Amidst a challenging economic landscape, Wayfair Inc . (NYSE: NYSE:W), an e-commerce company specializing in home goods, reported its third-quarter financial results for 2024. CEO Niraj Shah highlighted the company's resilient performance, maintaining a mid-single digit adjusted EBITDA margin for the second consecutive quarter with year-over-year improvements nearing $100 million. Despite a decrease in consumer spending and a historic slowdown in the housing market, Wayfair launched a new loyalty program, Wayfair Rewards, and is focusing on cost efficiency and profitability as it navigates through the downturn.
Key Takeaways
- Wayfair achieved a mid-single digit adjusted EBITDA margin for the second consecutive quarter, with year-over-year improvements of nearly $100 million.
- Consumer spending decreased, with a focus on lower-ticket items, amid a historic housing market slowdown.
- Wayfair launched Wayfair Rewards, a loyalty program aimed at increasing customer shopping frequency.
- Q3 net revenue decreased by 2% year-over-year, with a 6.1% drop in orders, but partially offset by a 4.4% increase in average order value (AOV).
- The company is prioritizing cost efficiency and profitability, preparing for a potential market recovery.
Company Outlook
- Wayfair is not expecting a near-term recovery in the housing market but remains focused on cost efficiency.
- The company anticipates revenue to decline in the low single-digit range in Q4, with adjusted EBITDA margins projected between 2% and 4%.
- For 2025, Wayfair targets higher EBITDA than in 2024, driven by market share gains and cost discipline.
Bearish Highlights
- The company noted a decrease in consumer spending and highlighted a significant slowdown in the housing market.
- Q3 net revenue decreased by 2% year-over-year and 7.5% sequentially.
- For Q4, revenue is expected to decline in the low single-digit range.
Bullish Highlights
- Wayfair's marketing strategy, particularly influencer marketing, is showing promising returns in customer engagement.
- The company ended the quarter with $1.3 billion in cash and equivalents.
- Adjusted EBITDA stood at $119 million, with a margin of 4.1%.
- The company is seeing a promising return on ad spend from nearly 4,000 creators producing content.
Misses
- The company's net revenue for Q3 was down 2% year-over-year due to a 6.1% decline in orders.
Q&A Highlights
- Executives addressed concerns about potential revenue slowdowns due to pre-election dynamics and seasonal shifts.
- Shah discussed the impact of high advertising rates during the election season and the company's cautious approach to ad spend.
- The company is adapting to tariff challenges by diversifying its supplier base.
Additional Insights
- Wayfair's strategic pivot towards profitability in 2024 is a return to its pre-IPO focus on balancing growth.
- The leadership is confident in capturing market share despite challenging macroeconomic conditions.
- Technological advancements, such as machine learning and AI, are being integrated to enhance operational efficiency and customer experience.
- Positive free cash flow is expected in Q4, driven by seasonal revenue increases and disciplined capital expenditure management.
- The company's international EBITDA has improved, showing a positive trajectory for the business.
Wayfair's leadership remains optimistic about the company's direction and is committed to enhancing customer loyalty and driving profitability. With strategic investments in technology and marketing, alongside a disciplined approach to spending, Wayfair is poised to navigate the current economic challenges while preparing for future growth opportunities.
InvestingPro Insights
Wayfair's recent financial performance and strategic initiatives align with several key insights from InvestingPro. The company's focus on profitability and cost efficiency is particularly relevant given its current financial position.
According to InvestingPro data, Wayfair's market capitalization stands at $4.9 billion, reflecting the market's valuation of the company amidst challenging economic conditions. The company's revenue for the last twelve months as of Q2 2024 was $11.9 billion, with a modest growth of 0.15%. This aligns with the reported Q3 results, which showed a slight decline in net revenue.
An InvestingPro Tip indicates that Wayfair's stock price movements have been quite volatile. This volatility is evident in the company's recent performance, with the stock trading near its 52-week low and showing a 19.55% decline over the past month. This information provides context to the company's cautious outlook and its focus on navigating through the current market downturn.
Another crucial InvestingPro Tip reveals that Wayfair's short-term obligations exceed its liquid assets. This insight underscores the importance of the company's efforts to maintain positive free cash flow, as mentioned in their Q4 expectations. It also explains why Wayfair is emphasizing cost discipline and operational efficiency.
Investors should note that while Wayfair faces challenges, analysts predict the company will be profitable this year, according to InvestingPro Tips. This projection aligns with Wayfair's own guidance of targeting higher EBITDA in 2025 compared to 2024.
For readers interested in a more comprehensive analysis, InvestingPro offers 4 additional tips that could provide valuable insights into Wayfair's financial health and future prospects.
Full transcript – Wayfair Inc (W) Q3 2024:
Operator: Good day, and welcome to the Wayfair Third Quarter 2024 Earnings Release and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome James Lamb, Head of Investor Relations to begin the conference. James, over to you.
James Lamb: Good morning and thank you for joining us. Today, we will review our third quarter 2024 results. With me are Niraj Shah, Co-Founder, Chief Executive Officer and Co-Chairman; Steve Conine, Co-Founder and Co-Chairman; and Kate Gulliver, Chief Financial Officer and Chief Administrative Officer. We will all be available for Q&A following today's prepared remarks. I would like to remind you that our call today will consist of forward-looking statements, including, but not limited to, those regarding our future prospects, business strategies, industry trends and our financial performance, including guidance for the fourth quarter of 2024. All forward-looking statements made on today's call are based on information available to us as of today's date. We cannot guarantee that any forward-looking statements will be accurate, although, we believe that we have been reasonable in our expectations and assumptions. Our 10-K for 2023, our 10-Q for this quarter 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 adjusted EBITDA, adjusted EBITDA margin and free cash flow. 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 any 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 now like to turn the call over to Niraj.
Niraj Shah: Thanks, James, and good morning, everyone. I'm excited to share our third quarter results with you today. Q3 marked another proof-point of resilience for Wayfair with further market share capture in the face of sustained challenges in the category. Once again, we navigated a dynamic consumer environment, while driving further discipline on costs to achieve a mid-single digit adjusted EBITDA margin for the second quarter in a row, but that's just one piece of the picture. As I've mentioned many times before, our North Star is driving adjusted EBITDA in excess of equity-based compensation and CapEx, and we're pleased to be making noteworthy improvements across each one of these, totaling almost $100 million year-over-year in Q3. The third quarter exhibited a continuation of choppy macro trends we've seen across 2024. Consumers remain trepidatious in their spending patterns and are demonstrating more price elasticity than we saw in the early months of the year. While we were pleased with the response we saw over Way Day at the start of the quarter, which we ran as an extended event for the first-time this fall, it has become clear even as we exited September that we were seeing a broader pullback by shoppers in the lead-up to the election. Attention is focused away from the home right now and when customers are in the market is increasingly for lower investment, lower consideration purchases versus larger ticket items that represent our traditional area of strength. We remain optimistic that pieces are coming together to support a category recovery in the quarters to come. While it will take some time to play out, this improvement is poised to provide some relief in what has become a historic slowdown in the housing market. Redfin (NASDAQ:RDFN) published an analysis at the end of Q3, noting that just 25 of every 1,000 U.S. homes changed hands in the first eight months of the year, the lowest level they saw in their study running back to 2012 and more than 30% below the turnover levels back in 2019. Now as we've said for many quarters, we are not running the business with the expectation of a recovery in any specific time frame. For more than two years, we've done two things simultaneously, driving cost efficiency and spending discipline to run the business profitably in a recessionary environment and setting ourselves up to be a considerable beneficiary when the category does return to growth. You've seen the former quite clearly with what is now nine sequential quarters of compression in our fixed costs and a third quarter result that is the lowest SOT G&A we've had since 2021. The latter you've seen us demonstrate across several vectors. For much of 2023, our mantra focused on the core recipe, bringing the best combination of competitive pricing, fast delivery and broad availability together into an offering that wins customer orders day-in and day-out. Across 2024, we went a step further by concentrating on strategies to drive mind share and frequency, including the three major initiatives we've spoken to several times. Even if customers aren't shopping for their homes at the moment, when that time does come, we want to make sure Wayfair is their first destination. These efforts include many things such as our brand refresh back in March and the launch of our first large format Wayfair branded store over Memorial Day weekend. Our new initiative is our loyalty offering, which just began rolling out last week. For $29 per year, Wayfair Rewards customers will unlock exceptional value and experiences with benefits including 5% back on purchases, free shipping on all orders, access to exclusive shopping events, special offers and a dedicated members-only support line. We know how much investors love math (ph), so let me walk you through the business model of Wayfair Rewards at a high level. Our average customer typically shops on Wayfair about twice a year, spending around $300 per order. Priced at $29 per year, the 5% back benefit would be roughly breakeven for our average shopper. Our goal is to push customers out of that two orders per year bucket into the three orders per year bucket or even higher. While we have more than 20 million active customers who have placed at least a single order over the past 12 months, about a 10 of those are shoppers that have made four or more orders in the same time frame. We see an important opportunity to grow that figure given shoppers typically purchase in the category 6 times to 8 times per year. There's a flywheel we see from customers that grow their shopping occasions on Wayfair, as they increasingly spend more time on the site, browse a broader selection of the catalog and are more likely to shop through our app. These behaviors are self-reinforcing, and we see that the path for a shopper to move from three to four orders per year is even quicker than the path from two to three. Customers who shop four or more times on Wayfair in any 12-month period, not only spend more, but also nearly a third more likely to come to us via free traffic. So growing that cohort is highly beneficial to margins. With the benefits of Wayfair Rewards, if that average customer now makes an incremental third order on Wayfair versus a competitor, we've grown our share of wallet by 50%. Those three orders at $300 a piece are worth $900 of total revenue, $45 of which goes back to the customer, thanks to the program. Accounting for the annual fee, we've now nicely grown revenue per customer per year profitably, that doesn't even include the efficiency on advertising as Wayfair Rewards customers are that much more likely to return on a direct basis. There's tremendous potential here to drive more frequency amongst our existing as well as new shoppers. We're excited about all the different ways customers will be able to interact with the new program from deal hunting in our member exclusive sales to saving up rewards over time for big aspirational upgrades. One of the areas we're excited to stimulate is in the frequency portion of our catalog, like, kitchenware, tabletop, decor and bedding, where the benefit value really stands out. We plan to lean into the treat yourself angle of the program and encourage customers to use their rewards for all those upgrades and finishing touches that they have been dreaming of, but may not have had the budget for. We're also eager to bring the program to new movers and project shoppers like, renovators or remodelers. These are customers with high category needs, who can draw a lot of value from the program. We've been focusing on these audiences for some time across our marketing and sales organizations, and we're excited to incorporate the value proposition of Wayfair Rewards in those outreaches to better attract their full business. You've likely seen some of this marketing outreach since the launch of our brand refresh. As we discussed right after the debut in the spring, this was years in the making, and we've been extremely pleased at the results we've seen in the months since. Much of our work has been focused higher in the customer acquisition funnel, as we've increased our investment in television, social media and streaming audio and video. Since Q1, we've seen nice improvements in qualified recall waiting, which measures how well customers recall seeing any advertising from Wayfair across any channel. This is an important high-level view of how our advertising is resonating with consumers and to what degree they recall key details, like our product message and identity. In fact, we are now ranked in the top 10 among major retailers. When we launched the Wayborhood, we talked about driving creative content that could exist across our portfolio of advertising channels and serve as a foundation for many years of marketing campaigns to come. In fact, in the past few weeks, we've rolled out our first major update to the Wayborhood with our holiday chapter and are in active development on more content for 2025. We've seen very healthy ROI on the first iteration of the campaign with strong results when it comes to brand linkage and awareness as customers are quickly coming to recognize the Wayborhood as a symbol of Wayfair. This has translated to positive movement in our core metrics, direct traffic and even more importantly, revenue per direct visits. Back in the spring, I noted how the launch of the campaign came alongside a refreshed view of our channel mix as we step more holistically into parts of the advertising funnel where we had been lagging behind. It should come as no surprise that influencer marketing has grown to be an incredibly important way that customers are exposed to the category. Shoppers are now routinely looking towards creators across YouTube, Instagram Reels, TikTok and more for inspiration on their next home purchases. Our reach and influencer marketing today is quite small relative to potential, and we're excited to scale it. Based on feedback from the creator community, we've made significant investments in improving the terms and technology supporting our program. Creators are eager to work with Wayfair because we treat them with the same mindset we treat our suppliers. We succeed when they succeed. This plan is working. We have dramatically increased our monthly piece of content produced by the nearly 4,000 and growing creators we've partnered with. Over the summer, we've amplified our influencer content and are seeing promising return on ad spend for the dollars we've tested. In fact, we've seen payback windows that are on par with what we find on lower funnel social ads, all while attracting what we expect to be higher lifetime value customers. We have a dense product road map that will allow us to scale breadth and depth of activities with influencers in partnership with our suppliers across the major platforms. This will open the door to working with an even wider field of creative talent as we get into 2025. The ROI here is clear to us, but we want to make it clear to you. We're still operating within our rigorous payback thresholds that extend up to one year but are often much quicker. As I mentioned at the outset, we remain laser-focused on driving healthy profitability, while setting ourselves up for success as the category rebounds. That has been the core goal across all three of our major initiatives in 2024 to foster customer loyalty and spur repeat business while driving economic value. By leaning into marketing strategies that build brand affinity and introducing programs like Wayfair Rewards to enhance the customer experience, we're not just aiming for short-term gains, of building long-lasting relationships with our customers that will be accretive on both the top and bottom lines. Thank you. We hope you all have a festive holiday season. And now, let me pass it to Kate to go through our financials.
Kate Gulliver: Thanks, Niraj, and good morning, everyone. Let's dive into our third quarter results, beginning with the top line. Net revenue was down 2% year-over-year in Q3 or down about 7.5% on a sequential basis, closely in line with the sequential pattern we saw in 2023. This is driven by orders down 6.1% versus the year ago period modestly offset by AOV, which was up 4.4% year-on-year and down 1% sequentially, again, in line with what we would typically expect to see in the seasonal cadence moving from the second to the third quarter of the year. Let me now 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. Gross margin for the quarter was 30.3% of net revenue. Back in August, we talked at length about the changing dynamics we have seen in customer price sensitivity and the opportunity we identify to lean and on take rates to drive incremental order capture. We heard many questions from investors around how this differs from funding promotions. So let me take a moment to address that because the answer fundamentally comes down to magnitude. For years now, we've seen robust interest by suppliers to participate in promotional events, where you'll see headline items at prices that are 20%, 30% off or more. These discounts are aligned in partnership with our suppliers and are funded through a reduction in their wholesale price, which we then reflect by lowering retail, while our gross margin remains resilient throughout. That's part of the reason why we've been happy to ramp up the number of promotional events and grow existing events like we did with Way Day last month. Promotion remains a critical marketing tool to drive customer engagement at a moment in time when the focus is just not centered on the home and supplier demand to participate in promotions remains quite high. Now when we talk about making our own investment into lower take rates, the scale is very different from the discounting you'll see from suppliers and promotion. The magnitude of the investment here is in the tens of basis points at the consolidated level, hence, targeting gross margin in the lower half of our 30% to 31% range. Across our nearly 10 million orders per quarter, we're able to collect a tremendous amount of data on price elasticity and can (ph) with a highly tuned degree of precision, determine exactly which classes and geographies would see an order lift from a very modest reduction in the take rate. As we've said for some time, it's considerably more valuable to multi-quarter gross profit and adjusted EBITDA dollars to have an incremental order come in at a gross margin in the low end of that range, they miss out on that order because we were keeping our gross margins at the top end. We're pleased with the results we're seeing so far as we've made this price investment, and you should expect that this will continue as we exit this year and enter 2025. Of course, the other question we hear from investors is why make this investment if you still are seeing orders and revenue contract year-over-year. Our response to that is to once more point to the share picture. As Niraj said earlier, our ability to outpace growth of the category while still driving a strong margin profile for the business, allows us to capture share now and sets us up for significant strength when customers begin to shop for the home in a more robust fashion once more. Now moving further down the P&L. Customer service and merchant fees were 3.7% of net revenue, while advertising was 12.3%, that was slightly higher than where our advertising margin had been in recent quarters, as a result of the renewed investment opportunities Niraj outlined. We're excited for the major unlocks we are seeing across the advertising funnel, but are keeping a steady hand on the wheel as we ensure that each dollar is spent with strict adherence to our payback windows. Our selling, operations, technology, general and administrative expenses totaled $388 million in the third quarter, a more than $70 million improvement versus the third quarter last year and $274 million improvement on a trailing 12-month basis. As I talked about investing in gross margin and advertising earlier, those of you who have followed Wayfair for years may have had flashbacks to our history of investment cycle at the expense of profitability. What we've made clear over the past two years is that Wayfair is now fundamentally a different company than we were in the past. We are at a level of scale and maturity where we can both invest for growth and drive profitability at the same time. So when I talk about compressing take rates or leaning into advertising due to their quick payback, you can see that we are funding these investments through further discipline as we manage our fixed cost base, a paradigm, we will continue to uphold. Ultimately, we are focused on growing adjusted EBITDA, less CapEx and equity based compensation measured in dollars. Our plans that are underway are progressing well, and this is part of why we are comfortable committing to 2025 adjusted EBITDA dollars being higher than 2024. Altogether, we generated $119 million of adjusted EBITDA in the third quarter for a margin of 4.1% of net revenue. As Niraj mentioned earlier, this was our second consecutive quarter of mid-single digit adjusted EBITDA margin, and we have now proven that we can operate at this level despite year-over-year revenue contraction. We ended the quarter with $1.3 billion of cash and equivalents and $1.9 billion of total liquidity when factoring in our undrawn revolving credit facility. This was, of course, before we bolstered our cash balance further with the close of our inaugural high-yield debt offering in early October. We saw investor demand many times larger than the $800 million that we raised, which was a testament to the tremendous work we've done on driving profitability across the business. With the rapid improvement in our financial profile and movement across rates and credit spreads, we saw this as an opportune time to derisk the balance sheet by effectively prefunding our upcoming convertible maturities in 2025. As I've said from the beginning of the year, we are laser-focused on delevering the business over the years to come, and we will use these proceeds in combination with our own free cash flow generation to handle our coming obligations. Now rounding out the cash flow statement. Cash from operations was $49 million in the third quarter, offset by capital expenditures of $58 million. This CapEx was a bit lower than our guided range due to a combination of timing and further expense rigidity on our part. So while there will be some catch-up in Q4, the net will still be lower than the run rate or Q3 guide implied. The end result was free cash flow of negative $9 million in the third quarter. Let's now turn to the fourth quarter guidance as we round out the year. Beginning with the top line, quarter-to-date, we are flat to down slightly year-over-year and expect to end the full quarter down in the low-single digit range. This contemplates sequential seasonality in line with what we saw last year. While we're pleased with the strength we saw on Way Day and are excited for the holiday season ahead, we're also cognizant that the weakness in the category on top of all the distractions facing consumers right now create a challenging operating environment. Turning to gross margin, we would guide you to the lower end of the 30% to 31% range once again, as we continue to lean in on take rates in the strategic areas where we see valuable payoffs in order capture. Customer service and merchant fees should be just below 4% again as well. Advertising should end up in a range of 12% to 13% of net revenue and likely towards the upper end of this range. This is higher than in the past few quarters, as we see clear demonstrable evidence of high-value opportunities to lean in here to drive further share capture as we get into 2025. It's important to bear in mind that many of the dollars spent today are driving order capture in the next few quarters. Finally, SOTG&A should fall in the $400 million to $410 million range. We saw some spending that had been planned for the third quarter shift to Q4. So there's a slight normalization here as you think about the sequential trend. Following this guidance down the P&L would lead to a fourth quarter adjusted EBITDA margin in the 2% to 4% range. Even with a challenging top line environment, this puts us right in line with the commitment we made to drive at least 50% growth in 2024 adjusted EBITDA dollars, which is a testament to our steadfast focus on cost efficiency. Now let me touch on a few housekeeping items. You should expect equity-based compensation and related taxes of roughly $90 million to $110 million, depreciation and amortization of approximately $90 million to $95 million, net interest expense of approximately $14 million, weighted average shares outstanding of approximately $125 million and CapEx in a $60 million to $70 million range. Layering this on top of the expectations for adjusted EBITDA and the working capital benefit with revenue up sequentially in the fourth quarter, we would expect healthy free cash flow generation to round out the year. I want to make sure investors appreciate just how unique 2024 has been in the context of Wayfair's long history. We spent many years post our IPO focused primarily on growth and then over the past several years, appropriately pivoted to prioritize profitability. 2024 has marked a return to the pre-IPO form of this business, balancing the dual mandate of driving progress on both the top and bottom line, and there is more to come in 2025. As we close out the year, I want to draw back to Niraj and Steve's remarks from their shareholder letter from February. Our mission is to make Wayfair the best place to shop for the home over not just the next quarter or a year, but the next decade and beyond. We believe the best is yet to come and have never been more excited to execute against the tremendous opportunity in front of us. Thank you. And now, Niraj, Steve and I will take your questions.
Operator: Thank you. And we are now opened for Q&A. [Operator Instructions] And your first question comes from the line of Ygal Arounian from Citi. Please go ahead.
Ygal Arounian: Hey. Good morning, guys. Maybe just first on the share gain that you're seeing. If you can, I don't know, quantify or qualify that a little bit more? Is it — do you see it all coming from the pricing that you can deliver the other factors that you're seeing and how do we think about that as the market gets better as you're positioning for that? And then on the 2025 EBITDA commentary, any more color we can get around that, the level of confidence, as you talked about the mid-teens incremental EBITDA margins? Just how do we think about that in a category that maybe doesn't improve as we work our way through the beginning of next year, at least? Than you.
Niraj Shah: Yeah. Ygal, thanks for the questions. Let me run through them and then Kate, if there's anything you want to add, Kate, you can jump in. So on the first one around the share gain we're seeing. So I would say since the end of 2022, since the fourth quarter of 2022, we've kind of consistently seen ourselves gaining market share every quarter, hitting all-time highs in the credit card panels that we get on market share. And in terms of how we're doing it, you mentioned pricing, and I'd say, optimizing our pricing to maximize our profit dollars, it's certainly one thing. Again, we didn't really change pricing that much. I just want to quantify that, right? That was low tens (ph) of basis points. But that's just the kind of an ongoing optimization we do on the demand elasticity to maximize our position there. But that's just one of many things. So we talked about pricing, but for example, we can talk about improvements we've made in our logistics network. Like, for example, on our prior calls, we talked about consolidated delivery, which is right now live in Houston, Las Vegas, we're rolling that out nationally or we've done a whole series of kind of logistics features and functionality that increases speed, increases customer service levels, that grows the business. So on our website, our apps, what we call our storefront experience, that's a team that had spent a lot of the last couple of years working on re-platforming big pieces of the technology. But as they've done that now, the developer velocity is much faster, the feature function we can roll out and optimize is back to a very high rate, and we're seeing gains from that. So the way we can kind of take market share is actually through a long list of things we can do to improve the customer experience, drive up conversion, gain customer reach, optimize the outcomes we're getting. And so when we look to 2025, we see a lot of ways to continue to grow market share regardless of whether the macro economy in this category is something that's getting better or not. So we're not counting on that. We know it's a cyclical category. We know that consumer discretionary durables are under a lot of pressure now, that is where we play. Despite that, we see a pretty good outlook for how we're going to grow on the back of taking market share. And then for the 2025 EBITDA, the way to think about the 2025 EBITDA is what we said is, we see 2025 EBITDA dollars being higher than 2024 EBITDA dollars because of the ongoing road map we have around what we can do around market share as I just described and kind of scale our business that way, while we also continue to have a good cost road map. And as you've seen on that SOTG&A line, for example, I don't know if — I forgot the number, is eight or nine quarters in a row, you've seen that come down in dollars. And that's just us being very smart about how we're spending money and continue to find ways to optimize that. But Kate, let me just turn it over to you.
Kate Gulliver: Yeah. I just want to jump in to clarify. Obviously, we haven’t given any 2025 guidance and we don’t typically give annual guidance. But all we have said to 2025 is exactly as Niraj said, which is we are focused on growing adjusted EBITDA dollars. And that continues to be our focus and commitment, and we can do that through the combination of the cost discipline that you’ve seen us execute on over the last few years and the investments that we’re making now to grow revenue. And so that revenue growth, which we see come in on this multi-quarter basis, on a positive front from adjusted EBITDA dollars will help us grow adjusted EBITDA dollars in combination with that cost discipline, Niraj referenced how that’s showing up on that SOTG&A line.
Ygal Arounian: All right. Appreciate it. Thank you.
Operator: Your next question comes from the line of Christopher Horvers of JPMorgan. Your line is open.
Christopher Horvers: Thanks. Good morning. So my first question is, you're — in the fourth quarter revenue guide, you're assuming some modest slowdown in revenue growth in the balance of the quarter, parsing a little bit here, but flat to low-single digits quarter-to-date, versus down low-single digits. You also mentioned pre-election deferrals. So can you bring that all together for us why wouldn't trends get better if consumers are slowing into election and pushing the holiday sales later into the quarter?
Niraj Shah: Yeah, Chris. So I think on that, you've got — you got the election coming up, that's something that may or may not really be determined in one day, that could take a little bit of time. We've got a calendar or the number of days that you're talking about kind of in the holiday season is a little shorter and you have what's been a challenging macro. So you have a bunch of uncertainty. So we feel very good about how we can continue to take share. But you're kind of looking forward to the quarter and you still have a lot of the revenue yet to come and you have some of these uncertainties, you're trying to like figure out where you think you're going to be.
Christopher Horvers: And I guess how significant has the — I mean, obviously, Way Day, you purposely extended that earlier, but do you think that — how significant is that slowdown ahead of the election versus maybe just timing shift around having a longer Way Day?
Niraj Shah: Yeah. I mean I think Way Day, we — in hindsight, we're pretty happy with how we played that. We planned for a three-day event. We've built some flexibility in how we did that. And as we saw the calendar playing out, we saw a bunch of other major retailers planning a two-day sales event right after Way Day. We decided to take advantage of the online shopping that was going to happen over that time, that's certainly maximize how we did, but I don't know that, that dramatically affects when you get a week or two from how the demand is going. I think it's just the macro, it just makes it harder to predict. I think that's basically the biggest thing I would just say when you look to the forthcoming holiday season and you're like, hey, how is this going to exactly play out? You could come out with a range of possibilities that all seems plausible.
Christopher Horvers: Got it. That makes sense. And then on the operating margin forecast for the fourth quarter, Kate, you talked about we're hitting our goal of mid-single digits. You did 4.1% in the third quarter, but at the same time, the midpoint of the fourth quarter guide is not mid-single digits. So I guess to what extent does that sort of undermine the view of hitting that goal that you've sort of said you would get to and have said that you've achieved that? And then, is any of that just seasonality from a mix perspective versus timing of spending?
Kate Gulliver: Yeah, Chris. Thanks for the question. I guess the way I'd look at it is, obviously, over the last two quarters, we've proven we can operate at that mid-single digits, right? And we've shown, I think, very nice discipline to get to that point. What you heard with the fourth quarter guide is a little bit of incremental investment on that marketing spend. And as a result, we stepped up that range a little bit. And then the net of that is that we think that, that is going to drive incremental revenue and incremental adjusted EBITDA dollars over the next few quarters. So I want to be clear that bottom of the final marketing spend is a place that we are quite disciplined. We have very good visibility, and we feel confident in the ability of that to drive both the revenue and the adjusted EBITDA dollars and that's really where we're driving for.
Christopher Horvers: Thanks very much.
Kate Gulliver: Thanks, Chris.
Operator: Your next question comes from the line of Peter Keith with Piper Sandler. Please go ahead.
Peter Keith: Thanks. Good morning, everyone. So just sticking on some of the advertising and election dynamics. So you're highlighting the elevated ad spend from the stepped-up influencer marketing. But we're also hearing that ad rates are very high right now around the election season. So how do you think about the ad spend going forward? Do you think the overall costs are going to come down as we get in further into November, December and going forward?
Niraj Shah: Yeah. Thanks, Peter. So the way to think about it is, certain parts of the ad market will definitely have elevated rates pre-election. So think about this as like local television, think of this as some of the upper funnel channels which you could use for any variety of messaging. And we — just to remind you, we're very quantitative in how we spend the money. So in other words, we won't chase that spend. So if it's not economic, someone else can buy that media. And of course, if it becomes economic again, and it makes sense to us, we would buy that medium and so that's sort of one thing. Think of that as like whether you think about influencers or separately, we're talking about some lower funnel, fast payback channels. Those are channels that are very narrow and specific to different types of advertising. And so those aren't ones where you'd find political ads. And so that's sort of a different segment of the advertising market. But I think the main thing to just to kind of keep in mind is that we're just very quantitative in when we're talking about the ad spend. So we're not — we don't really participate in anything that's not economic. And yes, those channels like local television do get much cheaper after the election, but we don't really do that much in local television, for example.
Peter Keith: Okay. Helpful. And then, Niraj, a separate question for you is just on Wayfair Rewards. So exciting to have a loyalty program out there. I am recalling it was six or seven years ago, you did have a loyalty program called MyWay, which was ultimately disbanded. So maybe just talk about the learnings from MyWay and what's different this time that ultimately might make this new loyalty program stay?
Niraj Shah: Yeah. So I think our biggest learning from MyWay was that the kind of customer value proposition that we had associated with the program, it just wasn't that strong. Now in contrast, if you think about what we're offering on Wayfair Rewards. What I talked about on the call already, if you think about that average customer $600 a year, they're getting 5% back, that tranche of customers would be basically breakeven on the program right off the bat off their annual spend. They pick up those other benefits, the members only customer service line, early access to the sale events. But obviously, the way it works is, if you're getting rewards dollars every time you make a purchase, you have a balance you could use against your next purchase. And that customer is already spending a few thousand dollars in home today spread across many, many retailers. So you think about that next $2,000, $3,000 that they're not spending with Wayfair, well, if they spend some of that with us, the programs have some cost for them, and they're going to get rewards on that incremental spend. And so it has some of the basic engineering you want in a program that makes it very obvious and easy for the customer to change kind of where they choose to drive their spend. And then there's a bunch of other benefits tied to the program that you say are not economic, but they could be exciting to consumers. So I think we've got a very good setup. And I don't think, in hindsight, MyWay did not have as good a set up. And for that reason, we didn't see the traction we wanted with that. Wayfair Rewards, it's new, right? It's only been out there for a couple of weeks. But we're happy with the start of the game.
Kate Gulliver: Yeah. I would just add, you heard Niraj speak to on the call, the value of loyal customers. And so we have a very good understanding of when someone is increasingly loyal with us the overall ROI that, that drives the customer lifetime value there. And so this program is really designed at driving incrementality from folks who were getting a portion of their spend, but we know we can be getting that third and that fourth order. And we tested the concept with customers we had good reaction. So we're really excited about both how the customer perceives this value prop and what it can do for us.
Peter Keith: Very good. Thank you so much.
Operator: Your next question is from the line of Simeon Gutman from Morgan Stanley. Your line is open.
Simeon Gutman: Hi. Good morning. A couple of questions first. On the category, home furnishing, if turnover or housing turnover picks up, I think the category would rebound. If it doesn't, curious, what you think about pent-up demand to drive — is that going to drive some life in the category? Where do you think we are in that continuum?
Niraj Shah: Yeah. So I think you kind of — you're phrasing it well in the sense that obviously, if housing demand and existing home sales picks up, that's obviously highly stimulative to the category. We are seeing signs that there is pent-up demand, but how much time needs to elapse before that becomes top of mind enough to be stimulative on its own is less clear, I would say. This is why — just thinking about our strategy we've had for two years during which the market has gone down, what, 25%, but we've basically been able to take significant market share. And so we are doing far better than that. I think our strategy is really not counting on a rebound in the category, but it's actually calling out the fact that use rough numbers. The category was whatever, a little over $400 billion in North America and now it's whatever, over $300 billion in North America, it's still $300, whatever plus billion of spend that's out there. And we think that there's a lot of argument on why we can take share very nicely with all the things we're doing. And if you kind of think about that as being a long tail, very fragmented and you're increasingly seeing players who are having a harder time being differentiated in the middle, sort of losing share or going away. You've kind of seen that from major players where they're declining a lot or there've been a handful — most recently [indiscernible] going out of business. And so there's definitely things that are changing. And I think this is the real opportunity for us. And yes, of course, when the category turns, there's going to be tremendous amount of growth, too. But it's sort of like, timing that I don't think it's very easy to do, and I don't think it's really pertinent with given the strategy we have.
Simeon Gutman: And then a follow-up on just the construct for '25, which I know once you give a construct, we're going to ask all sorts of questions. There's obviously a lot of room when you say EBITDA dollars north of 2024. The question is, you could, let's say, that's up a couple of hundred million dollars or are you going to lean in to market share to the point where you'll just drive a modest outcome? And I'm not looking at dollars and how much it will be up year-over-year, but more on your posture of how much you want to lean in to take market share to just achieve that goal of growing them or actually taking market share in a more meaningful way, if that's the essence of the question?
Niraj Shah: Yeah. The only thing I'll say, and I'm going to turn it over to Kate too, is that those are interrelated meaning that the things you do to take market share, some of those do not have costs associated with it that’s not really something, but for example, I've a storefront experience. That's a team of people we have on payroll. They're doing hard work every day, rolling out a lot of features, that will have an outcome that will drive market share. There's no incremental cost. The ongoing payroll is the cost there. There's other things you would do, like if you talk about advertising, you have a cost associated with revenue. But what we're seeing is, we're going to do the costs associated with profit dollars that it generates. So those who have a very direct relationship. They're not unrelated. But let me turn it over to Kate for any clarification.
Kate Gulliver: Hey, Simeon. Yeah. I would just reiterate, we are very focused on driving both the top and the bottom line. And we believe that we can do these things in concert with each other, and we have a high degree of conviction around that. So, what you're hearing us say is there are select places where we have made investments and are making investments. You obviously — last quarter, we started to talk about that in the gross margin line. You saw how that showed up this quarter. We talked a little bit about the marketing spend. We are doing these things because we think that they drive incremental order growth and revenue capture. And ultimately, that drives adjusted EBITDA dollars growth. And we can do that while continuing to be quite disciplined on the cost side, and you've seen that pan out over the last few years as well. Niraj already mentioned that SOTG&A expense, we've taken that down nine quarters in a row. On an LTM basis, that’s down over $250 million. That’s on top of the cost takeout that we took out at the end of ‘22 and throughout ‘23. So you’re seeing really nice discipline there where we can manage the fixed cost and you’re seeing us say, hey, there are some places where we think there are pockets of opportunity to invest that will drive on a multi-quarter basis, revenue, gross profit dollars and ultimately adjusted EBITDA dollars.
Simeon Gutman: Okay. Thank you. Good luck.
Operator: Your next question comes from the line of Brian Nagel from Oppenheimer. Please go ahead.
Brian Nagel: Hi. Good morning. So I have a couple of questions. My first question on market share. So I know this has been a big topic, and you've highlighted consistently the numbers show that clearly, Wayfair in a tough environment is taking market share broadly. The question I have is, as you look at that — the data you have maybe closer, is there any indication that some of these more mass-merchant, more value-oriented retailers or sites that are performing well in this environment, were they actually — you're having a more difficult time taking market share there or are they potentially taking market share back from Wayfair?
Niraj Shah: I guess just to clarify what I would say, so it's a large and fragmented market. There's quite a few people losing share. But just to clarify, we're not the only one winning share. And so two other folks have highlighted, who I think have done a very good job also over the last few years. One is Amazon (NASDAQ:AMZN). Now they played at the kind of opening price point commodity items is really where they specialize, but they've done a good job. Another one is HomeGoods, who's purely brick-and-mortar, and they really play in sort of the decorative accents, the core textile space, lower ticket items, but they've both been taking market share. So there's a handful of folks who are doing well. Much longer list of folks who are not doing well and that's kind of the landscape. And so I wouldn't say that we expect to be the only winner. But I think there's actually, kind of, only a handful of winners and quite a few folks who are on the other side.
Brian Nagel: That's helpful, Niraj. And then my second question, Kate, it's probably more for you, but again, you've done a great job taking your cost infrastructure down, controlling costs a bit this top line weakness. But as we look into 2025, and still the top line there is still somewhat of a wildcard. But I guess the question is, as you look at your cost infrastructure, how much incremental opportunity is to take costs down further? And then philosophically, if sales were to stay weaker, are you looking to take more cost down or at that point, start to prepare for the eventual recovery in sales and kind of keep the cost of structure in place?
Kate Gulliver: Yeah. Great question. So first, let me just start with how we look at the cost efficiency and the cost opportunity. You've seen us focus sort of up and down the P&L on cost. Obviously, the place where you see that continuing to show up is on that OpEx expense that SOTG&A, although, we've also seen nice discipline, for example, on the CapEx expense. And as we're driving towards our sort of ultimate goal of growing adjusted EBITDA dollars less the CapEx, less the equity-based compensation, where you've also seen nice gains from a cost control perspective. You're seeing that sort of combination of those three continuing to improve. So as we look at it, we do see ongoing opportunity for efficiency. You've seen us do in the restructuring in the past and then you've seen ongoing tightening on a quarterly basis on that SOTG&A line. And as a reminder, that line is not just labor, right? That's labor, but it's also P&E, it's R&O, it's some overhead, it's some software expense. You're seeing us be really disciplined in all of these pockets as well as CapEx, equity-based compensation, etc. So when we look at it, yes, we see ongoing places for tightening and places to be quite thoughtful. And as we think about '25, again, what I will say and reiterate is, we are very focused on growing those adjusted EBITDA dollars. So we intend to balance things appropriately to continue to drive that. And that in combination with CapEx equity-based compensation so that adjusted EBITDA less CapEx less equity-based compensation continues to improve.
Brian Nagel: That’s very helpful. I appreciate it. Thank you.
Operator: Your next question is from the line of Curtis Nagle, Bank of America. Your line is open.
Curtis Nagle: Great. Thanks very much for taking the question. I guess the first one just on the AOV came in above expectations but pointed to high price elasticity and press for small versus large ticket items. So just curious what drove the better expected and higher AOV in 3Q?
Niraj Shah: Yeah. Curtis, I think the way to think about AOV. AOV is really an output metric, right? So if you think about our business, we're doing a lot, for example, to sell lower ticket items. When we talk about like the frequency agenda and what we're doing with housewares item, decorative accents and one of the benefits in Wayfair Rewards, for example, is free shipping on every order. And so you say, that will decrease AOV, but then we have a luxury platform, Perigold, that's actually growing at a very nice rate and say, that's going to increase AOV. And so we're doing a whole variety of things that — our real goal is to grow the dollars per customer per year. So the way we think about getting market share, as we think about market share as more customers and those customers each spending more with us. And an outcome of that is obviously a number of orders, times AOV is the revenue. But again, because our strategy is not around low kit orders or high-ticket orders, AOV is an outcome metric of the combination of things we do. And so, I would say AOV is kind of like a pertinent topic when you're talking about inflation of like-for-like items or deflation of like-for-like items, meaning, your second quintile price for beds. Is that moving? But that's not really what's happening right now. All that inflation with COVID and the ocean freight rates, then there was a deep cycle of deflation of that coming back out, that's all behind us right now. And so this AOV is more — these moves are more an output metric of the seasonality and us executing the business on all the dimensions we talked about.
Curtis Nagle: Okay. Got it. Then just would love to ask a question on tariffs. Yeah. I mean, effectively just kind of how we should think about the framework, if we were to go to 50% or 60%. I think last you spoke and it was a while ago, China exposure about 50%. So in terms of just kind of the implications on revenue and margins, how the industry reacts, right? I mean pricing is probably harder to push and capacity that moves right out of China might be lower. So just kind of piecing all that together and maybe an update on what your exposure is at the moment would be incredibly helpful?
Steve Conine: Great, Niraj. Let me give some thoughts on this, and then I'll hand it over to you. This is Steve. So yeah, tariffs are something we've certainly seen over the history of this business and seen anti-dumping and we've seen tariffs. And they certainly can have an impact. I would say, on the one side, we're running a marketplace. And so, we really have selection across the broad spectrum of suppliers, and that allows our customers to see a lot of options for products they have and swap in different things. And so, we're able to sort of move demand around in that regard. We certainly had some practice now navigating tariffs. And so, I think when we look out in the future and certainly, it's uncertain exactly how that might play out. We feel much better about the playbook, we will run and the approach we will take to help consumers buffer whatever price increases they may see selectively and certainly imported products. The other side of it is, our suppliers are obviously more directly impacted deeper than we are. And so, they've been working over the last year or two here, to just to modify their businesses so they don't have single-source problem as quite as much as they have in the past. And so, I think the combination of all those, we think will buffer this as best as we can and should be very navigable.
Niraj Shah: Yeah. The only thing I would mention, though too, so in the five years, there's some antidumping thing that happen in like wood, some specific categories of wood goods, certain factories from China, which happened years and years ago. But then really the notable things were in the tariffs during the first Trump administration where we got the 10% and then 25%. Well, ever since then, and that was for goods from China in our categories, ever since then, what you've really seen happen is there's been a lot of suppliers who built manufacturing capabilities in Cambodia and Vietnam and Malaysia, Indonesia, other places, so that they actually have more control over their future should the tariff landscape change, etc. So I would say that the industry now is much more cognizant of that risk than they were five years ago. And so, I think we have kind of a couple of benefits going for us. One is that the industry is definitely in a different position than it was five years ago. The second is, as Steve mentioned, we have 20,000 plus suppliers and we have domestic suppliers. We have import suppliers, our suppliers make goods in Brazil. We have suppliers who make goods in Eastern Europe. So we have suppliers that are quite different from one another. And so we have the benefit of how they compete on our platform for the customer. So yeah, I think you never know quite what's going to happen, but I would say that, that's certainly a topic that folks have been thinking about and doing things about.
Curtis Nagle: Okay. Got it. Thank you.
Operator: Your next question is from the line of Colin Sebastian from Baird. Your line is open.
Colin Sebastian: Thanks, guys. Good morning. So I know there's a lot of focus here on the category challenges and efforts in pricing and advertising. But Niraj, if we sort of zoom out on broader e-commerce platform and technology trends, I mean, there's a lot of change happening around shopping tools and digital assistance and personalization within apps. And so, I wonder how important those initiatives are for Wayfair? And are you seeing any positive impacts perhaps in metrics like just time spent or discovery and browsing even if those aren't converting yet to sales in this environment?
Steve Conine: Yeah. Thanks for the question. This is Steve again. Let me just kick this off. We have been doing a lot of things internally. Actually just this morning, I sent out an internal sort of pre-earnings little video, and I did it completely with AI. And I think part of this is — we're all going through this learning curve together right now of how to best use these new tools. And so, when you look out and say, if we don't adopt the best practices in the business, we're going to be in trouble. And so, it's on us to really push our teams to make sure they're using these new tools and experimenting and trying new things and pushing the cutting edge so that we can be a leader and not be kind of at risk of the market changing around us without us catching it. So we have a number of initiatives internally that are — some are very tactical and some have a very direct efficiency paybacks, where teams are using them to improve process flows that they have today. And then some are much more experimental where they're trying to go after things that could be disruptive in the future that could be very exciting for our customers or could change the efficiency curves in different parts of our business.
Niraj Shah: Yeah. And what you've seen, like, so we've been large adopter of machine learning, data science for a very long time, and that's how we price the catalog, how we do sort of order, how we do a lot of personalization. But with the kind of more recent advent of GenAI, we've also been an aggressive adopter there, where we have a lot of use cases where you can kind of do things and you see the return very quickly. For example, we have a very large catalog, millions, millions, tens of millions of items. And so finding dimension inaccuracies in correcting them, auto tagging a lot of merchandising attributes. Those are things that we've actually put into production. They're driving a lot of value at a very insignificant cost. And similarly, on how we empower our customer service agents to be able to take care of the customer and do a good job. We've been able to create tools there or for our software development teams and kind of the copilot type products out there for increasing productivity of coding. So, there's been a bunch of things we've been an aggressive adopter on. On the customer side, I think what you're also getting at is it can change how customers shop. And there, I think we actually do have some kind of pilots and proof of concepts of things that we're trying that we do — we have one that we're setting a small amount of traffic in, and it actually shows really amazing customer engagement. It's still early. But we're basically — we're certainly, I think we're being prudent about how much we're investing. We're not overinvesting, but I think we're also not ignoring it. And I'd say, we definitely are pretty happy with some of the progress we're making. And we're in a good position because it's a category. We're not selling commodity goods. And I think the biggest challenge with agents are if you're a seller of commodity items. Now you can have an agent say, hey, I want to reorder those bounty paper towels, that dish soap, some more Dove soap bars. Well, that agent can basically figure out, hey, is it cheaper at Walmart (NYSE:WMT), at Target, Amazon, or does it make sense? So we're ordering enough from Walmart, automatically signing up for Walmart Plus or whatever, execute that order. I don't care who's kind of brown cardboard box shows up at my door, right? But if you're selling items that are exclusive, there's a lot of consideration in how you pick the right item, there's a lot of fine distinction between different items. The agent role is going to be a little different. And I think there's things you can do to kind of enhance the customer experience in a way that's really engaging. But it's not — I think the real challenge is if you're more of a commodity provider.
Colin Sebastian: Okay. Thanks, Niraj and thanks, Steve.
Operator: Your next question comes from the line of Oliver Wintermantel from Evercore. Your line is open.
Oliver Wintermantel: Thanks, guys. Kate, I think you mentioned you're looking forward to a healthy free cash flow generation in the fourth quarter. Maybe can you confirm the free cash flow that you guys expect free cash flow to be positive this year? And then maybe the capital allocation into next year. Maybe talk a little bit about how you want to invest and what is driving CapEx next year?
Kate Gulliver: Yeah. So a few thoughts. So just first, relative to the fourth quarter, we do typically see positive free cash flow in the fourth quarter. As a reminder, part of that is the working capital dynamic, right? So seasonally, the fourth quarter is typically a bigger revenue quarter than the third quarter. And that in combination with our ongoing discipline around adjusted EBITDA growth and CapEx should drive nice free cash flow in the fourth quarter. Obviously, we haven't given any 2025 guidance. But as we think about CapEx, I'd sort of look at what we've done over the past year. And so what you've seen is ongoing discipline on that line as well. There are really two sort of components to CapEx that we break out here. One is, the CapTech labor piece. And you've seen that continue to come in quite nicely as we've been very thoughtful and disciplined on our team and our structuring. And then, the other is that PP&E line. Within that PP&E line is the investment in our logistics network and the investment in physical retail. And what we've spoken about there is in the logistics network, we're very pleased with where the network is today. So we're not in a growth mode on that network. There's some maintenance CapEx there, but it's really not about expansion. We had ample capacity for the growth that we intend to have. And then on the physical retail side, what we've also said there is, we're excited about that opportunity. We're obviously quite pleased with the results from that first large format store that opened in the spring, but we intend to be very disciplined about the rollout there. And so you should, overall, you've seen us throughout this year, bringing CapEx nicely from last year as we maintain that expense discipline and rigor up and down the P&L.
Oliver Wintermantel: Got it. Thanks. And then maybe on international, it looks like that had a nice improvement in EBITDA versus the first half of the year. On your comment about next year's EBITDA dollars to be positive versus 2024, how much of that is international improvement?
Niraj Shah: Yeah. So I'll just make a quick comment and then turn it over to Kate for the details. But I think what you're seeing over time is a lot of the work we did over two years of really kind of streamlining our cost structure, focusing on the key things for each business line that we think are important to drive them forward. And then as time plays out, we're seeing that the business — we're pretty happy with the progress we're making on the key drivers in each line of business that we want to see progress. I'm not really allowed to give guidance. I'll turn it over to Kate.
Kate Gulliver: I am also not going to give you guidance. But I reiterate what you said, which is as we thought about the cost discipline and the selective areas where we invest across the business, right, that's not just specific to the U.S. And what we said was, we started some of the cost restructuring is that, that would be sort of global in nature and how we look at that. And as we sort of think about what we're driving for the business, we're really focused on the business overall and what that looks like across Wayfair Inc.
Operator: And in the interest of time, we will conclude our Q&A session here. I would like to hand back over to the Wayfair team for closing remarks.
Niraj Shah: Yeah. Thank you, everybody for joining us today. As you can probably tell, we're pretty excited with where we are now with the business, the things that are rolling out and coming, and we're pretty — we really like the prospects we have as we're looking forward. Thanks for your interest in Wayfair. I hope you have a great holiday season.
Kate Gulliver: Thank you, all.
Steve Conine: Thanks.
Operator: This concludes today's conference call. Enjoy the rest of your day. You may now disconnect.
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