niraj Shah: Thanks, Ryan, and good morning, everyone. We're pleased to talk with you this morning to discuss our fourth quarter results. Q4 capped off a tremendous year for Wayfair, with revenue growing 7.8% year-over-year, excluding the impact of Germany. This growth was evenly split between order growth and AOV expansion, both of which grew more than 3%. We had our third consecutive quarter of new customer growth on top of healthy growth in repeat orders, all in the face of a category that contracted in the low single digits for the final quarter of the year. 2025 was a year where we returned to growth and accelerated throughout the year through a number of organic business strategies that can compound for years to come.

Niraj Shah: Thanks, Ryan, and good morning, everyone. We're pleased to talk with you this morning to discuss our fourth quarter results. Q4 capped off a tremendous year for Wayfair with revenue growing 7.8% year-over-year, excluding the impact of Germany. This growth was evenly split between order growth and AOV expansion, both of which grew more than 3%. We had our third consecutive quarter of new customer growth on top of healthy growth in repeat orders, all in the face of a category that contracted in the low single digits for the final quarter of the year. 2025 was a year where we returned to growth and accelerated throughout the year through a number of organic business strategies that can compound for years to come.

Speaker #2: This growth was evenly split between order growth and AOV expansion, both of which grew more than 3%. We had our third consecutive quarter of new customer growth on top of healthy growth in repeat orders.

Speaker #2: All in the face of a category that contracted in the low single digits for the final quarter of the year. 2025 was a year where we returned to growth and accelerated throughout the year through a number of organic business strategies that can compound for years to come.

Speaker #2: Numerically, this was characterized by two important themes: our share-taking and top-line growth overwhelming the drag of the macro, and the substantial flow-through of that growth to the bottom line.

Niraj Shah: Numerically, this was characterized by two important themes: our share taking and top-line growth overwhelming the drag of the macro, and the substantial flow-through of that growth to the bottom line. We expect our top-line growth and flow-through to Adjusted EBITDA to be the bedrock of our story for years to come. The opportunity in front of us is considerable. We're playing in a category that is nearly half a trillion dollars in the US, Canada, and the UK. The space is highly fragmented, filled with either large retailers that don't focus on home goods or pure-play competitors that cannot match our scale and the benefits we bring to both our customers and our suppliers.

Speaker #2: We expect our top-line growth and flow-through to adjusted EBITDA to be the bedrock of our story for years to come. The opportunity in front of us is considerable.

Speaker #2: We're playing in a category that is nearly half a trillion dollars in the US, Canada, and the UK. The space is highly fragmented, filled with either large retailers that don't focus on home goods, or pure-play competitors that cannot match our scale and the benefits we bring to both our customers and our suppliers.

Speaker #2: Our company was built around the idea that we could leverage technology to build a large business in an underserved retail category by being innovative in how we serve customers and by continually making our customer experience better.

Niraj Shah: Our company was built around the idea that we could leverage technology to build a large business in an underserved retail category by being innovative in how we serve customers and by continually making our customer experience better. Through our history, this simple, though hard to execute, strategy worked, and as a result, we saw it lead to rapid organic growth and an ever larger business through the wonders of compounding. Earlier today, we published our annual shareholder letter, where Steve and I explore the three core levers of our growth in 2026 and beyond. One, improving our core recipe of selection, price, availability, and speed of delivery. Two, inventing and scaling new business initiatives which can meaningfully contribute. And three, leveraging technology to improve how we operate, how our suppliers build their business on our platform, and how customers engage with us.

Niraj Shah: Our company was built around the idea that we could leverage technology to build a large business in an underserved retail category by being innovative in how we serve customers and by continually making our customer experience better. Through our history, this simple, though hard to execute, strategy worked, and as a result, we saw it lead to rapid organic growth and an ever larger business through the wonders of compounding. Earlier today, we published our annual shareholder letter where Steve and I explore the three core levers of our growth in 2026 and beyond. One improving our core recipe of selection, price, availability, and speed of delivery. Two, inventing and scaling new business initiatives which can meaningfully contribute. And three, leveraging technology to improve how we operate, how our suppliers build their business on our platform, and how customers engage with us.

Speaker #2: Through our history, this simple, though hard-to-execute, strategy worked, and as a result, we saw it lead to rapid organic growth and an ever-larger business through the wonders of compounding.

Speaker #2: Earlier today, we published our annual shareholder letter, where Steve and I explore the three core levers of our growth in 2026 and beyond. One, improving our core recipe of selection, price, availability, and speed of delivery.

Speaker #2: Two, inventing and scaling new business initiatives which can meaningfully contribute. And three, leveraging technology to improve how we operate, how our suppliers build their business on our platform, and how customers engage with us.

Speaker #2: We're focusing on activating the true power of our technology organization and the AI-driven enhancements we plan to bring to the shopping experience customers have at Wayfair.

Niraj Shah: We're focusing on activating the true power of our technology organization and the AI-driven enhancements we plan to bring to the shopping experience customers have at Wayfair. We talked about that at length on our Q3 call with our CTO, Fiona Tan, so I'd encourage anyone that didn't have the chance to go back and listen to that. Technology underpins everything we do and is the key enabler as we scale some of our newest growth drivers. I'd like to spend time talking about two of these today, our physical retail portfolio and our loyalty program, Wayfair Rewards. 2026 will mark a major milestone in our evolution with the launch of our next set of Wayfair stores. You've heard us talk at length about the major points of success we've had in our store just outside of Chicago for nearly two years now.

Speaker #2: We talked about that at length on our third-quarter call with our CTO, Fiona Tan. So I'd encourage anyone that didn't have the chance to go back and listen to that.

Speaker #2: Technology underpins everything we do and is the key enabler as we scale some of our newest growth drivers. I'd like to spend time talking about two of these today: our physical retail portfolio and our loyalty program, Wayfair Rewards.

Speaker #2: 2026 will mark a major milestone in our evolution with the launch of our next set of Wayfair stores. You've heard us talk at length about the major points of success we've had in our store just outside of Chicago for nearly two years now.

Speaker #2: More than half the customers have come through the store have been entirely new to file, and we've seen continued post-store visit lift on sales in the surrounding area.

Niraj Shah: More than half the customers that have come through the store have been entirely new to Wayfair, and we've seen continued post-store visit lift on sales in the surrounding area. That journey will continue with the launch of our next store in Atlanta early this year, followed by our stores in Columbus and Denver. These will carry over many of the core design themes that have resonated so well with customers in Chicago. Atlanta and Denver will be in the 150,000 sq ft range, while Columbus will be a smaller format, roughly 70,000 sq ft. Each store will showcase the true breadth of our catalog in a variety of special ways, and you'll find some of the favorites from Chicago, like the Dream Center and Shower Wall, appearing in our Atlanta store as well.

Niraj Shah: More than half the customers that have come through the store have been entirely new to Wayfair, and we've seen continued post-store visit lift on sales in the surrounding area. That journey will continue with the launch of our next store in Atlanta early this year, followed by our stores in Columbus and Denver. These will carry over many of the core design themes that have resonated so well with customers in Chicago. Atlanta and Denver will be in the 150,000sq ft range, while Columbus will be a smaller format, roughly 70,000 sq ft. Each store will showcase the true breadth of our catalog in a variety of special ways, and you'll find some of the favorites from Chicago, like the Dream Center and Shower Wall, appearing in our Atlanta store as well.

Speaker #2: That journey will continue with the launch of our next store in Atlanta early this year, followed by our stores in Columbus and Denver. These will carry over many of the core design themes that have resonated so well with customers in Chicago.

Speaker #2: Atlanta and Denver will be in the 150,000-square-foot range, while Columbus will be a smaller format, roughly 70,000 square feet. Each store will showcase the true breadth of our catalog in a variety of special ways, and you'll find some of the favorites from Chicago, like the Dream Center and Shower Wall, appearing in our Atlanta store as well.

Speaker #2: This is a hallmark example of our ability to drive cost-effective execution at scale. We already have years of investment across the most significant areas of retailer needs to be successful.

Niraj Shah: This is a hallmark example of our ability to drive cost-effective execution at scale. We already have years of investment across the most significant areas a retailer needs to be successful: our brand, our fulfillment and delivery capabilities, our supplier relationships, and our curated offerings. The incremental cost here is simply the cost of the stores themselves. These stores are all located in relatively close proximity to one of our fulfillment centers. So when customers purchase large parcel items, those products can show up on their doorstep in a matter of days rather than weeks. And of course, there's a vast selection of cash and carry items in the stores themselves. Many investors have asked about the working capital needs to fill the stores, and that is another area where our unique platform model shines.

Speaker #2: Our brand, our fulfillment and delivery capabilities, our supplier relationships, and our curated offerings. The incremental cost here is simply the cost of the stores themselves.

Speaker #2: These stores are all located in relatively close proximity to one of our fulfillment centers, so when customers purchase large parcel items, those products can show up on their doorstep in a matter of days, rather than weeks.

Speaker #2: And of course, there's a vast selection of cash and carry items in the stores themselves. Many investors have asked about the working capital needs to fill the stores, and that is another area where our unique platform model shines.

Speaker #2: The products in the stores are largely owned by our suppliers, exactly like items stored in CastleGate. In many ways, the store functions as a new form of consumer marketing, with the product offering and inventory provided by our suppliers, who've been very keen to put their items on our shelves.

Niraj Shah: The products in the stores are largely owned by our suppliers, exactly like items stored in CastleGate. In many ways, the store functions as a new form of consumer marketing, with the product offering and inventory provided by our suppliers, who've been very keen to put their items on our shelves. From the beginning, one of our objectives with physical retail has been growing share of wallet among our shoppers across all categories, and also notably, when it comes to frequency items. Today, customers are, on average, spending roughly $600 per year on Wayfair across two shopping occasions out of the roughly $3,000 they spend on their homes in total each year. Part of the story is one of awareness.

Speaker #2: From the beginning, one of our objectives with physical retail has been growing share of wallet, among our shoppers across all categories. And also notably, when it comes to frequency items.

Speaker #2: Today, customers are on average spending roughly $600 per year on Wayfair, across two shopping occasions. Out of the roughly 3,000 they spend on their homes in total each year.

Speaker #2: Part of the story is one of awareness. Walking through a physical store gives every shopper a broad view of the breadth of our categories and the depth of our assortment.

Niraj Shah: Walking through a physical store gives every shopper a broad view of the breadth of our categories and the depth of our assortment, often inspiring purchases they didn't know they could get through Wayfair. We're seeing this work in real time. In the Chicago DMA, we've seen a nearly 30% spread in the performance of our frequency categories, items such as bedding, decor, kitchen, and tabletop, as a few examples, compared to similar DMAs. In tandem with our physical retail efforts, one of our other big initiatives is to drive share of wallet expansion via our loyalty program, and soon shoppers will actually be able to sign up as they're checking out from any of our stores.

Speaker #2: Often inspiring purchases they didn't know they could get through Wayfair. We're seeing this work in real time. In the Chicago DMA, we've seen a nearly 30% spread in the performance of our frequency categories, items such as bedding, decor, kitchen, and tabletop, as a few examples.

Speaker #2: Compared to similar DMAs. In tandem, with our physical retail efforts, one of our other big initiatives is to drive share of wallet expansion via our loyalty program.

Speaker #2: And soon, shoppers will actually be able to sign up as they're checking out from any of our stores. We've heard many investor questions about the loyalty program as we hit the one-year mark, and so I wanted to spend a few minutes running through some of the highlights of what we've achieved and what's coming next.

Niraj Shah: We've heard many investor questions about the loyalty program as we hit the one-year mark, and so I want to spend a few minutes running through some of the highlights of what we've achieved and what's coming next. We launched Wayfair Rewards in the fall of 2024, with the goal of deepening customer loyalty. The program offers terrific value for shoppers, with free shipping, access to members-only sales and events, and 5% in rewards. Priced at $29 per year, our membership is intentionally designed to be effectively break even for that average customer spending $600 per year on Wayfair. The response we've seen from shoppers over the first year of the program has been terrific, with over 1 million members today. As we expected, many of our existing customers see clear value in the program, and early sign-ups were weighted towards recurring Wayfair shoppers.

Speaker #2: We launched Wayfair Rewards in the fall of 2024, with the goal of deepening customer loyalty. The program offers terrific value for shoppers, with free shipping, access to members-only sales, and events, and 5% in rewards.

Speaker #2: Priced at $29 per year, our membership is intentionally designed to be effectively break-even for that average customer spending $600 per year on Wayfair. The response we've seen from shoppers over the first year of the program has been terrific, with over a million members today.

Speaker #2: As we expected, many of our existing customers see clear value in the program and early sign-ups were weighted towards recurring Wayfair shoppers. As the program matured, we were really pleased to see a nice diversification in the mix of subscribers, as we increasingly drew in non-active customers.

Niraj Shah: As the program matured, we were really pleased to see a nice diversification in the mix of subscribers as we increasingly drew in non-active customers. In fact, our recent cohorts have shown more than half of new paid members are non-active customers. What's been most exciting are the spending patterns we're seeing among rewards members. As we exited 2025, we're seeing members driving more than 15% of Wayfair US revenue. The average reward shopper is purchasing on Wayfair across more than 3 shopping occasions over the first year of the program, and spending multiples more than non-members. We're seeing higher engagement across a wider mix of our categories. Compared to non-members, reward shoppers have a conversion rate on furniture and decor that's nearly 3 times higher, and a conversion rate on housewares that's more than 3.5 times higher.

Speaker #2: In fact, our recent cohorts have shown more than half of new paid members are non-active customers. What's been most exciting are the spending patterns we're seeing among rewards members.

Speaker #2: As we exited 2025, we're seeing members driving more than 15% of Wayfair US revenue. The average reward shopper is purchasing on Wayfair across more than three shopping occasions over the first year of the program, and spending multiples more than non-members.

Speaker #2: We're seeing higher engagement across a wider mix of our categories. Compared to non-members, reward shoppers have a conversion rate on furniture and decor that's nearly three times higher, and a conversion rate on housewares that's more than three and a half times higher.

Speaker #2: All of this comes alongside noteworthy benefits on the P&L. For several recorders, you've heard us talk about our focus on contribution margin as the best metric to measure our variable cost efficiency rather than just gross margin.

Niraj Shah: All of this comes alongside noteworthy benefits on the P&L. For several quarters, you've heard us talk about our focus on Contribution Margin as the best metric to measure our variable cost efficiency rather than just Gross Margin. Our improvements in Contribution Margin, in conjunction with steady fixed costs, lead to healthy growth in Adjusted EBITDA, which is our core goal. Wayfair Rewards is a perfect example of this in action. As you can surmise, the program bears incremental gross profit costs as we offer 5% rewards dollars and free shipping on smaller orders, resulting in a headwind to Gross Margin. However, the Gross Margin impact is more than offset by our ability to leverage advertising spend as these shoppers return to buy from us at much higher rates, and ultimately drive share capture through increasing order volume.

Speaker #2: Our improvements in contribution margin in conjunction with steady fixed costs lead to healthy growth in adjusted EBITDA, which is our core goal. Wayfair Rewards is a perfect example of this in action.

Speaker #2: As you can surmise, the program bears incremental gross profit costs as we offer 5% rewards dollars and free shipping on smaller orders, resulting in a headwind to gross margin.

Speaker #2: However, the gross margin impact is more than offset by our ability to leverage advertising spend, as these shoppers return to buy from us at much higher rates.

Speaker #2: And ultimately, drive share capture through increasing order volume. The net impact is this. We improve contribution margin and lever against our fixed costs to drive appreciation in adjusted EBITDA dollars.

Niraj Shah: The net impact is this: we improve contribution margin and lever against our fixed costs to drive appreciation in Adjusted EBITDA dollars. While the moving pieces are slightly different, the outcome is similar for physical retail. Stores actually drive a higher gross margin, but bear incremental OpEx costs from the associates. However, when combined with the uplift we see on revenue, the net impact is attractive growth in Adjusted EBITDA. 2026 holds even more for us to unlock for Wayfair Rewards. We're excited about new ways we can acquire members through highlighting the rich benefit set they receive. At the same time, we're going to deepen our engagement with our existing members to keep them coming back to Wayfair for even more of their home shopping. You'll see us broaden the aperture of Wayfair Rewards beyond just the core wayfair.com offering.

Speaker #2: While the moving pieces are slightly different, the outcome is similar for physical retail. Stores actually drive a higher gross margin, but bear incremental OPEX costs from the associates.

Speaker #2: However, when combined with the uplift we see on revenue, the net impact is attractive growth in adjusted EBITDA. 2026 holds even more for us to unlock for Wayfair Rewards.

Speaker #2: We're excited about new ways we can acquire members through highlighting the rich benefits that they receive. At the same time, we're going to deepen our engagement with our existing members to keep them coming back to Wayfair for even more of their home shopping.

Speaker #2: You'll see us broaden the aperture of Wayfair Rewards beyond just the core Wayfair.com offering. We've only just begun marketing the program on our specialty retail brands, and we'll launch in Wayfair Canada and Wayfair UK in the months ahead.

Niraj Shah: We've only just begun marketing the program on our specialty retail brands, and we'll launch in Wayfair Canada and Wayfair UK in the months ahead. Finally, later this year, we're going to debut a specialized rewards offering designed specifically for the luxury customer with Perigold. There's even more we're working on behind the scenes to drive value for rewards members. We're expecting to add even more members in 2026 than we did in 2025, as rewards provides one of the many pistons powering our engine of growth this year. You're going to hear that metaphor as a recurring theme across 2026. While the category may still have ways to go before it finds sustained organic growth, we're firmly in the driver's seat as we propel Wayfair forward.

Speaker #2: And finally, later this year, we're going to debut a specialized rewards offering designed specifically for the luxury customer, with Paragold. There's even more we're working on behind the scenes to drive value for rewards members.

Speaker #2: We're expecting to add even more members in 2026 than we did in 2025, as rewards provide one of the many pistons powering our engine of growth this year.

Speaker #2: You're going to hear that metaphor as a recurring theme across 2026. While the category may still have ways to go before it finds sustained organic growth, we're firmly in the driver's seat as we propel Wayfair forward.

Speaker #2: We're set up to take share at a pace we haven't seen in many years, and drive top-line expansion regardless of the macro, while continuing to deliver even more flow-through to the bottom line.

Niraj Shah: We're set up to take share at a pace we haven't seen in many years and drive top-line expansion regardless of the macro, while continuing to deliver even more flow-through to the bottom line. We couldn't be more excited for what lies ahead. With that, let me turn it over to Kate to walk through our financials.

Speaker #2: We couldn't be more excited for what lies ahead. And with that, let me turn it over to Kate to walk through our financials.

Speaker #1: Thanks, Niraj. And good morning, everyone. Let's dive into our financial results for the fourth quarter before we move to guidance for Q1. Starting with the top line, net revenue grew by 6.9% year-over-year on a reported basis, and 7.8% year-over-year, excluding the impact from our exit from Germany.

Kate Gulliver: Thanks, Niraj, and good morning, everyone. Let's dive into our financial results for the fourth quarter before we move to guidance for Q1. Starting with the top line, net revenue grew by 6.9% year-over-year on a reported basis, and 7.8% year-over-year, excluding the impact from our exit from Germany. This is our last quarter where there will be a meaningful distinction there. We saw solid performance in both of our geographies, with the US business up over 7% year-over-year, while the international business grew nearly 4%. Let me continue to walk down the P&L. As I do, please note that the remaining financials include depreciation and amortization, but exclude equity-based compensation, related taxes, and other adjustments. I will use the same basis when discussing our outlook as well.

Speaker #1: This is our last quarter where there will be a meaningful distinction there. We saw solid performance in both of our geographies, with the US business up over 7% year-over-year, while the international business grew nearly 4%.

Speaker #1: Let me continue to walk down the P&L. As I do, please note that the remaining financials include depreciation and amortization, but exclude equity-based compensation, related taxes, and other adjustments.

Speaker #1: I will use the same basis when discussing our outlook as well. Adjusted gross margin for the fourth quarter came in at 30.3% of net revenue.

Kate Gulliver: Adjusted gross margin for Q4 came in at 30.3% of net revenue. For more than two years now, we've held gross margin steadily at the low end of our 30 to 31% range, as we balance the structural benefits we're getting from programs like supplier advertising and CastleGate, against areas where we see an incremental opportunity to invest in the customer experience. Well, we'll get to formal guidance shortly. This will be the same play through you'll see in Q1. But as we look deeper into the year, we expect there will be opportunities for us to get growth margin slightly below 30%, as we look to capture share at a faster rate and generate more growth profit dollars at a slightly lower margin.

Speaker #1: For more than two years now, we've held gross margins steadily at the low end of our 30 to 31 percent range, as we balance the structural benefits we're getting from programs like Supplier Advertising and Castle Gate, against areas where we see an incremental opportunity to invest in the customer experience.

Speaker #1: While we'll get to formal guidance shortly, this will be the same playthrough you'll see in the first quarter. But as we look deeper into the year, we expect there will be opportunities for us to dip gross margins slightly below 30%, as we look to capture share at a faster rate and generate more gross profit dollars at a slightly lower margin.

Speaker #1: I want to be very clear here: the magnitude of this will be measured in the tens of basis points, not hundreds. Some of this investment is driven by programs like Wayfair Rewards, as Niraj just discussed.

Kate Gulliver: I want to be very clear here, the magnitude of this will be measured in the tens of basis points, not hundreds. Some of this investment is driven by programs like Wayfair Rewards, as Niraj just discussed. Scaling the number of rewards members comes at the expense of gross margin, but drives improvement on advertising expense, allowing us to hold to our contribution margin target of 15%, and most importantly, grow Adjusted EBITDA dollars. Ultimately, that is our core focus, and you should expect to see us grow the top line while delivering healthy year-over-year Adjusted EBITDA and free cash flow growth in 2026.

Speaker #1: Scaling the number of rewards members comes at the expense of gross margin, but drives improvement on advertising expense, allowing us to hold to our contribution margin target of 15%, and most importantly, grow adjusted EBITDA dollars.

Speaker #1: Ultimately, that is our core focus, and you should expect to see us grow the top line, while delivering healthy year-over-year adjusted EBITDA and free cash flow growth in 2026.

Speaker #1: Now, looking specifically at Q4, the combination of 30.3% of gross margin, with 3.7% of net revenue going to customer service and merchant fees, and 11.4% of revenue going to advertising, left us with a contribution margin of 15.3% for the quarter.

Kate Gulliver: Now, looking specifically at Q4, the combination of 30.3% of growth margin with 3.7% of net revenue going to customer service and merchant fees, and 11.4% of revenue going to advertising, left us with a contribution margin of 15.3% for the quarter. This was 250 basis points better than we delivered in the fourth quarter of 2024, as we lapped a period of investment into newer advertising channels. SOTG&A for the fourth quarter came in at $358 million, which in combination with contribution margin expansion, led to the significant profitability flow-through for the final quarter of the year. In total, we generated $224 million of adjusted EBITDA in Q4, for a 6.7% margin.

Speaker #1: This was 250 basis points better than we delivered in the fourth quarter of 2024, as we lacked a period of investment into newer advertising channels.

Speaker #1: SOT G&A for the fourth quarter came in at $358 million, which, in combination with contribution margin expansion, led to the significant profitability flow-through for the final quarter of the year.

Speaker #1: In total, we generated $224 million of adjusted EBITDA in Q4, for a 6.7% margin. This was more than double the number of adjusted EBITDA dollars we delivered in Q4 of 2024.

Kate Gulliver: This was more than double the number of Adjusted EBITDA dollars we delivered in Q4 of 2024. For the full year of 2025, we grew Adjusted EBITDA dollars by more than 60% to $743 million, and improved Adjusted EBITDA margin by over 200 basis points. A remarkable achievement that is a culmination of many years of work in cost rationalization, on top of a noteworthy year of share capture and top-line momentum. As Niraj said earlier, this is just the beginning of much more to come. We ended the quarter with $1.5 billion of cash on the balance sheet and $1.9 billion of total liquidity when including availability under our revolving credit facility.

Speaker #1: For the full year 2025, we grew adjusted EBITDA dollars by more than 60%, to $743 million, and improved adjusted EBITDA margin by over 200 basis points—a remarkable achievement that is the culmination of many years of work in cost rationalization, on top of a noteworthy year of share capture and top-line momentum.

Speaker #1: As Niraj said earlier, this is just the beginning of much more to come. We ended the quarter with $1.5 billion of cash on the balance sheet and $1.9 billion of total liquidity, when including availability under our revolving credit facility.

Speaker #1: Cash from operations was $202 million, offset by capital expenditures of $57 million, leaving free cash flow of $145 million for the fourth quarter. A more than 40% year-over-year improvement.

Kate Gulliver: Cash from operations was $202 million, offset by capital expenditures of $57 million, leaving free cash flow of $145 million for Q4, a more than 40% year-over-year improvement. We issued our third high yield bond during the quarter, retired the remainder of our 2025 notes, and repurchased just over $200 million of principal on our 2027 convertible notes. As with our 2028 convertible note repurchases during the summer, these bonds essentially trade as an equity substitute given the trading price of the stock. So another way to look at this is that we offset more than 5 million shares of potential dilution through the two sets of convertible note repurchases in the back half of the year.

Speaker #1: We issued our third high-yield bond during the quarter, retired the remainder of our 2025 notes, and repurchased just over $200 million of principal on our 2027 convertible notes.

Speaker #1: As with our 2028 convertible note repurchases during the summer, these bonds essentially trade as an equity substitute given the trading price of the stock.

Speaker #1: So another way to look at this is that we offset more than $5 million shares of potential dilution through the two sets of convertible note repurchases in the back half of the year.

Speaker #1: Our net leverage is now under 2.5 times, down from approximately 4 times exiting 2024 and over 6 times at the end of 2023. We also saw our burn rate come down meaningfully in 2025, from a peak of 11% in 2022 to just 4% this past year.

Kate Gulliver: Our net leverage is now under 2.5x, down from approximately 4x exiting 2024 and over 6x at the end of 2023. We also saw our burn rate come down meaningfully in 2025, from a peak of 11% in 2022 to just 4% this past year. I mentioned this last quarter, but it's worth repeating once more. We're operating with a dual mandate of reducing leverage while also managing dilution, and we'll continue to balance these opportunistically in the future. Let's now turn to guidance for the first quarter. Beginning with the top line, we will guide to mid-single-digit growth year-over-year for Q1. We're seeing another quarter of robust share capture translate into healthy growth, even in the face of a category that is starting off the year comping negatively.

Speaker #1: I mentioned this last quarter, but it's worth repeating once more. We're operating with a dual mandate of reducing leverage while also managing dilution, and we'll continue to balance these opportunistically in the future.

Speaker #1: Let's now turn to guidance for the first quarter. Beginning with the top line, we will guide to mid-single-digit growth year-over-year for Q1. We're seeing another quarter of robust share capture translated into healthy growth, even in the face of a category that is starting off the year comping negatively.

Speaker #1: Turning to gross margins, as I mentioned a moment ago, we will guide you to the 30 to 31 percent range, likely at the low end as we find further value in take rate and customer experience investments in the form of order capture.

Kate Gulliver: Turning to growth margins, as I mentioned a moment ago, we will guide you to the 30 to 31% range, likely at the low end, as we find further value in take rate and customer experience investments in the form of order capture. You should expect customer service and merchant fees to be just below 4% of net revenue and advertising to be in the range of 11 to 12% of net revenue. The net of this should produce a contribution margin of roughly 15% for Q1 for a healthy improvement year-over-year. SOTG&A is expected to stay in the range of $360 to 370 million, likely at the lower end of this range.

Speaker #1: You should expect customer service and merchant fees to be just below 4% of net revenue, and advertising to be in the range of 11 to 12 percent of net revenue.

Speaker #1: The net of this should produce a contribution margin of roughly 15% for the first quarter, for a healthy improvement year-over-year. SOT G&A is expected to stay in the range of $360 to $370 million, likely at the lower end of this range.

Speaker #1: As we've discussed, the power of our model is our ability to scale top line and contribution profit growth without needing to make further investment in headcount.

Kate Gulliver: As we've discussed, the power of our model is our ability to scale top-line and Contribution Profit growth without needing to make further investment in headcount. Our team is well equipped today to facilitate considerable growth in the years ahead, which puts us in a remarkable place to see noteworthy leverage as revenue growth compounds. Slowing all of that down, we would expect Adjusted EBITDA to be in the range of 4.5% to 5.5% of net revenue, again, demonstrating robust year-over-year improvement. While we don't guide on Free Cash Flow, I do want to remind investors that the Q1 is a cash outflow period for us, given the working capital dynamics of our business, even when revenue shows strong year-over-year growth. Now, let me touch on a few housekeeping items.

Speaker #1: Our team is well equipped today to facilitate considerable growth in the years ahead, which puts us in the remarkable place to see noteworthy leverage as revenue growth compounds.

Speaker #1: Flowing all of that down, we would expect adjusted EBITDA to be in the range of 4.5 to 5.5 percent of net revenue. Again, demonstrating robust year-over-year improvement.

Speaker #1: While we don't guide on free cash flow, I do want to remind investors that the first quarter is a cash outflow period for us, given the working capital dynamics of our business, even when revenue shows strong year-over-year growth.

Speaker #1: Now let me touch on a few housekeeping items. We expect equity-based compensation and related taxes of roughly $70 million to $90 million. You should expect further rationalization here over 2026, even accounting for the $20 million impact from the performance award, which is reflected in this quarter's figure.

Kate Gulliver: We expect equity-based compensation and related taxes of roughly $70 million to $90 million. You should expect further rationalization here over 2026, even accounting for the $20 million impact from the performance award, which is reflected in this quarter's figure. Depreciation and amortization should be approximately $67 million to $73 million. Net interest expense of approximately $37 million. Weighted average shares outstanding of approximately 132 million, and CapEx in a $55 million to $65 million range. 2026 is poised to be a tremendous year for Wayfair. We are leveraging our tech transformation, loyalty ecosystem, and logistics scale to consolidate share in a highly fragmented market. We're in full control of our destiny, and we are well set up to drive healthy top-line growth independent of the macro. And we are turning that growth into more profit dollars than ever before.

Speaker #1: Depreciation and amortization should be approximately $67 million to $73 million. Net interest expense of approximately $37 million. Weighted average shares outstanding of approximately 132 million.

Speaker #1: And CapEx in a $55 million to $65 million range. 2026 is poised to be a tremendous year for Wayfair. We are leveraging our tech transformation, loyalty ecosystem, and logistics scale to consolidate share in a highly fragmented market.

Speaker #1: We're in full control of our destiny, and we are well set up to drive healthy top-line growth independent of the macro. And we are turning that growth into more profit dollars than ever before.

Speaker #1: Our team is energized by the opportunity ahead of us and eager to turn our ambitions into reality. We're excited to have you along on this journey with us.

Kate Gulliver: Our team is energized by the opportunity ahead of us and eager to turn our ambitions into reality. We're excited to have you along on this journey with us. Thank you, and with that, Niraj, Steve, and I will take your questions.

Speaker #1: Thank you, and with that, Niraj, Steve, and I will take your questions.

Speaker #2: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead.

Speaker #2: To withdraw your question, please press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device.

Speaker #2: Please stand by while we compile the Q&A roster. Your first question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Speaker #2: Please go ahead.

Speaker #3: Thanks so much for taking the question. I wanted to ask sort of a multi-parter around AI. When you look at the current landscape, can you talk a little bit deeper about some of your initiatives, both internally that could be aimed at reducing friction in the business and/or driving operating efficiencies from AI?

Eric Sheridan: Thanks so much for taking the question. Wanted to ask sort of a multi-parter around AI. When you look at the current landscape, can you talk a little bit deeper about some of your initiatives, both internally, that could be aimed at reducing friction in the business and/or driving operating efficiencies from AI? And how you're increasingly thinking about partnering with external parties to bring your brand and your marketplace into external environments like LLM agents as a potential pathway to market. Thanks so much.

Speaker #3: And how you're increasingly thinking about partnering with external parties to bring your brand and your marketplace into external environments like LLM agents as a potential pathway to market.

Speaker #3: Thanks so much.

Speaker #4: Yeah, thanks, Eric, for the question and for being on the call. Actually, so one thing I'll just reference, because I'm sure you and folks haven't had a chance yet to see it.

Niraj Shah: Yeah. Thanks, Eric, for the question, and for being on the call. Actually, so one thing I'll just reference, because I'm sure, you and folks haven't had a chance, yet to see it, but today, obviously, we released earnings and the refreshed investor deck, but we released our annual shareholder letter. And in the letter, from Steve and I, we actually talk a lot about how we look out to the future, the opportunity we see for the business, the economic opportunity, but specifically what drives it. And one of the three things that we talk about significantly in it, is how technology plays a big role. And there's a meaningfully leng-- not very lengthy, but a page or so about AI, and it basically tries to address exactly what you're asking.

Speaker #4: But today, obviously, we released earnings and the refreshed investor deck. But we released our annual shareholder letter. And in the letter, from Steve and I, we actually talk a lot about how we look out to the future, the opportunity we see for the business, the economic opportunity, but specifically what drives it.

Speaker #4: And one of the three things that we talk about significantly in it is how technology plays a big role, and there's a meaningfully—not very lengthy, but a page or so—about AI. And it basically tries to address exactly what you're asking.

Speaker #4: So I'll give kind of a summary answer right now, but I think you'll probably find that, and others may find that, of interest. And what we talk about there is basically exactly as you posit it.

Niraj Shah: So I'll give, like, a kind of a summary answer right now, but I think you, you'll probably find that and others may find that of interest. And what we talk about there is basically exactly as you posit it. There's significant internal benefits, and the internal benefits have a lot to do with how AI is really an unusual opportunity in that you can improve quality, improve speed, and reduce cost all at the same time. Whereas usually, the truth is, when you have a technology that comes along that's transformative, usually there's an opportunity for quality and/or speed, but it comes at a cost, but the ROI is there. And here, what's tremendous about it is that you can actually do all three at the same time.

Speaker #4: There's significant internal benefits, and the internal benefits have a lot to do with how AI is really an unusual opportunity in that you can improve quality and improve speed and reduce cost all at the same time.

Speaker #4: Whereas, usually, the truth is when you have a technology that comes along that's transformative, usually there's an opportunity for quality and/or speed. But it comes at a cost.

Speaker #4: But the ROI is there. And here what's a tremendous about it is that you could actually do all three at the same time. So on the internal operations, you obviously start with everyone using an enterprise LLM chat product in our case, everyone had Gemini connected to all our data source to help them do their work more productively to get answers to questions.

Niraj Shah: So on the internal operations, you know, we obviously start with everyone using, you know, an enterprise LLM, you know, chat product. In our case, everyone had Gemini connected to all our data sources to help them do their work more productively, to get answers to questions. But where that's fairly quickly led to is how agentic workflows can allow you to automate meaningful pieces of work and do them, again, as I mentioned, faster, at higher quality, at a lower cost. And the speed of the development of the technology has been tremendous to where we have. We started, let me take a step, like a year ago, with some high-level areas, you know, a top-down effort, like, how can we really help our customer service agents do a great job for some of the more simple inquiries?

Niraj Shah: So on the internal operations, you know, we obviously start with everyone using, you know, an enterprise LLM, you know, chat product. In our case, everyone had Gemini connected to all our data sources to help them do their work more productively, to get answers to questions. But where that's fairly quickly led to is how agentic workflows can allow you to automate meaningful pieces of work and do them, again, as I mentioned, faster, at higher quality, at a lower cost. And the speed of the development of the technology has been tremendous to where we have. We started, let me take a step, like a year ago, with some high-level areas, you know, a top-down effort like, how can we really help our customer service agents do a great job for some of the more simple inquiries?

Speaker #4: But where that's fairly quickly led to is how agentic workflows can allow you to automate meaningful pieces of work and do them, again, as I mentioned, faster at higher quality at a lower cost.

Speaker #4: And the speed of the development of the technology has been tremendous to where we have we started let me take a step back. A year ago with some high-level areas, a top-down effort like how can we really help our customer service agents do a great job for some of the more simple inquiries?

Speaker #4: How can we just automate the answers to those? And we're doing that, and we're getting higher customer SAT scores on those, and then our agents are benefiting from where we have the co-assist product for them on the more complicated ones.

Niraj Shah: How can we just automate the answers to those? And we're doing that, and we're getting like, you know, higher customer stat scores on those. And then our agents are benefiting from where we have the assist, co-assist product for them on the more complicated ones. We did that in like a half dozen areas. You know, how we maintain the product catalog information, how we find inaccuracies in the catalog, et cetera. Where we then went to is now at the individual or the group level. How do you take workflows and help automate work in there, getting rid of some of the work that's monotonous and repetitive, and do it in a way that's quick, faster, more accurate, freeing up people's time to work on things that are higher value.

Speaker #4: And we did that in like a half dozen areas. How we maintain the product catalog information, how we find inaccuracies in the catalog, etc.

Speaker #4: Where we then went to is now at the individual or at the group level. How do you take workflows and help automate a work in there, getting rid of some of the work that's monotonous and repetitive and do it in a way that's quick, faster, more accurate, freeing up people's time to work on things that are higher value?

Speaker #4: And if you think about the efficiency opportunities as you reshape how you allocate resources in the future, there's upside there. So there's a whole section of activity there.

Niraj Shah: And if you think about the efficiency opportunities as you reshape how you, how you allocate, resource in the future, there's upside there. So there's a whole section of activity there. And then when you think about external parties, there's kind of two big groups of external parties, that I'll just touch on really quickly. One is how we help our suppliers succeed on our platform, and that's about giving them tools and taking all the process work of things they need to do with us and eliminating a lot of the work that's time-consuming and has the same sort of dynamic as you would think about with internal activities, and allow them to then do more to grow their business, on our platform.

Speaker #4: And then when you think about external parties, there's kind of two big groups of external parties. That I'll just touch on really quickly. One is how we help our suppliers succeed on our platform.

Speaker #4: And that's about giving them tools and taking all the process work of things they need to do with us and eliminating a lot of the work that's time-consuming and has the same sort of dynamic as you would think about with internal activities.

Speaker #4: And allow them to then do more to grow their business on our platform. And part of it also, then, is giving them analytics and insights that allow them to understand what's happening on the platform in a way that then allows them to know what to do.

Niraj Shah: Part of it also then is giving them analytics and insights that allow them to understand what's happening on the platform in a way that then allows them to know what to do. So there's a set of activities there. But then I think where you were going on the external parties has a lot to do with the kind of agentic surfaces that are out there, the kind of the core AI leaders that are out there. And I think I would draw an analogy to how in the early days, going back to whether it was Google-...

Speaker #4: And so, there's a set of activities there. But then I think where you were going on the external parties has a lot to do with the kind of the agentic surfaces that are out there, the kind of the core AI leaders that are out there.

Speaker #4: And I think I would draw an analogy to how in the early days going back to whether it was Google or Meta, later Pinterest, how we've always been a partner working with those folks on both making sure that we show up very well there and that's an organic placement and how we give them product information, feed data that allows them to represent us in a way that helps them with the consumer experiences they want to create.

Niraj Shah: Meta, later Pinterest, how we've always been a partner working with those folks on both making sure that we show up very well there, and that's in organic, placements and how we give them product information, feed data that allows them to represent us in a way that helps them with the consumer experiences they want to create. But then also, as they have paid advertising products and the like, how are we an early partner helping them develop those? Or in the case of commerce transactions, which Google did with Express, Shopping, Pinterest, and Buyable Pins, how are we an early partner there, helping them with that?

Speaker #4: But then also as they have paid advertising products and the like, how are we an early partner helping them develop those? Or in the case of a commerce transactions, which Google did with Express and Shopping and Pinterest and Bible pins, how are we an early partner there helping them with that?

Speaker #4: Well, that analogy, if you go to today, while using Gemini or ChatGPT or different than using these other products, I think there's an analogous series of activities where you start talking about how do we make sure we optimize how we show up there and represent ourselves well, and make sure that the product information is all there, including very nuanced details?

Niraj Shah: Well, that analogy, if you go to today, while, you know, using Gemini or ChatGPT are different than using these other products, I think there's an analogous series of activities where you start talking about how do we make sure we optimize how we show up there and represent ourselves well and make sure that the product information is all there, including very nuanced details. But then it goes to, they want to develop advertising units. Well, you partner with them on that in a way that, you know, allows us to, again, leverage all the data and the technology we have to make sure that we are a beneficiary as well. And then, frankly, with customers engaging there, you know, they foresee a world where on some set of transactions, consumers may want to execute the transaction on their agentic surface.

Speaker #4: But then it goes to—they want to develop advertising units. Well, you partner with them on that in a way that allows us to, again, leverage all the data and the technology we have to make sure that we are a beneficiary as well.

Speaker #4: And then frankly, with customers engaging there, they foresee a world where on some set of transactions, consumers may want to execute the transaction on their agentic surface.

Speaker #4: And that might be an agent executing a transaction. If it's like a commodity purchase—you're buying paper towels—it might just be replenishment, or maybe the agent's deciding how to solve that for you.

Niraj Shah: And that might be an agent executing a transaction. If it's a big commodity purchase, you're buying paper towels, it might just be replenishment, or maybe the agent's deciding where how to solve that for you. And so they want to develop commerce protocols. So we've been a partner, and I think multiple of them have named us as one of their handful of partners that they're developing those with. So I think you're seeing us be very early there.

Speaker #4: And so they want to develop commerce protocols. So we've been a partner in, I think, multiple of them have named us as one of their handful of partners that they're developing those with.

Speaker #4: So I think you're seeing us be very early there. And then in our world, we think that what's going to happen because it's not a commodity good where you're not going to be just, "Hey, I need some more of this and some more of that," and whoever can get it to me by Friday at the lowest price is great.

Niraj Shah: And then in our world, we think that what's going to happen, because it's not a commodity good, where you're not going to be just, you know, "Hey, I need some more of this and some more of that, and whoever can get it to me by Friday at the lowest price is great." It's going to be something where there's a lot of exploration customers do in the category. There's a whole view as to how that traffic gets handed off mid-funnel to places like Wayfair, and some of that, again, is organic traffic, and some of that could be paid traffic and in the form of ad units. So this is kind of relatively holistic view we have. So I think you're going to see us continue to be referenced as an early partner in all of these places.

Speaker #4: It's going to be something where there's a lot of exploration, customers doing the category. There's a whole view as to how that traffic gets handed off mid-funnel to places like Wayfair and some of that, again, is organic traffic and some of that could be paid traffic in the form of ad units.

Speaker #4: So this is kind of relatively holistic view we have. So I think you're going to see us continue to be referenced as an early partner in all these places.

Speaker #4: I think it's very early in how this will all shape out, but I think the same way being technology-driven, Stephen Eye's background both as engineer has been a mainstay of how we've been able to grow the business.

Niraj Shah: I think it's very early in how this will all shape out, but I think we're... You know, the same way being technology-driven, Steve and I's background, both as engineers, has been a mainstay of how we've been able to grow the business. You're going to see that continue to be true here.

Speaker #4: You're going to see that continue to be true here.

Speaker #1: Thanks, Eric.

Kate Gulliver: Thanks, Eric.

Speaker #3: Your next question comes from the line of Simeon Goopman with Morgan Stanley. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Simeon Gutman with Morgan Stanley. Your line is now open. Please go ahead.

Speaker #4: Hey, good morning, Niraj. Good morning, Kate. I wanted to ask about margins longer term. And if I get a follow-up, I want to ask about holdout tests.

Simeon Gutman: Hey, good morning, Niraj. Good morning, Kate. I wanted to ask about margins longer term, and if I get a follow-up, I want to ask about holdout tests. On the margin, so you, you had a, a really good incremental margin. I think Q4, like, big number, like north of 50%. Q1 looks pretty strong as well, up in the 20s. Can you update us on how you see incremental margins evolving, especially if the top line recovery continues over the next few quarters? And then we've talked about things you've done or that AI can help do on SG&A, on your cost base. So is it a level of revenue growth, or is it a matter of time until you get to your long-term EBITDA margin targets?

Speaker #4: On the margins, so you had a really good incremental margin, I think, Q4, big number, like north of 50, Q1 looks pretty strong as well in the 20s.

Speaker #4: Can you update us on how you see incremental margins evolving, especially if the top-line recovery continues over the next few quarters? And then, we've talked about things you've done, or that AI can help do, on SOTGNA, on your cost base.

Speaker #4: So is it a level of revenue growth, or is it a matter of time until you get to your long-term EBITDA margin targets?

Speaker #5: Yes. So let me start with some thoughts, and then I'll turn it over to Kate. I think the way to think about it, so just to take your question and kind of flip it around a little bit, what I would start with is so what you've seen is as we got through the tech replatforming and we got through a bunch of the things we need to do to get our organization back to being very lean, focused, efficient, executing very well, and that's all work we did already in '22, '23, '24.

Niraj Shah: Yes. So let me, let me start with some thoughts, and then I'll turn it over to Kate. I think the way to think about it, so just to take your question and kind of flip it around a little bit, what I would start with is... So what you've seen is, as we got through the tech replatforming and we got through a bunch of the things we needed to do to get our organization back to being, you know, very lean, focused, efficient, executing very well, and that's all work we did, you know, 2022, 2023, 2024. The category in those years, comping down, you know, negative double digits, we were kind of flattish through most of that period. We entered 2025 sort of flattish, you know, entered it, like, call it 0% revenue growth.

Niraj Shah: Yes. So let me, let me start with some thoughts, and then I'll turn it over to Kate. I think the way to think about it, so just to take your question and kind of flip it around a little bit, what I would start with is... So what you've seen is, as we got through the tech re-platforming and we got through a bunch of the things we needed to do to get our organization back to being, you know, very lean, focused, efficient, executing very well, and that's all work we did, you know, 2022, 2023, 2024. The category in those years, comping down, you know, negative double digits, we were kind of flattish through most of that period. We entered 2025 sort of flattish, you know, entered it, like, call it 0% revenue growth.

Speaker #5: The category in those years, coming down, negative, double digits—we were kind of flattish through most of that period. We entered '25 sort of flattish, entered what I call a zero-percent revenue growth.

Speaker #5: And by the end of the year, you see us sort of in a mid to high single-digit revenue growth. And it kind of ticked up each quarter.

Niraj Shah: By the end of the year, you see us sort of, like, in a mid- to high-single-digit revenue growth, and it kind of ticked up each quarter. And that's while the category continued to comp down. I think the overall TAM was probably down low single digits. If you index it to the categories were stronger in, probably down mid- to high-single digits. But you see us pull away. Well, that's really due to us taking share, because you saw profits grow even faster during the time period than revenue grew. And so we're taking share, we're taking share profitably. Well, how? We're doing it through these core initiatives we had, like I talked about stores, for example, and rewards on the call earlier. Well, there's over a half-dozen of those.

Speaker #5: And that's while the category continued to comp down. I think the overall PAM was probably down, low single digits if you index it to the categories were stronger in, probably down mid to high single digits.

Speaker #5: But you see us pull away. Well, that's really due to us taking share because you saw profits grow even faster during the time period than revenue grew.

Speaker #5: And so we were taking share. We were taking share profitably. Well, how? We were doing it through these core initiatives we had. Like I talked about, stores, for example, and rewards on the call earlier.

Speaker #5: Well, there's over a half dozen of those. So if you kind of look at what we foresee going forward is that these initiatives, a lot of these initiatives are set up to basically kind of continue to scale and compound these wins because a lot of these will get you new customers.

Niraj Shah: So if you kind of look at what we foresee going forward, is that these initiatives, a lot of these initiatives are set up to basically kind of continue to scale and compound these wins, because a lot of these will get you new customers. They'll get you new customers and drive loyalty from them. They'll, a lot of these initiatives will help customers understand the breadth of the categories we're in, and they'll start buying more in categories that we under index in. So there's all these things, and that share, customer share of wallet grows profits, you know, faster than it grows revenue. So, so the way to think about what we're expecting to have happen is we're expecting to see the rate at which we outpace the market continue to expand, and through our own initiatives, not through the market recovery.

Speaker #5: They'll get you new customers and drive a loyalty from them. They'll allow these initiatives will help a customer understand the breadth of the categories we're in, and they'll start buying more in categories that we under-index in.

Speaker #5: So there's all these things, and that share of customer share, while it grows profits faster than it grows revenue. So the way to think about what we're expecting to have happen is we're expecting to see the rate at which we outpace the market continue to expand.

Speaker #5: And through our own initiatives, not through the market recovery. And then we're expecting to see profits grow even faster than that through the combination of leveraging fixed costs and through the economics of these initiatives themselves, through the combination of those two things.

Niraj Shah: And then we're expecting to see profits grow even faster than that, through the combination of leveraging fixed costs and through the economics of these initiatives themselves, through the combination of those two things. And so that is, that's like the business strategy and the activities that are happening that are driving what you're noticing, which are like the quantitative analysis of the results. And that's kind of what we foresee happening. So then you say, well, so then what would that create? That would continue to create this outpacing where you see the profits grow faster than the revenue. So from your standpoint of incremental margins, you'd say, well, the incremental margins look quite strong, right? Because the incremental margins are quite, you know, accretive. But let me, let me turn it over to Kate for anything.

Speaker #5: And so that is the business strategy and the activities that are happening that are driving what you're noticing, which are the quantitative analysis of the results.

Speaker #5: And that's kind of what we foresee happening. So then you say, "Well, so then what would that create?" That would continue to create this outpacing where you see the profits grow faster than the revenue.

Speaker #5: So from your standpoint of incremental margins, you'd say, "Oh, the incremental margins look quite strong," right? Because margins are quite accretive. But let me turn it over to Kate for anything.

Speaker #1: I actually think you were to hit on the key point, right, which is that we expect to be able to continue to grow and accelerate EBITDA dollars, faster than the top line.

Kate Gulliver: I actually think you're hit on the key point, right? Which is that we expect to be able to continue to grow and accelerate EBITDA dollars faster than the top line. And so you are going to continue to see very nice flow-through there. And, you know, just as, you know, point of fact on that, you know, midpoint of our guidance range in Q1 is over the EBITDA margin is over 100 basis points higher than, you know, the Q1 2025 EBITDA margin, right? So I think that shows the strength of the flow through in the model. And, you know, as Niraj pointed out, that's been driven by a number of measures internally. You see our SG&A, our SOTG&A, that operating expense down again this quarter. I think that's, you know, many quarters in a row.

Speaker #1: And so you are going to continue to see very nice flow-through there. And just as point of fact on that, midpoint of our guidance range in Q1 is over the EBITDA margin is over 100 bips higher than the Q1 2025 EBITDA margin, right?

Speaker #1: So I think that shows the strength of the flow-through in the model. And as Niraj pointed out, that's been driven by a number of measures internally.

Speaker #1: You see our SOCA, our SOTGNA, that operating expense down again this quarter, I think that's many quarters in a row. I can't even count how many at this point because it's a few years in a row of that SOTGNA coming in.

Kate Gulliver: I can't even count how many at this point, because it's a few years in a row of that SOTG&A coming in. So that's providing really nice leverage there. And then, you know, that contribution margin around that 15 percent again. So you see this ongoing pattern of driving to that adjusted EBITDA growth, and that's really, you know, the North Star that we're driving towards. And when you think about these initiatives internally, you know, Niraj mentioned Wayfair Rewards on the call and talked through that. The way that we look at them is, how can we improve the customer experience with it, but make sure that even if the components of margin move around a bit, that we're again flowing that through at that adjusted EBITDA growth rate? The second part of your question was that timeline to 10%+ adjusted EBITDA.

Speaker #1: So that's providing really nice leverage there. And then that contribution margin around that 15% driving to that adjusted EBITDA growth. And that's really the North Star that we're driving towards.

Speaker #1: And when you think about these initiatives internally, Niraj mentioned Wayfair Rewards on the call and talked through that. The way that we look at them is how can we improve the customer experience with it, but make sure that even if the components of margin move around a bit, that we're again flowing that through at that adjusted EBITDA growth rate?

Speaker #1: The second part of your question was that timeline to 10% plus adjusted EBITDA. So I do want to be clear, we talked about we believe we can actually get over that 10% adjusted EBITDA.

Kate Gulliver: So I do want to be clear, we talked about, you know, we believe we can actually get over that 10% Adjusted EBITDA, and, you know, we're pretty excited about the potential to do that. I think we've shown that even in a down market, we've been able to grow Adjusted EBITDA margin significantly throughout the year. You know, and as we look forward, you know, certainly top line momentum obviously helps you on that leverage, and we think a number of our own self-help initiatives can continue to drive those share gains, you know, somewhat irrespective of the macro.

Speaker #1: And we're pretty excited about the potential to do that. I think we've shown that even in the down market, we've been able to grow adjusted EBITDA margin significantly throughout the year.

Speaker #1: And as we look forward, certainly top-line momentum obviously helps you on that leverage. And we think a number of our own self-help initiatives can continue to drive those share gains if somebody respective of the macro.

Speaker #4: Right. The holdout test that you're trying and does that shape how you're spending advertising in '26 or not yet?

Simeon Gutman: Great. The holdout test that you're trying, does that shape how you're spending advertising in 2026 or not yet?

Speaker #5: Yeah, I think the way to think about the holdout test—or that—that's not a one-time activity. That's like an ongoing set of activities.

Niraj Shah: Yeah, I think the way to think about the holdout test are that, that's not a one-time activity, that's like a ongoing set of activities. So the holdout tests don't, don't sort of start and stop. You know, there's periods where we, we're running more of them than, than other periods. But I, I think what we've been able to do is run, get back into a cadence of running a relatively high amount of tests that have let us really hone how we do a lot of the marketing, attribution and make sure that the-- anywhere where we're spending advertising costs, we get to really good precision on where we're getting a return and therefore spend our money wisely.

Speaker #5: So the holdout tests don't sort of start and stop. But what there's periods where we're running more of them than other periods. But I think what we've been able to do is run get back into a cadence of running a relatively high amount of tests that have let us really hone how we do a lot of the marketing attribution and make sure that the anywhere we're spending advertising costs, we get to really good precision on where we're getting a return and therefore spend our money wisely.

Speaker #5: And you've seen some of that in the form of the ad cost leverage where we're certainly scaling in a lot of new channels. But we've also been able to become more honed in a surgical and where we're spending money.

Niraj Shah: And you've seen some of that in the form of the ad cost leverage, where we're certainly scaling in a lot of new channels, but we've also been able to become more honed and surgical in where we're spending money. And so we've been able to drive up our return in a way that's, we've been pretty happy with. But let me-

Speaker #5: And so we've been able to drive up our return in a way that we've been pretty happy with. But let me.

Speaker #1: Yeah. So I mean, I think you may be referring specifically to the Q3 testing of last year. That was a little bit bigger than maybe typical on any given quarter.

Kate Gulliver: Yes, I mean, I think you may be referring specifically to the Q3 testing of last year. That was a little bit, you know, bigger than, you know, maybe typical on any given quarter. To Niraj's point, so there is a little bit of quarterly, you know, change in that. To Niraj's point, on what we've learned, you know, I think, for example, we've seen pockets of influencer spend and, you know, other elements there that we actually believe we can spend into and yield the kind of returns that we're, you know, expecting and requiring ourselves to get on those lines.

Speaker #1: To Niraj's point, so there is a little bit of quarterly change in that. To Niraj's point though, on what we've learned, I think, for example, we've seen pockets of influencer spend and other elements there that we actually believe we can spend into and yield the kind of returns that we're expecting and requiring ourselves to get on those lines.

Speaker #4: Okay. Thanks. Good luck.

Simeon Gutman: Okay, thanks. Good luck.

Speaker #3: Your next question comes from the line of Steve Forbes with Guggenheim Securities LLC. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Steve Forbes with Guggenheim Securities LLC. Your line is open. Please go ahead.

Speaker #4: Good morning, Niraj, Kate. Niraj, maybe just revisiting maybe just revisiting your comments on physical retail expansion as we look forward to this next class of stores.

Steven Forbes: Good morning, Niraj, Kate. Niraj, maybe just revisiting-

Niraj Shah: Good morning.

Steven Forbes: Maybe just revisiting your comments on physical retail expansion, you know, as we look forward to this next class of stores. I wanted you—I was hoping you maybe revisit Wilmette and talk about how those DMAs surrounding the store have performed, you know, sort of two years in here. Is the outperformance gap versus the company average still as strong as it originally was? In any way, sort of like, frame up for us how you're thinking about how those DMAs surrounding those new stores should perform in 2026.

Speaker #4: I wanted to I was hoping you maybe revisit Wilmette and talk about how those DMAs surrounding the store have performed. Sort of two years in here, is the outperformance gap versus the company average still as strong as it originally was?

Speaker #4: In any way, sort of frame up for us how you're thinking about how those DMAs surrounding those new stores should perform in 2026.

Speaker #5: Yeah, Steve, that's a great question. So the store in Wilmette opened up quite strongly when we first opened in May of '24. We could see the lift in that trade area in the state of Illinois very quickly.

Niraj Shah: Yeah, Steve, that's a great question. So the store in Wilmette opened up quite strongly when we first opened in May of 2024. We could see the lift in that trade area in the state of Illinois very quickly. Now that it's been open over a year, it's been open, you know, over a year and a half at this point, what we've been able to say is that it, that we've seen that continue nicely. In fact, in the refresh investor presentation, we put a slide in and put some updated numbers, and we talk about how the store. You know, one thing that's exciting about the store is that it, it's attracting new customers, and you're seeing that. You know, our business overall, you're seeing that we have order growth in new customers and in repeat orders.

Speaker #5: Now that it's been open over a year—it's been open over a year and a half at this point—we've been able to say that we've seen that continue nicely.

Speaker #5: And in fact, in the refresh investor presentation, we put a slide in and put some updated numbers. And we talk about how the store one thing that's exciting about the store is that it's attracting new customers.

Speaker #5: And you're seeing that our business overall, you're seeing that we have order growth and new customers and in repeat. Orders. So repeat orders, which are 80% of our orders, growing.

Niraj Shah: So repeat orders, which are 80% of our orders, growing. New, new orders, 20%, growing. So, so the store is one small piece of how we're doing that, but the stores help us attract new customers. But to your point, we also put the CAGR in there, and we see that the Illinois over national growth CAGR, you see that it's an over 10% CAGR since, since the opening. And what's happening is that customers obviously could be loyal to Wayfair from experiencing our online offering and be very happy with that. Then, having a store is only going to take those loyal customers and have them have more use cases and methods to interact with us and grow with us. So it's going to enable us to get more share of wallet from them.

Speaker #5: New orders, 20% orders, growing. So the store is one small piece of how we're doing that. But the stores help us attract new customers.

Speaker #5: But to your point, we also put the CAGR in there. And we see that the Illinois over national growth CAGR, you see that it's over 10% CAGR since the opening.

Speaker #5: And what's happening is that customers, obviously, could be brought to Wayfair from experiencing our online offering, be very happy with that. Then having a store is only going to take those loyal customers and have them have more use cases and methods to interact with us and grow with us.

Speaker #5: So it's going to enable us to get more share of wallet from them. And then you may have new customers who are maybe have heard of Wayfair, but have never really engaged with us.

Niraj Shah: Then you may have new customers who maybe have heard of Wayfair but have never really engaged with us, and maybe they're sort of online for the home category is not a comfortable thing for them to think about, or maybe they were habitual in going to other places. Well, some of the store, it may dent that curve. They experience Wayfair in a different way. Well, that could lead to not just buying in the store, but that could then lead to them buying online as well. And so what you see is that the interplay of the store to the overall impact in the trade area is very nice, where the store itself is very economically productive and we're really changing the customer's behavior.

Speaker #5: And maybe there's sort of online for the home category is not a comfortable thing for them to think about. Or maybe they were habitual in going to other places.

Speaker #5: Well, all of a sudden, with the store, it may dent that curve. They experience Wayfair in a different way. Well, that could lead to not just buying in the store, but that could then lead to them buying online as well.

Speaker #5: And so what you see is that the interplay of the store to the overall impact in the trade area is very nice. Where the store itself is very economically productive and we're really changing the customer's behavior and so there's a big strategy if you think about what we're trying to do is if the average customer was spending $600 with us a year out of, call it, a $300 or $4,000 annual spend, how do we high-level over time get to, call it, $1,500?

Niraj Shah: And so there's a big strategy, if you think about what we're trying to do, is if the average customer was spending $600 with us a year, out of call it a $3,000 or $4,000 annual spend, how do we high level over time, get to, call it $1,500? You know, how do we get to half of their wallet or, you know, pick some number, but meaningfully higher. And the answer is, well, one thing that you'd look at, you say that is, well, you really need them to buy across the breadth of categories that Wayfair offers, because if they only buy in a small subset of categories, well, you're limiting how much they could really buy with you. What does that mean?

Niraj Shah: And so there's a big strategy, if you think about what we're trying to do, is if the average customer was spending $600 with us a year, out of call it a $3,000 or $4,000 annual spend, how do we high level over time, get to, call it $1,500? You know, how do we get to half of their wallet or, you know, pick some number, but meaningfully higher. And the answer is, well, one thing that you'd look at, you say that is, well, you really need them to buy across the breadth of categories that Wayfair offers, because if they only buy in a small subset of categories well you're limiting how much they could really buy with you. What does that mean?

Speaker #5: How do we get to half of their wallet? Or pick some number, but meaningfully higher. And the answer is, well, one thing that you'd look at and you say that is, well, you really need them to buy across the breadth of categories that Wayfair offers.

Speaker #5: Because if they only buy in a small subset of categories, well, you're limiting how much they could really buy with you. And what does that mean?

Speaker #5: Well, you'd want them to buy small frequency items, candles and pillows from us, as well as we'd want them to do a renovation project with us where we could do the cabinetry, we could do the larger appliances, we could do the flooring and tile, we could do the plumbing.

Niraj Shah: Well, you'd want them to buy small frequency items, you know, candles and pillows from us, as well as we'd want them to do a renovation project with us, where we could do the cabinetry, we could do the larger appliances, we could do the flooring and tile, we could do the plumbing. How do you do that? Well, they need to become aware that we're in all these categories. We need to give them an easy way to buy these categories. Some of these categories are easily purchased in person. Some of these categories require working with a designer, may require financing. Some of these categories, we just may not have the awareness. How do you grow the awareness? Someone running into that in the store is one of the highly economic ways to drive awareness.

Speaker #5: And so how do you do that? Well, they need to become aware that we're in all these categories. We need to give them an easy way to buy these categories.

Speaker #5: Some of these categories are easily purchased in person. Some of these categories require working with a designer and may require financing. Some of these categories we just may not have the awareness.

Speaker #5: How do you grow the awareness? Someone running into that in the store is one of the highly economic ways to drive awareness. So what's happening is stores is one way to dent that.

Niraj Shah: So what's happening is, stores is one way to dent that. Then you think about the Wayfair Rewards loyalty program. Well, if you spend $29, you're getting 5% back in rewards dollars. You're getting access to the members-only customer service line. You're getting access to the members-only sales. Well, once you spend the 29, you've sunk the 29, you want to maximize your benefits. So yes, if you spend $600, you break even just from the 5%, but the truth is, if you spend the next $600 with us, you know, in your mind, you just made $30. Well, that six hundred dollars doesn't need to be incremental to you, just, you know, from our standpoint, to be better, it could be incremental to us, and it could just be used diverting that spend.

Speaker #5: Then you think about the Wayfair rewards loyalty program. Well, if you spend $29, you're getting 5% back in rewards dollars. You're getting access to the members-only customer service line.

Speaker #5: You're getting access to the members-only sales. Well, once you spend the 29, you've sunk the 29. You might not want to maximize your benefits.

Speaker #5: So yes, if you spend $600, you're break-even just from the 5%. But the truth is, if you spend the next $600 with us, in your mind, you just made $30.

Speaker #5: Well, that $600 is not going to be incremental to you. Just from our standpoint, to be beneficial, it can be incremental to us. And it could just be used diverting that spend, particularly when you start realizing what you're getting in the members-only sales and some of the other benefits.

Niraj Shah: Particularly, when you start realizing what you're getting in the members-only sales and some of the other benefits, you realize, well, you probably should have been spending that money with us even before, but now you're getting even more juice out of it, and so you should be now. So there's a bunch of initiatives we have that sort of ladder up to this customer PNL, and this is why we really want to focus on, like, how do we accelerate our revenue growth, taking more and more share, and do it while we grow profits even faster? Because the lines in between, to our mind, don't, don't really matter in the same way, in the sense that, like, the rewards program, it lowers gross margin, but it grows, grows the profit margin. But it does that because the customers come direct and there's no, the ad cost is different.

Speaker #5: You realize, well, you probably should have been spending that money with us even before, but now you're getting even more juice out of it.

Speaker #5: And so you should be now. So there's a bunch of initiatives we have that sort of ladder up to this customer P&L, and this is why we really want to focus on how do we accelerate our revenue growth, taking more and more share, and do it while we grow profits even faster?

Speaker #5: Because the lines in between, to our mind, don't really matter in the same way, in the sense that the rewards program lowers gross margin, but it grows the profit margin.

Speaker #5: But it does that because the customers come direct, and there's no ad cost—it's different. Or stores, for example, you may say, okay, the gross margin looks great, but oh, it hurts 'sacra.'

Niraj Shah: Or stores, for example, you know, you may say, "Okay, the gross margin looks great, but oh, it hurts SG&A." Well, why does it hurt SG&A? Well, the way accounting works is you got to actually take the store's labor cost and put it into SG&A, which doesn't make any sense to me, but that's what you have to do. So these things don't make any sense, but it doesn't matter, because if you can grow revenue at an accelerating rate and grow profits even faster, that's really the outcome you want. And that's, that's the way to think about these initiatives.

Speaker #5: Well, why does it hurt soccer? Well, the way accounting works is you got to actually take the store's labor cost and put it into soccer, which doesn't make any sense to me, but that's what you have to do.

Speaker #5: So these things don't make any sense, but it doesn't matter because if you can grow revenue at an accelerating rate and grow profits even faster, that's really the outcome you want.

Speaker #5: That's the way to think about these initiatives.

Speaker #4: That's helpful, Niraj. And then just a quick follow-up, multi-channel fulfillment. I don't think you mentioned your prepared remarks, so just curious if you can comment on how the benefits of this offering are ramping or accruing to Wayfair in any sort of framework for 2026 on that offering in terms of the benefits to P&L?

Steven Forbes: That's helpful, Niraj. And then just a quick follow-up. Multi-channel fulfillment, I don't think you mentioned in your prepared remarks, so just curious if you can comment on how the benefits of this offering are ramping or accruing to Wayfair and any sort of framework for 2026 on that offering in terms of the benefits to PNL?

Speaker #3: Yeah, I think the key thing to think about is we've built a logistics infrastructure. So one of the big opportunities we have is that the way the world's playing out is that it's increasingly hard to be a small player and offer the customers the benefits they expect from a retailer today.

Niraj Shah: Yeah, I think the key thing to think about is, like, we've built a logistics infrastructure. So one of the big opportunities we have is that the way the world's playing out is that, you know, it's increasingly hard to be a small player and offer the customers the benefits they expect from a retailer today. And why is that? Well, there's three big things that have a tremendous cost in our business. So one is the cost of technology. We have over 2,500 folks, and we're getting into a world where even technology is mattering more and more, not less and less.

Speaker #3: And why is that? Well, there's three big things that have a tremendous cost in our business. So one is the cost of technology. We have over 2,500 folks and we're getting into a world that's even technology is mattering more and more, not less and less.

Speaker #3: The second is if you think about the marketing reach we have with spending over a billion dollars in ad spend and having the brand be as strong as it is, it's very hard to do that if you have a very small budget.

Niraj Shah: The second is, if you look at, think about the marketing reach we have with spending over $1 billion in ad spend and having the brand be as strong as it is, it's very hard to do that if you have a very small budget. And the third is the logistics infrastructure with, you know, you know, dozens and dozens and dozens of buildings and, you know, 20 million or so sq ft of buildings and operations, you know, you can now offer fast delivery and, and higher quality, lower damage, and better customer services and experiences, et cetera. And so if you're a small retailer, you can't do that. And if you're a big retailer, there's, you know, really only a handful who can do this. You really then optimize it for something.

Speaker #3: And the third is the logistics infrastructure with dozens and dozens and dozens of buildings and 20 million or so square feet of buildings, and operations you can now offer fast delivery and higher quality lower damage and better customer services and experiences, etc.

Speaker #3: And so if you're a small retailer, you can't do that. And if you're a big retailer, there's really only a handful who can do this.

Speaker #3: You really then optimize it for something. So we're the only one who optimizes it for home because we don't particularly worry about building materials or grocery or a bunch of categories.

Niraj Shah: So we're the only one who optimizes it for home, because we don't particularly worry about building materials or grocery or a bunch of categories. We're not in those. So we really are only in home, and so everything's optimized for home. And so then you think about the logistics network, because your question was about multi-channel, and you say, "Well, how do you think about the logistics network?" Well, you say, "Okay, we've got these suppliers all over the world, and they want to put forth the best experience they can for the end customer so they can get share. And how do they do that? Well, we have scale they don't have, so we can help them with ocean freight. We can help them with fulfillment. We can help them with transportation delivery.

Speaker #3: We're not in those. So we really are only in home. And so everything's optimized for home. And so then you think about the logistics network because your question was about multi-channel.

Speaker #3: And you say, well, how do you think about the logistics network? Well, you say, okay, we've got these suppliers all over the world, and they want to put forth the best experience they can for the end customers so they can get share.

Speaker #3: And how do they do that? Well, we have scale they don't have. So we can help them with ocean freight. We can help them with fulfillment.

Speaker #3: We can help them with transportation delivery, things that they can't optimize, we can. Well, it really only makes sense for us to do that for items that we can then where customers can buy enough volume where we can then predict the demand, suppliers can put in that quantity, they can turn that inventory, and customers can then benefit from all the benefits that accrue to them.

Niraj Shah: Things that they can't optimize, we can." Well, it really only makes sense for us to do that for items that we can then, you know, where customers can buy at enough volume, where we can then predict the demand. Suppliers can put in that quantity, they can turn that inventory, and customers can then benefit from all the benefits that accrue to them. And because it won't work sustainably for the suppliers, they're speculating goods, and goods come in there and they don't sell. So the big benefit of multi-channel is it allows suppliers to put in a broader breadth of products, which then allow us to figure out which ones are really great, winners on our platform. And then suppliers can lean in and put a lot more of that product.

Speaker #3: And because it won't work sustainably for the supplier if they're speculating goods and goods come in there and they don't sell. So the big benefit of multi-channel is it allows suppliers to put in a broader breadth of products which then allow us to figure out which ones are really great, winners on our platform, and then suppliers can lean in and put a lot more of that product.

Speaker #3: We can then position it into more and more facilities faster and faster delivery, lower and lower shipping costs, less and less damage. And so think of multi-channel as just one of the most recent additions into the logistics suite.

Niraj Shah: We can then position it into more and more facilities, faster and faster delivery, lower and lower shipping costs, less and less damage. And so think of multi-channel as just one of the most recent additions into the logistics suite that enables suppliers to better take advantage of the Wayfair fulfillment operations in a way that allows them to grow their business on our platform because they're giving customers more benefits, and all of this along the way helps us. And so, you know, one of the things I talk about in the shareholder letter is a forthcoming delivery offering for consumers called Wayfair Delivery Plus.

Speaker #3: That enables suppliers to better take advantage of the Wayfair fulfillment operations in a way that allows them to grow their business on our platform because they're giving customers more benefits and all of this along the way helps us.

Speaker #3: And so one of the things I talk about in the shareholder letter is a forthcoming delivery offering for consumers called Wayfair Delivery Plus. And what we're really excited about that is that's going to offer customers a set of services in a very easy and convenient way that no one else offers specifically tailored for home goods that takes away a lot of the hassle that's associated with home goods from a customer standpoint and lets them then just focus on all the benefits they have.

Niraj Shah: What we're really excited about that is, that's going to offer customers a set of services in a very easy and convenient way that no one else offers, specifically tailored for home goods, that takes away a lot of the hassle that's associated with home goods from a customer standpoint, and lets them then just focus on all the benefits they have, because they want that item, but maybe they want it assembled when it's delivered, maybe they want the old one taken away, or maybe they want multiple items delivered on the same day because it's just going to be convenient for them, or maybe they're doing a project, or maybe they're setting up their summer home, or they're helping their daughter move into her apartment, or there's all these use cases.

Speaker #3: Because they want that item, but maybe they want it assembled when it's delivered. And maybe they want the old one taken away, or maybe they want multiple items delivered on the same day because it's just going to be convenient for them. Or maybe they're doing a project, or maybe they're setting up their summer home, or they're helping their daughter move into her apartment. There are all these use cases.

Speaker #3: And so what you're going to keep seeing as ad or services that are software-powered and operations-powered services that sit on top of the infrastructure we've built, that allow the customers to benefit from what we've built, that allow suppliers to more easily participate in economically winning it.

Niraj Shah: And so what you're going to keep seeing us add are services that are software-powered and operations-powered services that sit on top of the infrastructure we've built, that allow the customers to benefit from what we've built, that allow suppliers to more easily participate and economically win in it. Multi-channel is one example, but frankly, you know, Wayfair Delivery Plus, which I talked about in the shareholder letters and other, and we're going to keep seeing us do more and more… Thank you.

Speaker #3: Multi-channels is one example, but frankly, Wayfair Delivery Plus, which I talked about in the shareholder letters and other, and we're going to keep seeing us do more and more.

Speaker #4: Thank you.

Steven Forbes: Thank you.

Speaker #2: Thanks, Steve.

Kate Gulliver: Thanks, Steve.

Speaker #1: Your next question comes from the line of Zachary Fadum with Wells Fargo, your line is now open. Please go ahead.

Operator: Your next question comes from the line of Zachary Fadem with Wells Fargo. Your line is now open. Please go ahead.

Speaker #5: Hey, good morning. Kate, can we walk through the cadence of Q4 in a little bit more detail and any particular standouts in terms of Way Day versus holiday, etc.?

Zachary Fadem: Hey, good morning. Kate, can we walk through the cadence of Q4 in a little bit more detail and any particular standouts in terms of Way Day versus holiday, et cetera? And then I know you aren't disclosing quarter to date anymore, but since you're guiding for a deceleration in Q1, is it fair to say that the Q4 strength continued into Q1 or, or not?

Speaker #5: And then I know you aren't disclosing quarter-to-date anymore, but since you're guiding for a deceleration in Q1, is it fair to say that the Q4 strength continued into Q1 or not?

Speaker #2: Yeah. So as you know, we don't give color or guidance on monthlies. But I think when we look at Q4, what we really saw overall was ongoing momentum of the initiatives that we started over a year plus ago.

Kate Gulliver: Yeah. So, you know, as you know, we don't, you know, give color or guidance on monthlies. But, you know, I think when we look at Q4, what we really saw overall was ongoing momentum of the initiatives that we started, you know, over a year plus ago. So those are things like Wayfair Rewards, and you spoke to on the call, Wayfair Verified, that we've talked to in the past. You know, one that we think is particularly exciting, changes to the customer experience from the storefront updating, and that really is due to the developer capacity that we have freed up from the tech replatforming. All of those things combine and really compound to, you know, deliver a pretty exciting Q4 in our minds.

Speaker #2: So those are things like Wayfair rewards and you spoke to on the call, Wayfair verified that we've talked to in the past. One that we think is particularly exciting changes to the customer experience from the storefront updating and that really is due to the developer capacity that we have freed up from the tech replatforming.

Speaker #2: All of those things combined and really compound to deliver a pretty exciting Q4 in our minds. As we look into Q1, obviously, we're guiding to a mid-single digits.

Kate Gulliver: As we, you know, look into Q1, obviously, you know, we're guiding to a mid-single digits. I think that shows pretty healthy ongoing share gain in a category that we think is actually down low single digits. So when we look at Q4 and sort of, you know, into Q1, particularly with some of the complexities of the weather in the beginning of the quarter, we see our share gains really continuing to grow here, and that's what you're seeing in the guide, and I think that's exciting about our ongoing momentum.

Speaker #2: I think that shows pretty healthy ongoing share gain in a category that we think is actually down low single digits. So, when we look at Q4 and sort of into Q1, particularly with some of the complexities of the weather at the beginning of the quarter, we see our share gains really continuing to grow here, and that's what you're seeing in the guide.

Speaker #2: And I think that's exciting about our ongoing momentum.

Speaker #5: And what I would say is I think Kate hit it there. Really well. And I think the point is there's no momentum is actually the same way we started last year at zero.

Niraj Shah: What I would say is, I think Kate hit it there really well, and I think the point is momentum is actually the same way we started last year at zero, and we ended the year mid to high single digits. You know, we basically expect to see this momentum continue. So in other words, we're starting the year, you know, it's the turn of the year, but nothing's really changed. So if you draw the line from the beginning of last year, we should just keep taking it up to the right over the course of time, because the initiatives we have are compounding benefit type initiatives, and there's a lot of gains we're seeing from them. So, you know, the market is sort of not really providing the lift, but we don't really expect it to.

Speaker #5: We ended the year mid to high single digits. And we basically expect to see this momentum continue. So in other words, we're starting the year it's the turn of the year, but nothing's really changed.

Speaker #5: So if you draw the line from the beginning of last year, we should just keep taking it up to the right over the course of time because the initiatives we have are compounding benefit-type initiatives.

Speaker #5: And there's a lot of gains we're seeing from them. And so the market is sort of not really providing the lift, but we don't really expect it to.

Speaker #5: And so a lot of one of the things I talked about in the shareholder letter is how over time, we can we think the organic growth rate can be 20% plus.

Niraj Shah: And so, you know, one of the things I talked about in the shareholder letter is how over time, we can, you know, we think the organic growth rate can be 20%+, and that's just off the back of how we can take share through the compounding nature of the benefits we have. And we think we can do that while profits grow faster than revenue. And the reason is, as I was kind of addressing a couple of minutes ago, is these initiatives drive quite profitable growth.

Speaker #5: And that's just off the back of how we can take share through the compounding nature of the benefits we have and we think we can do that while profits grow faster than revenue.

Speaker #5: And the reason is, as I was kind of addressing a couple of minutes ago, these initiatives drive quite profitable growth, but the growth they drive does compound because it's really about how customer behavior changes—in terms of customers understanding the breadth of categories we're in, becoming more loyal, coming back more often, us also getting in front of new customers, drawing them in, and then them going through that same experience curve.

Niraj Shah: But they, the growth they drive does compound because it's really about how customer behavior changes in terms of customers understanding the breadth of categories we're in, becoming more loyal, coming back more often, us also getting in front of new customers, drawing them in, and then them going through that same experience curve. One thing, you know, there's a whole series of efforts that get there. So I talked about rewards and stores on the call today, but, you know, we could talk about what we're doing in our Wayfair Professional B2B program with the account managers, the recently released project shopping tool and the like. We could be talking about the Wayfair app and how that continues to take share and some of the planned product enhancements this year. One of the things I will highlight is, now that we're really...

Speaker #5: One thing, there's a whole series of efforts that get there. So I talked about rewards and stores on the call today, but we could talk about what we're doing in our Wayfair professional B2B program with the account managers, the recently released Project Shopping tool and the like.

Speaker #5: We could be talking about the Wayfair app and how that continues to take share and some of the planned product enhancements this year at one of the things I will highlight is now that we're really the tech replatforming project was a very large project, multiple-year project.

Niraj Shah: The tech replatforming project was a very large project, multiple year project, but now that we're on the backside of that, the amount of technology resource we can put into product-led growth is substantial. And so we sort of have the best of the both worlds right now because we both have a tremendous amount of tech resource coming back available to drive the business forward. I mentioned the app is one thing, but there's a long list of things we're going after, and these things are pretty meaningful. If you just look at the app roadmap, you'd be pretty excited. But also, you have a new set of technologies available with what GenAI allows. So you sort of have an interesting time where you'd wish you had tech resources you could put against it.

Speaker #5: But now that we're on the backside of that, the amount of technology resource we can put into product-led growth is substantial. And so we've sort of had the best of both worlds right now because we both have a tremendous amount of tech resource coming back available to drive the business forward.

Speaker #5: I mentioned the app is one thing, but there's a long list of things we're going after. And these things are pretty meaningful. If you just look at the app roadmap, you'd be pretty excited.

Speaker #5: But also, you have a new set of technologies available with what GenAI allows. So you sort of had an interesting time where you'd wish you had tech resources you could put against it.

Speaker #5: In our case, we think we have an amazing team and we actually do have resources to put against it. And we're, in fact, if anything, at the best point in the cycle we could be because we're working off very new platforms that really allow for tremendous amounts of developer productivity and actually solves for one of the challenges in the GenAI world, which is that the more clean and modern your systems are, the faster it is to use some of the developer productivity tools that are out there as well.

Niraj Shah: In our case, we think we have an amazing team, and we actually do have resources to put against it. We're in fact, if anything, at the best point in the cycle we could be because we're working off, you know, very new platforms that really allow for, you know, tremendous amounts of developer productivity and actually solves for one of the challenges in the GenAI world, which is that, you know, the more clean and modern your systems are, the faster it is to use some of the developer productivity tools that are out there as well.

Speaker #5: Got it. That's helpful. And then following up on Wayfair rewards, is there a way to quantify what the drag was on the gross margin line in 2025?

Zachary Fadem: Got it. That's helpful. And then following up on Wayfair Rewards, is there a way to quantify what the drag was on the gross margin line in 2025? And should we think about that rolling off in 2026, or would you expect the impact to persist as you grow new members? And then I suspect the net impact is positive when you offset that with advertising. But if you could walk through that in a little more detail, that'd be great.

Speaker #5: And should we think about that rolling off in 2026, or would you expect the impact to persist as you grow new members? And then I suspect the net impact is positive when you offset that with advertising.

Speaker #5: But if you could walk through that in a little more detail, that'd be great.

Speaker #4: Yeah. I mean, look, so if things go as we plan, actually, the drag should become an increasing drag on the gross margin line because the number of members and the amount of revenue of the total revenue that are coming from rewards members actually is growing at a very nice rate.

Niraj Shah: Yeah, I mean, look, so if things go as we plan, actually the drag should become an increasing drag on the gross margin line because the number of members and the amount of revenue of the total revenue that are coming from rewards members actually is growing at a very nice rate. And you'd be fantastic. That would be fantastic. That'd be an amazing outcome because the profits that you're getting from those customers actually are higher. So this is why I think, like, the gross margin line or the SG&A, these lines don't really tell you very much. Because if these initiatives are successful, what you should really see is that the revenue line continues to accelerate, the profit line, the EBITDA line, what have you, accelerates even faster.

Speaker #4: And you'd be fantastic. That would be fantastic. That'd be an amazing outcome. Because the profits that you're getting from those customers actually are higher.

Speaker #4: So this is why I think the gross margin line or the socket, these lines don't really tell you very much. Because if these initiatives are successful, what you should really see is that the revenue line continues to accelerate, the profit line, the EBITDA line, what have you, accelerates even faster.

Speaker #4: And that's the dynamic you would get. Whereas you'd see these lines in between move at a faster divergence. But let me turn it over to Kate.

Niraj Shah: And that, that's the dynamic you would get, whereas you'd see, you know, these lines in between move, you know, at faster divergences. But let me turn it over to Kate.

Speaker #2: Yeah, Zach. I think you were treating it well, which is as we described on the call, we think it's an appropriate rewards, an appropriate investment to make in the consumer obviously that does impact the gross margin line.

Kate Gulliver: Yeah, Zach, you know, I think Niraj hit it well, which is as we described on the call, we think it's an appropriate, you know, rewards and an appropriate investment to make in the consumer. Obviously, that does, you know, impact the growth margin line. But on the other end, for example, those customers are coming direct, right? So you're not spending the money on the ad spend to get them to the site, and therefore, it flows through quite efficiently to Adjusted EBITDA margin and Adjusted EBITDA dollars. And that's ultimately the goal. And you actually, when we talked about sort of some of the growth margin dynamics going forward, that contemplates something like Wayfair Rewards continuing to grow. We think it has enormous potential, and we're seeing really strong benefit from the consumers in this program.

Speaker #2: But on the other end, for example, those customers are coming direct, right? So you're not spending the money on the ad spend to get them to the site.

Speaker #2: And therefore, it flows through quite efficiently to adjusted EBITDA margin and adjusted EBITDA dollars. And that's ultimately the goal. And you actually when we talked about sort of some of the gross margin dynamics going forward, that contemplates something like Wayfair rewards continuing to grow.

Speaker #2: We think it has enormous potential, and we're seeing really strong benefit from the consumers in this program. So certainly, our focus is on how we can continue to expand it.

Kate Gulliver: So certainly, our focus is on how we can continue to expand it, again, knowing that you get a trade-off on the growth margin line to the ACNR line, and that's ultimately flowing through to adjusted EBITDA growth.

Speaker #2: Again, knowing that you get a trade-off on the gross margin line to the ACNR line, and that's ultimately flowing through to adjusted EBITDA growth.

Speaker #5: Makes sense. Appreciate the time.

Brian Nagel: Makes sense. Appreciate the time.

Zachary Fadem: Makes sense. Appreciate the time.

Speaker #1: Your next question comes from the line of John Blackledge with TD Cohen. Your line is open. Please go ahead.

Operator: Your next question comes from the line of John Blackledge with TD Cowen. Your line is open. Please go ahead.

Speaker #5: Great, thank you. Two questions. First, just any color on the potential for a rebound in the home category as we get through the year.

John Blackledge: Great, thank you. Two questions. First, just any color on the potential for a rebound in the home category as we get through the year? And then second question on Agentic Commerce. So there's, there have been questions around risk to advertising revenue streams for e-commerce marketplaces as Agentic Commerce ramps up. Just curious how you guys are thinking about that. Thank you.

Speaker #5: And then second question on agentic commerce. There have been questions around risk to advertising revenue streams. For e-commerce marketplaces, as agentic commerce ramps up, just curious how you guys are thinking about that.

Speaker #5: Thank you.

Speaker #4: Thanks, John. Yeah, the rebound in it's very hard to predict how housing will play out. My general view is what we've been seeing, which is that for the housing market to recover, it's a little bit of a slow burn.

Niraj Shah: Thanks, John. Yeah, you know, it's very hard to predict how housing will play out. My general view is what we've been seeing, which is, you know, for the housing market to recover, it's a little bit of a slow burn, and you're seeing, like, every quarter that goes by, the percentage of mortgages that get refinanced at the current rates keeps ticking up, but it's a relatively slow process. And that's basically, you know, not having a crystal ball, we basically underwrite something like that. So our whole plan is not really premised on how the market turns, because I think that's a very hard thing to predict. And frankly, there's a very good chance it's just a slow burn, and it kind of works itself out over a longer period of time. But it's really about, it's a pretty dynamic market.

Speaker #4: And you're seeing every quarter that goes by, the percentage of mortgages that get refinanced to the current rates keeps ticking up. But it's a relatively slow process.

Speaker #4: And that's basically not having a crystal ball. We basically underwrite something like that. So our whole plan is not really premised on how the market turns because I think that's a very hard thing to predict.

Speaker #4: And frankly, there's a very good chance it's just a slow burn, and it kind of works itself out over a longer period of time.

Speaker #4: But it's really about it's a pretty dynamic market. There's really not very many folks who can offer customers the experience that they really want today.

Niraj Shah: There's really not very many folks who can offer customers the experience that they really want today. There's a lot of folks who are still operating off a model that's really not what customers are really looking for as you go forward. And so there's a lot of market share in what's still quite a big category that can move around. And so if you go back to thinking about our particular initiatives and how those would impact a customer and allow for market share to move, I think that's the way you could think about our strategy. And so you saw it last year allow us to kind of pull away from the market and at an increasing rate, and we expect that to continue.

Speaker #4: There's a lot of folks who are still operating off a model that's really not what customers are really looking for as you go forward.

Speaker #4: And so there's a lot of market share in what's still quite a big category. That can move around. And so if you go back to thinking about our particular initiatives and how do those how would those impact a customer and allow for market share to move, I think that's the way you could think about our strategy.

Speaker #4: And so you saw it last year allow us to kind of pull away from the market, and at an increasing rate. And we expect that to continue.

Speaker #4: And so, our whole plan that we've discussed, and the numbers we talk about, are basically what we can make happen, sort of, without the housing market turning around.

Niraj Shah: So our whole plan that we've discussed and the numbers we talk about are basically what we can make happen sort of without the housing market turning around. And I think it will. You know, it's a cyclical category. It's just the time horizon for when there's a next big, you know, kind of upcycle tied to housing is just very hard to predict. And so it's not something that we're putting into how we think about the market, time horizon, and our initiatives. I don't know, Kate, any thoughts on that?

Speaker #4: And I think it will. It's a cyclical category. It's just the time horizon for when there's a next big kind of upcycle tied to housing is just very hard to predict.

Speaker #4: And so it's not something that we're putting into how we think about the market. Time horizon and our initiatives. I don't know, Kate, any thoughts on that?

Speaker #2: Yeah. I think you hit it well, which is our focus is on our own measures and how those are gaining share. And you've seen that share spread actually expand throughout the course of '25.

Kate Gulliver: Yeah, I think you hit it well, which is, you know, our focus is on our own measures and how those are gaining share. And you've seen that share spread actually, you know, expand throughout the course of 2025, and we feel really good about the momentum going into 2026. I think you had a second question around supplier ads and the impact of agentic shopping on supplier ads.

Speaker #2: And we feel really good about the momentum going into '26. I think you had a second question around supplier ads and the impact of agentic shopping on supplier ads.

Speaker #4: Yeah. Kate, why don't I just comment on that? You can feel free to. I think it goes back to the type of goods. So, in other words, if you want to think about these agentic surfaces, I think the way you would say, 'Hey, supplier ads could get impacted,' it would mean that the traffic is not moving downstream to the apps or the sites operated by those commerce players.

Niraj Shah: Yeah, Kate, why don't I just comment on that? You can feel free to. I you know, I think it goes back to the type of goods. So in other words, if you want to think about these agentic surfaces, I think the way you would say, "Hey, supplier ads could get impacted," it would mean that the traffic is not moving downstream to the apps or the sites operated by those commerce players, and the transactions are happening upstream on the agentic surfaces. And so I think if you're you know, if you're selling paper towels and dish soap and, you know, Chips Ahoy!

Speaker #4: And the transactions are happening upstream on the agentic surfaces. And so I think if you're selling paper towels and dish soap and Chips Ahoy cookies, and that could be fulfilled by any number of folks, and you don't particularly care whose corrugated box shows up at your door or whose plastic bag shows up at your door.

Niraj Shah: Cookies, and that could be fulfilled by any number of folks, and you don't particularly care whose corrugated box shows up at your door, or whose plastic bag shows up at your door, then yes, that traffic may never make it to the retailer. The transaction may take place upstream. There's the traffic by not making it to the retailer, then there's no opportunity for the retailer to show the variety of products and the ad units, and that could be a big factor. If customers are coming direct to the retailer, or if customers are still making it to the retailer through these Agentic surfaces because there's more product understanding and exploration involved, then the advertising, I think, still gets seen.

Speaker #4: Then yes, that traffic may never make it to the retailer; the transaction may take place upstream. The traffic, by not making it to the retailer, means there's no opportunity for the retailer to show the variety of products in the ad units, and that could be a big factor.

Speaker #4: If customers are coming direct to the retailer, or if customers are still making it to the retailer through these agentic surfaces because there's more product understanding and exploration involved, then the advertising, I think, still gets seen.

Speaker #4: And frankly, the less of a commodity it is, therefore, the more browsing and the more curiosity the customer has about the offerings, the more ad units become relevant.

Niraj Shah: And frankly, the less of a commodity it is, therefore, the more browsing and the more curiosity the customer has about the offerings, the more ad units become relevant. And so we tend to think that our product roadmap on ads, which in some ways is similar to some others, but in some ways is quite different, is a very good fit for what customers want to experience at home. And we think home is inherently more browsable and requires more sort of, it has more of a customer curiosity and customer desire to understand what's out there than some other categories. I would liken it more to fashion. And in that up-- in that scenario, that presents you, as the retailer operating a platform, an opportunity to let other suppliers, you know, get their products seen, and that's effectively what these ad units do.

Speaker #4: And so we tend to think that our product roadmap on ads, which in some ways is similar to some others, but in some ways is quite different, is very good fit for what customers want to experience at home.

Speaker #4: And we think home is inherently more browsable and requires more sort of it has more of a customer curiosity and customer desire to understand what's out there than some other categories.

Speaker #4: I would elect it more to fashion. And in that scenario, that presents you as the retailer offering a platform and opportunity to let other suppliers get their products seen.

Speaker #4: And that's effectively what these ad units do. And if you think about something like video, well, certain products lend themselves to video telling a much better story than others, right?

Niraj Shah: And if you think about something like video, well, certain products lend themselves to video telling a much better story than others, right? And so I think, you know, home is a great one. Fashion would be a great one. Well, you know, if it's like Chips Ahoy! cookies, the value of the video could be very high, but, you know, you could say, "Well, that could easily get replaced, too.

Speaker #4: And so I think home is a great one. Fashion would be a great one. Well, if I'm selling Chips Away cookies, they value the video.

Speaker #4: It could be very high, but you could say, "Well, that could easily get replaced too."

Speaker #2: Thanks, John.

Kate Gulliver: Thanks, John.

Speaker #5: Thank you.

John Blackledge: Thank you.

Speaker #1: Your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Brian Nagel with Oppenheimer. Your line is open. Please go ahead.

Speaker #5: Good morning. Nice quarter. Congrats.

Brian Nagel: Hi, good morning. Nice quarter. Congrats.

Speaker #2: Thank you.

Kate Gulliver: Thank you.

Speaker #5: So the question I want to ask, I think it's probably a longer-term in nature, but today's results and the results related have shown this nice market share.

Brian Nagel: So the question I want to ask, I guess, I think it's probably longer term in nature, but, you know, today's results and the results lately, they've shown, you know, this nice market share. You know, Wayfair is definitely consistently now capturing market share. So as you look at all your data, is there anything we, you know, we can call out on that market share? Are you, you know, do you see new customer new customer cohorts coming to Wayfair? Are you taking, you know, are you taking more share in, in different income cohorts? Anything as this market share dynamic has persisted, is there something is there anything new that can kind of speak to, like, the broadening reach of the, of the Wayfair brand?

Speaker #5: Wayfair is definitely consistently now capturing market share. So, as you look at all your data, is there anything we can call out in that market share?

Speaker #5: Do you see new customer cohorts coming to Wayfair?

Speaker #1: Be taking . You know , you're taking more share in in different income cohorts . Anything that anything . Is this market share dynamic has persisted .

Speaker #1: Is there something is there anything new that can kind of speak to like the broadening reach of the Wayfair brand

Speaker #2: Well , I think that a few thoughts there . So one , you know , we're definitely seeing that that whole k-shaped economy thing is real .

Niraj Shah: Well, I think that a few thoughts there. So one, you know, we're definitely seeing that whole K-shape economy thing is real. So when you do talk about higher-income cohorts, you know, the highest income cohort, place that we offer is our Perigold platform, the luxury platform, and that's growing at a very fast rate. You see, you know, you really don't see any economic strain there, especially retail brands would be the second highest level after Perigold. You know, the AllModern, Birch Lane, Joss & Main, you see nice growth there. And then when you go to Wayfair, you see nice growth there. But then if you cut it by income cohort, you definitely see more strain as you go down the income segments. And our data is not any different than the market data you're gonna see broadly.

Speaker #2: So when you do talk about higher income cohorts , you know , the highest income cohort place that we offer our Perigold platform , luxury platform .

Speaker #2: And that's growing at a very fast rate . And you see , you know , you really don't see any economic strain there , especially retail brands would be the second highest level after Perigold .

Speaker #2: And you know, all modern Birch Lane just in Maine. You see nice growth there. And then we go to Wayfair.

Speaker #2: You see nice growth there . But then if you cut it by income cohort you definitely see more strain as you go down the income segments .

Speaker #2: And our data is not any different than the market data . You're going to see broadly . But you do see it . And that's the case .

Niraj Shah: But you do see it, and that, that's the case. But then what happens as you go down the cohorts, the truth is there's still customers buying products because life goes on, and they may need something. And so then the question becomes: Are you providing value? Do you make it easy for them to figure out which item provides them with the best price value? You know, are you in a position to offer items that are a better value than maybe a competitor? This goes back to how our logistics operate and the fact that we have so many suppliers on our platform, and so the ones who can really optimize something can offer the better value. So we do think we're benefiting through that. But I don't know, Kate, anything-

Speaker #2: But then what happens is you go down the cohorts . The truth is there's still customers buying products because life goes on and they may need something .

Speaker #2: And so then the question becomes , are you providing value . Do you make it easy for them to figure out which item provides them with the best price value ?

Speaker #2: You know , are you in a position to offer items that are a better value than maybe a competitor ? And this goes back to how our logistics operate and fact that we have so many suppliers on our platform .

Speaker #2: And so the ones who can really optimize something can offer the better value . So , so we do think we're benefiting through that .

Speaker #2: But I don't know , Kate , anything .

Speaker #3: I would just add that , Brian that I don't there's not one particular cohort that's outperforming . I mean , to Niraj Shah point , customer segmentation certainly higher income , higher net worth customers have over the last year or so , done better , but are cohorts , you know , perform pretty consistently .

Kate Gulliver: Yeah, I would just add that, Brian, that I don't... There's not one particular cohort that's outperforming. I mean, to your point, customer segmentation, certainly higher income, higher net worth customers have, you know, over the last year or so, done better. But our cohorts, you know, perform pretty consistently. And I think what's unique about the platform, frankly, versus, you know, maybe other retailers in this space, is we cover the full spectrum. So we cover opening price point all the way up to luxury. We cover decorative accessories to furniture, right? So we have the full breadth, and, you know, we're seeing share gains, you know, really across the full catalog. And so we look at the share gains, it's not coming from any one retailer, it's not coming from any one profile type.

Speaker #3: And I think what's unique about the platform , frankly , versus maybe other retailers in the space is we cover the full spectrum .

Speaker #3: So, we cover opening price point all the way up to luxury. We cover decorative accessories to furniture. Right. So, we have the full breadth.

Speaker #3: And , you know , we're seeing share gains really across the full catalog . And so when we look at the share gains , it's not coming from any one retailer .

Speaker #3: It's not coming from any one profile type . I do think it's the compounding effect of all of these different initiatives . And I think that makes them more durable over time .

Kate Gulliver: I do think it's the compounding effect of all of these different initiatives, and I think that makes them more durable over time, and that's what's really exciting when you get into 2026.

Speaker #3: And that's what's really exciting When you get into 2026 .

Speaker #1: That's very helpful. Then, my quick follow-up: So, again, a nice job here on the ongoing deleveraging of the balance sheet.

Brian Nagel: That's very helpful. Then my quick follow-up. So again, nice job here on the ongoing delevering of the balance sheet. But Kate, or have you indicated, you know, just for some kind of parameter, like a, you know, a target debt ratio or kind of what you're working towards?

Speaker #1: But Kate , if you have you indicated , you know , just for some kind of parameter like , you know , a target debt ratio or kind of what you're working towards .

Speaker #4: Yeah . Well we said Brian , is we .

Kate Gulliver: Yeah, what we've said, Brian, is we really have a dual mandate that we're operating against right now, which is managing that ongoing, you know, Net Leverage down and continuing to also manage dilution. I think you've seen us take some really nice steps in that direction. It's really been an evolution of our capital structure over the last, you know, few years, where we moved from a position where we said, "Hey, what we want to try to do here is create optionality for us, and we'll do that by improving the P&L to open up, improving Free Cash Flow, to open up, you know, new sort of vectors for us." You know, you saw us improve the P&L considerably.

Speaker #3: Really have a dual mandate that we're operating against right now , which is managing that ongoing net leverage down and continuing to also manage dilution .

Speaker #3: And I think you've seen us take some really nice steps in that direction . It's really been an evolution of our capital structure over the last few years , where we moved from a position where we said , hey , but we want to try to do here is create optionality for us , and we'll do that by improving the PNL to open up improving free cash flow , to open up , you know , new , new sort of vectors for us .

Speaker #3: And , you know , you saw us improve the PNL considerably . Free cash flow went up from this year , you know , from 83,000,000 in 20 4 to 320 9,000,000 in 2025 .

Kate Gulliver: Free cash flow went up from this year, you know, from $83 million in 2024 to $329 million in 2025. And that's allowed us to then move into a position where we can be more proactive from a capital structure perspective, and you've seen us do that. So in Q4 alone, you saw us bring net leverage down. You saw us, in effect, sort of buy back some shares with the work that we did against the 2027 notes and the 2028 combined. That's about 5 million shares that we, you know, were able to manage there. And you also have seen us throughout 2025, you know, manage our, our dilution effectively. Our burn rate has come down considerably to around 4%.

Speaker #3: And that's allowed us to then move into a position where we can be more proactive from a capital structure perspective. And you've seen us do that.

Speaker #3: So in Q4 alone , you saw us bring net leverage down . You saw us in effect , sort of buy back some shares with the work that we did against the 27 notes and the 28 combined .

Speaker #3: That's about 5 million of shares that we were able to manage there . And you also have seen us 25 manage our dilution effectively .

Speaker #3: Our burn rate has come down considerably to around 4% . So I think you're seeing all of the pieces in place to manage that .

Kate Gulliver: So I think you're seeing all of those pieces in place to manage that net leverage and to manage that dilution, and that's the ongoing goal.

Speaker #3: Net leverage and to manage that dilution . And that's the ongoing goal

Speaker #1: Thank you . I appreciate it .

Brian Nagel: Thank you. I appreciate it.

Speaker #3: Thanks so much .

Kate Gulliver: Thanks so much.

Speaker #5: Thank you .

Niraj Shah: Thank you.

Speaker #6: This concludes today's question and answer session . I will now turn the call back to the Wayfair team for closing remarks

Operator: This concludes today's question and answer session. I will now turn the call back to the Wayfair team for closing remarks.

Niraj Shah: Just want to say thanks to everybody for your interest in Wayfair, and just put in one more plug to encourage you to read the shareholder letter we posted today. And we look forward to chatting with you next quarter. Thank you.

Speaker #2: I just want to say thanks to everybody for your interest in Wayfair , and just put in one more plug to encourage you to read the shareholder letter we posted today , and we look forward to chatting with you next quarter .

Speaker #2: Thank you .

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q4 2025 Wayfair Inc Earnings Call

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