Wayfair's (W) CEO Niraj Shah on Q3 2015 Results - Earnings Call Transcript

Nov. 10, 2015 2:30 PM ETWayfair Inc. (W)2 Comments
SA Transcripts profile picture
SA Transcripts
129.93K Followers

Wayfair Inc. (NYSE:W) Q3 2015 Earnings Conference Call November 10, 2015 8:00 AM ET

Executives

Kate Gulliver – Head-Investor Relations

Niraj Shah – Co-Founder, Chief Executive Officer and Co-Chairman

Steve Conine – Co-Founder and Co-Chairman

Michael Fleisher – Chief Financial Officer

Analysts

Neely Tamminga – Piper Jaffray

Matt Nemer – Wells Fargo

Seth Basham – Wedbush

Oliver Wintermantel – Evercore ISI

Paul Weaver – Bank of America Merrill Lynch

Aaron Kessler – Raymond James

John Blackledge – Cowen and Company

Deb Schwartz – Goldman Sachs

Michael Graham – Canaccord Genuity

Mark May – Citi

Jason Helfstein – Oppenheimer

Operator

Good morning, ladies and gentlemen. My name is Shawn and I will be your host operator on this call. At this time, I would like to welcome everyone to the Wayfair Q3 2015 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] Thank you.

At this time, I would like to introduce Kate Gulliver, Head of Investor Relations at Wayfair. Please go ahead.

Kate Gulliver

Good morning and thank you for joining us. Today, we will review our third quarter 2015 results. With me are Niraj Shah, Co-Founder, Chief Executive Officer and Co-Chairman; Steve Conine, Co-Founder and Co-Chairman and Michael Fleisher, Chief Financial Officer. We will all be available for Q&A following today’s prepared remarks.

I’d 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 2015. These statements are only predictions based on assumptions that are believed to be reasonable at the time they are made and are subject to significant risks and uncertainties.

You should not rely on these forward-looking statements as representing our views in the future. Except as required by law, we undertake no obligation to publicly update or revise these statements. Our actual results may differ materially and adversely from any forward-looking statements discussed on this call.

For a discussion of factors that could affect our future performance, results and business, please refer to our annual report or Form 10-K, our quarterly report or from 10-Q, which we expect to file in the near future, and other reports we have on file from time-to-time with the SEC.

Also, please note that during the course of this conference call, we may discuss certain non-GAAP financial measures as we review the Company’s performance. Please refer to the Investor Relations section of our website to obtain a copy of our earnings release which contains 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 is available for replay on our IR website.

Now, I’d like to turn the call over to Niraj.

Niraj Shah

Thanks, Kate and thank you all for joining us this morning. We are excited to announce that the business continue to experience accelerating revenue growth this quarter, with the total business up 76.7% year-over-year to $594 million in revenue. Our Direct Retail business grew 90.9% year-over-year to $545 million. This is the fastest year-over-year growth rate for the Direct Retail buisness since Q4 of 2013 and represents three quarters in a row of accelerating growth. As a reminder, our Direct Retail business consists primarily of sales from the websites and apps of our five brands, Wayfair.com, Joss & Main, AllModern, Birch Lane and DwellStudio. Wayfair.com is by far our largest brand and its trajectory is the primary driver behind the Direct Retail growth rate.

Many factors contributed to this phenomenal growth rate including the day-to-day improvements we make to our site and our ongoing efforts to provide best-in-class customer experience from product selection to delivery and also the improving strength of our brand.

This quarter our aided brand awareness reached 67%, this is compared to 52% in the same quarter a year ago. Our multi-channel advertising efforts including television, display and social are driving this steady increase and while we are pleased with the improvements, we believe there is still significant opportunity to further grow our awareness.

We ended the quarter with $4.6 million active customers, an increase of 60.6% from Q3 2014 and a net increase of approximately 547,000 active customers from the prior quarter. This is almost 100,000 more net new active customers they were added last quarter. Orders from repeat customers represented 55.2% of total orders and annual, orders per customer, per active customer increased to 1.69 from 1.67 in the prior quarter. Our history of driving new customer growth and repeat customer growth is continuing its phenomenal trajectory as seen on the updated charts we posted to our IR website.

This quarter we added a new chart to more clearly show the breakout between orders from new and orders from repeat customers. In Q3 orders from repeat customers grew an incremental 173,000 over the prior quarter. As we said this before our IPO, our investment strategy is simple. On one hand, we are investing in advertising to acquire high quality new customers and concurrently on the other we are investing in the site experience, merchandising and operations to grow repeat orders. Combined this creates the flywheel that drives our strong revenue growth and the long-term leverage in the business. As just described there are multiple ways we work to improve customer satisfaction and in turn drive repeat business.

One specific lever is our loyalty program. Historically this program was largely based on rewards dollars that customers could apply to future purchases.

We knew we could operate more comprehensive loyalty program to our shopper that is better tailored to her needs and desires. In October we took the first step in revamping this program with the launch for private label credit card which provides benefits such as rewards dollars and financing on purchases. We’re particularly excited to be able to offer financing on large purchases. In our category, customers are frequently shopping high ticket items. It has been customary for years and retail to offer financing option.

Overtime, we hope to rollout more specific benefits and personalized offerings to our card holders. We partnered with Alliance Data on the card and its typical that these partnerships Alliance qualifies the customers and take all risk on payments. We think that private-label card is a strong start to enhance loyalty program and we’re excited about the launch.

Before handing the call over to Steve, I want to touch on our holiday plans. Last year, we expanded our holiday promotions with improvements across assortment, merchandising, visual imagery, product discounts and marketing activities allowing us to unlock a previously untapped seasonal sales lift.

Historically, we had not viewed our category as one that had large seasonal potential. Furniture and decor are not traditionally gift items. And we are very excited about the work our team did last year to capture this seasonal demand. We took the learnings from last holiday and used them to refine our overall promotional calendar for 2015, by adding events, development proprietary imagery and content and working with our suppliers to source the best products and prices for our customers.

Accordingly we’ve seen strong revenue growth from these seasonal events throughout 2015. Most recently in Q3, we had a highly successful Labor Day weekend event. But of course many of these seasonal promotions occur in the fourth quarter. And we’re excited to build on the learnings from last year for this holiday season. This year we started holiday events in early October, a few weeks earlier than in 2014 and we’ll be promoting a broader assortment of relevant offerings including decorative accents, seasonal décor and an extensive collection of house wares across a more in-depth and integrated marketing campaign that combines television, display, personalized email, and direct mail.

We’re excited about how the season has started and we believe we had a fantastic lineup. However, since most of revenue from holiday is generated later in the quarter, it’s too early to tell how this season will compare to last year. We look forward to sharing the results with you on our Q4 call.

I’d now like to hand the call over to Steve, to update everyone on some exciting engineering and technology. Over to you.

Steve Conine

Thanks, Niraj and good morning everyone. One of our goals at Wayfair is to offer the customer an easy and convenient shopping experience. Wherever she maybe, at home, at work, running errands, watching TV, an easy-to-use and engaging mobile site and app for each of our brand is a key part of this approach and are engineered to regularly refine our mobile product and explore ways we can offer unique experience to our customers on phones and tablets. This approach is working in Q3 35.1% of the orders in our Direct business, were completed on a mobile device compared with 28.7% in Q3 2014.

Although we have mobile sites or apps for all our brands much of this growth is due to the success of our Wayfair.com app. Our iOS app was originally released in March 2014. In July of this year we hit one million downloads in recent months we’ve seen accelerating app interest that are now approaching two million total download. The app has become a key channel for our repeat customer engagement in sales.

From a technical and customer experience perspective we are constantly innovating and updating our apps, we’ve updated our iOS app 30 times since launch including as recently as last week when we deployed a redesign that incorporates Apple Pay technology to further streamline the mobile shopping experience.

Our Android Wayfair app, launched in May at this year, has already been updated 24 times. Increasingly, we are looking to offer unique content and product on our apps. Beginning this year Wayfair.com app users will have access to exclusive products and early access to our Black Friday and Cyber Monday sale. Eventually we believe the app can offer the customer not always to engage with us, and enhance the shopping experience. We are able to maintain this pace of development and innovation across all our business because of the scale and growing team of over 400 engineers and data scientists.

I’ll now turn the call back over to Nir.

Niraj Shah

Thanks, Steve. Our apps help to round out the customer experience and support the strong Direct Retail growth rate. Overall, our efforts in merchandising, marketing, site experience, customer service, supplier integration and logistics, all powered by technology are combining to offer a world-class customer experience across multiple platforms and geographies.

I’ll now hand the call over to Michael to walk through the financial.

Michael Fleisher

Thanks, Niraj and good morning everyone. As always, I will highlight some of the key financial information for the quarter with more detailed information available in our earnings release, which can be found on our IR website.

In Q3, our total net revenue increased 76.7% year-over-year to $594 million. As Niraj described, this growth was driven by our Direct Retail business which increased 90.9% over Q3 2014 to $545 million. Our other business which includes revenue from our small media business and from our retail partners declined as expected 3.3% over Q3 2014 to $49 million. Our gross profit for the quarter which is net of all product costs, delivery and fulfillment expenses; was $141.4 million or 23.8% of total net revenue. This is compared to 23.5% in the same quarter last year and 24.6% in Q2 of 2015. As we shared on the call last quarter, we believe gross margin should be between mid 23% to low 24% over the near term, as it is the right long-term strategy for the business to invest in the customer experience today across price, delivery and service to create even more loyal customers. Going forward we expect margin to be similar to where it is this quarter.

The remaining financials I’ll share on a non-GAAP basis, excluding the impact of equity-based compensation and related taxes, which totaled $8 million in Q3, 2015 and zero in Q3, 2014, as the IPO did not occur until early fourth quarter of 2014. Post the IPO, we recognized equity-based compensation each quarter in all line items that have headcount. For reconciliation of GAAP to non-GAAP reporting, please refer to our earnings release on our Investor Relations site.

Customer service and merchant fees were 3.5% of sales, compared to 3.7% in Q2. This cost is largely variable and should continue to run in the high threes to 4% of sales going forward.

Advertising spend was 11.9% of revenue in the quarter or $70.7 million. Year-over-year advertising spend, as a percentage of sales improved 290 basis points, from Q3, 2014, when it was 14.8% of revenue. This continues the trend we’ve seen throughout 2015 of year-over-year ad spend leverage each quarter, as benefits from the investments we’ve made in advertising to build our brand and acquire new customers. As you heard from Niraj, we added approximately 547,000 net new active customers this quarter, roughly a 100,000 more than we added last quarter.

We’re excited about the success that we’ve seen with our marketing efforts to-date and will continue to invest, where we see appropriate pay backs, as we believe it’s the right long-term strategy for the business. Overall, customer dynamics remain incredibly strong. LTM net revenue per active customer increased 8.5% to $371 annually and LTM orders per active customer grew to 1.69 from 1.65 a year-ago.

Orders from repeat customers were 55.2% of total orders and up 173,000 orders sequentially. As you can see in the updated cohort chart, we posted to accompany this call repeat dynamics across all our cohorts remained strong, with cohorts as old as 2011 and 2012, experiencing improving repeat dynamics through the improvements in our site experience, merchandizing and customer experience. Even after four years, we’re seeing an increase in the monthly revenue per customer over the last year as they experience all the investments we continue to make in the site and customer experience.

Our merchandizing, marketing and sales spend on a non-GAAP basis, were $23.7 million or 4% of net revenue, compared to $13.4 million or 4% of net revenue in Q3 2014. Non-GAAP, operations, technology and G&A expense was $36.7 million for the quarter or 6.2% of net revenue, compared to $25.2 million or 7.5% of net revenue in Q3 2014. As we explained last quarter, these two line items of primarily headcount and the increasing spend both on a year-over-year basis and on a quarterly basis, is due to the ongoing investments in our teams.

As our expanded recruiting team has ramped up, we’ve been able to accelerate our hiring pace, adding over 390 net new employees in the third-quarter. Even with this increase in hiring, we did see overhead leverage, due to our significant revenue growth. We expect our headcount and operating expenses to continue to catch up some, during the next quarter, as we have ramped up our hiring to meet the higher levels of growth of the last several quarters.

Adjusted EBITDA for the quarter was negative $1.4 million or negative 0.2% of net revenue, compared to negative $18.0 million [ph] or negative 5.4% of net revenue in the same quarter, a year-ago. Year-over-year improvement in EBITDA margin was driven by the ongoing leverage in both advertising spend and operating expenses. As I stated on this call, last quarter, I want to be clear that while we’ve seen greater flow through over the last few quarters, we plan to continue to invest in advertising and headcount to effectively grow and manage the business.

For the second quarter in a row, non-GAAP free cash flow was positive at $35.3million. This positive free cash flow was driven by net cash from operations of $51.5 million, primarily as a result of the favorable working capital dynamics in our business. This strong free cash flow was despite our $16.2 million investment in capital expenditures for the quarter.

Our inventory level was $22.6 million, only 1.2% of LTM sales, roughly consistent with last quarter. It’s important to note that while total net revenue increased over $250 million from last year, inventory only increased by $1.4 million.

Non-GAAP diluted net loss per share was negative $0.13, $83.9 million weighted average common shares outstanding. As of September 30, 3015 we had approximately $400 million of cash, cash equivalents and short and long-term investments.

Overall, we’re very excited with our third quarter results and continued strong revenue growth from both our new and repeating customers.

Now I’d like to discuss guidance for Q4 2015. The good news is we have a business with extraordinary, strong accelerating growth. The bad news is this makes my job of giving guidance very difficult. We forecast Direct Retail revenue growth of $575 million to $610 million, a growth rate of approximately 66% to 76% year-over-year.

As we did last quarter, I want to provide a little more color on this growth rate. Currently, Q4 quarter-to-date, we’ve experienced a similar Direct Retail growth rate at that in Q3. Of course in the fourth quarter revenue is more heavily weighted towards the back half of the quarter for holiday shopping. Therefore it’s difficult to predict the full quarter at this stage.

As you heard from Niraj we anticipate very strong holiday performance based on all the work the team has done. But we also had an extremely good holiday last year and we’ll be comping off that strength. As always we’re attempting to be thoughtful in setting our guidance based on what we’ve seen quarter-to-date while often taking into account all the other factors of being a retailer were the customer has to show up every day.

We forecast other revenue to be between $50 million and $55 million for total net revenue of $625 million to $665 million. We forecast EBITDA margins of negative 0.75% to negative 1.25%. As I’ve said before we are catching up on our operating expenses as we’ve ramped hiring to meet the needs of the accelerating top line growth.

We anticipate that our expanded recruiting team will continue to catch up during the fourth quarter so we’re guiding EBITDA margins taking that into account, as well as our continued investment in ad spend. For modeling purposes for Q4, 2014 please assume equity-based comp expense of $12 million. Average weighted shares outstanding of $84.2 million, depreciation and amortization of approximately $10 million and CapEx of approximately 3% to 4% of sales roughly consistent with recent quarterly CapEx trend.

As a reminder, because we don’t invest in physical stores or inventory, our capital requirements are very low, resulting in strong free cash flow and enabling investment in high ROI initiatives, like improvements in our site experience and the speed, quality and efficiency of our delivery process. CapEx in the near-term is primarily related to the scaling of our supply chain infrastructure, including warehouses and our distribution network and of course, our ongoing engineering investments.

Now let me turn the call over to Niraj, before we take your questions.

Niraj Shah

Thank you, Michael. This call is our fifth earnings call as a public company, following our IPO in October of last year. We’re extremely pleased with the performance and trajectory of the business over these past five quarters. The Direct Retail business has continued to accelerate with its fastest growth rates since Q4 of 2013. Our customer base gets stronger every day with increasing numbers of new customers trying our site for the first time and existing customers engaging with greater frequency and increasing spend. All of this has occurred in the context of leveraging ad cost and improved profitability.

As excited as we are about the past five quarter we’re even more excited about the future. The home space represents an enormous market opportunity that we are just beginning to tap. And we believe that Wayfair can be leading the destination for all things home.

We’d be happy to now take your questions. So I’ll turn the call over to the operator.

Question-and-Answer Session

Operator

Thank you. [Operator Instruction] Your first question comes from the line of Neely Tamminga from Piper Jaffray. Your line is open.

Neely Tamminga

Great. Good morning, and congratulations on a solid performance. I have a question and then a follow-up, if I may. On the first question Niraj, we looked through the slides and we saw the slide referring to the 2011 2012 cohorts spending back up. It’s really impressive. What we’re trying to figure out, is she just naturally gravitating back to the site? Is she clicking through email? What is the customer cost of that reacquisition, or re-engagements that you’re spending, that was what we’re trying to figure out? Then I will have a follow-up if I may.

Michael Fleisher

Sure, Neely. Thanks for your question. Yes, the way to think about our business, obviously revenue is growing very nicely and you’ve seen revenue growth actually accelerate now for a few quarters in a row obviously that acceleration cannot continue for ever. But the reason we’ve been accelerating while ad cost has been coming down, is actually because the repeat business actually runs at very low ad cost relative to new business.

So what happens overtime is just that that makeshift is actually what drives down the ad cost as a percentage even though we actually have more dollars in an absolute amount to acquire more new customers.

For the 2011 and 2012 cohorts there, those cohorts are sort of predate the Wayfair brand being known. And it’s important to note that those cohorts have much smaller number of people in the 2013 which has less than the 2014 which less than the 2015. So not only those lines going up, now it’s that represents, the cohorts that are more valuable on a per person basis, but actually, frankly that the more recent cohorts are much larger than the older one.

So actually the momentum you see there is actually kind of multi-fold in terms of its value to us.

Michael Fleisher

Neely, it’s Michael, the only other thing I might add is, you’ve seen us over the last year continuing to make a huge investment in the site experience. And even our most – our oldest cohorts since 2011, 2012 customers they are getting the benefit of that site experience. Right so when they come back the ease of shopping how easy it’s to find things all of this other great things that we’ve invested in, that’s paying off in terms of listing their revenues, they sort of – easier to find something make that purchase sale.

Neely Tamminga

That’s helpful. It’s logical, but it’s helpful, just to make sure we have that framed up there. And then just a follow up here. There’s been some noise in the press recently, as I think last night related to a foreign vendor that I think your company and others carry. Could you comment on some of the overall situation of whatever potential impact there is in your business? I guess just a bigger higher level question here is what is your general approach to vendors around safety and compliance type issues? Thanks.

Michael Fleisher

Yes, sure, Neely. Yes, thanks for the question. We carry a big selection, as you know, 7 million items, and I think some of the other folks mentioned Walmart, Home Depot, these are all folks who carry a big assortment of items, along with Amazon. So our approach is actually to be very thorough in worrying about the safety the products we sell. In order to do that, we do a few things. One is all our suppliers, we have supplier agreements with them, we have indemnification agreements with them, we have certificates of insurance from them, we have detailed product information which specifies down to the various regulatory bodies whether they be local, state or federal, what pieces they comply with, or if items don’t comply, so that we can take the appropriate steps in terms of whether we offer them or not. And that’s how we are able to make sure that the products are of high quality, and meet all the guidelines.

The other thing we do though, that not many people do, is that we do not source items directly from the factories that they are made overseas. So we are sourcing from folks who are the distributors and the actual product designers, who are generally American and European companies who are then sourcing in Asia. So we have an additional layer of QA, QC that a lot of the other retailers who are directly sourcing may not have, except through their own QC personnel, who would be on site. And so that’s our approach, it’s been pretty thorough, it’s worked quite well.

In terms of that article, that refers to laminate wood flooring, and that’s a category that’s been featured prominently in the press because of Lumber Liquidators, who I think had a fairly extensive problem of their own sourced product. And for us it’s important to know, laminate flooring’s a really small category, so laminate flooring, it’s 0.2% of our sales, so that’s 2/100 of a percent of our sales, which is about – the number have is just under $400,000 year to date in that whole category.

A lot of that product comes from large producers like Armstrong and Mohawk, and so Ark, for example, which the brand that article mentioned, we have had 10 orders from Ark in total in total for this type of product, and similar to what we always do, we made sure that the product complied, and then there’s a point in time where the manufacturer actually told us that they were discontinuing the product, so actually pulled it at that point, which was even before the New York Times got interested in the product.

So we would like to be very thorough there, and that process which we set up and honed over the years, we think has worked very well, had millions and millions of orders, and we’ve been able to really avoid problems.

Neely Tamminga

Thanks Niraj tough wishes for you guys for holiday, thanks.

Niraj Shah

Thanks, Neely.

Operator

The next question comes from the line of Matt Nemer from Wells Fargo, your line is open.

Matt Nemer

Good morning and congrats on a great quarter. My first question was, I wanted to talk about the potential residual impact of the unseasonably warm weather in the US. It doesn’t seem like it’s impacting you, but we are seeing a lot of promotional activity in terms of fall decor and decorative accessories. I’m just wondering if you think that will impact the overall home furnishings complex this fall, given that we’re breaking fifty-year records on temperatures?

Niraj Shah

Yes, sure, Matt. Thanks for your question. Kind of a few thoughts I will give you on that. One is obviously, we can be much more agile and nimble than most other retailers, because we do not take inventory positions. So in other words, if we take an inventory position and we are an inventory-based retailer and we made a mistake where the weather friends don’t support the right product mix relative to what we thought, we then are stuck with that inventory, we have to put in front and center in our stores until we can get rid of it, and so we may then be pushing the wrong guys. We don’t do that, right? So we focus and we actually assort on a personal basis for folks using our personalization technology, and we put a tremendous amount of content.

So as a result, what happens is we’re always leaning forward on the right product for the customer, regardless of what that may be, and regardless of how that may change. But the bigger point I will tell you is that, whether it’s the weather seasonal patterns, or whether as housing getting stronger or slowing, none of that in our mind affects anyone in online. Everyone in online has the benefit of basically a market that’s growing at a 15% growth rate versus a brick-and-mortar market that’s growing on an average year at 2% and a good year maybe at 3% or 3.5%. And if you’re growing at 2% or 3%, that rate is so low that you frankly get affected by those things. But if the overall average is 15%, and online, where there’s folks who are going to take big share and folks who are not going to get that share, frankly it’s all about whether or not you’re the person doing the best job.

And so here, where our direct business grew at 90%, which would be six times the online growth rate, you’re not going to really see swings affected very much by a seasonal weather pattern or by these very micro-specific effects, or even by the macroeconomic effects, because, frankly, whether the market grows at 2% to 3%, that 15% is basically saying that people are stopping going to brick-and-mortar stores, and they are increasingly going online, because of all the benefits. And so we just can’t, we just don’t see trends like that, and we don’t believe they affect us very much.

Matt Nemer

Make sense, it doesn’t seem like an issue. And then secondly, I’m wondering how big of a hurdle to conversion financing has been historically as you survey your customers and what you know how much of a benefit the new ABS program could be, particularly in terms of larger orders.

Steve Conine

Sure, its always hard to know the answer on something like that basically what we know is that financing obviously is an additive, right. So for some folks it doesn’t matter to them and for other folks it does matter. And for the folks for whom it doesn’t matter you are giving them another tool which they can buy from you. In terms of the size of that, we’ve done work to understand our customers’ interest in financing but I wouldn’t say that we’ve been able to turn that into a size take number that precise at all.

What we know is that there’s just things that increase the customer experience with us that offer the customer more options and more benefits this is one of them. And we know that a loyalty program in general we have a pretty road map of where we want to take it. And we know that the version we had in the past is a pretty basic one where we’re simply offering straight up rewards to everybody for buying [indiscernible] it’s relatively weak version on a relatively basis to what we’re now working on. So we know the program has significant [indiscernible]. But I really don’t have a sizing estimate for you.

Matt Nemer

I guess put it another way, is it fair to say that in the month of October, since you launched that program, you have seen a benefit to conversion from it? Do you get offered the card at some point in the funnel?

Steve Conine

Sure. So we’re now offering the car to folks. But just like anything new, its current effect is tiny, right? So the effects of these things tend to grow over time. Today’s effect is actually very, very small.

Matt Nemer

Okay. It makes sense. Good luck during the holiday.

Steve Conine

Thanks you.

Niraj Shah

Thanks Matt.

Operator

The next question comes from the line of Seth Basham from Wedbush. Your line is open.

Seth Basham

Thanks a lot and good morning. My first question is on your guidance. I just want to make sure I understand it. It looks like from a revenue standpoint, you are looking for higher revenues versus the third quarter, but from an EBITDA margin standpoint, a little bit lower. I understand that you’re investing in people. I’m trying to understand where else there’s a big delta between Q3 and Q4 on EBITDA margins.

Niraj Shah

I think the biggest delta set is in people, as we continue to accelerate our pace of hiring as we mentioned last quarter. We added to our recruiting team and this past quarter in Q3 we added 390 net new people so you can sort of see that ramp growing as we try to sort of meet the needs of the accelerating growth rate of the business. So I think piece number one is, catch up there.

And then the second thing as we will continue to spend on the ad spend line and we’ve talked about that, before we expect to continue to see a bridge there, as we’ve noted before. But we think that the customers were bringing in and you can see that in the cohort work and the number of repeat orders all the customers we’re bringing and are doing exactly if not even better than we anticipated and so continuing to spend on the ad spend line in order to bring in more of those customers makes a lot of sense.

Seth Basham

That’s helpful. So you are still on track for at least break-even EBITDA in 2016?

Niraj Shah

Yes, I think what we’ve said in the past is by the end of 2016, that’s our goal.

Seth Basham

Got it. Okay and secondly, my follow-up is on shipping. There’s been a lot of talk in the marketplace around FedEx and UPS raising shipping rates, particularly for companies that have a lot of people with third parties associated with shipping. Can you give us some insight into whether or not you think there’s going to be a big effect on your business?

NirajShah

This is Niraj. I will tell you that, so we’re obviously a large shipper. We are large shipper of both small parcel items for which we use UPS and FedEx, and for large parcel items, for which we have a different freight network. And as you would expect, at the scale that we ship at, we have deep relationship with these folks. We have very nuanced contracts, we have our own transportation operation where we move product in advance of tendering into these carriers.

So what I will tell you is that these types of developments that you’re seeing where they are changing rates, the effect that they would have on us as not something that we would tell you gives us any pause, in the sense that we tend to think about where these things are headed well in advance, we understand them, and how we operate with these carriers is not the same off the street rate structure that someone gets if they sign up for a new account.

Seth Basham

Got it that’s helpful. Thanks a lot and good luck in the fourth quarter.

NirajShah

Thanks Seth.

Operator

Your next question comes from the line of Oliver Wintermantel from Evercore ISI. Your line is open.

Oliver Wintermantel

Yes, good morning. I had a question on the average order value. It increased by about 8 points, just over 8%. That was the fastest growth that we’ve seen so far. It was flat in the second quarter. Can you give us some more details on what drove that growth?

Steve Conine

Yes sure. So, what I will tell you, here’s the thing. We don’t really worry about the AOV, and by that, what I mean is we are doing a tremendous amount of things to be the customer’s go-to for larger parcel items like sofas and bedroom sets, and things that would drive up the AOV. We’re also doing a tremendous amount to really become a leader and be the go-to place in categories like basics and seasonal decor and decorative accents and housewares, and all these things drive down the AOV.

So the number we’re really interested in is, if you look on Slide 20 in the slide deck we posted, and we’ve updated this every quarter, we derive this net revenue per active customer, annual net revenue per active customer, we’re really looking to grow that. So we’re looking to grow our share of the customer’s wallet with us, and whether we do that by adding some incremental small purchases, or by adding incremental large purchases, we are pretty agnostic, because we want to just be a customer’s go-to at home.

So what I think has been driving up the AOV is that the strength of the Wayfair brand and some of the things we’ve done in the merchandising side and on the delivery and logistics side have increasingly made us the go-to place for furniture and larger decor items. At the same time, we are having really good success in these smaller items, and so these gains largely offset each other. They drive up this total net revenue per active customer, the green bars on the bottom of Slide 20. And they cause the repeat really metrics to look great, which is what accelerated growth in the direct business to the 91% to 90.9%. But the numbers we really care about is we care about the customer spend with us and the retention, the repeat characteristics, and as long as those keep going the right way, whether AOV goes up or down, we think doesn’t matter.

Oliver Wintermantel

Okay great thanks. And I just had one on the equity-based compensation, I mean that was the last two quarters was about the $3 million shy off what you guided to and the third quarter looks like there’s step up from the guidance. Can you may be explain why the numbers where $3 million lower in the first and second quarter? Thanks.

Michael Fleisher

I think the equity-based comp pieces we’re trying to give a big round number for everybody for modelling purposes and then the actually obviously is tied to all the movements in and out of people. There was a little bit of with the Australia deal we saw the Australia business in the second quarter and then some into the third quarter of some of that equity-based comp rolling in during that period because we accelerated some of the people’s equity. But otherwise there’s no other sort of unusual anomalies there.

Oliver Wintermantel

Yes, thanks good luck.

Operator

The next question comes from the line of Paul Weaver from Bank of America Merrill Lynch. Your line is open.

Paul Weaver

Good morning and thanks for taking my questions. And congratulations on a good quarter. I was hoping you could provide some color on accelerating revenue growth and the active customer numbers. Are you finding efficient online marching channels or do you think the TV advertising is contributing to the acceleration?

And then, secondly, by my calculations, the contribution margins improved year-over-year. Can you provide some color and context on what’s driving the improvement in contribution margins?

Steve Conine

Sure. Let me answer the first quarter around accelerating revenue growth in the active customer numbers. I think it’s important to note there are a couple of things. One is, I wouldn’t talk about TV per se, but I would talk about the brand awareness, right? Which is a function, TV is one of the main drivers of that. And the aided brand awareness, we cited that during the call, and the 67% there, that’s continued to climb over time, and we think that obviously has very strong benefits for our folks decided to buy from us and folks thinking of us top of mind.

That said, the other thing I will point out is just the way that you think about active customers. You actually give credit when they first buy, but if you think about, from a marketing standpoint, the way it works is at some point, they see our advertising, they become aware of us. Then they start visiting the site, perhaps they download the app, or perhaps they sign up for the email list or bookmark our site. And they start coming back, and eventually they make that first purchase.

And so the timeframe that they are engaged before they buy from us is a period of time that generally the quantitative metrics don’t look at.

And so what I would point out is just, as we are engaged with more and more people and they are coming back to our site more and more often, the brand getting stronger and stronger, it seems logical that more and more would tip towards buying from us, particularly as they more likely have a friend who has bought from us, who had a great experience and told them about it or what not. And then obviously if they have good experience and they really enjoyed it, and then it’s reinforced by what their friends are saying, and is reinforced by what they are seeing, they’re obviously going to become more likely to come back, and if we are doing a good job merchandising all these categories and improving the delivery experience and everything, it becomes more likely they’ll become back more and more often, right?

So that whole continuum is the story, and that beginning piece really starts before they first buy and so I think that’s sort of why it seems more stark when you just look at it as a quarter standalone because you not thinking of the accumulated benefit.

Michael Fleisher

Hey, Bob it’s Michael on the contribution margin question, I think, if you look year-over-year gross margin this quarter $23.8 million, we talked a lot about this last quarter is now kind of in the place we think it should be and I think we’ve been cleared sort of mid $23 million is up to $24 million. So I think we’re right in that zone right now, I feel good about that. Obviously that’s a little bit better performance than Q3 last year which is $23.5 million. And then from the customer service and merchant fees piece obviously also rolling in a contribution margin.

I think last year Q3 was a bit of high watermark, this quarter at 3.5%, as I noted in the top track, I think is a little bit low and I think we should – people should anticipate that will be sort of high threes to just under 4%. And that’s sort of the normal range, it really is a variable cost, but it’s somewhat tied to how many people you have on board and how you are staffing your customer service operation and anticipation of upcoming holidays or additional staffing and teams you want to put in place. So there is a little bit of lumpiness in that as well.

Paul Weaver

Okay, thank you.

Operator

Your next question comes from the line of Aaron Kessler from Raymond James. Your line is open.

Aaron Kessler

First, can you talk about what percentage proprietary products are today, and where you view that going longer term? And second, maybe in terms of traffic sources, direct versus indirect traffic, and how that’s been changing over the last year? Thank you.

Niraj Shah

Sure, Aaron. This is Niraj. A couple of thoughts. So on the proprietary product assortment, I think we’ve referenced that on prior calls. We didn’t gave a specific update on this call, but what we’ve said in the past is that is a relatively small portion of total revenue, but growing it at a good speed, and that’s from a verbal, that the same thing I would say today, is that’s continuing to grow nicely. We’re certainly very much believers that’s a great opportunity for us.

I will highlight, we do it in a way that does not have us carry inventory, which we believe is very novel and unique, and will accrue significant benefit to us. And we believe it’s actually proving that it does. But we don’t have a specific number to update you on this call, but we will periodically give you update on where that is quantitatively, and we’re very happy with how it’s growing.

On the traffic side, the direct versus indirect, again, I don’t have specific numbers for you, but the thing I would tell you is that a lot of what you are seeing in the numbers is because it’s being driven by the repeat. The repeat is driven by a low ad expense, as I mentioned, which is what drops ad expense. The reason it’s driven by low ad expense is because a lot of these folks are just proactive with coming back to our site, either because they’ve downloaded the app, they go to it automatically, or they have app notifications, or they are on the email list and they’re getting emails, or we’re just more top of mind, or they are engaging in our editorial content. So this combination of things basically causes the direct to continue to grow. We obviously do advertise a fair bit, so that supports the indirect, but frankly, the direct is taking share. You can almost think of it as direct being something of a proxy of repeat, and indirect being a proxy of new. That’s not technically correct, but that’s similar, philosophically, to what’s happening.

And if you look at Slide 21, if you download that presentation, which is a new side we added, all we did there was chart the number of orders that are new versus the number of orders that are repeat by quarter, which technically would have been numbers that were available, but we never turned it into a chart. What you see there is you do see the repeat line really break out on trajectory from the new line. The new line keeps the same trajectory it’s had, but you how repeat is really inflecting up, and I think that’s, even though it’s not the answer, it’s almost the answer to your question about traffic sources.

Aaron Kessler

Great. Any product categories you would hightlight in the quarter that were stronger as kind of across the board strength in the quarter? Thank you.

Michael Fleisher

I would say it’s across the board of strength.

Aaron Kessler

Got it, okay. Thanks good quarter.

Michael Fleisher

Thank you.

Niraj Shah

Thank you.

Operator

Your next question comes from the line of John Blackledge from Cowen and Company, your line is open.

John Blackledge

Great, thanks, just couple of questions. So just to clarify, in Q4 quarter-to-date, direct retail revenue was growing in line with Q3 growth, or around 91%. And also, do you think the increased focus around the holidays and an integrated marketing campaign could perhaps drive accelerating top line growth from this point through quarter end?

And then just for the 4Q EBITDA guide, what are the biggest swing factors for to possibly be positive? Thank you.

Niraj Shah

So John, I’m really excited to hear how Michael answers that question, so I’m going to turn it over to him.

Michael Fleisher

John, so yes that is what I said in my talk track about how Q4 is running quarter-to-date versus the Q3’s performance. I think the swing factor, well I think on the holiday the reality is we don’t know, we’ve done a ton of great work, the team has done an amazing job getting us ready for holiday, obviously early result in the quarter-to-date look fantastic. But as I noted in the talk track, we are comping off of a really strong holiday last year when we really got focused on sort of holiday promotions and so just it’s too early to tell at this point exactly what the impact is going to be of that.

And then look I think on the EBITDA side, obviously revenue upside has potential flow through to the higher rate to the EBITDA line at the same time we have continued to be very aggressive in terms of our hiring plans in order to make sure that we’ve got all the teams staffed to continue to serve our customers in the way we’re used to serving our customers and continue to invest for the future, as well particularly, on the ad spend line. Right as everyone is aware the ad dollars we spent today aren’t necessarily generating a customer is contentiously right we’re introducing a customer to Wayfair who buys overtime and then continues to buy and repeat. And so there is that side of it.

And then the other side of it is continuing to invest in people on – so the OpEx line. Whether its engineers who are building the next pieces to our product or new product editions, or making the customer site experience even better and better and those are that people we’re going to add today, that are going to really show up in repeat rate of customers a quarter from now, two quarters from now, three quarters from now. So that investment is going to continue and so it’s – that’s really what you’re seeing in the Q4 EBITDA guidance.

John Blackledge

Okay, great. And just maybe just one follow-up, longer term, given that the repeat customer rate, I think it accelerated from a growth perspective this quarter, that’s better maybe than what you thought a year ago. And so longer term, you guys have always said it’s kind of like 8% to 9% EBITDA margin is the right number to think about. Is it perhaps better with theoretically better repeat customers than you guys thought a year ago, or when you talked about that number? And then also just much higher top line. The top line trajectory and market share is much greater. Thank you.

Michael Fleisher

Yes, look our long-term EBITDA margin target has been 8% to 10%. There is no – nothing we would see that would change our view that that’s sort of where we are driving to over the long-term. And I think the repeat metrics we’re seeing how the customers are coming back, how they are sort of recognizing the great site experience, customer service experience all of that is kind of as we anticipated when we sort of put those together.

And as Niraj mentioned earlier there’s obviously a much, much, much lower cost of advertising to get a customer to come back because we know who they are we have their email, we can connect with them through the email and the apps.

And so I think that follows a long into us in many ways it starts to prove out what we believe its long-term thesis when we understand and dig into what it cost to get the customer to comeback. It really proves out the long-term thesis around being able to get to that 6% to 8% ad spend in the long-term model.

John Blackledge

Thank you.

Michael Fleisher

Thanks.

Operator

Your next question comes from the line of Deb Schwartz from Goldman Sachs. Your line is open.

Deb Schwartz

Hey, great. Thanks and congrats on the quarter. Two quick questions. First on vendor services, can you talk a little bit about some of the initiatives that you have around fulfillment and vendor services. How far along are you, what you expect the impact to be on ship times, and particularly into holiday?

And then second, question on free cash flow, Michael, you’re now free cash flow positive. Any reason to think that you’re not sustainably free cash positive from here? Thanks.

Niraj Shah

Hey, Deb, it’s Niraj, I will answer the first part and then turn it over to Michael. Yes, so on your question around vendor services, fulfillment, ship times and the like, and we actually have a multi-year track record now of decreasing ship times, and I think when we went public, people were surprised that our lead time for something to leave a warehouse was already down to just over two days, and that was considered really good.

In our mind, we wanted to get it down further and further over time, and we continue to march along that road map. And we also obviously think about when it delivers, and we’re working on really reducing that significantly. And so, a lot of what we’re doing on the operations side is around that delivery experience, which is basically a function of the time it takes for delivery. On large parcel, it’s a function of also how it’s delivered and the customer experience associated with that. And on the small parcel side, absolutely, we use UPS and FedEx for that. And so it’s really being tightly integrated with them. And so we keep making tremendous headway there.

Steve Conine

And Deb, on the free cash question, so we’re – obviously as we’re running sort of right at are very close to breakeven at this point in the business is sort of comfortably free cash flow positive. The one thing I would note though is we do we have a working capital cycle and a seasonality to that. Particularly in Q4 where we sell a lot towards the end of the quarter and then in the paying out to suppliers in January. And so there tends to be a larger positive free cash flow – because of the working capital swings in Q4 and then a negative working capital outflow in Q1. But other than that I think we’re – based on where we’re at from a EBITDA perspective and we feel pretty good about the positive free cash flow we’re putting on the board.

Debra Schwartz

That’s helpful, thanks. And just a quick follow up to the first question. Niraj, what I’m referring to a little bit more is some initiatives we’ve been hearing from vendors about storing inventory in your fulfillment centers. Can you talk about how much of a focus that is for you?

Niraj Shah

Yes sure. So the way we think about the world is that a lot of traditional retailers focus on just going directly to the factories and sourcing goods themselves. They orient around a narrow selection, they take inventory and that traditional model focuses on lowering their first costs as much as possible, and basically try to push the gross margin up as much as possible.

The thing about that, that is predicated on a world where narrow selection is efficient. Our belief online is that wide selection is much more beneficial. So our whole model is about being tightly integrated with suppliers, to where we can have a much wider selection. We can lean on the supplier to basically do a lot of product development and do the sourcing, procurement, and do that into the supply chain.

And then the place where we meet is the domestic logistics, and then, obviously, we’re doing all the marketing, merchandising, customer service and that end experience for the customer. And that partnership with these key supplier partners of ours, we think is a big piece of what’s fueling our success, in terms of giving the customer such a good experience.

So to that end, one of the things we do is we do provide a lot of the distribution logistics services to basically provide that seamless end-to-end experience because that’s the integration point where we work with these suppliers, and so we have definitely have been ramping that up over time, and for really the suppliers we’re tight with, we do focus on basically providing that operational capability to them in the same way that we don’t want them doing customer service, we don’t want them needing to do a lot of merchandising work, we want to do that. We similarly want to control this piece of the experience and let them focus on what they’re great at, which is really this product sourcing and product development piece. And so we have been growing that substantially.

Debra Schwartz

Great, thank you.

Niraj Shah

Thanks, Deb.

Operator

Your next question comes from the line of Michael Graham from Canaccord Genuity. Your line is open.

Michael Graham

Hi, thanks. Two questions, please. The first, just the bigger question one on the addressable market. If you could just give us a quick refresher on the $60,000 to $175,000 household, how many households do you think that is in the U.S., and how deeply do you think you can penetrate that? And maybe just, do you have any comfort that you’re not about to hit an early adopter cliff, which I don’t take you are, but some are saying that?

And then second question is just, if I could ask on 2016, for any kind of preliminary content or comment, you’re growing revenue in the 90% range, looks like consensus has you growing in the high 20% next year, and I’m just wondering as to anything structural in the business that would make the growth rate slow down that much? Thanks.

Niraj Shah

Sure, Mike. This is Niraj. On the addressable market question, let me just give you a couple of numbers. So first, the wider definition we’d use the addressable market, $50,000 household income to $250,000 million, if you use that its $60,000 million household, if you narrow it into what you mentioned which is $60,000 to $175,000, you would narrow it into about 45 million household.

So the way to think about it roughly is that 4.6 million active customers and you then think about the U.S. households I mentioned, we really do not have very much penetration at all, particularly when you think about what we are, right. Wayfair is an everyday store. The every day store model is the primary commerce model that captures the bulk of the market, so specialty models tend to play at the fringes, but they have a hard time scaling up. So a lifestyle retail play, like a Pottery Barn, a Restoration, they tend to get small pieces of the market.

Something like online this private sale models, they tend to get small pieces of the market, but then if you look at like the Targets and the Home Depots and these mass retailers, they tend to get big chunks in the market and it is because of the everyday store and nature of it. And so, we have a variety of models but Wayfair is an everyday store. So we tend to think that it based on its also ability to provide the selection, the merchandizing and the experience can be the customers go to in-home.

So in other words, when we start thinking about the 60 million households, we think that we can be the customers go to in the majority of those households. So, 4.6 million, we think we’re still pretty in the early days. The other thing I would point to that supports that is slide 18, if you look at the cohorts on slide 18, I agree with you that you always would worry about it, diminishing return on your next customer and at some point that that you can know that you’re saturating you TAM.

What slide 18 shows I think it’s really interesting is that despite the size, the $2.4 billion run rate we’re now at as of this last quarter, if you look at this slide, you’ll see that the newer cohorts are far more productive than the older cohorts and that’s kind of been sustainably proven over a period of time that chart now runs out right at about just under five years of history.

And so what I think you’re seeing is that we’re still in the early part of that adoption curve and there are still far more households to get before we reach any sort of diminishing return problem, which would imply that saturation is a real thing. On 2016, I will let Michael to answer it more fulsome, but I think to be honest the biggest thing is, while revenue growth can’t keep accelerating, I don’t think most of the folks, who cover us, have updated their models for 2016.

Michael Fleisher

Yes, Michael, the key thing is, I guess, I’m hopeful that with the Q3 numbers now done and Q4 guidance out there that everyone will start to really look at their 2016 number. There is nothing – to your question, there is nothing structural that would cause – I think cause a lower – that lower rate in 2016. And I think what you really have is a situation where most of those models haven’t been updated in quite sometime. But hopefully now everybody has got a sort of clear picture of what 2015 looks like and then can start to figure out what they want to put out there for 2016.

Michael Graham

Okay. Thank you guys and congrats.

Niraj Shah

Thanks.

Operator

Your next question comes from the line of Mark May from Citi. Your line is open.

Mark May

Hi, guys. Thanks for let me ask you a question. Just I think most of them have been addressed, but just a couple. On the non-Wayfair brands, can you talk about the level of investment, and kind of what the trend has been in terms of profitability or improvements, or expansion in investment, or losses in those brands? And then, I think there were some changes in the quarter related to Google and the search algorithm. I wonder if you could talk a little bit about any benefit that you may have derived from that in the quarter? And then how an improved ranking in the Google search engine could impact growth and profitability in Q4 and into 2016? Thanks.

Niraj Shah

Sure Mark. Thanks for your questions. So the first question on the non-Wayfair brands, the other four brands, Joss & Main, Birch Lane, AllModern, DwellStudio, so, as you know, we don’t break out the numbers for all of them, but the way I would describe them is, I referenced a minute ago actually, different merchandising models versus the everyday store, and what I would point out the two that are everyday stores are Wayfair and AllModern, but AllModern is cut by a very specific style, so right there, it become specialty in a way.

And then you have two that are lifestyle retailers in Birch Lane and DwellStudio, and you have one that operates as a lifestyle retailer with that very heavy engagement merchandising model, which is Joss & Main. So the way we think about these specialty brands, we know sort of know they’ll have different market sizes that are all much smaller than the Wayfair opportunity. But the way we tend to think about them is that they either need to be growing well with good unit economics in a productive way that means that every dollar invested is getting us the economic return we want meaning that quick payback, good lifetime value, good profits on the long-term value of the customer or as the growth is coming off, they need to be glide pathing into the profitability we want them to have long-term. And what I will say about each of them is that they are all run that way. And so, while they are in different stages, each one is in a different stage of its evolution, that is a consistent story kind of across all five of our brands.

Now what you see in total, because Wayfair so big, relative to the rest, you really see the profile of Wayfair.com coming through in the total. But that philosophy that we described for Wayfair.com, you can take as applying to all five, which is why we think the overall business is stronger by having all of them. On the second question, about Google changed in the quarter, our general experience, this is a multi-year comment, is that Google continues to make changes to their algorithm, making their algorithm more and more reflective of what customers actually show interest in.

So where our customers most excited to see, what sites should be they want to go to, where are they happiest, where are they most likely to purchase, where they most likely to repeat visit, and so on and so forth. And they’ve kept enhancing that. I will tell you that we’ve continued, in general, to be a beneficiary along the way, where we see ourselves benefiting from a competitive standpoint in garnering that traffic. But despite that, what I would tell you is that natural search traffic, while it’s a nice piece of traffic in the sense that it’s free and it’s incremental, it’s actually a pretty modest portion of the total.

So it’s not that big. So we obviously want to keep gaining in search results, but we believe the way we do that is because we’re making the experience better and better, and we just think Google is frankly getting better and better at measuring that. And what’s happening is we’re getting favored, but because it’s not that bigger source of traffic, even though we are getting favored, it doesn’t help you, it doesn’t move you up that fast in terms of your total business. So it’s a nice thing to have, and we think we will keep benefiting, but it’s not going to be a primary driver.

Mark May

Thanks.

Niraj Shah

Thanks.

Operator

Your next question comes from the line of Jason Helfstein from Oppenheimer. Your line is open.

Jason Helfstein

Thanks. Just dig a little, Michael, into your comments around next year and profitability. I mean you commented that you expect to be positive EBITDA by the end of the year. I mean it would seem that you could be profitable in the first half of the year. If you don’t, it’s because you choose not to be? So maybe kind of help us understand, are those more investments around continued investments around marketing, is that more of the other engineering-driven investments? Just maybe talk about kind of how your decision making around that kind of profit pivot? Thanks.

Niraj Shah

Yes, thanks Jason, look I think to your point we could be profitable and more profitable now if we wanted to be and we are making a very conscious set of decisions I think we’ve been clear about this from the time of our IPO. And I think maybe more importantly everybody is now seeing the benefit of those investment decisions right in the accelerating growth rate and the incredible repeat that we’re seeing with our customers including the old cohorts. And so I think there is little clarity now for everyone that the investments are worthwhile and have great ROI.

And so for us it’s a matter of managing that but also managing our commitment to getting the profitability by the end of the year and so we’re working those two off against each other. But there is a very long list of places where we think there is a huge opportunity on the engineering side adding engineering talent and another headcount talent that can really sort of build the business and deliver great new experiences for customers. And we continue to see great results on the ad spend and so I think you’ll continue to see us leaning on both of those again as we go into 2016 but making sure that we’re doing that in a sort of thoughtful and measured way.

Jason Helfstein

Thank you.

Niraj Shah

Thanks Jason.

Operator

That concludes today’s questions. I would now like turn the call back to Niraj Shah, please go ahead.

Niraj Shah

Thanks everyone for calling in, we hope you guys have a great holiday season and we look forward to talking to you next quarter.

Operator

This concludes today’s conference call. You may now disconnect.

Recommended For You

Comments (2)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.