Wayfair, Inc. (W) IPO Opens Sharply Higher after Strong Pricing

Today's IPO for Wayfair, Inc. (NYSE: W) is getting a warm reception on Wall Street. After pricing 11,000,000 shares of its Class A common stock at a price to the public of $29.00 per share, above the expected $25-$28 range, shares opened at $35.53.

Goldman, Sachs & Co. is the lead bookrunning manager. BofA Merrill Lynch and Citigroup are acting as joint bookrunning managers. Allen & Company LLC, Pacific Crest Securities, Piper Jaffray & Co., Wells Fargo Securities, Canaccord Genuity, Cowen and Company and Raymond James are acting as co-managers.

Wayfair offers an extensive selection of home furnishings and décor across all styles and price points. The Wayfair family of brands includes:

• Wayfair.com, an online destination for all things home
• Joss & Main, an online flash sales site offering inspiring home design daily
• AllModern, a go-to online source for modern design
• DwellStudio, a design house for fashion-forward modern furnishings
• Birch Lane, a collection of classic furnishings and timeless home décor

Financial summary: In 2013 and the six months ended June 30, 2014, we generated net revenue of $915.8 million and $574.1 million, respectively, up 52.4% and 49.8% over 2012 and the six months ended June 30, 2013, respectively. Our 2013 and six months ended June 30, 2014 net revenue included $673.4 million and $469.5 million, respectively, from Direct Retail and $242.4 million and $104.6 million, respectively, from Other, which we define as net revenue generated primarily online through third parties, which we refer to as our retail partners. In 2013, we generated a net loss of $15.5 million and Adjusted EBITDA of $(2.9) million, improvements of $5.5 million and $9.1 million, respectively, over 2012. In the six months ended June 30, 2014, we generated a net loss of $51.4 million and Adjusted EBITDA of $(37.0) million, increases of $43.1 million and $34.9 million, respectively, over the six months ended June 30, 2013. Our net loss and Adjusted EBITDA results were driven primarily by our increased investment in advertising in 2012, 2013 and the six months ended June 30, 2014. Because we hold minimal inventory and a majority of our customers pay us before we pay our suppliers, we have an attractive net working capital dynamic which typically allows us to generate more cash than our Adjusted EBITDA on an annual basis.

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