0001616707-20-000224.txt : 20201103 0001616707-20-000224.hdr.sgml : 20201103 20201103160852 ACCESSION NUMBER: 0001616707-20-000224 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 82 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20201103 DATE AS OF CHANGE: 20201103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Wayfair Inc. CENTRAL INDEX KEY: 0001616707 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 364791999 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36666 FILM NUMBER: 201283574 BUSINESS ADDRESS: STREET 1: 4 COPLEY PLACE CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 617 532 6100 MAIL ADDRESS: STREET 1: 4 COPLEY PLACE CITY: BOSTON STATE: MA ZIP: 02116 10-Q 1 w-20200930.htm 10-Q w-20200930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 Form 10-Q
 
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to      
 
Commission File Number: 001-36666 
Wayfair Inc.
(Exact name of registrant as specified in its charter) 
Delaware 36-4791999
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification Number)
4 Copley PlaceBostonMA02116
(Address of principal executive offices) (Zip Code)
(617) 532-6100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share WThe New York Stock Exchange
    Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large Accelerated FilerAccelerated filer 
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No 
Class Outstanding at October 27, 2020
Class A Common Stock, $0.001 par value per share  72,811,806
Class B Common Stock, $0.001 par value per share 26,636,234


WAYFAIR INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2020
  Page
  
 
  
 
   
 
  
 

  
 
  
 

  
 
  
  
  
  
 
  
  
  
 
1

PART I
 
FINANCIAL INFORMATION


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our investment plans and anticipated returns on those investments, our future customer growth, our future results of operations and financial position, available liquidity and access to financing sources, our business strategy, plans and objectives of management for future operations, consumer activity and behaviors, developments in our technology and systems and anticipated results of those developments and the impact of the novel coronavirus (COVID-19) pandemic and our response to it, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions.
Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.
Factors that could cause or contribute to differences in our future results include, without limitation, the following:
our ability to acquire new customers and sustain and/or manage our growth;
our ability to increase our net revenue per active customer;
our ability to build and maintain strong brands;
our ability to manage our global growth and expansion;
our ability to compete successfully;
the rate of growth of the Internet and e-commerce;
economic factors, such as interest rates, the housing market, currency exchange fluctuations and changes in customer spending;
disruptions or inefficiencies in our supply chain or logistics network, including any impact of the COVID-19 outbreak on our suppliers and third party carriers and delivery agents;
potential impacts of the COVID-19 outbreak on our business, financial condition, and results of operations;
world events (such as the 2020 U.S. presidential election), natural disasters, public health emergencies (such as the COVID-19 outbreak), civil disturbances, and terrorist attacks; and
developments in, and the outcome of, legal and regulatory proceedings and investigations to which we are a party or are subject, and the liabilities, obligations and expenses, if any, that we may incur in connection therewith.
A further list and description of risks, uncertainties and other factors that could cause or contribute to differences in our future results include the cautionary statements herein and in our other filings with the Securities and Exchange Commission, including those set forth under Part II, Item 1A, Risk Factors of this Quarterly Report on Form 10-Q and under Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019. We qualify all of our forward-looking statements by these cautionary statements.

2

WAYFAIR INC.
CONSOLIDATED AND CONDENSED BALANCE SHEETS
(Unaudited)
September 30,
2020
December 31,
2019
(in thousands, except share and per share data)
Assets:  
Current assets  
Cash and cash equivalents$2,442,939 $582,753 
Short-term investments113,985 404,252 
Accounts receivable, net of allowance for credit losses of $26,884 and $22,774 at September 30, 2020 and December 31, 2019, respectively
109,652 99,720 
Inventories54,241 61,692 
Prepaid expenses and other current assets322,649 228,721 
Total current assets3,043,466 1,377,138 
Operating lease right-of-use assets802,369 763,400 
Property and equipment, net682,057 624,544 
Goodwill and intangible assets, net17,605 18,809 
Long-term investments 155,690 
Other noncurrent assets12,943 13,467 
Total assets$4,558,440 $2,953,048 
Liabilities and Stockholders' Deficit:
Current liabilities
Accounts payable$1,236,895 $908,097 
Accrued expenses328,694 298,918 
Unearned revenue318,175 167,641 
Other current liabilities333,589 236,863 
Total current liabilities2,217,353 1,611,519 
Long-term debt2,862,135 1,456,195 
Operating lease liabilities867,711 822,602 
Other liabilities70,827 6,940 
Total liabilities6,018,026 3,897,256 
Commitments and contingencies (Note 8)
Stockholders’ deficit: 
Undesignated preferred stock, $0.001 par value per share: 10,000,000 shares authorized and none issued at September 30, 2020 and December 31, 2019
  
Class A common stock, par value $0.001 per share: 500,000,000 shares authorized, 68,959,957 and 66,642,611 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
69 67 
Class B common stock, par value $0.001 per share: 164,000,000 shares authorized, 26,636,721 and 26,957,815 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
27 27 
Additional paid-in capital
452,111 1,122,548 
Accumulated deficit(1,909,768)(2,065,423)
Accumulated other comprehensive loss(2,025)(1,427)
Total stockholders’ deficit(1,459,586)(944,208)
Total liabilities and stockholders’ deficit$4,558,440 $2,953,048 
The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.
3

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
(in thousands, except per share data)
Net revenue$3,839,570 $2,305,487 $10,474,305 $6,593,567 
Cost of goods sold2,692,142 1,765,566 7,426,724 5,023,590 
Gross profit1,147,428 539,921 3,047,581 1,569,977 
Operating expenses:    
Customer service and merchant fees139,589 91,255 372,825 256,230 
Advertising344,025 281,846 1,037,562 784,981 
Selling, operations, technology, general and administrative441,960 426,529 1,377,410 1,153,286 
Total operating expenses925,574 799,630 2,787,797 2,194,497 
Income (loss) from operations221,854 (259,709)259,784 (624,520)
Interest (expense), net(36,315)(14,432)(87,472)(33,922)
 Other (expense) income, net (13,584)2,182 (10,720)5,582 
Income (loss) before income taxes171,955 (271,959)161,592 (652,860)
(Benefit) provision for income taxes, net(1,211)76 414 1,502 
Net income (loss)$173,166 $(272,035)$161,178 $(654,362)
Basic earnings (loss) per share$1.82 $(2.94)$1.70 $(7.13)
Diluted earnings (loss) per share$1.67 $(2.94)$1.64 $(7.13)
Weighted-average number of shares of common stock outstanding used in computing per share amounts:
Basic95,373 92,540 94,767 91,820 
Diluted109,200 92,540 98,021 91,820 
 
The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

4

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
(in thousands)
Net income (loss)$173,166 $(272,035)$161,178 $(654,362)
Other comprehensive income (loss):
Foreign currency translation adjustments(895)(75)(665)129 
Net unrealized (loss) gain on available-for-sale investments(606)(5)67 195 
Comprehensive income (loss)$171,665 $(272,115)$160,580 $(654,038)
 
The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

5

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
Three Months Ended
Class A and Class B Common Stock
SharesAmountAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive Loss
Total
Stockholders'
Deficit
(in thousands)
Balance at June 30, 201992,098 $93 $859,092 $(1,463,166)$(1,376)$(605,357)
Net loss— — — (272,035)— (272,035)
Other comprehensive loss— — — — (80)(80)
Exercise of options to purchase common stock3 — 10 — — 10 
Issuance of common stock upon vesting of RSUs781 — — — —  
Shares withheld related to net settlement of RSUs(8)— (1,086)— — (1,086)
Equity-based compensation expense— — 65,553 — — 65,553 
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)— — 130,566 — — 130,566 
Balance at September 30, 201992,874 93 1,054,135 (1,735,201)(1,456)$(682,429)
Balance at June 30, 202095,065 $95 $1,295,971 $(2,082,934)$(524)$(787,392)
Net income— — — 173,166 — 173,166 
Other comprehensive loss— — — — (1,501)(1,501)
Exercise of options to purchase common stock6 — 161 — — 161 
Issuance of common stock upon vesting of RSUs787 1 — — — 1 
Equity-based compensation expense — — 74,425 — — 74,425 
Repurchase of common stock(844)(1)(280,235)— — (280,236)
Shares issued upon conversion of convertible notes (Note 15)583 1 151,419 — — 151,420 
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes (Note 15)— — (829,004)— — (829,004)
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)— — 39,374 — — 39,374 
Balance at September 30, 202095,597 $96 $452,111 $(1,909,768)$(2,025)$(1,459,586)
The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.





6


WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
Nine Months Ended
Class A and Class B Common Stock
SharesAmountAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Deficit
(in thousands)
Balance at December 31, 201890,748 $91 $753,657 $(1,082,689)$(1,780)$(330,721)
Net loss— — — (654,362)— (654,362)
Other comprehensive income— — — — 324 324 
Exercise of options to purchase common stock28 — 90 — — 90 
Issuance of common stock upon vesting of RSUs2,109 2 — — — 2 
Shares withheld related to net settlement of RSUs(11)— (1,510)— — (1,510)
Equity-based compensation expense— — 171,332 — — 171,332 
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)— — 130,566 — — 130,566 
Adoption of ASU No. 2016-02— — — 1,850 — 1,850 
Balance at September 30, 201992,874 $93 $1,054,135 $(1,735,201)$(1,456)$(682,429)
Balance at December 31, 201993,600 $94 $1,122,548 $(2,065,423)$(1,427)$(944,208)
Net income— — — 161,178 — 161,178 
Other comprehensive loss— — — — (598)(598)
Exercise of options to purchase common stock24 — 380 — — 380 
Issuance of common stock upon vesting of RSUs2,234 2 — — — 2 
Equity-based compensation expense — — 208,740 — — 208,740 
Repurchase of common stock(844)(1)(280,235)— — (280,236)
Shares issued upon conversion of convertible notes (Note 15)583 1 151,419 — — 151,420 
Reacquisition of equity component from repurchases and conversions of convertible notes, net of taxes (Note 15)— — (829,004)— — (829,004)
Equity component of issuance of convertible notes, net of premium paid on capped calls (Note 15)— — 78,263 — — 78,263 
Adoption of ASU No. 2016-13— — — (5,523)— (5,523)
Balance at September 30, 202095,597 $96 $452,111 $(1,909,768)$(2,025)$(1,459,586)
The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.

7

WAYFAIR INC.
CONSOLIDATED AND CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) 
 Nine months ended September 30,
 20202019
(in thousands)
Cash flows from operating activities:  
Net income (loss)$161,178 $(654,362)
Adjustments used to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization208,532 134,172 
Equity-based compensation197,199 162,014 
Amortization of discount and issuance costs on convertible notes78,225 40,737 
Other non-cash adjustments12,065 (1,659)
Changes in operating assets and liabilities:
Accounts receivable, net(14,891)(25,309)
Inventories7,602 (22,716)
Prepaid expenses and other current assets(93,055)(29,648)
Accounts payable and accrued expenses356,215 215,786 
Unearned revenue and other liabilities296,306 22,382 
Other assets612 (1,920)
Net cash provided by (used in) operating activities1,209,988 (160,523)
Cash flows from investing activities: 
Purchase of short- and long-term investments(19,994) 
Sale and maturities of short- and long-term investments466,310 115,468 
Purchase of property and equipment(146,303)(183,968)
Site and software development costs(109,678)(94,697)
Other investing activities, net(124)(15,977)
Net cash provided by (used in) investing activities190,211 (179,174)
Cash flows from financing activities: 
Proceeds from borrowings200,000  
Repayment of borrowings(200,000) 
Proceeds from issuance of convertible notes, net of issuance costs2,027,758 935,146 
Premiums paid for capped call confirmations(255,024)(145,728)
Payments to extinguish convertible debt(1,040,349) 
Repurchase of common stock(280,236) 
Other financing activities, net380 (2,211)
Net cash provided by financing activities452,529 787,207 
Effect of exchange rate changes on cash and cash equivalents7,458 (1,586)
Net increase in cash and cash equivalents1,860,186 445,924 
Cash and cash equivalents:  
Beginning of period582,753 849,461 
End of period$2,442,939 $1,295,385 
Supplemental cash flow information:  
Cash paid for interest on long-term debt$14,173 $4,528 
Issuance of common stock for conversion of convertible debt, net of taxes$45,447 $ 
Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities$38,391 $34,028 
 
The accompanying notes are an integral part of these Unaudited Consolidated and Condensed Financial Statements.
8

Wayfair Inc.
Notes to Consolidated and Condensed Financial Statements
(Unaudited)
 
1. Description of Business
Wayfair Inc. (the "Company") is one of the world's largest online destinations for the home. Through its e-commerce business model, the Company offers visually inspired browsing, compelling merchandising, easy product discovery and attractive prices for over eighteen million products from over 12,000 suppliers.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Consolidated and Condensed Financial Statements contained in this Quarterly Report on Form 10-Q are those of the Company and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Certain information and note disclosures normally included in the audited financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.
The Consolidated and Condensed Balance Sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.
The accompanying unaudited Consolidated and Condensed Financial Statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, that are necessary to present fairly the results of the interim periods presented. Interim results are not necessarily indicative of the results for the full year ended December 31, 2020 or future periods.
The Company believes that other than the implementation of Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), there have been no significant changes during the nine months ended September 30, 2020 to the items disclosed in Note 2, Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Principles of Consolidation    
The accompanying unaudited Consolidated and Condensed Financial Statements of Wayfair Inc. include its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
Use of Estimates    
The preparation of the unaudited Consolidated and Condensed Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. Actual results could differ from those estimates.
Earnings (Loss) per Share
The Company follows the two-class method when computing earnings (loss) per share for its two issued classes of common stock - Class A and Class B. Basic earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed using the weighted-average number of shares of common stock outstanding during the period plus, if dilutive, stock awards, including stock options and restricted stock units, as determined under the treasury stock method, and convertible debt instruments, as determined under the if-converted method. In periods when we have a net loss, stock awards and convertible debt instruments are excluded from our calculations of earnings per share as their inclusion would have an antidilutive effect.
Credit Impairment
The Company adopted ASU No. 2016-13 on January 1, 2020 using the modified retrospective transition method. This ASU revises how entities account for credit losses for most financial assets and certain other instruments that are not measured
9

at fair value through net income. As of January 1, 2020, the adoption of ASU 2016-13 resulted in a $5.5 million cumulative adjustment to accumulated deficit on our Consolidated and Condensed Balance Sheet. Refer to Note 4, Credit Losses, for additional detail.
3. Investments and Fair Value Measurements
Investments
As of September 30, 2020 and December 31, 2019, the Company's investments consisted of corporate bonds and other government obligations priced at fair value. These investments were classified as available-for-sale and their estimated fair values were $114.0 million and $559.9 million, respectively.
To the extent the amortized cost basis of the available-for-sale debt securities exceeds the fair value, management assesses the debt securities for credit loss, however management considers the risk of credit loss to be minimized by the Company's policy of investing in financial instruments issued by highly-rated financial institutions. When assessing the risk of credit loss, management considers factors such as the severity and the reason of the decline in value (i.e., any changes to the rating of the security by a rating agency or other adverse conditions specifically related to the security) and management's intended holding period and time horizon for selling. During the three and nine months ended September 30, 2020 and 2019, the Company did not recognize any credit losses related to its available-for-sale debt securities. Further, as of September 30, 2020 and December 31, 2019, the Company did not record an allowance for credit losses related to its available-for-sale debt securities. During the nine months ended September 30, 2020, the Company collected $161.3 million of proceeds from the sale of long-term investments and recognized a realized gain of $0.8 million. The Company did not recognize any realized gains or losses during the three months ended September 30, 2020 or during the three and nine months ended September 30, 2019.
 The following tables present details of the Company’s investments as of September 30, 2020 and December 31, 2019:
 September 30, 2020
 Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Short-term:    
Investment securities$113,886 $99 $ $113,985 
Total$113,886 $99 $ $113,985 
 December 31, 2019
 Amortized
Cost
Gross Unrealized GainsGross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Short-term:   
Investment securities$404,294 $20 $(62)$404,252 
Long-term:
Investment securities155,616 92 (18)155,690 
Total$559,910 $112 $(80)$559,942 


10

Fair Value Measurements
The Company's financial assets and liabilities are measured at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The three levels of inputs used to measure fair value are as follows:
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability
This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company measures its cash equivalents and short- and long-term investments at fair value. The Company classifies its cash equivalents and certificates of deposits within Level 1 because the Company values these investments using quoted market prices. The fair value of the Company's Level 1 financial assets is based on quoted market prices of the identical underlying security. The Company classifies short- and long-term investments within Level 2 because unadjusted quoted prices for identical or similar assets in markets are not active.  
The following tables set forth the fair value of the Company’s financial assets measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 based on the three-tier value hierarchy:
 September 30, 2020
 Level 1Level 2Level 3Total
(in thousands)
Cash and cash equivalents:   
Cash$538,767 $ $ $538,767 
Cash equivalents1,904,172   1,904,172 
Total cash and cash equivalents2,442,939   2,442,939 
Short-term investments:
Investment securities 113,985  113,985 
Other non-current assets:
Certificate of deposit5,200   5,200 
Total$2,448,139 $113,985 $ $2,562,124 
 December 31, 2019
 Level 1Level 2Level 3Total
(in thousands)
Cash and cash equivalents:    
Cash$308,521 $ $ $308,521 
Cash equivalents274,232   274,232 
Total cash and cash equivalents582,753   582,753 
Short-term investments:   
Investment securities 404,252  404,252 
Other non-current assets:
Certificate of deposit5,076   5,076 
Long-term investments:   
Investment securities 155,690  155,690 
Total$587,829 $559,942 $ $1,147,771 
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4. Credit Losses

Accounts receivable are stated net of the allowance for credit losses, which are recorded based on historical losses as well as management's expectation of future collections. Uncollectible amounts are written off against the allowance after all collection efforts have been exhausted. The Company's exposure to credit loss is minimized through fraud assessments performed prior to customer checkout and the Company's policy of monitoring the creditworthiness of its customers to which it grants credit terms in the normal course of business. Further, management notes credit risk is mitigated as approximately 99% of the net revenue recognized for the three and nine months ended September 30, 2020 was collected in advance of recognition.

As of September 30, 2020, the Company reported $109.7 million of accounts receivable, net of allowance for credit losses of $26.9 million. Other than the adjustment related to the adoption of ASU 2016-13, as discussed in Note 2, Summary of Significant Accounting Policies, changes in the allowance for credit losses were not material for the three and nine months ended September 30, 2020.
5. Intangible Assets and Goodwill
As of September 30, 2020 and December 31, 2019, the Company had $17.2 million and $18.4 million of intangible assets, respectively. Amortization expense related to intangible assets was $0.4 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $1.2 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively.
Goodwill was $0.4 million as of September 30, 2020 and December 31, 2019.
6. Property and Equipment, net
The following table summarizes property and equipment, net as of September 30, 2020 and December 31, 2019:
September 30,
2020
December 31,
2019
(in thousands)
Furniture and computer equipment$554,489 $509,120 
Site and software development costs397,027 297,252 
Leasehold improvements341,345 228,514 
Construction in progress23,667 45,503 
 1,316,528 1,080,389 
Less accumulated depreciation and amortization(634,471)(455,845)
Property and equipment, net$682,057 $624,544 
Property and equipment depreciation and amortization expense was $72.2 million and $50.1 million for the three months ended September 30, 2020 and 2019, respectively, and $207.3 million and $133.8 million for the nine months ended September 30, 2020 and 2019, respectively.
7. Leases
The Company has lease arrangements for warehouse, fulfillment center, office, and data center spaces. These leases expire at various dates through 2034. Operating lease expense was $38.6 million and $31.8 million in the three months ended September 30, 2020 and 2019, respectively, and $118.8 million and $86.8 million for the nine months ended September 30, 2020 and 2019, respectively.
The following table presents supplemental cash flow information related to leases:
Nine months ended September 30, 2020Nine months ended September 30, 2019
(in thousands)
Cash payments included in operating cash flows from lease arrangements$105,416 $77,687 
Right-of-use assets obtained in exchange for lease obligations$110,210 $281,006 

12

The following table presents supplemental balance sheet information related to leases:
September 30, 2020December 31, 2019
Additional lease information
Weighted average remaining lease term8 years10 years
Weighted average discount rate6.5 %6.7 %

The following table presents future minimum lease payments under non-cancellable leases as of September 30, 2020:
 Amount
(in thousands)
2020 (excluding the nine months ended September 30, 2020)$33,793 
2021161,998 
2022162,800 
2023157,581 
2024155,062 
Thereafter602,837 
Total future minimum lease payments 1,274,071 
Less: Imputed interest(303,994)
Total$970,077 
The following table presents total operating leases as of September 30, 2020 and December 31, 2019:
September 30,
2020
December 31,
2019
(in thousands)
Balance sheet line item
Other current liabilities$102,366 $91,104 
Operating lease liabilities867,711 822,602 
Total operating leases$970,077 $913,706 
As of September 30, 2020, the Company has entered into $149.4 million of additional operating leases, primarily related to build-to-suit warehouse leases that have not yet commenced. As the Company does not control the underlying assets during the construction period, the Company is not considered the owner of the construction projects for accounting purposes. These operating leases will commence between 2020 and 2021 with lease terms of 2 to 15 years.
8. Commitments and Contingencies
Letters of Credit
The Company has issued letters of credit, primarily as security for certain lease agreements, for approximately $54.9 million and $46.7 million, as of September 30, 2020 and December 31, 2019, respectively.
Legal Matters
From time to time the Company is involved in claims that arise during the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, the Company does not currently believe that the outcome of any of these legal matters will have a material adverse effect on the Company's results of operation or financial condition. Regardless of the outcome, litigation can be costly and time consuming, as it can divert management's attention from important business matters and initiatives, negatively impacting the Company's overall operations. In addition, the Company may also find itself at greater risk to outside party claims as it increases its operations in jurisdictions where the laws with respect to the potential liability of online retailers are uncertain, unfavorable, or unclear.
On January 10, 2019 and January 16, 2019, putative securities class action complaints were filed against the Company and three of its officers in the U.S. District Court for the District of Massachusetts. The two complaints alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, relating to certain prior disclosures of the
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Company. Each plaintiff was seeking to represent a class of shareholders who purchased or acquired stock of the Company between August 2, 2018 and October 31, 2018, and was seeking damages and other relief based on allegations that the defendants' conduct affected the value of such stock. On July 8, 2020, the consolidated complaint was dismissed with prejudice.
9. Equity-Based Compensation
The board of directors of the Company (the "Board") adopted the 2014 Incentive Award Plan ("2014 Plan") to grant cash and equity incentive awards to eligible participants in order to attract, motivate and retain talent. The 2014 Plan is administered by the Board with respect to awards to non-employee directors and by the compensation committee of the Board with respect to other participants and provides for the issuance of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance shares, stock payments, cash payments, dividend awards and other incentives. Prior to the adoption of the 2014 Plan, Wayfair LLC issued certain equity awards pursuant to the Wayfair LLC Amended and Restated Common Unit Plan (the "2010 Plan"), which was administered by the board of directors of Wayfair LLC. Awards issued under the 2010 Plan that remain outstanding currently represent Class A or Class B common stock of the Company.
For awards granted pursuant to the 2014 Plan, 8,603,066 shares of Class A common stock were initially available for issuance. The 2014 Plan also contains an evergreen provision whereby the shares available for future grant are increased on the first day of each calendar year beginning January 1, 2016 and ending on and including January 1, 2024. As of January 1, 2020, 5,111,305 shares of Class A common stock were available for future grant under the 2014 Plan. Shares or RSUs forfeited, withheld for minimum statutory tax obligations, and unexercised stock option lapses from the 2010 and 2014 Plans are available for future grant under the 2014 Plan.
The following table presents activity relating to stock options for the nine months ended September 30, 2020: 
 SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Term (Years)
Outstanding at December 31, 201943,606 $3.00 1.5
Options exercised(23,660)$3.02  
Outstanding and exercisable at September 30, 202019,946 $2.98 0.7
The intrinsic value of stock options exercised was $4.4 million and $4.2 million for the nine months ended September 30, 2020 and 2019, respectively. The aggregate intrinsic value of stock options outstanding and currently exercisable is $5.7 million as of September 30, 2020. All stock options were fully vested at September 30, 2020.
The following table presents activity relating to RSUs for the nine months ended September 30, 2020: 
 SharesWeighted-
Average Grant
Date Fair Value
Outstanding at December 31, 20198,112,736 $95.69 
RSUs granted1,688,442 $171.72 
RSUs vested(2,233,708)$95.30 
RSUs forfeited/canceled(1,343,119)$103.73 
Outstanding as of September 30, 20206,224,351 $115.27 
The intrinsic value of RSUs vested was $342.9 million and $290.5 million for the nine months ended September 30, 2020 and 2019, respectively. The aggregate intrinsic value of RSUs unvested is $1.8 billion as of September 30, 2020. Unrecognized equity-based compensation expense related to outstanding RSUs is $649.7 million with a weighted average remaining vesting term of 1.2 years at September 30, 2020.
10. Unearned Revenue
The Company has three types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are initially recorded in unearned revenue, and are recognized as net revenue when the products are delivered, (ii) unredeemed gift cards and site and store credits, which are initially recorded in unearned revenue, and are recognized in the period they are redeemed, and (iii) membership rewards redeemable for future purchases, which are earned by customers on purchases made with the Company's Wayfair branded, private label credit card, and are initially recorded in other current liabilities, and are recognized as net revenue when redeemed. The portion of gift cards and site and store credits not expected to be redeemed ("breakage") are recognized as net revenue based on historical redemption patterns, which is substantially within
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twenty-four months from the date of issuance, to the extent there is no requirement for remitting balances to governmental agencies.
Contractual liabilities included in unearned revenue and other current liabilities in the Consolidated and Condensed Balance Sheet were $318.2 million and $5.3 million at September 30, 2020 and $167.6 million and $4.6 million at December 31, 2019, respectively. During the nine months ended September 30, 2020, the Company recognized $139.7 million and $2.8 million of net revenue that was included in unearned revenue and other current liabilities, respectively, at December 31, 2019.
Net revenue from contracts with customers is disaggregated by geographic region because this manner of disaggregation best depicts how the nature, amount, timing, and uncertainty of net revenue and cash flows are affected by economic factors. Refer to Note 11, Segment and Geographic Information, for additional detail.
11. Segment and Geographic Information
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated on a regular basis by the Chief Operating Decision Maker ("CODM") in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its chief executive officer. 
The Company's operating and reportable segments are the U.S. and International. These segments reflect the way the CODM allocates resources and evaluates financial performance, which is based upon each segment's Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) before depreciation and amortization, equity-based compensation and related taxes, interest (expense), net, other (expense) income, net, (benefit) provision for income taxes, net, non-recurring items, and other items not indicative of our ongoing operating performance. These charges are excluded from evaluation of segment performance because it facilitates reportable segment performance comparisons on a period-to-period basis as these costs may vary independent of business performance.
The Company allocates certain operating expenses to the operating and reportable segments, including customer service and merchant fees and selling, operations, technology, general and administrative based on the usage and relative contribution provided to the segments. It excludes from the allocations certain operating expense lines, including depreciation and amortization, equity-based compensation and related taxes, as well as interest (expense), net, other (expense) income, net, and (benefit) provision for income taxes, net. There are no net revenue transactions between the Company's reportable segments.
U.S.
The U.S. segment primarily consists of amounts earned through product sales through the Company's family of sites in the U.S. The U.S. net revenue for the three and nine months ended September 30, 2019 includes $5.8 million and $30.9 million, respectively of net revenue previously classified as other net revenue
International
The International segment primarily consists of amounts earned through product sales through the Company's international sites.
Net revenue from external customers for each group of similar products and services are not reported to the CODM. Separate identification of this information for purposes of segment disclosure is impractical, as it is not readily available and the cost to develop it would be excessive. No individual country outside of the U.S. provided greater than 10% of consolidated net revenue.
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The following tables present net revenues and Adjusted EBITDA attributable to the Company's reportable segments for the periods presented:
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
(in thousands)
U.S. net revenue$3,274,872 $1,966,654 $8,901,559 $5,624,870 
International net revenue564,698 338,833 1,572,746 968,697 
Total net revenue$3,839,570 $2,305,487 $10,474,305 $6,593,567 
Three months ended September 30,Nine months ended September 30,
2020201920202019
(in thousands)
Adjusted EBITDA: 
U.S.$377,007 $(62,878)$766,486 $(91,002)
International(5,895)(81,306)(82,838)(225,383)
Total reportable segments Adjusted EBITDA371,112 (144,184)683,648 (316,385)
Less: reconciling items (1)(197,946)(127,851)(522,470)(337,977)
Net income (loss)$