Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Wayfair Fourth Quarter 2023 Earnings Release and Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. James Lamb, Head of Investor Relations and Treasury, you may begin your conference.

Good morning, and thank you for joining us. Today, we will review our fourth quarter 2023 results. With me are Niraj Shah, Co-Founder, Chief Executive Officer and Co-Chairman; Steve Conine, Co-Founder and Co-Chairman; and Kate Gulliver, Chief Financial Officer and Chief Administrative Officer. We will all be available for Q&A following today's prepared remarks. I would like to remind you that our call today will consist of forward-looking statements, including, but not limited to, those regarding our future prospects, business strategies, industry trends and our financial performance, including guidance for the first quarter of 2024. All forward-looking statements made on today's call are based on information available to us as of today's date. We cannot guarantee that any forward-looking statements will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Our 10-K for 2023 and our subsequent SEC filings identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made today. Except as required by law, we undertake no obligation to publicly update or revise any of these statements whether as a result of any new information, future events or otherwise. Also, please note that during this call, we will discuss certain non-GAAP financial measures, as we review the company's performance, including adjusted EBITDA, adjusted EBITDA margin and free cash flow. These non-GAAP financial measures should not be considered replacements for and should be read together with GAAP results. Please refer to the Investor Relations section of our website to obtain a copy of our earnings release and investor presentation, which contain descriptions of our non-GAAP financial measures and reconciliations of any non-GAAP measures to the nearest comparable GAAP measures. This call is being recorded and a webcast will be available for replay on our IR website. I would now like to turn the call over to Niraj.

Thanks, James, and good morning, everyone. We're excited to be with you today to discuss our fourth quarter results and recap 2023. Q4 was one more definitive step on our profitability journey as we generated a 3% adjusted EBITDA margin, even in a difficult macro environment. This was our third consecutive quarter of positive adjusted EBITDA and free cash flow and a reflection of the immense progress we achieved across the entire year. In fact, on a revenue base that largely mirrored 2022, our free cash flow in 2023 improved by over $1 billion. As we exited 2022, we anchored ourselves around three core initiatives, nailing the basics, driving customer and supplier loyalty and cost efficiency. Over the course of 2023, we systematically executed on all three fronts. Our efforts to nail the basics and drive customer and supplier loyalty led to a large improvement in our core recipe across availability, speed and price competitiveness. The improvements across our offering were directly responsible for the step-up we saw in loyalty, which manifested in our robust share expansion over the last year and by the fourth quarter, a return to year-over-year growth in our active customer count. That engagement was driven in part by our progress on the third initiative, a meaningful evolution in our cost structure with savings spanning labor, operations and every other line of our P&L, which allowed us to reinvest in our customer experience. We've consistently shared that those same core initiatives would carry forward into 2024, and you've already seen the results of that play out. If you haven't had the chance, I'd encourage you to take a look at our shareholder letter that was published alongside our earnings results earlier this morning. Last year, we saw our team unlock large productivity gains as focused execution…

Thanks, Niraj, and good morning, everyone. Let's dive into our fourth quarter results, beginning with revenue. Net revenue for the quarter came in at $3.1 billion, up 0.4% from the same period last year. Orders grew by 2.7% year-over-year, and we saw active customer growth return positive, up 1.4% year-over-year in the period. As Niraj discussed earlier, average order values came in higher than expected, down only 2.5% against the fourth quarter of last year as we saw boost from our performance in higher ticket classes during the holiday shopping season. I want to touch on the top line and macro context a bit before going further in the P&L. As Niraj shared in his remarks, our category broadly remains under pressure. Within this context, we are very encouraged by our ongoing share gains and our continued ability to outpace the category. We've started this year with the best share figures we've seen across all the data we have in our credit card panel back to 2018. As we've shared previously, the share capture can be attributed to the return and strength of our core recipe in Q4 of 2022, as we improved availability, speed and price, driving a best-in-class customer experience. All of course, in the context of also aggressively managing our cost structure and driving profitability and free cash flow. I'll now move further down the P&L. As I do, please note that the remaining financials include depreciation and amortization, but exclude equity-based compensation, related taxes and other adjustments. I will use the same basis when discussing our outlook as well. Gross profit came in at 30.4% of net revenue as we saw the typical effects of holiday seasonality play out in tandem with our own proactive reinvestment of some operational savings that we had achieved earlier in…

[Operator Instructions] Your first question comes from the Simeon Gutman from Morgan Stanley. Your line is open.

Hey. Good morning, everyone. I wanted to ask first about the spread of your share gains vis-à-vis the industry, if you can contextualize it all where, I don't know, e-com or total industry is trending? And then what gives you confidence that spread holds throughout the year or could even expand?

Thanks, Simeon. This is Niraj. Sure. Let me answer that. So first on market share, obviously, there's a lot of ways to calculate market share. I'd say our main two ways we do that or we have a credit card data set we get, which has close to 100 competitors on it, and that gives us really good granular data at the competitor level and in total. The second is we talk to our suppliers lately, and they share how we're doing, and they'll share details relative to specific competitors. And while that's less of a quantitative read, that's a pretty dense detailed read. And so we use those two. But if you zoom out, the easiest one is just to look at our revenue, right? And if you zoom way out, you see our revenue was up just under 0.5% in the quarter year-over-year. I think if you look at competitors, depending on the category you pick, you're going to see numbers negative 10, negative 15. You're going to basically see numbers even maybe higher than that some are going to negative 20, that's where the category was year-over-year. So obviously, that delta is the share that we took because obviously, the revenue is customers voting with their dollars, that's the market share. So we are - the way to think about it for five quarters now since the fourth quarter of 2022, we've been taking away taking share, and that was basically on the back of availability and price starting to recover post COVID in the December 2022. By the fourth quarter of 2022, we had that recipe back in tax. So we very quickly started picking up the share, the low-hanging fruit of the share. But then even though that got hard after that as we hit…

And to that point, and this will be the follow-up. As sales recover, what is the right way to think about incrementals for every point above zero? And then alternatively, if it stays negative for the medium term, is there a way to think about decrementals?

Yeah, sure. So I think the way to think about - so actually, one thing I'll just put a plug in for is that we, today, along with obviously the earnings call materials, one of the things we released on the investor website is our annual shareholder letter and as title say, we only do that, obviously, once a year. So it's an opportunity to look out to the future and for us to share our thinking on a bunch of topics. And I really encourage everyone on the call to just take a few minutes to download that and read it. It's right on the IR website. Because there, we can really share some detailed thinking about what we're focused on, which is not so much the near term focus as the call tends to be. But one of the things I do mention is how we think about how we're poised for future earnings. And I talk about how the next $1 billion of revenue would flow through in the mid to high teens on EBITDA. And that's basically the concept. We have fixed costs in the business, and we get to leverage those as we grow. So there's - that's hopefully your point on kind of how - what's the incremental potential look like?

Yes. Simeon, it's Kate. Good morning. I guess what I would add to that, too, you asked sort of going the other way. And in the prepared remarks, I referenced the comment that we made on the third quarter call around substantial EBITDA growth. And I said, somewhat irrespective of the top line, we expect to see 15% EBITDA growth is really up floor. So even with ongoing challenging macro or in your scenario, a potential contraction ongoing, we would still expect pretty significant EBITDA growth in 2024 due to the cost actions that we've already taken.

Thank you, both.

Your next question comes from the line of Alexandra Steiger from Goldman Sachs. Your line is open.

Great. Thank you so much. So you've been very clear that reducing headcounts over the past few months have been a driver of efficiency and productivity within the organization. Where are we in that journey? Do you think there is more room for efficiencies? And when do you think it's actually the right time to start rehiring grow head count again? And then my second question for Kate. Could you just elaborate a little bit more on your Q1 revenue guide in terms of drivers behind the outlook and the factors that are inside versus outside your control? Thank you.

Why don't I answer the first part and then I then turn it over to Kate for your second part there. On the productivity, efficiency gains, head count side, I think the way to think about it is, we obviously did reduce head count over the last 18 months. But this last time, what we did is we did it with first and foremost in eye to what we thought a very efficient organizational model would be versus a cost savings target or something like that is the initial going-in goal. And so we think we've set up what will be a very efficient organization. There is some head count we will add to that, but it's modest in the scheme of the head count we have and what it really does, it lets us really reformulate teams including a lot of the more junior members of those teams, which during the COVID period, we hadn't hired. And so we didn't have as many of those folks on the team as would make sense from a ratio standpoint. And so with the college hires will join, we'll have them there. But that's from like an incremental head count cost standpoint, that's not a big number. And what we think is that there's a lot of productivity gains to come and that comes from a few different things. One, it comes from with the organizational model we set up, we think it enables folks to move faster and get more done. We're already seeing early signs of that. Second, we think then a lot of people are in new roles. So then as they get settled in as they're executing, we think there's compounding gains there. And then the last piece is we've spent a lot of the last couple of years on a technology transformation and re-platforming our core technology stack. And as we're nearing the later stages of that, we get a lot of gains from when we build feature function on the new technology. It's much faster to build and much flexible. And those games will come in the future, but we're nearing that point. So we're quite -- we feel quite good about how productivity will continue to compound as we go forward.

Yes. So as you know, on your revenue question, a few thoughts there. Obviously, the macro context is the macro context. We don't drive that. But we have been focused for the past fixed quarters on controlling what we can control. And as it pertains to revenue, a key piece of that is the recipe. So price, availability and speed. You heard your speak to that. That's been driving our share gains and we think we've done a really great job driving gains in what has been a challenging market. As it particularly pertains to this quarter, we’re obviously, sitting on this call deep into the quarter at this point. And so I just point you to that as you think about our quarter-to-date number and referencing that is generally what you expect for the quarter.

Great. Thank you.

Your next question comes from the line of Brian Nagel from Oppenheimer. Your line is open.

Hi, good morning. Thanks as always for the details. So I have a couple of questions here. I know the first one is going to be a follow-up. Just with regard to that, the guidance -- the top line guidance you've given here for Q1, should we interpret that to mean that if you're down mid-single digits, the backdrop of Wayfair has actually gotten more difficult here. And I recognize there's a lot of seasonality and such. But as we've gone from Q3, Q4 and then into Q1, as the backdrop actually gotten more difficult. And then my follow-up question, unrelated, Kate, thanks for all the details there with respect to the balance sheet. I guess maybe if you could help us understand better. You've obviously repositioned the business extraordinarily well. You have a better year and a better cash position, cash flow position, but how should we think about the timing of some of these actions on the balance sheet?

Okay. Great. Brian, why don't I - On your first part of your question, where you talk about is the backdrop getting more difficult. I think what you're referring to there is, has the macroeconomic climate gotten tougher. I think that's kind of where you're going with that. And we would say, yes, we would say that the macroeconomic climate has gotten tougher. I think that is what -- we just read comments from a lot of other retailers that have made public comments. That's what I think you're hearing broadly we've seen that in the credit card data. And I was at the Vegas furniture market, which I referenced earlier in January was particularly tough. Now, there was some bad weather in there that was temporal. So things have gotten a little better since. But the market is softer than you would have thought it would be if it was kind of like sequentially just kind of modestly seasonality adjusted flat. So I'd say the macro has gotten tougher, but I will also point out the macro, the depth of the macro drawdown now is quite significant. So it's kind of like, again, someone -- I forget who know it was, they referred to like demand bouncing along the bottom. And I'd say that's kind of like generally what we would think it roughly is, but you can't predict the macro. So that's why we focus more on the internal execution on the recipe. We focus on the internal drivers that we know will let us take share, that will let us outcompete others and do well regardless of what the market size is. And we -- just in this quarter, to date, so not the fourth quarter, but the first quarter our market share has continued to climb. So we're still hitting all-time highs. We're continuing meaning, we're climbing -- we're hitting new all-time highs.

Thank you for the question on capital structure. As you pointed out, we've seen significant changes in the profitablity and free cash flow nature of the business. And that broadly gives us optionality on capital structure. So as I said in the prepared remarks, one of notions [ph] actually is to pay the 2025s op in cash and we think that is a good and viable option. That said, we're very focused on what is most economically efficient for our shareholders and best for the business. And we intend to be prudent and thoughtful. And so we continue to be a wide range of options from cash payments or refinancing to a combination. With regards to your question on timing, it's worth noting that each quarter that our financial profile continues to improve and our free cash flow generation improves, obviously, the cost of capital for us continues to come down, and so there is some benefit there to the timing as well.

Very helpful. I appreciate. Thank you.

Your next question comes from the line of Anna Andreeva from Needham. Your line is open. Anna Andreeva, your line is open.

Apologies. Good morning, guys. Thanks so much. Can you talk about if you're seeing anything different with demand across various household incomes, is it the lower-income consumer that's more pressure so far in 1Q? And also curious on performance of other high-margin brands in a portfolio outside of core Wayfair banner, headed to specialty retail and the Wayfair professional perform that's either in the fourth quarter or so far quarter-to-date? Thank you so much.

Thanks, Ann. So a few thoughts on that. So first, you do see demand get increasingly pressured as you move down the income levels. So, obviously, you would expect that, but we see that in our data, and we also see that in the macro data we get from – particularly some of the banks and credit card companies. So I'd say that trend is pretty clean and pretty obvious. And so I think there's nothing surprising to that. And then in terms of our brands, when you talk about our brand and specialty brands, which play above mass and then the luxury platform Perigold, which plays above that, you're seeing that those hiring ones are doing quite well. And Perigold, I mean the luxury market is much less competitive, but it's growing at very significant rates. And part of that is, it's smaller than Wayfair, but we have small market share everywhere. It's just -- that's a relatively young brand for us. It's executing very well. And as we mentioned a minute ago, that higher end market is less pressure. So it's a much better plus, but it's growing significant growth rates.

Your next question comes from the line of Colin Sebastian from Baird. Your line is open.

Thanks and good morning. I appreciate the opportunity. Maybe one quick follow-up on the last question around customer segmentation, I know there's a lot of curiosity around emerging competition in e-commerce, from Asia, including expansion of the home category. Is that something that you foresee impacting prices or customer acquisition costs? Or is that more likely limited to the lower end consumer segment? And then maybe secondly, in the shareholder letter, I was intrigued by some of the comments on logistics around additional services that you're building on top of that infrastructure. And just curious for maybe a little more color on is that adding new revenue opportunity? Or is that more about creating additional efficiency, obviously, in terms of competitive differentiation. There's some interesting stuff happening there. Thank you.

Thanks, Colin. So first on your first part of your question around the customer segmentation, and I think basically, your question is like the growth of Temu and Shein and TikTok shop. And so what role do you see them playing from a competitive standpoint for us. What I would say is what we've really seen is where they compete is at the very low end of the market, both low end quality wise and ticket size. And so that's where their volume is that's what they're known for kind of with customers for I think that's where you see Amazon obviously lowered their take rate at the low end of certain categories, I think, because it's kind of a holiday competition there with those folks were. And I think some of the other folks who sell kind of smaller odds and then kind of referencing. We have not seen them really be a competitor. And we -- obviously, we go focus on home. Many people have a home business, the question is what do they really sell in home? What are the subcategories and what tranches of them? Do they really play in and that's where you start seeing the event diagram overlaps end up not being necessarily a very large in certain places, and they are much larger in other places. So we have not seen these folks to be competitors. Also, some of them are very large advertising spenders and we have not seen them really be a player when we look at the share and who our competitive set is in certain of the lower funnel advertising, things like Google, PLAs and Google Search or some of these things that are highly targeted and high intent. We don't see them being players there. And as you…

Great. Thanks, Niraj.

Your next question comes from the line of Christopher Horvers from JPMorgan. Your line is open.

Thanks. Good morning, everybody. So as you think about -- a couple of questions. So first, as you think about the flat scenario and $600 million plus of EBITDA, can you help us think about how that plays out down the P&L? Would you expect gross margin to expand in that scenario. If you go back to the Analyst Day, a lot of the long-term margin potential is in the gross margin line or is it simply more weighted to the lower cost on the SOTG&A line? Thanks.

Yeah. Hey Chris, good morning, it's Kate. I'll start with that. So it really is more of the cost takeout that we took out in January and seeing that flow through. So I would think about gross margin staying in that 30% to 31% range, which is where we've guided to and obviously where we averaged for '23, where you're going to see the cost savings from January and on the P&L that was actually in two places. One is on the customer service and merchant fees. We said of the $280 million total takeout and again, that was net, so that included the hiring back. But of the $280 million total takeout, $150 million would hit down to the adjusted EBITDA line of that $25 million within that customer service emergency line. And so when I guided, I said that would come in a little bit more going forward and then $125 million of that was on that SOTG&A line. We actually saw that in the guide. If you take the Q4 SOTG&A number and the midpoint of the guide, you'll see that $125 million feeding there. So really, where you see the pickups are on customer service and merchant fees on SOTG&A. Gross margin AC&R stay about where they average in '23 for that hypothetical $600 million on a flat revenue scenario.

And is that because the long-term gross margin initiatives are more sales dependent versus an opportunity to continue to take cost out? And just as a quick second follow-up, the worst case, plus 50% EBITDA in '24. Is that -- does that assume that the current trend of the business that's down mid-single digit sticks to the rest of the year? Thank you.

So let me answer the first part of your question first on the gross margin. So first, we remain very confident in the gross margin opportunities. Obviously, we've talked about getting in our Analyst Day, we talked about getting to 35-plus on gross margin. That, of course remains, what we were trying to provide in that $600 million is the framework on that flat revenue scenario, just from the cost savings for this year, how you can see that flow through. We continue to see ongoing operating efficiency in that gross margin line. And we always make the trade-off of, do we pass that through to the customer or do we pocket that. And as we've spoken about in the past, that's an ongoing discussion around what is going to be optimal on a multi-quarter basis. And you obviously saw us reinvest some of that in the fourth quarter of this year. So, although an opportunity there, nothing has changed in our longer-term plan, and we expect to see that to continue to pan out. On your question around the 50% adjusted EBITDA growth, I would think about that as a floor that we're trying to set. So the top line scenario, we're obviously not guiding to the top line, but we wanted to help folks see the opportunity that we have on adjusted EBITDA, somewhat irrespective of the macro conditions, based on all these cost efforts and the levers that we have at our disposal. You and I actually just talked about two of them. So one would be the hiring in the SOTG&A. That includes some hiring back throughout the year that can be needed as necessary depending on the macro and the other one on that gross margin line, we of course, always have ongoing operating and cost efficiency there that we're pushing on, and we can choose to pass that through to pocket that. And that gives us some optionality is why we felt comfortable saying that we can have that substantial adjusted EBITDA growth, irrespective of where the top line goes.

Thanks very much.

Your next question comes from the line of Steven Forbes from Guggenheim Securities. Your line is open.

Good morning. Niraj, I wanted to maybe expand on your curation comments in the letter, especially as we think about sort of how the assortment right, or the vendor base can change or house brand penetration can change over the coming years. And then maybe if you can sort of weave in how the curation strategy could or does sort of marry together with like any mitigation strategy around tariffs.

Great. So what I would say is the curation strategy, which is about really building up the - talk about the house brands and the specialty retail brands, but building up the selection in those with great items that we know customers will be thrilled with once they open the item and get it in their house and set it up and putting that kind of stable approval on it. Obviously, nature is very well priced. The logistics are under optimized. We think we can keep building that up and adding that value to that curation. So we think what we've done so far is just the beginning of that. Now what I would say is, obviously, we then are very thoughtful about which suppliers we're working with for those items, like where we taking these items from. So we're picking these from items who we know from suppliers that we know are reliable and ones that we can work with it well and who we have tight relationship with. Obviously, that then we could take many things into account. And obviously, like where items are produced through the tariffs question really is about a source of production. The category I would point to that's had a lot of tariff complexity over the last couple of years of mattress. And there's been multiple rounds where mattress sort of different countries have been assigned, different kind of penalties associated with tariffs, which really inhibited production in different places. And we've obviously been very cognizant to make sure that we have production that lets us have the quality items we want at the prices that make sense and making sure that we maintain availability that we're not out of stock and chasing it. So that's the type of thing that we think about as we're building our assortment in mattresses, our assortment is under brands like Nora or Wayfair Sleep. And then obviously, we work with branded folks as well. So hopefully, that answers your question in terms of how we think about it in the kind of the context of geographic location and supplier selection is part of how we think about it.

Thank you. And maybe just a quick follow-up for you, Kate. The comments around sort of your ability to pull back on maybe the reinvestment plans for the back half, anyway to help us contextualize the spread between gross and net? Should we look at the first quarter SOTG&A guidance compared to the fourth quarter and assume that's like two thirds of the benefit? Or any help on sort of just framing where the second quarter SOTG&A number sort of trough?

Yes. So I guess I would help you with this. On the SOTG&A, if you put the midpoint of that guide for Q1 and compare that to where the fourth quarter landed, you see the $125 million of net savings later, right? And so within that first quarter, you obviously had a month of comp for folks that exited in that quarter and not sort of offsetting what we said would be some of the hiring back. You actually end up at that net number in the first quarter, and that should stay based on the hiring plan, that should stay relatively constant throughout the year. Now, as I said, short is a lever for us as we had to pull and you could see us pull that lever dependent on the macro. But it's important to note that we think these hires made sense. It's part of rebuilding the pyramid structure that we think is appropriate for the ongoing growth and execution of the business. Niraj referenced some of the cabin hires and how those flow in and the benefit there. But generally, the Q1 guide, you think about that as a sort of good point on SOTG&A throughout the year based on the current hiring plan.

Thank you.

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

Yeah. Hi, guys. I had a question, Niraj, you mentioned three things that you're excited about in 2024. One was the new campaign in March and then the loyalty program. Maybe if you could spend a couple of minutes on explaining what that entails?

Sure. Yes, so yes, I mentioned three things I was excited about. One was the launch of the first Wayfair retail store and which opens in May, just north of Chicago and Wilmette. Another one was the new marketing campaign for Wayfair, which debuted in mid-March. So, that that's a campaign that obviously the most notable place you'll see it on is in television, but it really carried through all the different channels. We're really excited about it. You'll see it very shortly. But the whole goal is to continue to build brand loyalty for Wayfair until the story to make sure customers really understand the breadth and depth of what we offer and why Wayfair should be the place to go to for all things home. And so we think that this campaign can further that depth of understanding and continue to kind of build a real understanding and ultimately preference for what we offer. And the third one, which you're asking about is the tender-neutral loyalty program. And the tender-neutral loyalty program, the way to think about it today, what we have for a loyalty program, all the benefits of the loyalty program are associated with having the Wayfair credit card. So, you have to get a Wayfair credit card, either the Mastercard that’s co-branded with Citibank or just the Wayfair-specific store-based credit card. And then there's different rewards benefits that are associated with that. But we don't have a broad-based loyalty program that works regardless of how you choose to pay. And we think that there's a real opportunity for that, which could also help us not just provide customers with enhanced benefits, but help make us the more top of mind place for all things home. So it creates significant incremental revenue and drive significant profit. So, we're going to launch that later this year. We've internally of kind of figuring out the framework of what that is, but we need to build the technology to support it and the marketing plans for it and to roll it out. So that's coming. But the reason I referred to it is we know that customers love us and we think, A, there's an opportunity to deepen their understanding of what we do. That's where the marketing campaign comes in. And we also think there's a lot of things we can do to just cause them to come to us far more often. And that's where the tender-neutral loyalty program plays a big role.

All right. Thanks very much. Good luck.

Thank you.

Your final question comes from the line of Curtis Nagle from Bank of America. Your line is open.

Good morning. Thanks for taking the question. Kate, just if you go back to 1Q and the guidance, just curious if you could go through is kind of the range of outcomes within the mid-single, sorry, the low single-digit EBITDA, how much is that based on the ranging of the gross margin? How much of that is revenue, right? I think anticipation is it continues into low singles. So, mid-single, so if that got better, what would that mean? But just walking through kind of the most important or the biggest things that could drive variability within that low single would be really helpful.

Yes. So, obviously, we're somewhat unique about the first quarter. We're guiding somewhat seven weeks into the quarter. We said the trend on revenue is quarter-to-date that negative mid-singles. Obviously, if trend on revenue improves, certainly, you see more flow through, right? And that could be a variability on the bottom line. But generally speaking, that's what we've seen so far quarter-to-date, we've maintained that 30 to 31 guidance range on gross margin. You've seen that hit that very consistently over the last several quarters. And then obviously, on the AC&R and the ad spend, that being another line that you've seen us bring that into that 11.5, 12.5 very consistently over the last several quarters, those being two of the more somewhat variable pieces there. Certainly, if revenue were to accelerate from here, would you see more flow through to that low single-digit number? Absolutely. But I'd again point you to the fact that we're in the third week of February, we're into the quarter and we see negative mid-singles at this current time.

Got it. Make sense. And then just a quick follow-up on the AOV. It sounds like it was impacted and certainly more than you expected from, I think you said mix. But could we just dig a little bit more into what the change -- the theoretical change? Was it anything you did or anything, I guess, a customer perspective?

Yeah. So I think the thing about AOV, I think what I was trying to describe is actually the real phenomenon AOV over the last 1.5 years has actually been that all the ocean freight inflation then reversed and have come back out. And as that's come back out, you've seen AOV drop. That's been the primary driver of AOV, but then as you start anniversarying where it drops. So in other words, it started dropping in the fourth quarter 2022 the subsequent drop to the following year is not going to be as high because a lot of the drop had already happened, right? And so we're just in the latter stages of anniversarying that deflation coming out. So over the next couple of quarters, that -- all that deflation will come out a year ago, and so that AOV will not really be moving for that reason anymore. And what I was trying to say is that AOV can move for many reasons, right? It can move for mix of our brands. It can move for category mix. It can move from a mixture to seasonality. And those are primarily the things that move AOV. It's just that the phenomenon over the last year where it's come down a lot, is due to the deflation and we're nearing the end of that. And so you should expect AOV to not necessarily drop as much because we're now finishing the anniversarying of that AOV. So that was more just kind of the question I was trying to answer earlier.

Okay. Got it. Thanks very much.

Thanks. And so I just want to thank everybody for joining on the call. One more plug, just to encourage you to read our shareholder letter, which is on our Investor Relations website, which we think you'll enjoy. And obviously, we think we're poised for really great things both in the tough macro, while we can take share. And then as things recover, obviously, significant EBITDA gains to come this year regardless of the environment. And we're seeing great customer success. So thank you very much for your interest in Wayfair.

This concludes today's conference call. Thank you for your participation. You may now disconnect.