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|
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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36-4791999
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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4 Copley Place, 7
th
Floor, Boston, MA
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02116
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Class
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Outstanding at October 31, 2016
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Class A Common Stock, $0.001 par value per share
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49,450,946
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Class B Common Stock, $0.001 par value per share
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36,091,181
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Page
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September 30,
2016 |
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December 31,
2015 |
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Assets
|
|
|
|
|
|
|
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Current assets
|
|
|
|
|
|
|
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Cash and cash equivalents
|
|
$
|
208,344
|
|
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$
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334,176
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|
Short-term investments
|
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84,471
|
|
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51,895
|
|
||
Accounts receivable, net of allowance of $2,675 and $2,767 at September 30, 2016 and December 31, 2015, respectively
|
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16,689
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|
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9,906
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Inventories
|
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19,188
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19,900
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|
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Prepaid expenses and other current assets
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87,417
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76,446
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Total current assets
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416,109
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492,323
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Property and equipment, net
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211,285
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112,325
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Goodwill and intangible assets, net
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4,530
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|
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3,702
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Long-term investments
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41,718
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79,883
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Other noncurrent assets
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10,477
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|
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6,348
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|
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Total assets
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$
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684,119
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$
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694,581
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Liabilities and Stockholders' Equity
|
|
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Current liabilities
|
|
|
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|
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Accounts payable
|
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$
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312,306
|
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$
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270,913
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Accrued expenses
|
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68,289
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|
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51,560
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|
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Deferred revenue
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55,383
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50,884
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Other current liabilities
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37,014
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23,669
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Total current liabilities
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472,992
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397,026
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Lease financing obligation
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28,900
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—
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Other liabilities
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71,723
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|
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55,010
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Total liabilities
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573,615
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452,036
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|
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Commitments and contingencies (Note 6)
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|
|
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Convertible preferred stock, $0.001 par value per share: 10,000,000 shares authorized and none issued at September 30, 2016 and December 31, 2015
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—
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—
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|
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Stockholders’ equity:
|
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Class A common stock, par value $0.001 per share, 500,000,000 shares authorized, 49,303,861 and 45,814,237 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
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49
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46
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|
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Class B common stock, par value $0.001 per share, 164,000,000 shares authorized, 36,100,764 and 38,496,562 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively
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36
|
|
|
38
|
|
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Additional paid-in capital
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396,949
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|
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378,162
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|
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Accumulated deficit
|
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(285,984
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)
|
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(135,565
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)
|
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Accumulated other comprehensive loss
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(546
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)
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(136
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)
|
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Total stockholders’ equity
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110,504
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|
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242,545
|
|
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Total liabilities and stockholders’ equity
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$
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684,119
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$
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694,581
|
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Three months ended September 30,
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Nine months ended September 30,
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||||||||||||
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2016
|
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2015
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2016
|
|
2015
|
||||||||
Net revenue
|
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$
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861,525
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|
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$
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593,972
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$
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2,395,801
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$
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1,510,095
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Cost of goods sold
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659,864
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452,586
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1,826,570
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1,145,073
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||||
Gross profit
|
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201,661
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|
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141,386
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|
|
569,231
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|
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365,022
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|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
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Customer service and merchant fees
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33,872
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|
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21,109
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|
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91,286
|
|
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55,417
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|
||||
Advertising
|
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101,333
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|
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70,711
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|
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293,436
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|
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190,249
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|
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Merchandising, marketing and sales
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48,550
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|
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27,083
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129,679
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|
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74,131
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|
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Operations, technology, general and administrative
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79,526
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|
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41,120
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207,289
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|
|
110,581
|
|
||||
Total operating expenses
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263,281
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|
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160,023
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|
|
721,690
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|
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430,378
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|
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Loss from operations
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(61,620
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)
|
|
(18,637
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)
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|
(152,459
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)
|
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(65,356
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)
|
||||
Interest (expense) income, net
|
|
(292
|
)
|
|
325
|
|
|
791
|
|
|
897
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|
||||
Other income, net
|
|
889
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|
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2,746
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1,804
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|
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2,542
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|
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Loss before income taxes
|
|
(61,023
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)
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(15,566
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)
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(149,864
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)
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(61,917
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)
|
||||
(Benefit from) provision for income taxes
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(83
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)
|
|
(88
|
)
|
|
555
|
|
|
31
|
|
||||
Net loss
|
|
$
|
(60,940
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)
|
|
$
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(15,478
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)
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$
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(150,419
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)
|
|
$
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(61,948
|
)
|
Net loss per share, basic and diluted
|
|
$
|
(0.72
|
)
|
|
$
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(0.18
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)
|
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$
|
(1.77
|
)
|
|
$
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(0.74
|
)
|
Weighted average number of common stock outstanding used in computing per share amounts, basic and diluted
|
|
85,105
|
|
|
83,886
|
|
|
84,779
|
|
|
83,569
|
|
|
|
Three months ended September 30,
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Nine months ended September 30,
|
||||||||||||
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2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
|
|
$
|
(60,940
|
)
|
|
$
|
(15,478
|
)
|
|
$
|
(150,419
|
)
|
|
$
|
(61,948
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
|
(240
|
)
|
|
371
|
|
|
(875
|
)
|
|
323
|
|
||||
Net unrealized (loss) gain on available-for-sale investments
|
|
(163
|
)
|
|
(67
|
)
|
|
465
|
|
|
(69
|
)
|
||||
Comprehensive loss
|
|
$
|
(61,343
|
)
|
|
$
|
(15,174
|
)
|
|
$
|
(150,829
|
)
|
|
$
|
(61,694
|
)
|
|
|
Nine months ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Cash flows from operating activities
|
|
|
|
|
|
|
||
Net loss
|
|
$
|
(150,419
|
)
|
|
$
|
(61,948
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
|
|
|
|
|
||||
Depreciation and amortization
|
|
38,528
|
|
|
23,351
|
|
||
Equity based compensation
|
|
35,188
|
|
|
21,741
|
|
||
Gain on sale of a business
|
|
—
|
|
|
(2,997
|
)
|
||
Other non-cash adjustments
|
|
(134
|
)
|
|
1,395
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
(6,773
|
)
|
|
(3,832
|
)
|
||
Inventories
|
|
716
|
|
|
(2,778
|
)
|
||
Prepaid expenses and other current assets
|
|
(12,493
|
)
|
|
(28,419
|
)
|
||
Accounts payable and accrued expenses
|
|
53,443
|
|
|
60,340
|
|
||
Deferred revenue and other liabilities
|
|
33,556
|
|
|
37,927
|
|
||
Other assets
|
|
(2,292
|
)
|
|
(25
|
)
|
||
Net cash (used in) provided by operating activities
|
|
(10,680
|
)
|
|
44,755
|
|
||
|
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
|
|||
Purchase of short-term and long-term investments
|
|
(76,458
|
)
|
|
(141,309
|
)
|
||
Sale and maturities of short-term investments
|
|
82,060
|
|
|
78,715
|
|
||
Purchase of property and equipment
|
|
(81,844
|
)
|
|
(36,695
|
)
|
||
Site and software development costs
|
|
(21,444
|
)
|
|
(13,107
|
)
|
||
Cash received from the sale of a business, net of cash sold
|
|
1,508
|
|
|
2,860
|
|
||
Other investing activities, net
|
|
(1,000
|
)
|
|
302
|
|
||
Net cash used in investing activities
|
|
(97,178
|
)
|
|
(109,234
|
)
|
||
|
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
|
|||
Taxes paid related to net share settlement of equity awards
|
|
(18,426
|
)
|
|
(12,899
|
)
|
||
Net proceeds from exercise of stock options
|
|
166
|
|
|
374
|
|
||
Net cash used in financing activities
|
|
(18,260
|
)
|
|
(12,525
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
|
286
|
|
|
(165
|
)
|
||
Net decrease in cash and cash equivalents
|
|
(125,832
|
)
|
|
(77,169
|
)
|
||
|
|
|
|
|
||||
Cash and cash equivalents
|
|
|
|
|
|
|
||
Beginning of period
|
|
334,176
|
|
|
355,859
|
|
||
End of period
|
|
$
|
208,344
|
|
|
$
|
278,690
|
|
|
|
|
|
|
||||
Supplemental disclosure of non-cash investing activities
|
|
|
|
|
|
|
||
Purchase of property and equipment included in accounts payable and accrued expenses and in other liabilities
|
|
$
|
5,744
|
|
|
$
|
2,636
|
|
Construction costs capitalized under finance lease obligations
|
|
$
|
29,726
|
|
|
$
|
8,687
|
|
Class
|
|
Range of Life
(In Years)
|
Furniture and computer equipment
|
|
3 to 7
|
Site and software development costs
|
|
2
|
Leasehold improvements
|
|
Lesser of useful life or lease term
|
Building
|
|
30
|
|
|
September 30, 2016
|
||||||||||||||
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities
|
|
$
|
54,327
|
|
|
$
|
21
|
|
|
$
|
(10
|
)
|
|
$
|
54,338
|
|
Commercial paper
|
|
5,135
|
|
|
—
|
|
|
(2
|
)
|
|
5,133
|
|
||||
Long-term:
|
|
|
|
|
|
|
|
|
|
|||||||
Investment securities
|
|
41,564
|
|
|
163
|
|
|
(9
|
)
|
|
41,718
|
|
||||
Total
|
|
$
|
101,026
|
|
|
$
|
184
|
|
|
$
|
(21
|
)
|
|
$
|
101,189
|
|
|
|
December 31, 2015
|
||||||||||||||
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair Value
|
||||||||
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities
|
|
$
|
16,908
|
|
|
$
|
—
|
|
|
$
|
(13
|
)
|
|
$
|
16,895
|
|
Long-term:
|
|
|
|
|
|
|
|
|
||||||||
Investment securities
|
|
80,172
|
|
|
2
|
|
|
(291
|
)
|
|
79,883
|
|
||||
Total
|
|
$
|
97,080
|
|
|
$
|
2
|
|
|
$
|
(304
|
)
|
|
$
|
96,778
|
|
▪
|
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities
|
▪
|
Level 2—Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable or can be corroborated by observable market data for substantially the full-term of the asset or liability
|
▪
|
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability
|
|
|
September 30, 2016
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds
|
|
$
|
88,265
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88,265
|
|
Commercial paper
|
|
—
|
|
|
5,133
|
|
|
—
|
|
|
5,133
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|||||||
Certificates of deposit
|
|
25,000
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
||||
Investment securities
|
|
—
|
|
|
54,338
|
|
|
—
|
|
|
54,338
|
|
||||
Restricted cash:
|
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
|
5,000
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
||||
Long-term:
|
|
|
|
|
|
|
|
|
|
|||||||
Investment securities
|
|
—
|
|
|
41,718
|
|
|
—
|
|
|
41,718
|
|
||||
Total
|
|
$
|
118,265
|
|
|
$
|
101,189
|
|
|
$
|
—
|
|
|
$
|
219,454
|
|
|
|
December 31, 2015
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds
|
|
$
|
267,300
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
267,300
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Certificates of deposit
|
|
35,000
|
|
|
—
|
|
|
—
|
|
|
35,000
|
|
||||
Investment securities
|
|
—
|
|
|
16,895
|
|
|
—
|
|
|
16,895
|
|
||||
Restricted cash:
|
|
|
|
|
|
|
|
|
||||||||
Certificate of deposit
|
|
5,000
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
||||
Long-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment securities
|
|
—
|
|
|
79,883
|
|
|
—
|
|
|
79,883
|
|
||||
Total
|
|
$
|
307,300
|
|
|
$
|
96,778
|
|
|
$
|
—
|
|
|
$
|
404,078
|
|
|
|
Weighted - Average Amortization
Period (Years)
|
|
September 30, 2016
|
||||||||||
|
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Book Value
|
|||||||
Trademarks
|
|
5
|
|
$
|
1,900
|
|
|
$
|
(1,203
|
)
|
|
$
|
697
|
|
Technology
|
|
3
|
|
1,453
|
|
|
(40
|
)
|
|
$
|
1,413
|
|
||
Customer relationships
|
|
5
|
|
1,300
|
|
|
(823
|
)
|
|
477
|
|
|||
Other intangibles
|
|
3
|
|
373
|
|
|
(354
|
)
|
|
19
|
|
|||
Total
|
|
|
|
$
|
5,026
|
|
|
$
|
(2,420
|
)
|
|
$
|
2,606
|
|
|
|
Weighted - Average Amortization
Period (Years)
|
|
December 31, 2015
|
||||||||||
|
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Book Value
|
|||||||
Trademarks
|
|
5
|
|
$
|
1,900
|
|
|
$
|
(918
|
)
|
|
$
|
982
|
|
Customer relationships
|
|
5
|
|
1,300
|
|
|
(628
|
)
|
|
672
|
|
|||
Non-compete agreements
|
|
3 - 5
|
|
100
|
|
|
(81
|
)
|
|
19
|
|
|||
Other intangibles
|
|
3
|
|
373
|
|
|
(270
|
)
|
|
103
|
|
|||
Domain names
|
|
5
|
|
2,687
|
|
|
(2,685
|
)
|
|
2
|
|
|||
Total
|
|
|
|
$
|
6,360
|
|
|
$
|
(4,582
|
)
|
|
$
|
1,778
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Furniture and computer equipment
|
|
$
|
127,565
|
|
|
$
|
68,416
|
|
Site and software development costs
|
|
68,906
|
|
|
50,907
|
|
||
Leasehold improvements
|
|
58,322
|
|
|
29,315
|
|
||
Construction in progress
|
|
23,364
|
|
|
27,563
|
|
||
Building (leased - Note 6)
|
|
29,856
|
|
|
—
|
|
||
|
|
308,013
|
|
|
176,201
|
|
||
Less accumulated depreciation and amortization
|
|
(96,728
|
)
|
|
(63,876
|
)
|
||
Property and equipment, net
|
|
$
|
211,285
|
|
|
$
|
112,325
|
|
|
|
Shares
|
|
Weighted-
Average Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term (Years)
|
|||
Outstanding at December 31, 2015
|
|
279,591
|
|
|
$
|
2.98
|
|
|
5.5
|
Options exercised
|
|
(55,827
|
)
|
|
$
|
2.98
|
|
|
|
Options forfeited/canceled
|
|
(176
|
)
|
|
$
|
3.42
|
|
|
|
Outstanding at September 30, 2016
|
|
223,588
|
|
|
$
|
2.98
|
|
|
4.7
|
Exercisable at September 30, 2016
|
|
223,588
|
|
|
$
|
2.98
|
|
|
4.7
|
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Outstanding at December 31, 2015
|
|
1,993
|
|
|
$
|
4.75
|
|
Restricted stock granted
|
|
60,000
|
|
|
$
|
44.34
|
|
Restricted stock vested
|
|
(1,993
|
)
|
|
$
|
4.75
|
|
Unvested at September 30, 2016
|
|
60,000
|
|
|
$
|
39.37
|
|
Expected to vest at September 30, 2016
|
|
49,171
|
|
|
$
|
39.37
|
|
|
|
Shares
|
|
Weighted-
Average Grant
Date Fair Value
|
|||
Outstanding at December 31, 2015
|
|
5,607,867
|
|
|
$
|
28.30
|
|
RSUs granted
|
|
2,851,452
|
|
|
$
|
39.65
|
|
RSUs vested
|
|
(1,431,327
|
)
|
|
$
|
25.14
|
|
RSUs forfeited/canceled
|
|
(517,519
|
)
|
|
$
|
33.18
|
|
Outstanding at September 30, 2016
|
|
6,510,473
|
|
|
$
|
33.60
|
|
Expected to vest at September 30, 2016
|
|
5,002,821
|
|
|
$
|
34.01
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct Retail
|
|
$
|
832,398
|
|
|
$
|
544,971
|
|
|
$
|
2,299,901
|
|
|
$
|
1,354,665
|
|
Other
|
|
29,127
|
|
|
49,001
|
|
|
95,900
|
|
|
155,430
|
|
||||
Net revenue
|
|
$
|
861,525
|
|
|
$
|
593,972
|
|
|
$
|
2,395,801
|
|
|
$
|
1,510,095
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Geographic net revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States
|
|
$
|
787,801
|
|
|
$
|
566,227
|
|
|
$
|
2,226,395
|
|
|
$
|
1,431,466
|
|
International (1)
|
|
73,724
|
|
|
27,745
|
|
|
169,406
|
|
|
78,629
|
|
||||
Total
|
|
$
|
861,525
|
|
|
$
|
593,972
|
|
|
$
|
2,395,801
|
|
|
$
|
1,510,095
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Geographic long-lived assets:
|
|
|
|
|
|
|
||
United States
|
|
$
|
205,113
|
|
|
$
|
110,042
|
|
International
|
|
6,172
|
|
|
2,283
|
|
||
Total
|
|
$
|
211,285
|
|
|
$
|
112,325
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net loss
|
|
$
|
(60,940
|
)
|
|
$
|
(15,478
|
)
|
|
$
|
(150,419
|
)
|
|
$
|
(61,948
|
)
|
Weighted average common shares used for basic and diluted net loss per share computation
|
|
85,105
|
|
|
83,886
|
|
|
84,779
|
|
|
83,569
|
|
||||
Net loss per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic and Diluted
|
|
$
|
(0.72
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(1.77
|
)
|
|
$
|
(0.74
|
)
|
|
|
Three and nine months ended September 30,
|
||||
|
|
2016
|
|
2015
|
||
Stock options
|
|
223,588
|
|
|
302,617
|
|
Restricted stock
|
|
60,000
|
|
|
6,001
|
|
Restricted stock units
|
|
6,510,473
|
|
|
4,915,338
|
|
Total
|
|
6,794,061
|
|
|
5,223,956
|
|
|
|
Three months ended September 30,
|
|
|
|||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
Consolidated Financial Metrics
|
|
|
|
|
|
|
|
|
|
||
Net Revenue
|
|
$
|
861,525
|
|
|
$
|
593,972
|
|
|
45.0
|
%
|
Adjusted EBITDA
|
|
$
|
(30,849
|
)
|
|
$
|
(1,445
|
)
|
|
|
|
Free cash flow
|
|
$
|
(13,968
|
)
|
|
$
|
35,332
|
|
|
|
|
Direct Retail Financial and Operating Metrics
|
|
|
|
|
|
|
|
||||
Direct Retail Net Revenue
|
|
$
|
832,398
|
|
|
$
|
544,971
|
|
|
52.7
|
%
|
Active Customers
|
|
7,362
|
|
|
4,591
|
|
|
60.4
|
%
|
||
LTM Net Revenue per Active Customer
|
|
$
|
406
|
|
|
$
|
371
|
|
|
9.4
|
%
|
Orders Delivered
|
|
3,417
|
|
|
2,323
|
|
|
47.1
|
%
|
||
Average Order Value
|
|
$
|
244
|
|
|
$
|
235
|
|
|
3.8
|
%
|
|
|
Nine months ended September 30,
|
|
|
|||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
Consolidated Financial Metrics
|
|
|
|
|
|
|
|
|
|
||
Net Revenue
|
|
$
|
2,395,801
|
|
|
$
|
1,510,095
|
|
|
58.7
|
%
|
Adjusted EBITDA
|
|
$
|
(76,666
|
)
|
|
$
|
(18,757
|
)
|
|
|
|
Free cash flow
|
|
$
|
(113,968
|
)
|
|
$
|
(5,047
|
)
|
|
|
|
Direct Retail Financial and Operating Metrics
|
|
|
|
|
|
|
|
||||
Direct Retail Net Revenue
|
|
$
|
2,299,901
|
|
|
$
|
1,354,665
|
|
|
69.8
|
%
|
Active Customers
|
|
7,362
|
|
|
4,591
|
|
|
60.4
|
%
|
||
LTM Net Revenue per Active Customer
|
|
$
|
406
|
|
|
$
|
371
|
|
|
9.4
|
%
|
Orders Delivered
|
|
9,343
|
|
|
6,079
|
|
|
53.7
|
%
|
||
Average Order Value
|
|
$
|
246
|
|
|
$
|
223
|
|
|
10.3
|
%
|
▪
|
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
▪
|
Adjusted EBITDA does not reflect equity based compensation and related taxes;
|
▪
|
Adjusted EBITDA does not reflect changes in our working capital;
|
▪
|
Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us;
|
▪
|
Adjusted EBITDA does not reflect depreciation and interest expenses associated with the lease financing obligation; and
|
▪
|
Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Reconciliation of Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss
|
|
$
|
(60,940
|
)
|
|
$
|
(15,478
|
)
|
|
$
|
(150,419
|
)
|
|
$
|
(61,948
|
)
|
Depreciation and amortization
|
|
15,463
|
|
|
9,207
|
|
|
38,528
|
|
|
23,351
|
|
||||
Equity based compensation and related taxes
|
|
15,308
|
|
|
7,985
|
|
|
37,265
|
|
|
23,248
|
|
||||
Interest expense (income), net
|
|
292
|
|
|
(325
|
)
|
|
(791
|
)
|
|
(897
|
)
|
||||
Other (income), net
|
|
(889
|
)
|
|
(2,746
|
)
|
|
(1,804
|
)
|
|
(2,542
|
)
|
||||
(Benefit from) provision for income taxes
|
|
(83
|
)
|
|
(88
|
)
|
|
555
|
|
|
31
|
|
||||
Adjusted EBITDA
|
|
$
|
(30,849
|
)
|
|
$
|
(1,445
|
)
|
|
$
|
(76,666
|
)
|
|
$
|
(18,757
|
)
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net cash provided by (used in) operating activities
|
|
$
|
15,621
|
|
|
$
|
51,504
|
|
|
$
|
(10,680
|
)
|
|
$
|
44,755
|
|
Purchase of property and equipment
|
|
(20,408
|
)
|
|
(11,491
|
)
|
|
(81,844
|
)
|
|
(36,695
|
)
|
||||
Site and software development costs
|
|
(9,181
|
)
|
|
(4,681
|
)
|
|
(21,444
|
)
|
|
(13,107
|
)
|
||||
Free cash flow
|
|
$
|
(13,968
|
)
|
|
$
|
35,332
|
|
|
$
|
(113,968
|
)
|
|
$
|
(5,047
|
)
|
|
|
Three months ended September 30,
|
|
|
|||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
||
Cost of goods sold
|
|
$
|
659,864
|
|
|
$
|
452,586
|
|
|
45.8
|
%
|
As a percentage of net revenue
|
|
76.6
|
%
|
|
76.2
|
%
|
|
|
|
|
|
Three months ended September 30,
|
|
|
|||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
Customer service and merchant fees (1)
|
|
$
|
33,872
|
|
|
$
|
21,109
|
|
|
60.5
|
%
|
Advertising
|
|
101,333
|
|
|
70,711
|
|
|
43.3
|
%
|
||
Merchandising, marketing and sales (1)
|
|
48,550
|
|
|
27,083
|
|
|
79.3
|
%
|
||
Operations, technology, general and administrative (1)
|
|
79,526
|
|
|
41,120
|
|
|
93.4
|
%
|
||
|
|
$
|
263,281
|
|
|
$
|
160,023
|
|
|
64.5
|
%
|
As a percentage of net revenue:
|
|
|
|
|
|
|
|
|
|
||
Customer service and merchant fees (1)
|
|
3.9
|
%
|
|
3.6
|
%
|
|
|
|
||
Advertising
|
|
11.8
|
%
|
|
11.9
|
%
|
|
|
|
||
Merchandising, marketing and sales (1)
|
|
5.6
|
%
|
|
4.6
|
%
|
|
|
|
||
Operations, technology, general and administrative (1)
|
|
9.2
|
%
|
|
6.9
|
%
|
|
|
|
||
|
|
30.5
|
%
|
|
27.0
|
%
|
|
|
|
|
|
Three months ended September 30,
|
|
|
||||||
|
|
2016
|
|
2015
|
|
|
||||
Customer service and merchant fees
|
|
$
|
627
|
|
|
$
|
236
|
|
|
|
Merchandising, marketing and sales
|
|
$
|
6,588
|
|
|
$
|
3,414
|
|
|
|
Operations, technology, general and administrative
|
|
$
|
7,881
|
|
|
$
|
4,239
|
|
|
|
|
|
Three months ended September 30,
|
|
|
||||
|
|
2016
|
|
2015
|
|
|
||
|
|
|
|
|
|
|
|
|
Customer service and merchant fees
|
|
3.9
|
%
|
|
3.5
|
%
|
|
|
Merchandising, marketing and sales
|
|
4.9
|
%
|
|
4.0
|
%
|
|
|
Operations, technology, general and administrative
|
|
8.3
|
%
|
|
6.2
|
%
|
|
|
|
|
Nine months ended September 30,
|
|
|
|||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
Cost of goods sold
|
|
|
|
|
|
|
|
|
|
||
Cost of goods sold
|
|
$
|
1,826,570
|
|
|
$
|
1,145,073
|
|
|
59.5
|
%
|
As a percentage of net revenue
|
|
76.2
|
%
|
|
75.8
|
%
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
|||||||
|
|
2016
|
|
2015
|
|
% Change
|
|||||
Customer service and merchant fees (1)
|
|
$
|
91,286
|
|
|
$
|
55,417
|
|
|
64.7
|
%
|
Advertising
|
|
293,436
|
|
|
190,249
|
|
|
54.2
|
%
|
||
Merchandising, marketing and sales (1)
|
|
129,679
|
|
|
74,131
|
|
|
74.9
|
%
|
||
Operations, technology, general and administrative (1)
|
|
207,289
|
|
|
110,581
|
|
|
87.5
|
%
|
||
|
|
$
|
721,690
|
|
|
$
|
430,378
|
|
|
67.7
|
%
|
As a percentage of net revenue
|
|
|
|
|
|
|
|
|
|
||
Customer service and merchant fees (1)
|
|
3.8
|
%
|
|
3.7
|
%
|
|
|
|
||
Advertising
|
|
12.2
|
%
|
|
12.6
|
%
|
|
|
|
||
Merchandising, marketing and sales (1)
|
|
5.4
|
%
|
|
4.9
|
%
|
|
|
|
||
Operations, technology, general and administrative (1)
|
|
8.7
|
%
|
|
7.3
|
%
|
|
|
|
||
|
|
30.1
|
%
|
|
28.5
|
%
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
||||||
|
|
2016
|
|
2015
|
|
|
||||
Customer service and merchant fees
|
|
$
|
1,488
|
|
|
$
|
743
|
|
|
|
Merchandising, marketing and sales
|
|
$
|
16,910
|
|
|
$
|
10,484
|
|
|
|
Operations, technology, general and administrative
|
|
$
|
18,510
|
|
|
$
|
11,775
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
||||
|
|
2016
|
|
2015
|
|
|
||
|
|
|
|
|
|
|
|
|
Customer service and merchant fees
|
|
3.7
|
%
|
|
3.6
|
%
|
|
|
Merchandising, marketing and sales
|
|
4.7
|
%
|
|
4.2
|
%
|
|
|
Operations, technology, general and administrative
|
|
7.9
|
%
|
|
6.5
|
%
|
|
|
|
|
9/30/2016
|
|
12/31/2015
|
||||
|
|
(in thousands)
|
||||||
Cash and cash equivalents
|
|
$
|
208,344
|
|
|
$
|
334,176
|
|
Short-term investments
|
|
$
|
84,471
|
|
|
$
|
51,895
|
|
Accounts receivable, net
|
|
$
|
16,689
|
|
|
$
|
9,906
|
|
Long-term investments
|
|
$
|
41,718
|
|
|
$
|
79,883
|
|
Working capital
|
|
$
|
(56,883
|
)
|
|
$
|
95,297
|
|
|
|
Nine months ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in thousands)
|
||||||
Net loss
|
|
$
|
(150,419
|
)
|
|
$
|
(61,948
|
)
|
Net cash (used in) provided by operating activities
|
|
$
|
(10,680
|
)
|
|
$
|
44,755
|
|
Net cash used in investing activities
|
|
$
|
(97,178
|
)
|
|
$
|
(109,234
|
)
|
Net cash used in financing activities
|
|
$
|
(18,260
|
)
|
|
$
|
(12,525
|
)
|
Exhibit
|
|
|
Incorporated by Reference
|
|
Number
|
|
Exhibit Description
|
Form
|
Filing Date/Period End Date
|
10.1
|
|
Amendment No. 4 to Loan Agreement, dated as of July 31, 2016, by and between Bank of America, N.A. and Wayfair LLC.
|
8-K
|
8/4/2016
|
|
|
|
|
|
10.2*
|
|
Fifth Amendment to Office Lease between Copley Place Associates, LLC and Wayfair LLC (such lease, as amended to date, the "Copley Lease"), dated as of July 29, 2016, by and between Copley Place Associates, LLC and Wayfair LLC.
|
|
|
|
|
|
|
|
10.3*
|
|
Elevator Side Letter to Copley Lease, dated as of July 28, 2016, by and between Copley Place Associates, LLC and Wayfair LLC.
|
|
|
|
|
|
|
|
31.1*
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
31.2*
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
32.1**
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
32.2**
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Calculation Linkbase Document
|
|
|
|
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Labels Linkbase Document
|
|
|
|
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Presentation Linkbase Document
|
|
|
*
|
|
Exhibits filed herewith.
|
|
|
|
**
|
|
Exhibits furnished herewith.
|
|
|
WAYFAIR INC.
|
|
|
|
|
|
|
Date: November 8, 2016
|
By:
|
/s/ NIRAJ SHAH
|
|
|
Niraj Shah
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
Date: November 8, 2016
|
By:
|
/s/ MICHAEL FLEISHER
|
|
|
Michael Fleisher
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
A.
|
Base Rent for the Current Premises for the extension of the Term to December 31, 2027 is set forth on
Exhibit C
attached hereto and Section 1.11 of the Lease is amended hereby.
|
B.
|
Base Rent for the Amendment 5 Expansion Spaces, and the date as which Base Rent for the Amendment 5 Expansion Spaces commences, shall be as set forth on
Exhibit D
. Effective as of the date Base Rent becomes payable for a portion of the Amendment 5 Expansion Spaces, the Base Rent payable under Section 1.11 of the Lease (as such section of the Original Lease has been amended to date) shall be the sum of (i) the Base Rent otherwise payable under the Lease as amended by Subsection 3A above and (ii) the increase in Base Rent, attributable to the Amendment 5 Expansion Spaces set forth in
Exhibit D.
|
A.
|
Section 1.12 of the Lease is amended to read in its entirety:
|
1.12 Operating Expense
Base Year: |
As to the Premises other than the Fifth Expansion Spaces, the Calendar Year 2014.
As to the Fifth Expansion Spaces, the Calendar Year 2016.
As to Amendment 5 Expansion Spaces, the Calendar Year 2018
|
B.
|
Section 1.14 of the Lease is amended to read in its entirety:
|
1.14 Tax Base Year:
|
As to the Premises other than the Fifth Expansion Spaces, the Calendar Year 2014.
As to the Fifth Expansion Spaces, the tax fiscal year July 1, 2016 to June 30, 2017.
As to Amendment 5 Expansion Spaces, the tax fiscal year July 1, 2017 to June 30, 2018.
|
C.
|
Section 1.16 of the Lease is amended to read in its entirety:
|
1.16 Tenant’s Proportionate
Tax Share: |
33.25 % for the Premises (computed on the basis of 95% occupancy) consisting of 278,534 rentable square feet, exclusive of the Fifth Expansion Spaces.
11.22% for the Fifth Expansion Spaces (computed on the basis of 95% occupancy).
19.52% for the Amendment 5 Expansion Spaces.
|
D.
|
Effective for periods from and after the Fifth Expansion Commencement Date, Section 1.17 of the Lease is amended to read in its entirety:
|
1.17 Tenant’s Proportionate
Expense Share: |
33.25% for the Premises (computed on the basis of 95% occupancy) consisting of 278,534 rentable square feet, exclusive of the Fifth Expansion Spaces.
11.22% for the Fifth Expansion Spaces Premises (computed on the basis of 95% occupancy).
19.52% for the Amendment 5 Expansion Spaces
|
A.
|
The Amendment 5 Expansion Spaces are being delivered to Tenant as of the date hereof in as-is, where-is condition (subject only to Landlord’s Contributions (as defined in Subsection C below) to demolition and construction), except that Landlord shall deliver the Amendment 5 Expansion Spaces broom-clean and free of all occupants, furniture, debris and other personal property. Subject to the foregoing, without limitation, Landlord shall have no responsibility for any condition or construction within the Amendment 5 Expansion Spaces or for any condition above the finished ceilings except with regard to utilities and conduits serving premises other than the Premises, except that the foregoing shall not relieve Landlord from its obligations to deliver the Premises with all base Building systems operational at the Premises and to repair and maintain the Building components described in Section 8.02 of the Original Lease (as the same may be amended from time to time) in accordance with and subject to said Section 8.02 of the Original Lease (as the same may be amended from time to time). Subject to the foregoing, the obligations of Landlord under Exhibit B-2 of the Original Lease shall not be applicable to the Amendment 5 Expansion Spaces nor shall Tenant have any right to any Allowance with respect to the Amendment 5 Expansion Spaces under Article 38 of the Original Lease (except as set forth in Subsection C below). Tenant shall be responsible for the demolition of the Amendment 5 Expansion Spaces and, subject only to Landlord’s Contributions, for all construction therein and for installation of telecommunications, business equipment and furniture (all of which shall be subject to the terms and conditions of the Lease regarding Alterations as if the amendment 5 Expansion Spaces were a part of the Premises) and all costs in connection therewith including without limitation, electricity used incident to such demolition and construction therein. Without limiting the generality of the foregoing, all work necessary to prepare the Amendment 5 Expansion Spaces for Tenant’s occupancy shall be performed at Tenant’s sole cost and expense, in accordance with the applicable provisions of this Lease. Furthermore, if any alterations or modifications to the Building are required under applicable Legal Requirements by reason of the density of Tenant’s usage if in excess of ordinary office-related use or the Alterations made by Tenant to the Amendment 5 Expansion Spaces which are not ordinary office leasehold improvements, the cost of such Building modifications (including, without limitation, to bathrooms) shall be paid by Tenant.
|
B.
|
Entry by Tenant for demolition and construction shall be at Tenant’s sole risk and without material interference to any work then being performed in the Building by Landlord or to any work then being performed by other tenants in space occupied by such tenants, and all of the covenants and conditions of the Lease as amended hereby shall be binding upon the parties hereto with respect to such whole or part of the Amendment 5 Expansion
|
C.
|
Landlord shall contribute to the cost of Tenant’s demolition and improvements to the Amendment 5 Expansion Spaces, an amount equal to Ten Dollars ($10.00) per rentable square foot of the Amendment 5 Expansion Spaces or
$1,634,850.00
(“Landlord’s Contribution”). Payment of Landlord’s Improvement Contribution shall be subject to the procedures of Article 38 of the Original Lease except that (a) “Allowance” under Article 38 shall mean the amount of the Landlord’s Contribution, (b) “Initial Alterations” shall mean the Alterations to the Amendment 5 Expansion Spaces, (c) the date of June 15, 2015 shall be replaced with June 30, 2017. Tenant shall not be required to pay Landlord for the use of elevators and hoists during and with respect to the making of Alterations to the Amendment 5 Expansion Spaces.
|
D.
|
Solely for the purpose of determining Tenant’s obligations with respect to restoration of the Premises at the end of the Term, all Alterations made by Tenant to initially prepare the Amendment 5 Expansion Spaces shall be deemed “Initial Alterations”; accordingly, Tenant shall not be required to remove or restore any of such Alterations (or Alterations that were comparable replacements thereof) whether or not the same are Specialty Alterations. Tenant shall not be required to pay Landlord for the use of elevators and hoists during the making of initial Alterations to the Amendment 5 Expansion Spaces.
|
A.
|
Landlord anticipates that approximately 100,698 rentable square feet of space in the Building “
Potential Expansion Space
”), currently leased to a single tenant, will become available for lease on or about January 1, 2018. Landlord agrees that if Tenant notifies Landlord not later than January 1, 2017, that it desires to lease such space, Landlord shall lease such space to Tenant as of the last to occur of (a) January 1, 2018 and the date on which the current tenant of the space vacates the Potential Expansion Space. The Potential Expansion Space will be leased on all of the terms and conditions of the Amendment 5 Expansion Spaces (commencing on the date the Potential Expansion Space is delivered to Tenant) except that the Rent for the Potential Expansion Space shall not commence until four (4) months following the date of delivery of all of the Potential Expansion Space to Tenant. The Potential Expansion Space is described on Exhibit E attached hereto.
|
B.
|
If Tenant exercises the expansion option under Subsection A, Landlord shall prepare an amendment (an “
Expansion Amendment
”) adding the applicable expansion space to the Premises on the terms set forth above and reflecting the changes in the Base Rent, Rentable Square Footage of the Premises, Tenant’s Proportionate Share of Taxes and Tenant’s Proportionate Share of Expenses and other appropriate terms. Without limiting the generality of the foregoing, the associated Landlord contribution with respect to the Potential Expansion Space shall be at Ten Dollars ($10.00) per rentable square foot of the Potential Expansion Space and the Letter of Credit Amount will increase by $
608,000.00
|
A.
|
Right
. If, during the Term, Landlord determines (in Landlord’s sole judgment) from time to time that any space in the Office Section (including without limitation the Potential Expansion Space, if Tenant did not exercise its option with respect thereto, or any part thereof) will be, or is then, leasable to a third party and Landlord is prepared to enter into a lease to a specific third party on terms set forth in the most recent response to a request for a proposal from, or other exchange with, such third party (such space, except as set forth in the provisos below, is referred to herein as “
Available
”), Landlord shall (subject to the provisos set forth below) offer to lease such space (“
Offering Space
”) to Tenant (such offer on terms consistent with the provisos below, the “
Advice
”), such lease to commence as of the date on which the Landlord is prepared to deliver such space; provided, however,
|
i.
|
In the event Tenant accepts such offer and the Offering Space will become a part of the Premises by December 31, 2018, the Offering Space will be added to the then Premises under the Lease as amended on the same terms and conditions as the Amendment 5 Expansion Premises are added to the Premises under this Fifth Amendment and otherwise on all of the terms and conditions of the Lease as the same may be amended from time to time. For purposes of certainty, and without limitation, the then monthly Base Rent applicable to the Amendment 5 Expansion Premises, the per square foot Landlord’s contribution (prorated to reflect the reduction in term from a term commencing January 1, 2017), the Operating Expense Base Year and the Tax Base Year, the term and the condition of the Offering Space at delivery and the increase in the letter of credit shall be as contemplated with respect to the Amendment 5 Expansion Premises.
|
ii.
|
In the event Tenant accepts such offer and the Offering Space will become a part of the Premises after December 31, 2018, the Offering Space shall be leased to Tenant at Prevailing Market Rent (as hereinafter defined) and otherwise on all of the terms and conditions of the Lease as the same may be amended from time to time, except as otherwise set forth in the Advice as terms under which Landlord would be leasing to a third party, and except that there shall be no extension or expansion options, no rights of first offer and no allowance or contribution except as otherwise so set forth in the Advice to reflect the terms offered or to be offered to the third party) or as a factor in determining the Prevailing Market Rent; provided, however, Tenant shall be entitled to an increase in parking rights as set forth in Article 37 of the Lease as amended.
|
iii.
|
In the event Tenant does not timely exercise the right to Offering Space, Landlord shall have a period of six (6) months to enter into a lease of the Offering Space with a third party before Tenant’s rights with respect to such Offering Space are again in effect.
|
iv.
|
As to any space which Landlord leases to a third party by reason of Tenant having not exercised rights to lease such space under clause iii of this Section 9A, Landlord may effect renewals and extensions of the lease of space to such tenants, without such action triggering any right of Tenant to lease such space hereunder but only if such third party tenant had a right of extension or renewal under the lease or amendment thereof entered into after Tenant determined not to exercise the right to the space as Offering Space (which may occur with respect to the original lease to the third party or as a result of a proposed amendment of the lease to the third party). For purposes of clarity, if a third party enters into a lease of Offering Space after Tenant has failed to exercise its right of first offer with respect thereto and such third party lease (and the Advice to Tenant) contained a renewal option or a right of extension, Landlord may enter into a renewal with such third party or an extension of the lease with such third party on such terms as Landlord and such third party may negotiate even if not consistent with the rights of the third party to renewal or extension under the existing third party lease. Furthermore, if such third party has no such rights under its lease, but Landlord then offers the space to Tenant consistent with the right of first offer hereunder and Tenant elects not to exercise its right of first offer with respect to such space, Landlord may renew or extend the lease to the third party or to any other third party and in any case the space will again be subject to Tenant’s right of first offer at the expiration of the term of the new or extended lease, subject to the right of Landlord to renew or extend if the new lease or the extended or renewed lease then has a right of renewal or extension.
|
v.
|
Tenant shall have no right to an Advice with respect to the space currently leased to the Canadian Consulate (comprising 12,778 rentable square feet in Tower 3) or the German Consulate (comprising 12,574 rentable square feet in Tower 3) or to the space currently occupied by the Landlord as a management office, comprising 5,911 rentable square feet in Tower 3. Any renewal by the current tenants of such spaces shall not be subject to a prior right to lease by Tenant pursuant to the right of first offer.
|
vi.
|
Tenant may lease Offering Space that is subject to an Advice in its entirety only, under the applicable terms described below, by delivering written notice of exercise to Landlord (the "
Notice of Exercise
") within five (5) business days from the date of such offer set forth in the Advice, time being of the essence. In any event, Tenant’s delivery of a Notice of Exercise shall be deemed to be the irrevocable exercise by Tenant of its right of first offer subject to and in accordance with the provisions of this Section 9.
|
vii.
|
Notwithstanding the foregoing, Tenant shall have no such right of first offer and Landlord need not provide Tenant with an Advice, if:
|
a.
|
A material default is then continuing at the time that Landlord would otherwise deliver the Advice; or
|
b.
|
Tenant herein named (or a transferee pursuant to a Related Party Transfer, as defined in Article 17 of the Lease) is not in occupancy of at least 70% of the
rentable square feet leased by Tenant at the time
|
c.
|
This Lease has been assigned (other than pursuant to a Related Party Transfer) prior to the date Landlord would otherwise deliver the Advice.
|
B.
|
Definition of Prevailing Market Rent
. “
Prevailing Market Rent
” for purposes of this Section 9 shall mean the rent (base rent and additional rent adjusted, if necessary, to reflect the base years to be used for the applicable period) per rentable square foot for similar office space in the Building and in comparable buildings as reasonably located in the City of Boston (i) taking into account (a) any difference in the base years between the Offering Space and the compared space for measurement of additional rent on account of taxes and expenses, (b) the magnitude of any free rent or buildout allowance included in rent for the compared space, (c) length of lease, (d) building amenities in the respective buildings, (e) the location and floor levels of the Offering Space and the compared space, (f) services provided in the respective buildings, (g) surrender rights, if any, in the compared space (h) parking rights and obligations, (i) free rent, tenant allowances or other concessions in the compared space and (j) all other relevant market factors and (iii) taking into account the brokerage commissions, if any, to be paid in connection with the leasing the respective spaces.
|
C.
|
Determination of Prevailing Market Rent
. Within thirty (30) days after Landlord’s receipt of the Notice of Exercise, Landlord shall provide Tenant with its good faith estimate of the Prevailing Market Rent. If, within thirty (30) days after Tenant’s receipt of Landlord’s estimate, Tenant shall not have notified Landlord of its objection to Landlord’s estimate and of Tenant’s estimate of Prevailing Market Rent, the estimate of Prevailing Market Rent quoted by Landlord shall be deemed to be the Prevailing Market Rent for the Offering Space. If Tenant so notifies Landlord of its objection, the parties shall discuss the matter in good faith for thirty (30) days after Tenant’s objection notice. If within such thirty (30) day period the parties have not agreed on the Prevailing Market Rent rate in writing, then Landlord and Tenant shall, during the ensuing fifteen (15) days, attempt to agree on an arbitrator not affiliated with either party (and if they are unable to do so, either party may request that the President of the American Arbitration Association in Boston choose an arbitrator, as promptly as possible, meeting the criteria set forth below; provided, however, the parties shall have the right during the ten (10) day period following the end of the fifteen (15) day period to submit the names of not more than two (2) potential arbitrators meeting the said criteria and if the parties or either of them makes such a submission, the choice of the President of the American Arbitration Association shall be made from the arbitrators so submitted). Such arbitrator shall have a period of thirty (30) days to determine which of Landlord’s estimate of Prevailing Market Rent or Tenant’s estimate of Prevailing Market Rent hereunder more closely corresponds to the Prevailing Market Rent and the estimate of Prevailing Market Rent which more closely corresponds to the arbitrator’s estimate of Prevailing Market Rent shall be the Prevailing Market Rent for purposes hereof with respect to the subject Offering Space and the determination shall be binding upon the parties. The arbitrator must choose either the Prevailing Market Rent estimate submitted by Landlord or the Prevailing Market Rent Estimate submitted by Tenant. Such arbitrator shall have at least ten (10) years’ experience in the valuation and appraisal of first-class office rents for real estate in the City of Boston, be experienced with leasing transactions exceeding 100,000 square feet within the downtown Boston area, and have no then contractual relationship with either
|
E.
|
Condition of Offering Space
. Offering Space (including improvements therein) with respect to which Tenant has timely exercised its right to add the same to the Premises shall be delivered to Tenant broom-clean and free of occupants and personal property with all Building Systems servicing the Offering Space providing good working order service to the Offering Space, but otherwise in its condition and as-built configuration existing on the earlier of the date Tenant takes possession of the Offering Space or as of the date the term for such Offering Space commences. If Landlord is delayed delivering possession of the Offering Space due to the holdover or unlawful possession of the Offering Space by any party, or otherwise, Landlord shall use reasonable efforts to obtain possession of the Offering Space, and the commencement of the term for the Offering Space and Tenant’s obligation to pay Rent for such Offering Space shall be postponed until the date Landlord delivers possession of the Offering Space to Tenant free from occupancy by any party and otherwise in the condition required hereunder and the scheduled rent commencement date occurs. If Landlord is unable to deliver the Offering Space by the date which is ninety (90) days following the commencement date set forth in the applicable Advice, Tenant shall have the right to withdraw its notice to add the Offering Space to the Premises at any time thereafter, but only prior to delivery of such Offering Space in the condition required hereunder, by thirty (30) days’ notice to Landlord of such withdrawal; provided, however, such notice of withdrawal shall be of no force or effect if, prior to the end of such thirty (30) days, Landlord delivers the Offering Space to Tenant in the condition required hereunder.
|
F.
|
Amendment to Incorporate ROFO Space
. If Tenant exercises a right of first offer hereunder, Landlord shall prepare an amendment to the Lease as then amended on the terms contemplated in this Section 9 and reflecting the Base Rent, Rentable Square Footage of the Premises, Tenant’s Proportionate Share of Taxes and Tenant’s Proportionate Share of Expenses and other appropriate terms as contemplated hereby. A copy of such amendment shall be sent to Tenant and, subject to Landlord and Tenant agreeing upon the final form to reasonably reflect the amendment terms contemplated herein, Tenant shall execute and return the amendment to Landlord within thirty (30) days thereafter, and Landlord shall promptly thereafter deliver a copy thereof executed by Landlord to Tenant, but an otherwise valid exercise of a right of first offer shall be fully effective, whether or not an amendment is executed.
|
A.
|
This Fifth Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any Rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Fifth Amendment or the Lease as amended hereby. Exhibits attached hereto are incorporated herein by reference.
|
B.
|
Landlord and Tenant hereby agree to execute, acknowledge and deliver, in recordable form, an amended notice of the Lease to reflect all of the Premises leased by Tenant under the Lease, consistent with the provisions of Massachusetts General Laws, Chapter 183, Section 4. Landlord represents and warrants to Tenant that as of the date of Landlord’s execution of this Fifth Amendment, there is no mortgage on the Building or the Property. Landlord shall request and use reasonable efforts to obtain from the DOT a recognition agreement with respect to this Fifth Amendment consistent with the provisions of the last paragraph of Article 21 of the Lease.
|
C.
|
Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.
|
D.
|
In the case of any inconsistency between the provisions of the Lease and this Fifth Amendment, the provisions of this Fifth Amendment shall govern and control.
|
E.
|
Submission of this Fifth Amendment by Landlord is not an offer to enter into this Fifth Amendment, but rather is a solicitation for such an offer by Tenant. Neither party shall be bound by this Fifth Amendment until such party has executed and delivered the same to the other party.
|
By:
|
SPG COPLEY ASSOCIATES, LLC, a Delaware limited liability company,
managing member |
TOWER
|
FLOOR
|
RENTABLE SQUARE FOOTAGE
|
ADD TO PREMISES DATE
|
One
|
1
|
33,633
|
On Execution and Delivery Hereof
|
Two
|
5
|
27,853
|
January 1, 2017
|
Two
|
6
|
28,737
|
January 1, 2017
|
Two
|
7
|
18,481
|
January 1, 2017
|
Three
|
5
|
19,862
|
January 1, 2017
|
Three
|
6
|
34,919
|
January 1, 2017
|
Period
|
Annual Base Rent per Rentable Square Foot
|
Annual Base Rent
|
Monthly Installment of Annual Base Rent
|
July 1, 2025-June 30, 2026
|
$45.25
|
$17,239,978.50
|
$1,436,664.88
|
July 1, 2026-June 30, 2027
|
$46.25
|
$17,620,972.50
|
$1,468,414.38
|
July 1, 2027-December 31, 2027
|
$47.25
|
$18,001,966.50
|
$1,500,163.88
|
Period
|
Annual Base Rent
Per Rentable Square Foot |
Annual
Base Rent |
Monthly
Installment of Annual Base Rent (proportionately for any partial month |
January 1, 2017 through June 30, 2017
|
$36.25
|
None
|
None
|
July 1, 2017 through August 31, 2017
|
$37.25
|
None
|
None
|
September 1, 2017 through February 28, 2018, based on 63,485 rsf
|
$37.25
|
$2,364,816.25
|
$197,068.02
|
March 1, 2018 through March 30, 2018, based on 113,485 rsf
|
$37.25
|
$4,227,316.25
|
$352,276.35
|
April 1, 2018 through June 30, 2018, based on 163,485 rsf
|
$37.25
|
$6,089,816.25
|
$507,484.69
|
July 1, 2018 through June 30, 2019, based on 163,485 rsf
|
$38.25
|
$6,253,301.25
|
$521,108.44
|
July 1, 2019 through June 30, 2020, based on 163,485 rsf
|
$39.25
|
$6,416,786.25
|
$534,732.19
|
July 1, 2020 through June 30, 2021, based on 163,485 rsf
|
$40.25
|
$6,580,271.25
|
$548,355.94
|
July 1, 2021 through June 30, 2022, based on 163,485 rsf
|
$41.25
|
$6,743,756.25
|
$561,979.69
|
July 1, 2022 through June 30, 2023, based on 163,485 rsf
|
$42.25
|
$6,907,241.25
|
$575,603.44
|
July 1, 2023 through June 30, 2024, based on 163,485 rsf
|
$43.25
|
$7,070,726.25
|
$589,227.19
|
July 1, 2024 through June 30, 2025, based on 163,485 rsf
|
$44.25
|
$7,234,211.25
|
$602,850.94
|
July 1, 2025 through June 30, 2026, based on 163,485 rsf
|
$45.25
|
$7,397,696.25
|
$616,474.69
|
Period
|
Annual Base Rent
Per Rentable Square Foot |
Annual
Base Rent |
Monthly
Installment of Annual Base Rent (proportionately for any partial month |
July 1, 2026 through June 30, 2027, based on 163,485 rsf
|
$46.25
|
$7,561,181.25
|
630,098,44
|
July 1, 2027 through December 31, 2027, based on 163,485 rsf
|
$47.25
|
$7,724,666.25
|
$643,722.19
|
Tower
|
Floor
|
Rentable Square Feet
|
One
|
2
|
39,414
|
One
|
6
|
3,881
|
Two
|
2
|
29,573
|
Two
|
3
|
27,830
|
1.
|
Landlord has exercised its rights referred to above and, consistent with the Third Amendment, in connection with the construction of the elevator shafts, Landlord shall at its own cost erect dust walls around the area being taken for the elevator shafts and paint the exterior of the dust walls to make the same compatible with the surrounding space of Tenant. As a result of the erection of the dust walls, the space in the Premises shall, as of the Takeover Date (hereinafter defined), be reduced, for the time periods described below, by 955 rentable square feet on the 3
rd
floor of Tower One and 1,809 rentable square feet on the 4
th
floor of Tower One in the areas designated as “Dust Wall Impact” on the floors shown on
Exhibit A
attached hereto and made a part hereof.
|
2.
|
By reason of the construction of the dust walls:
|
(a)
|
from the date Landlord takes control of any portion of the 3
rd
floor of the Premises to erect dust walls (“
Takeover Date
”) through the date (“
3
rd
Floor Re-Delivery Date
”) on which (i) Landlord has removed the 3
rd
floor dust wall, (ii) substantially completed the restoration, as described in Section 5 below, of the portion of the Premises which had been surrounded by the 3
rd
floor dust wall and (iii) made such area available to Tenant, the Base Rent otherwise payable by Tenant shall be reduced monthly (and proportionately for any partial month) by an amount equal to the corresponding month’s Base Rent per rentable square foot multiplied by 955; and
|
(b)
|
from the Takeover Date through the Training Room Date (as hereinafter defined), the Base Rent otherwise payable by Tenant shall be reduced monthly (and proportionately for any partial month) by an amount equal to the corresponding month’s Base Rent per rentable square foot multiplied by 1,809; and
|
(c)
|
during and with respect to the period that Base Rent is reduced with respect to the dust walls as set forth above, Tenant’s Proportionate Share of Operating Expenses and of Taxes shall be correspondingly reduced.
|
3.
|
From the date immediately following the 3
rd
Floor Re-Delivery Date, the Premises on the 3
rd
floor of Tower One shall be permanently reduced by 471 rentable square feet, the “Permanent Elevator Impacts” on the 3
rd
floor as shown on
Exhibit A
. Accordingly, from and after the 3
rd
Floor Re-Delivery Date, the Base Rent otherwise payable for the Premises under the Lease shall be reduced monthly (and proportionately for any partial month) by an amount equal to the corresponding month’s Base Rent per rentable square foot multiplied by 471. Furthermore, Tenant’s Proportionate Share of Operating Expenses and of Taxes shall be correspondingly reduced to reflect the permanent reduction, by 471 rentable square feet, in rentable square footage in the Premises.
|
4.
|
From and after the Training Room Date, the Premises on the 4
th
floor of Tower One shall be reduced by 216 rentable square feet, the “Permanent Elevator Impacts” on the 4
th
floor as shown on Exhibit A. Accordingly, from and after the Training Room Date, the Base Rent otherwise payable for the Premises under the Lease shall be reduced monthly (and proportionately for any partial month) by an amount equal to the corresponding month’s Base Rent per rentable square foot multiplied by 216. Furthermore, Tenant’s Proportionate Share of Operating Expenses and of Taxes shall be correspondingly reduced to reflect the permanent reduction, by 216 rentable square feet, in rentable square footage in the Premises.
|
5.
|
The area on the 3
rd
floor of Tower One is currently an employee “break” room and will be restored by Landlord at Landlord’s expense to that use with comparable finishes so as to match existing conditions.
|
6.
|
The area enclosed by the dust walls on the 4
th
floor of Tower One is currently a Board Meeting Room, but will be reconstructed by Tenant as an employee training room (“
Training Room
”) at Tenant’s expense (subject to the Landlord contribution referred to below). “
Training Room Date
” shall mean the date that is the twenty-first (21
st
) day following the date on which Landlord has removed the 4
th
floor dust wall to allow Tenant to accomplish construction of the Training Room and delivered the area, in its then as-is condition, to Tenant for Tenant’s construction.
|
7.
|
Tenant shall be responsible for all costs of constructing a new Board Meeting Room within the Premises and the Training Room in accordance with the plans referred to in
Exhibit B
attached hereto and made a part hereof, wiring the new facilities and relocating any necessary furniture, fixtures and equipment in connection with such construction and move; provided, however, Landlord shall contribute to the cost of construction, wiring and furniture fixtures and equipment, an amount equal to $119,180.00 with respect to the Board Room and an amount equal to $94,300.00 with respect to the Training Room, each such amount to be disbursed upon substantial completion of the respective construction projects. Construction shall be undertaken by Tenant in a manner consistent with the requirements for Alterations set forth in the Lease as amended. The foregoing payment and the costs to be paid by Landlord as set forth in this letter shall be in full satisfaction of Landlord’s obligation under the Lease with respect to moving, restoration and reconstruction.
|
8.
|
Consistent with Section 6 of the Third Amendment (which is hereby amended to reflect the correct floor reference as referred to in the Preamble hereto), Landlord and Tenant shall, following the Landlord’s delivery of space back to the Tenant after the removal of the dust walls, enter into an amendment to the Lease to document the permanent reduction in rent resulting from the permanent reduction in the size of the Premises.
|
By:
|
SPG COPLEY ASSOCIATES, LLC, a Delaware limited liability company,
managing member |
cc:
|
Enrique G. Colbert, Esq.
Maurice Sullivan, Esq. Patrick Peterman Jeffrey Cromer, Esq. |
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Wayfair Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 8, 2016
|
|
/s/ NIRAJ SHAH
|
|
|
Niraj Shah
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Wayfair Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 8, 2016
|
|
/s/ MICHAEL FLEISHER
|
|
|
Michael Fleisher
|
|
|
Chief Financial Officer
|
1)
|
the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 8, 2016
|
|
/s/ NIRAJ SHAH
|
|
|
Niraj Shah
|
|
|
President and Chief Executive Officer
|
1)
|
the Report which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 8, 2016
|
|
/s/ MICHAEL FLEISHER
|
|
|
Michael Fleisher
|
|
|
Chief Financial Officer
|