Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wayfair Second Quarter 2022 Earnings Conference Call. Today's conference is being recorded and 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] Thank you. And I will now turn the conference over to Jane Gelfand, Director of Investor Relations, Corporate Development and Capital Markets. Ms. Gelfand, you may begin your conference..

Good morning, and thank you for joining us. Today, we will review our second quarter 2022 results. With me are Niraj Shah, Co-Founder, Chief Executive Officer and Co-Chairman; Steve Conine, Co-Founder and Co-Chairman; Michael Fleisher, Chief Financial Officer; and Kate Gulliver, incoming 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 we will make forward-looking statements during this call regarding future events and financial performance, including guidance for the third quarter of 2022.

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 2021, 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 non-GAAP measures to the nearest comparable GAAP measures.

This call is being recorded, and a webcast will be available for replay on our Investor Relations website. I would now like to turn the call over to Niraj..

one, drive cost efficiency; two, deliver best-in-class execution by nailing the basics; three, earn customer and supplier loyalty every day. Through this lens, we are making swift decisions prioritizing clearly and looking to drive costs out of every pocket of the business.

Some of this is already visible to you and more will become apparent as time goes on. This is an ongoing exercise and frankly, one that will serve us well in all sorts of environments as we evolve in the way we operate and grow Wayfair. For an advantage our business model is that our P&L is highly variabilized.

This means that gross margins, customer service and merchant fees and to a large degree, advertising, to be quite responsive to the trend in revenue. Protecting Wayfair's unit economics and leaving room for potential upside through incremental efficiencies. In areas of more fixed spend, predominantly OpEx and CapEx.

We have the ability and willingness to prioritize and sequence differently if need be. One visible example that many of you are aware of is the hiring pause that we implemented back in May. This gives us the opportunity to step back, assess how consumer demand is developing and to react accordingly.

Less visible to you are decisions such as pushing off market expansion plans in Europe in favor of reinforcing our focus on the UK and Germany, pausing the development of certain opportunities like registry and flexing our planned logistics CapEx investments in response to changing revenue trajectory.

As I said, we are increasing our cost efficiency focus across all facets of Wayfair in an ongoing manner. In companies of our size and scale, these opportunities take a quarter or two to begin to unlock. But we are highly confident that they will not only help us reach our financial goals, but also make Wayfair's execution even tighter.

Even as we reshuffle some priorities, we are not trading off on important future growth drivers and enablers. The profitability levels we are targeting should allow us to both control our destiny and simultaneously invest for the long-term, which has long been a key to Wayfair's success.

While we tighten our belt in some places, our support is fully behind high ROI initiatives that will set us up for years to come. For instance, our technology organization continues to pursue the transformation agenda that our CTO, Fiona Tan described last quarter. We are expanding our fast delivery capabilities.

We are growing our flagship house brands and increasing more exclusive assortment, and we're investing in top of funnel marketing channels and content to drive awareness and frequency among both new and loyal customers. We are also sticking to our test and scale approach in physical retail.

In May, we launched our first all modern store with a couple of additional locations under our specialty retail banners slated to open later this year. Next year and on a limited basis, you will see us continue to experiment with new specialty retail formats to be followed by a larger Wayfair branded store concept in 2024.

It is important to bear in mind that we are very much still in a learning stage here. Our goal is to use these handful of stores as a test bed for new ideas around how and where to bring the core competencies of Wayfair to a physical shopping environment.

We believe the omnichannel opportunity for Wayfair is quite meaningful, but we intend to pursue it with our usual approach of testing, iterating and proving our success before finally scaling. Across everything I've discussed just now, our goal has been to make clear the thoughtful and considerate approach we are taking to the current environment.

We've always said that we run this business for the long-term, and nothing about that has changed. The size of our category remains tremendous. The field is fragmented, the structural march of shopping more online will continue and Wafer is uniquely positioned to grow and consolidate share over many years to come.

We have a management team that has seen multiple cycles in all sorts of different businesses. We all recognize that in moments of macro volatility, like we are living through today, it is just as important to focus only here and now as we steer through this period as it is to look forward.

Doing so centers around returning to and sustainably operating in a free cash generative way.

The time frame to get there will evolve with the macro environment and our response to it, but we're very focused on the variables that are in our control, driving out excess costs, while being there for our customers and suppliers and driving the tightest execution possible.

We also take confidence that our platform model is designed with the flexibility to weather unpredictable moments like this and emerge stronger for it on the other side. I'm going to hand things over to Michael for a review of our financials and outlook..

equity-based compensation related taxes of $127 million to $132 million, depreciation and amortization of approximately $91 million to $96 million, net interest expense of approximately $6 million to $7 million, weighted average shares outstanding equal to approximately $106 million and CapEx in a $110 million to $120 million range.

With that framing, let me further illuminate how we are planning to navigate Wayfair into 2023 and beyond. We're diligently moving the business to generate positive free cash flow. So this will take some time and the path and actions required to get there will be dictated by how the macro evolves.

In the near term, we're planning for Q4 revenues to build on Q3 levels, consistent with the typical holiday period. Provided this occurs, we would expect our adjusted EBITDA losses to narrow considerably before the end of the year and then to make substantially more progress towards our ultimate goal from there.

It is true that our time line to get there will vary depending on how the top line fares in the macro environment. But we're committed to moving steadfastly in this direction, and our liquidity position enables us to proceed responsibly down this path.

And with no meaningful maturities until late 2024, we have sufficient time to ensure multiple options are at our disposal for how to manage our capital structure. I want to wrap up by underscoring yet again how dynamic and tricky period this is for any company to navigate.

It's also at moments like this, where you must acknowledge that our internal confidence is bound to build before yours on Wall Street. So let me be very clear.

We are highly confident that our consumer and supplier focused platform model, coupled with our team's clear-eyed assessment of the challenges and opportunities before us and our willingness to take action will only make Wayfair operationally and financially stronger as we proceed over the coming quarters.

And as I approach my retirement and as a shareholder myself, what reinforces this view for me is the talented leadership team fully behind our goals.

Key among this group is Kate Gulliver, who is actively architecting and underwriting these plans with me and the team, and who will be speaking to you next quarter about the progress we're making in her new capacity as CFO and Chief Administrative Officer. Next, we're going to break from tradition slightly.

Rather than having a deep dive on a single part of the business, we thought we'd speak to some of the key questions we've heard from investors over the last few months. So before proceeding to the live Q&A, Niraj and Kate are going to address these upfront so that we can get into other details later. Let me hand it back to Niraj first..

Thanks, Michael. Over the past several months, many of you have asked about the path to profitability and how long it will take us to reach our goals. Let me first be clear about our financial priorities. We are steering Wayfair to be cash generative.

We are also establishing a lower bound on profitability that we will stick to, all while working to drive margins even higher.

Why is this lower bound Important? At a mid-single-digit adjusted EBITDA margin, higher in the US as international continues to mature, we should be able to cover expenses like depreciation and amortization associated with CapEx and begin to mitigate the dilution associated with equity compensation, all while continuing to invest in future growth initiatives.

While we are perhaps being more pointed about how we're talking about this, this practice is not new to us. Steve and I operated this business in a cash-generative way for more than a decade when we started.

And starting in 2019, we have been moving Wayfair back in this direction, admittedly with a lot of volatility in between, which brings us to how and when we will get there. You should expect to begin to see progress starting in Q4. But the reality is that this is an iterative exercise.

We are philosophically committed to this set of financial goals, which means that we are constantly evaluating what's happening to the customer and the economy, the time frame over which we can responsibly get to these levels and adjusting as needed.

The macro can help or slow us down some, but we are not relying on solely the top line to get us there. As I mentioned earlier, we're in a fortunate position where large parts of our platform business are variable, designed to move more or less in tandem with revenue.

On other fronts, you're seeing us adjusting in real-time, and we will continue to do so. In thinking through our options, we're balancing moving quickly we’re doing so responsibly for the company with nothing sacrosanct. But also a strong awareness of the elements that make us unique today and will set us up for success in the years to come.

Next, let's tackle a slightly different question having to do with how customer acquisition costs are trending. As many of you know, when we study CAC, we are looking at whether we are staying efficient in paid advertising channels, both more transactional ones like search and PLAs and upper funnel channels such as TV.

Our approach to deploying advertising spend is based on efficiency targets. We are orienting around an effective payback target in each channel. So if we can't deploy dollars within that payback envelope, we won't spend them. This means that we're constantly controlling for CAC by channel.

That said, there are mix effects that layer on top of this that happen to be headwinds to overall CAC in this moment. Michael spoke about a few of these mix elements earlier. But let me expand. First, upper funnel channels like TV, online video and catalog are scaling.

Though that it can have longer lead times, these channels are important vehicles to drive brand and category awareness. As a category leader, we have a unique opportunity during this time to be visible to new and repeat customers, which should translate into a higher share of voice as others pull back and ultimately to market share gains.

Secondly, in softer macro periods, we unsurprisingly see the volume of free and direct traffic to site decrease. This will optically make advertising grow as a percentage of net revenue, though we are still deploying dollars against paid channels efficiently. This is also a temporary phenomena.

When category demand recovers, direct traffic trends will reverse and drive incremental leverage in advertising. Third, our fast-growing brands are those that operate at higher levels of advertising.

For example, Perigold, which grew net revenue at approximately 30% year-over-year in Q2 and is scaling quickly in general, operates at a higher advertising level in percentage terms than does Wayfair, part of that is due to its smaller repeat base and its higher cost of brand marketing as a percentage of revenue, but it is also because of its higher level of profitability, which justifies our ability to pay more to acquire customers while remaining well within our efficiency parameters.

Overall, our unit economics remain very sound and well-above pre-pandemic levels even after accounting for these moving parts to the near-term cost of customer acquisition. Our variable contribution margins are substantially higher, driven by gross margins, which means we can spend more to acquire and stay well within our payback parameters.

So we think we are striking the right balance between the elements that we explicitly control, like efficiency targets and some of the outputs that are less controllable like mix. We're also continuously monitoring and adjusting from a top-down perspective, if necessary.

For instance, we are sharpening our efficiency targets in areas like top of funnel to account for lower predictability in this environment. And rest assured, we will always closely monitor and react to trends across all of our channels. Now I'll hand it over to Kate to discuss our latest thinking on liquidity..

Thanks, Niraj, and good morning, everyone. I'm excited to meet some of you and to reconnect with others over the coming months as I step into the CFO role. One question we know is top of mind from many investors right now is our liquidity profile and capital structure. As we sit here today, we see our liquidity position as healthy.

We ended the quarter with north of $1.7 billion of cash and short-term investments on our balance sheet. And don't forget that we also have a revolving credit line of an additional $0.5 billion available to us.

So where we are right now at $2.2 billion to $2.3 billion in total liquidity and with no meaningful near-term maturities is a relatively comfortable place to be. But as you also heard us say, we're very focused on getting to a state of positive cash flow as quickly as practicable to the total liquidity growth.

We have the benefit of a cost structure that is highly variable, options on how to control elements like OpEx and CapEx and also the benefit of a net working capital flow that typically works in our favor. Getting to a position where we are sustainably generating cash is very important to us.

But it is not an overnight thing for a business of our size. However, we are aiming to make steady progress over the coming quarters, which will begin to show up in the financials in Q4. We hope this is helpful additional color to frame our thinking. Let's now move to the open Q&A.

Please feel free to direct your questions to Niraj, Steve, Michael and to me..

[Operator Instructions] And we will take our first question from Steve Forbes with Guggenheim Securities. Your line is open..

Good morning and thank you all for the color today. Niraj, I wanted to start with the supplier base, right? You mentioned how the suppliers are using more of Wayfair services offering.

But maybe if you could just expand on how they are engaging? What's different today than last year? Whether they're competing for certain services via lower wholesale cost? Just any additional color that helps us better understand how the supplier community is viewing Wayfair today?.

Yes. Great. Thanks, Steve. Yes. So what I would say is, if you think about our platform business model, one of the things we mentioned a couple of quarters ago is, generally is an advantaged model.

The only time its disadvantage would have been the example in the back half of last year when there's too little inventory relative to demand, which basically almost never happens. What's common is that there's roughly a balance of the two or in these kind of tougher macro scenarios where there's far more inventory than demand.

Well, that's actually the scenario we're in now. So suppliers basically have too much inventory. And so what we're seeing happen is our inventory availability levels have gone up. Suppliers have too much and they want to sell that inventory.

So what do we see them do? We see them using some of the pricing tools we have on our platform to basically allow them to control their price to be aggressive where they want to move inventory, that creates value for the end customer, drives up conversion. We're seeing them become increasingly large adopters of CastleGate.

CastleGate basically facilitates them getting high-speed badging, which drives up conversion. It also facilitates lower retail prices because the outbound ship cost drops, which also drives up our conversion as an example there, our two-day speed badging is up about 10 percentage points.

And so we're seeing them leaning on aspects of the model and other piece of the model. That's still pretty small force relative to others is advertising. And that's something that has been growing over time.

But frankly, we're seeing a lot of growth and interest there too, as we're adding sophistication of the product, but frankly suppliers are in a position where they want to sell more goods. So these are these are kind of the types of things that are happening.

There advantages we have relative to others, and frankly, it's why we -- it's kind of the inherent strength of the business model..

Helpful. And then just a quick follow-up. Really about international, right, given the comments about balancing the long-term investment and the path of achieving a mid-single digit EBITDA margin.

So curious, Niraj, just additional high-level comments on how you're thinking about the broader international opportunity? Has it changed? Should we expect you to pause expansion for a multiyear period of time into new markets and really just focus on the core that you're in? I mean, is there any -- are you seeing anything that deters the opportunity that you see in the UK, or Germany? Any higher level color as you're thinking about the broader opportunity in international?.

Yeah. Thanks, Steve. Yeah. Right now, there's no question that the macro environment in the international markets we're in is tougher than even the macro environment in the United States, and then that's certainly not great for that segment of our business.

That said, one of the things I did mention in the prepared remarks is we have been very thoughtful about in this period of time. What do we focus on? And what does that mean we need to pause or where do we narrow our focus. And frankly, in the European market, we said let's focus on the UK and Germany.

We built a leadership position in the UK We're on the road to that. We're not there in Germany. Well, let's pause moving to other international markets in Europe. Let's pause our expansionary focus in Europe. Let's focus on our core. And that's what we're doing there.

And the way we think about it is there's no -- there's nothing that we decided yesterday that will automatically remain committed to today. So we're going to constantly reassess what we're doing.

But we feel very good about the strategic long-term focus that we have in the company, but we're also very cautious given the macro of making sure that we're not expanding them.

And in fact, anything we're going to continue to do that we think makes sense in light of how we're thinking about the P&L, how we want to drive the EBITDA profitability, how we want to drive the free cash flow. And we want to show that steady progress there and get there, frankly, in a time frame that we think quite fast.

And so this is the balance that we're taking..

Thank you..

And we will take our next question from Peter Keith with Piper Sandler. Your line is open..

Thanks. Good morning, everyone. Appreciate on the extra commentary. On the mid single digit low threshold EBITDA margin target, obviously, putting a time frame on that's going to be possible.

But what are the thoughts on the revenue growth needed to achieve it? Could you show significant progress over the coming year if revenues were to remain flat year-on-year to reach that goal?.

Yeah, Peter. So I think on one hand, you're absolutely right, the macro does affect it. However, I will say our plan on making progress to get to EBITDA profitability and positive free cash flow is not contingent on expecting the overall revenue to expand. So does the shape of the curve get affected by the macro? Absolutely.

But is our plan hinging on revenue growth, it's not. So why do we say it that way? Well, do we expect to see us take share and get revenue growth? We do. However, the macro is very murky. So to bet on a plan that requires a certain amount of revenue growth, we would view as risky.

So the core of the -- when we say you're going to see steady progress, that does not assume that the market turns right around..

Okay. That's helpful. A follow-up question maybe to what Steve asked just around the supplier services. I'm wondering if there's any quantification you could provide just to show us some progress that you're making. The CastleGate revenues have come down to about 20% of total, at least that was as of Q4.

Maybe update us on where you stand today? And then any quantification too, on that, that sponsors to advertising and maybe how that's increasing as a percent of revenue would be very helpful..

Sure. So on CastleGate, what I'll say is, CastleGate penetration is ramping and it's been -- all year, been increasing at a nice pace. And so, when we said that it's on track to hit record highs to meet old record highs and then exceed them. We see that happening not over the long term but rather over the near term.

So we're seeing very good adoption there. Frankly, that adoption was taking place even before the demand really started to turn down, and then it's only accelerated since then. So suppliers are very interested in benefiting from the speed badging, benefiting from the lower retails, the lower outbound ship cost, the customer conversion.

And so that CastleGate penetration is, I would say, meaningfully higher than where it was at the beginning of the year, and it's on track for these types of records that I mentioned.

On advertising, we haven't given out an exact number on that, but this is not super helpful for you to quantify, but I'll just say it's certainly growing faster than the overall business is growing at very fast relative to the overall business. But it's still small, quite small relative to what we think the potential is.

So it's still very much in its early days..

Yes. Said another way on advertising, its still -- there's still a huge upside on gross margin in that product..

Okay. Thanks so much. Very helpful..

We will take our next question from John Blackledge with Cowen. Your line is open..

Great. Thank you. Two questions. First on just the revenue trends thus far. Could you just discuss the drivers of the current revenue pacing in 3Q? If I heard it correctly, Michael, I think you referenced that 4Q net revenue would likely be up Q-over-Q. I just wanted to check on that.

And then on the 3Q gross margin, what are kind of the drivers that provide confidence that gross margin will come in kind of at the high end of the 27% to 28% range? Thank you..

Great. So let's do revenue trends first. Let me say some thoughts and Michael can comment on his quote. But I think everything you said is correct. So revenue trends, so we said in the script that quarter-to-date is down roughly 10%.

The revenue trends, frankly, we are seeing we, I wouldn’t say -- good, I don't know, I describe good traction on revenue, meaning we're seeing customers being engaged. The macro is clearly softening. There's been a shift from goods to services.

But things like, for example, the percentage of revenue coming through the app is -- it's at an all-time high, except for the first two COVID quarters.

And so, there's things like that, that are happening that we think are positive things that we're seeing with our customer base that is engaged, but engage with in the context that HomeGoods is not top of the agenda right now. We're also seeing that our suppliers are leaning in on the platform to sell goods. As I mentioned, they're over-inventoried.

They're lowering retails.

What we're finding is that, that creates an opportunity for customers to get more value, the speed of delivery of these items is up, which is a great customer, kind of, experienced driver, we're then creating the sale events and these promotional events, for example, we launched one a couple of weeks ago called Flash Sale Fridays.

It's only two weeks old, and it will build up over time, but it's off to a very good start. And so what we're doing for showcasing that value to customers. Customers are then quite curious. We're getting good reaction from customers coming in, browsing and buying.

And so this is a playbook that we've used in the past, and it works very well, because customer’s -- it’s not that they don't have money, but they need an excuse to spend it. So when they see value, interesting, when they don't want to pass it up that, that's when they buy.

So we're seeing positive momentum on revenue based on that we expect, of course, fourth quarter to be bigger. But Michael, anything I don't know exactly what you're….

No, I would just confirm what I said in the prepared remarks, John, that we do expect that the fourth quarter, the fourth quarter is always a better quarter, bigger quarter for us, and so share is the biggest share quarter. Obviously, the macro environment is super uncertain, but we feel pretty bullish about when we look out from Q3 to Q4.

And as Niraj just talked about a couple of times now, I think the underlying business model that we have and how that performs in this environment sets us up extremely well, both to serve our suppliers but also serve our customers, right, when they are looking for the best deal on something that they need.

And I think that's the other -- sort of to your other question about like why do we feel confident talking about the upper end of our 27% to 28% gross margin range. It's really because this is where our business model can shine when there's an oversupply in the marketplace.

And we're the -- we are the best place for suppliers to move that product and we are the best place for our customers to come find deals on the things that they want to buy. And then on the second part of your question, John, about gross margin.

So we talked about -- starting a year ago, we talked about there being like a 1,000 basis point runway that we could quantify between four bit levers. One, meaning as we grow in volume, the efficiency associated with growing in volume.

The second pillar was around is items become increasingly exclusive and we lean on red carpet merchandising, the demand response curve is there and the price elasticity. Third was a pillar around logistics. And the fourth was the pillar around supplier services, which cascade advertising with the supplier services.

Back then, I think our gross margin was more like 25%. So, obviously, where we are today is higher than that, but there's still a lot of runway left.

And so what you're going to see happen, like when we talk about being at the high end of the range, well, some of these pillars, like I talked a little bit about how supplier service adoption is growing earlier in the call.

Another example is in logistics, logistics expense had grown something like over-the-road trucking, you could see what the -- there's an index of dry van rates. You could see how that grew and how that's falling now at a fairly fast pace as some of the congestion is behind us, and as -- so pricing is loosening.

So there's a bunch of drivers around efficiency, around transportation that will accrue to our gross margin. And I think it's important to just remind people that in our platform model, unlike a retailer who bought inventory x-months ago to sell it today, and so they're locked in at some price and they're locked in with a certain set of goods.

And so if they want to discount it, it then comes out of their margin. Of course, it helps them in supply-constrained environments like the end of last year, but those are pretty rare. Generally, it hurts you -- this is the example where it hurts you.

They need to choose between discounting and taking it out of their margin or trying to sell it based on the price they bought it at and the price they expected prior to sell it out. What happens in our model is we don't own the inventory. So, of course, that hurt us last year, but helps us this year.

So our gross margin has this inherent stability of the platform model, but then it adds these benefits that we can take advantage of. And I just want to remind you, there's still a long runway past that..

Thank you. Thanks so much..

Thanks John..

We will take our next question from Oliver Wintermantel with Evercore ISI. Your line is open..

Thank you. And, Michael, thank you very much for all the help over the years, and Kate, looking forward to working with you again. So my question was just a clarification question from the guidance for next year, when you said EBITDA positive.

So do I hear that right that most of that should probably come just from reduced costs and most of that from the OpEx line, is that correct?.

So let me just make a couple comments and then I'll turn it over to Kate or Michael to maybe specifically answer your question on what they said for the guidance.

But what I would say is -- the way to think about it is, we have a plan to get to EBITDA positive and then to free cash flow positive, that really is not counting on revenue growth being the reason and the way we get there. So in that sense, you would say there, obviously, is -- their internal drivers past revenue growth.

Now I will highlight cost is one element of it. And costs can manifest as lower OpEx, for example, it can manifest also, for example, as higher gross margin. And we just talked a little bit about gross margin. So think about all the different aspects adding together to why can we get there without revenue perhaps growing dramatically.

And then, obviously, we do expect revenue to grow as well. And frankly, there's more gross margin and more things over time that we expect to get also. So there's a number of pieces that add together to this trajectory that we say you'll see steady and continued progress.

And we talked about a level obviously much higher than EBITDA and zero that we're working towards. But Michael or Kate, I don't know if you want to add anything..

Yes. First of all, Oli, thanks for the nice comment. So I do think that, as I mentioned in the prepared remarks, we think there's a lot of opportunity to really examine everything in our cost structure and understand where we can run in a more efficient way.

At the same time, still protecting the investments we're making that are really critical to sort of the long-term growth and the long-term success of the business and the opportunity.

And so, I want to be careful not to sort of say, it's like, in this one line, right? It's like not just OpEx or not just CapEx, but rather this is a more holistic view looking at everything we're doing, understand what the most important priorities are, making sure that we've got all of our people and teams and resources focused off against those, and then on the things that we can either push off to the future or cut out completely, how do we do that and do that in a pretty thoughtful way.

You can't do all of that instantly, which is why you're not seeing a change in the results in the Q3 guide. But when we look out over the back half of 2022 into 2023, I think that's when you'll start to see some of that performance flow through..

Yes. Great. Thank you. And the only one follow-up quickly is on customer retention. Looking at the active customer trends and how you try to reverse that and what you've seen in retention rates? Thank you..

Yes. And so, there, what I would say is, there's definitely -- when we say the macro is soft in HomeGoods, that then has an effect to our customer base, the degree to which they're proactively engaged in searching. But what I would say is, we're seeing -- there's kind of a -- the active customer trend requires them to buy within 12 months.

There's predecessor trends around like, are they still engaged, meaning are they opening the e-mail? Do they have the app? Are they engaging in the app? Are they visiting the site? Are they clicking on the e-mails or clicking on app notification? And like, for example, we have 60 million people who've downloaded the app.

And so we kind of can measure these things. We have numbers that make us feel good about how we're doing relative to the macro demand, but the truth is the macro demand is soft as well. So I think that's what you're seeing in that number. It's the net of the two..

Got it. Thanks very much and good luck..

Thanks Oliver..

We will take our next question from Anna Andreeva with Needham. Your line is open..

Great. Thank you so much. And thank you for all the color this morning. We had two quick questions. Just on quarter-to-date as a follow-up. I'm curious what kind of trends are you seeing in Wayfair.com in the US, you guys had previously provided that color. And then secondly, you mentioned that you're seeing some trade down in the portfolio.

Can you talk specifically what categories that being seen? And are you adjusting prices lower as a result. Thank you so much..

Yeah.

And the only other thing I'd add there is that I do think that in a trade down moment is where you really see the benefit of our model of having extraordinarily broad assortment, right, and letting suppliers effectively compete in the marketplace, right? So that you can offer the customer who wants the trade down, both the lower priced version of that product, but also for the supplier who might have the over inventory to the higher priced version of that product, if they want to push the whole sales lower and compete at that trade down level, they have the ability to do that across the platform.

And I think that's part of what we're seeing as well..

Thanks so much. Makes sense guys..

Thank you..

And ladies and gentlemen, that concludes our question-and-answer session for today. At this time, I would like to turn the call back over to management for any additional or closing remarks..

Well, great. Well, thank you, everybody, for joining us today. We are happy to spend the time with you and excited about your continued interest in Wayfair. Thank you very much..

And ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect..