Wayfair Inc Q1 2021 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Paul Forbes - Guggenheim Securities, LLC, Research Division - Analyst : So Niraj, maybe just a quick follow-up, right, on the sequential trends. If we look at sort of the LTM net revenue per active customer strength in the first quarter, is the commentary you're laying out here lead to the expectation of continued strengthening sequentially in that particular line item? Or what is all the visits, right, the millions of members who have downloaded it, what does that mean for that particular line item? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2021 / 12:00PM, W.N - Q1 2021 Wayfair Inc Earnings Call Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO So I think you're asking about the LTM revenue per active customer, the number that would be like $461 right now.

Question: Steven Paul Forbes - Guggenheim Securities, LLC, Research Division - Analyst : Yes. Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO Yes. Okay. So that's the number. When I refer to like, oh, we're only getting $500 per year, that's effectively what I'm referring to. And when I talk about ticking, repeat keeps ticking up slowly, you can look at that number and if you take a long view, you see it ticking up, but you see it ticks up slowly. And the reason it ticks up slowly is you're getting tons of new customers who just made a purchase for the first time, and you're mixing them with what's significant number in absolute count, but it's small in a proportion who went from first to second. And that's bigger than who went from second to third order and third to fourth order and fourth to fifth order. But these are each growing. And as they grow, they spend more with us. And so that number moves up but it moves up slowly because you have so many customers piling in the top of that funnel, right? And obviously, that number is weighted by the customers who are in each tranche and how loyal they are and the age of the customers. Because you're mixing customers who bought yesterday with customers who bought a year ago, right, because it's this trailing metric. And so yes, we would look for that number to go up over time. It bounces around a little bit, but that number would be -- basically, the easier number to look at I think is the repeat order growth and the new order growth if really think about it. But this number will be impacted by that because as customers repeat more often, become more loyal, they do spend more per year with us.

Question: Steven Paul Forbes - Guggenheim Securities, LLC, Research Division - Analyst : And then just a quick follow-up. I don't know if you could provide some color on the anticipated cadence of international EBIT margin or just simplistically, if we should assume the first quarter is sort of the trough year in terms of the performance for 2021? Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO So I think the way to think about international is the same way I was kind of guiding you to think about the whole business, but effectively, it's earlier stage. Meaning, right, if you look at it, we're getting tons of new customers because we have so few on a relative basis to the size of the market compared to the U.S. And then, in fact, the repeats continuing to expand and it's expanding nicely. So in other words, all those metrics underneath in the International segment keep going the right way. So revenue will compound, revenue should grow faster in international over time than it can in the U.S. even though both will grow at a very significant rate. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2021 / 12:00PM, W.N - Q1 2021 Wayfair Inc Earnings Call And then -- so then if you look at the EBITDA, your question specifically I think on profit, international profit, what you'll see there is -- ultimately, we basically are -- we have been investing in international for our long-term plan, not for the near-term plan. What I mean by that is when we really decided to invest in international in 2014, we started summer of '14, we purposely decided to headquarter our business in Germany, headquarter ourselves, as you know, in Berlin, Germany, But the first market we focused on is the U.K. So it was a lot. So you put a headquarter in Berlin. Why would you do that if you're focused on U.K.? Well, the reason is our long-term plan is to be -- expand throughout Europe and have -- basically, this is the North American playbook. But the U.K. was the first market. Well, as we prove that out and became the leader in U.K., today, we're a household brand in the U.K., we're the leader online in home in the U.K. And that business continues to grow at a very fast rate. We then in 2017, expanded to focus on Germany. And then they'll say, well, why aren't you expanding more? And so well, we want to prove out Germany work. So now you roll forward, we're 2 years into what's a 4-year cycle to build a brand in Germany, that's working really well. And so now we're in a position where you [can kind of tell]. Well, what's interesting is all the investments we've made that -- the pan-European transportation network where we move goods from 30 different countries and we deliver them today in the U.K. and Germany. The country category teams, we have a team based in Berlin. We have an Italian category team, there's native Italian speakers who cover our suppliers in Italy. We have one of these for Spain, one of these for Poland. They're all based in Berlin. We've made all these investments over time because of what we're doing to -- with our long-term plan in Europe. And for example, just to give you some context, we have over 2,000 people in Europe, only 100 are in London. So it's really -- we built the same kind of operation in Boston built in Berlin. And so from a leverage standpoint, the way profitability will play out is you're going to see us, on one hand, be ambitious and expanding Europe in a methodical manner. However, the economics will keep getting better. You say, how could the economic keep getting better and profitability keep getting better over time as you expand? The reason is you take something that's more mature like the U.K. where it started with really low gross margins. Those margins then rise over time. It's so much bigger than anything that's newer, right, that its growth outpaces the growth in something newer. So basically, the long story short, international EBITDA will keep getting better over time. But really, where we are with a mature -- more mature piece, but it can still grow like wildfire is the U.S. So profit is real going to be driven by the U.S. business. But International, it's on the right trajectory. I don't know, Michael, do you have anything on international EBITDA? I think the question had some near-term question aspect to it, too.