Wayfair Inc.

today and welcome to the Wayfair third quarter 2022 earnings release conference call. Please note today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one again. Thank you. At this time, I will turn the conference over to James Lamb, Head of Investor Relations. Mr. Lamb, you may begin your conference.

Good morning, and thank you for joining us. Today, we will review our third quarter 2022 results. With me are Neeraj 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 we will make forward-looking statements during this call regarding future events and financial performance, including guidance for the fourth 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 10Q 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. 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 IR website. I would now like to turn the call over to Neeraj.

Thank you, James, and good morning, everyone. We're glad to reconnect with you today to share the details of Wayfair's third quarter results. This past August marked our 20th anniversary. It was in the summer of 2002 that Steve and I first started this business out of a nursery in Steve's home. We were still nearly a decade away from adopting the Wayfair name at that point, but since the beginning, we've had a vision of creating a premier online shopping destination for the home. We've thought big and bold every step along the way, And for nearly a decade, we were able to self-fund our growth as we reinvested operating profits back into the business. In 2011, we rebranded as Wayfair and for the first time raised outside capital as we looked to scale up our growth. In the decade since, we've grown the business by nearly 20-fold and made meaningful investments in building out our catalog, customer file, geographic presence, logistics platform, and more. With the size and scale we've achieved, we are now in a position where we can operate the business for both profitability and growth and are well on our way to returning to a state of self-funding once more. Last quarter, we talked about controlling the controllables and orienting Wayfair in this environment around three key principles, driving cost efficiency, nailing the basics, and earning customer and supplier loyalty every day. Kate and I will talk through what we're doing on each of these fronts, and I want to begin at the top. When we spoke in August, we framed what our path to profitability would look like and told you that there would be more detail to come in the not-too-distant future. You saw the first evidence a couple of weeks later as we made the decision to eliminate nearly 900 corporate roles across the organization. Our goal here was to reduce redundancies and remove excess management layers as part of an organization-wide effort to streamline our operations. At the same time, we talked about additional reductions coming from our spend on third party labor. These two components represent just one set of actions in the cost efficiency that we are executing. Simultaneously, we kicked off a separate set that involves operational initiatives such as returns monetization, scam reduction, incident prevention, logistics optimization, and more. Let me provide just one example by further illustrating returns monetization. When we process a return today, there are complexities involved with the cost to send the product back and how we can merchandise and resell it after the return. We see an opportunity to improve the accuracy of our grading, to increase open box sales through platform and pricing improvements, and to decrease shipping expenses by changing how we manage logistics. This initiative alone should result in tens of millions of dollars of savings and is one of numerous operational improvements we are working on. Altogether, we expect the actions we've taken so far to drive over $500 million of savings in our P&L.