Hi, I'm Lasser, the Hardline Broadline and Food Retail Analyst. This is the last company-specific presentation in this room today and we definitely saved the best for last. Well, I can close it out. So we are super excited to, we've got the team from Wayfair with us as if they needed no introduction. To my immediate left is Kate Gulliver, who is the Chief Financial Officer and Administrative Officer. To her left is James Lamb, who is the Head of Investor Relations. Ryan Barney from the Investor Relations team is here as well. Now, if you were to measure a finance team in terms of strength and fortitude by the volatility of one's stock price, it doesn't get any tougher than this. No one's ever given us that particular compliment. So thank you, Michael. That is just the beginning of the compliments that are coming, Kate. So this is gonna be a fun and lively conversation 'cause the Wayfair journey, anyone who has some time on their hands, they should go back and listen to How I Built This, which is a great podcast by Guy Raz and Niraj and Steve. Mm-hmm. Told the wonderful story of how this incredible company was bootstrapped from the ground up. I think Kate joined in 2014. That's right. 10-year anniversary. Happy anniversary. Thank you. Originally heading up the Investor Relations function, then moving to the People function, and then more recently, filling those very small shoes of her predecessor, Michael, who did a great job for the organization. So where I do wanna start the conversation is this is a consumer conference. So, I don't know that there is an organization in the consumer world that's got more data, more insight, and does a better job of harnessing the power of those insights than Wayfair. So as you look at that data, are you seeing signs that either some of the pull forward in demand that has been afflicting the home furnishings category over the last couple of years is starting to bottom? And how do you think about that pull forward dynamic where people had bought a lot of stuff. Mm-hmm. In the last few years versus the fact that people just aren't moving right now? Mm-hmm. Yeah. So there's a few factors at play there. I maybe could start and then James, you should jump in. But, you know, to level set on where we're at, on the data that we look at for the category, we believe that the category's been down, the last nine quarters and double-digit declines the last six quarters. So to put that in comparison, that is sort of rivaling what we saw in the Great Financial Crisis, you know, another period of housing disruption, of course, 2009, 2010. So the category has been depressed for quite some time. I think the natural next question becomes, well, how much of that is just anniversary in the pull forward and sort of cycling that out versus how much is the category itself is in decline? And so, you know, I think there's a few ways to look at the pull forward. I know you and your team have spent some time looking at that. Maybe you wanna talk through some of what you guys have looked at there and how you've thought about, you know, the normalized CAGR of the category and where it could be. Sure. So this is a category that historically grows pretty consistently at a low single-digit kinda rate, right? So call it 2.5% or 3%. If you had just erased COVID and starting with 2019 continued that CAGR to today, you'd be at a level of total industry volume that's about seven points higher than where we are in actual terms. Industry revenue. Industry revenue. Exactly. Units, you know, more. Right. And then on units, even more depressed, obviously, 'cause there's been inflation that's entered the system. So to Kate's point, we're very dislocated from a historical perspective. And ultimately, we think that that turns around at some point. Yeah. And then I think the other factor, so part of that has certainly been, you know, that big inventory you had to ingest the pull forward and then sort of digest that and that had to come back out. To your point, Michael, certainly an element of it is housing-related. You know, we've always said that we are not directly correlated to the housing market to the same degree that other folks, you know, may be in our category or may perceive us to be. If you look at our average order value, it's around $300. Our customer's doing two purchases a year from us. So she's not furnishing a whole house with us. She's, you know, furnishing an item for a room. But in general, the category certainly is a housing relationship. And so when housing is as disrupted as it is, certainly that drags down the category. And so I think, you know, as, you know, interest rates, housing, all of these things over time start to move, obviously, this category starts to experience some tailwinds and comes back. It is a cyclical category. It's not a category that I think is forever altered. You know, people need a place to sit. They need a bed to sleep on, a dining table to eat on. You know, that will come back over time. And just so, combining those two answers, one of the themes that we've heard through some of our conversations today is that maybe the pull forward has now worked itself out, whether it's mattresses or appliances. Yeah. We're just not seeing people move because they're locked in. Yeah. Now that the phase that we're in is more about that lack of move events, whether it's into and out of a home or an apartment, the move events, but eventually, that will take care of itself. That'll usher in a much healthier environment, especially for these bigger-ticket durable items that consumers might be in the market for infrequently. Yeah. I think that's all accurate when you think about the category as a whole. And I would add an element to that that, you know, even if you're not planning to move, if your perception is that you can't get out of your house because the interest rates are such that that's not an option, the market is so backed up, you're probably psychologically less likely to invest in the incremental piece for your house to begin with. And so I think there's both the actual reality of moving being less and the sort of perception by the consumer at a time where he maybe feels somewhat stretched already. Got you. And I would just remind everybody, on your app, feel free to submit questions. Got a lot of ground to cover here with two of the finest around. But feel free to submit questions to as part of our conversation. One that has been of interest is, have you seen any evidence of the consumer trading down? Yeah. That's a great question. We've actually not seen a lot of evidence of that. So, you know, that was certainly a trend that we tracked in 2009, 2010. We think that's a place where actually we perform well if that happens. We, you know, have the ability to trade down on our site. But we haven't seen anything notable to call out there on the trade down. Got you. Wayfair's done a really nice job of stabilizing its market share. It's been an interesting journey 'cause for a while, consumers were apprehensive about going into stores. Then they went back into stores. All through it, you know, Wayfair was steadfast. I can't hear you. It was steadfast in just, you know, doing its thing. Now is seeing some benefit from that because its market share is stabilizing. With that being said, you know, what do you think has driven. Yeah. The market share gains? And how do you see market share unfold from here? Yeah. So when we look at, you know, our what we call our core recipe to the consumer, it's really three critical factors: price, availability of the goods, and then speed of delivery of that good to you. We always want to be, you know, on our best foot forward on that core recipe in our positioning across our range of categories. What I would tell you is that the back half of 2021 and in 2022, our positioning worsened across those fronts. So when inflation came into the category, you know, one of the downsides of not being an inventory-based retailer, there are many upsides. But one of the downsides was that inflation hit us first and faster than other folks who had landed inventory. As we all know, availability was quite challenged. We didn't have any inventory to fall back on. You know, due to supply chain disruption, speed was challenged. So we felt that our relative positioning during that time was not where it should have been. As a result, we lost some share. That started to turn around in the fourth quarter of 2022. And we started to regain share at that time. And we've been regaining share consistently since then. So throughout 2023, to the extent that actually on our most recent call, we said based on the data that we look at, you know, our share is actually the strongest that it has been from the data set that we've been tracking for many years now. And that's really due to getting, you know, our sort of best positioning across those three metrics, so across price, availability, and speed. Were there any learnings that you could take from the path that Wayfair's been on over the last couple of years and say, "All right. We can apply these now and accelerate some of our share gains"? Yeah. I think, well, let me talk to I think accelerating share gains probably comes from other unlocks. And I'll go to that in a second. I think there are. Great. Learnings from the last few years, you know, particularly around how can we manage price and price competitiveness in a world where inflation and deflation is going up and down? How do we think about that in our pricing algorithms? So that's certainly a factor and something that we will be very cognizant of going forward. In terms of, you know, how do we think about ongoing share gain, we've always been a share gainer. So with the exception of that 2021, 2022 period, through the rest of our history, so 2002, you know, up to that point, we were a consistent share gainer in the category, you know, both from the benefiting from the shift to online but also, you know, sort of gaining share overall. And as we look sort of going forward, you know, we've seen a reason why that share gain can't continue. We have a number of growth initiatives that we're already investing in today. On the core sort of Wayfair.com site, part of our goal is improving, you know, sort of frequency and brand affinity. Some of that, you know, we'll do through we actually just relaunched a brand campaign over the weekend. And we've talked to, on the earnings call about, the launch of the loyalty program in the fall. So that's really designed to focus on frequency. But then we have other levers on top of that with some of our other business lines. So our Specialty Retail Brands, which are much more targeted and curated brands, our luxury brand, Perigold, our B2B business, which is growing. You know, all of these are areas that are much smaller than the Wayfair.com business and we think have significant upside. James, I don't know what you'd add to that. Maybe just to bring it all together, there's a big opportunity for us in terms of frequency, right? So as Kate mentioned, to your question on the housing cycle, typically, our customer is in the market six to eight times per year. They're spending about $3,000. Over Over the course of that year, we're capturing about two of those occasions today with an AOV just south of $300, right? So there's a lot of opportunity to be in front of that customer for more occasions than we are currently. And that's a function of being better known for the breadth of things that we sell. Got you. I wanna pivot the discussion a little bit because if you have not read it, Niraj and Steve's annual letter was one of the best annual letters I've read in recent memory, not just for its explanation of what's been happening at Wayfair but also how organizations work more broadly. One of the themes was Wayfair had become a little too top-heavy. When you get top-heavy, it slows down the organization because you need committees to talk about committees to talk about decisions to talk about decisions. Whereas if you pare back on some of that, it just increases both the speed and the efficiency. I probably didn't characterize it well. No. I actually think that's a great characterization. Yeah. But so if you could give us a sense of what the journey was that. Yeah. You know, that drove this year of reset. Reset. Yeah. My wife tells me I need a year of reset every year. But Wayfair's only doing it once. Hopefully, we all get to do it once. Yeah. Yeah. So I think actually that was a very good articulation of it. You know, if we sort of step back, even going back a little bit further to mid-2022, when we pulled up in mid-2022 after going through just the incredible boom time of 2020, think about in 2020, in one quarter, our business doubled, right? We went from a $9 billion run rate in, you know, the prior quarter to in Q2 of 2020, it was like an $18 billion run rate, right? That is just a wild amount of growth for any organization to absorb. And as a result, we sort of kicked into gear on the hiring side. And prior to this, we'd always operated, I think, as sort of a very, you know, we're a mass market retailer. So we needed to be lean. And we'd operated lean. I think it had good design principles around that. We definitely lost our way a bit from 2020 to 2022. We pulled up in mid-2022, and we knew, you know, that we were overbuilt for what was appropriate for the scale of the business. And so we did that, you know, RIF in August of 2022. And And then the other one in January of 2023. Those were really sort of top-down targets that we used at those occasions. And it was combined with a broader cost-savings package that we talked about at that time. What's been interesting to see throughout 2023 was—and this is what Niraj and Steve were touching on in that letter—was that we actually saw productivity gains. So in the RIF in January of 2023, by removing some of this excess overhead and, you know, some of the sort of, maybe gating steps on some of the decision-making and, you know, putting more of the focus back on the execution and putting more of the bets back on, you know, what had historically been our preference, which was sort of junior team members who we can bet on and can continue to drive growth, we were actually seeing real benefits in how the team was operating. And so when we pulled up again, you know, we saw ongoing opportunity, we believe, to unlock further savings. And what we really wanted to do was ensure that we were applying the appropriate org design principles across the company to continue to enhance that productivity. And so what we did in January of 2024 was a much more detailed bottoms-up process to say, do we have the right spans and layers in this part of the business? Are we appropriately giving headroom to more junior people to give them the opportunity? And are we removing this committee upon committee upon committee? And where can we really streamline? And that was the action that we took in January of 2024. And it was really, as you described it, it's really designed, you know, one, to remove any excess fat that was still remaining and, two, to hopefully accelerate productivity over time for folks. And I think, you know, James, you should add, but I think we are already starting to see some of the benefits of that. Yeah. Exactly. So to Kate's point, in January of 2023, as we removed some layers, folks had more to own. And they ran with that. And they were really excited about it. We think we've done that again. We're beginning to see that. And I think, you know, as Niraj talked about in his remarks in Q4, we're comfortable being frugal with headcount, right? We would rather hire interns and staff against resources staff against projects with resources as they need to as opposed to proactively in advance. I think that's one of the big learnings coming out of these. So if I could clarify or characterize the 2020, 2022, 2023, that might have been more meat cleaver, broad-based. This was more strategic. Is that fair? Yeah. I think that's reasonable. The way I would say it is 2022 and 2023 were more top-down target-driven. So saying, "Hey, if we look at where the OpEx expense is relative to the size of this business and what this business could be able to operate with, it is too high. Here's where we need to bring it down to." and as a result, that ends up being a little bit, you know, yeah, meat cleaver sort of broad stroke, right? Yeah. Broad stroke. Whereas in 2024, it was we went through every single role in, you know, not frontline roles, right? So not, you know, warehouse, customer service, but every single role in the, you know, corporate team, and really ensured that we were structured in the way that we wanted to be structured. In practical terms, this may not be the right example, but it's vivid in my mind. Over the weekend, I got, "Hey, come to Wayfair. We've got beanbags," and would it be that in the past, you wanted to highlight a beanbag, you would have had, you know, the beanbag buyer and the website person who would have had to spend some time figuring out when and where the optimal time to send out that type of messaging is. And now with a leaner team, you're just able to do it. Is that? May not be the best example. Yeah. On that particular example, my guess is. Did you buy a beanbag? I know. Well, I'm thinking someone in your house is looking at beanbags. So it retargeted you. So either your wife or your kids. Guilty as charged. So that was probably an automatic retargeting. But you are right in the way that you talk through how decision-making can go. So that is an automatic, you know, targeting email based on personalization around what you're browsing. But I'll give you another example that's very similar to that. So, as you think about, on, you know, one of our Specialty Retail Brands, we have recently launched three Birch Lane stores in Florida, and the process to get those stores open was a much more efficient, scrappier process. In fact, it took us about two months versus the many months that we took to open AllModern stores and Joss & Main stores because there were less decision-makers in the process. So less people to exactly your point that you had to go through to sort of get some of that approval and also a willingness to say, "We can pivot quickly if we don't have the right merch in the store." These are small stores. It's like 8,000 sq ft-10,000 sq ft store. If we don't have the right merch in the store, we can adjust that. And so that was work that happened, you know, at the very beginning of this year. They just opened a few weeks ago and really took advantage of moving quite fast. And then what I would call, you know, given I've been at the company for 10 years, more of a sort of prior Wayfair operating construct. Got you. And speaking of retargeting, James got the kegerator email as I got the beanbag email. So I don't know what's going on there. But you have great perspective on these types of actions, having served both as a representative to the outside world from Wayfair then, heading up the human function and now focusing on finance. So this question is important because to what degree does some of this layer complexity come back over time? And how do you prevent the inefficiencies from settling back in? Yeah. I think it's a great question, which is really sort of how do you institute cultural change such that, you know, some of that inefficiency is not easy for that inefficiency to creep back in? Yep. I think there's a few ways that we're working on doing that. So one is just a much tighter process around the sort of team, you know, at a team-by-team level, the headcount budgeting process for those teams and the reviews and deliberation around that process. And that had, you know, already started to get tighter sort of in the back half of 2023 and got much tighter throughout or back half of 2022 and got much tighter throughout 2023. So that puts in place sort of the, you know, executive management tools to enable some of that construct. The other piece is really continuing to explain and be transparent around what your objectives are and the discipline around those objectives with the team. So, you know, we were very transparent around how we did this. We said, "This is what we looked at. This is the spans and layers that we think are appropriate. This is how this should play out over time. These are the types of things that we took into account." We, you know, we actually published that letter publicly. It was an email that we sent to all employees the day of the RIF to really explain what it is. We then spent, you know, several hours with employees or an hour-long meeting with employees, you know, the day following the RIF where Niraj and Steve, the two co-founders, walked through this process again and explained how we did it. And so I do think there's both how do you put in place the technical controls, which we believe that we've done, but then how do you start to institutionalize the thinking around it? And that's sort of a softer skill and softer approach. But it takes repeated, you know, messaging and management. Got you. I wanna pivot a little bit to your customer base. It's been quite a remarkable journey and evolution. I think at its peak during 2020 and 2021, there were 33 million Wayfair customers. There's 135 million homes in the United States. It means that, you know, almost one out of every four homes was buying a product from Wayfair, something that you should be extremely proud of. Now, the customer count has stabilized in the 20 million range. How do you get some of those customers who were part of your active file for a period of time, were engaged in that behavior? How do you get them back? Yeah. Great question. So, to sort of level set on where we're at today, we're at a little over 22 million active customers. And our definition of active customers, for those that may be less familiar, is an LTM active customer number. So anybody who purchased at all in the last 12 months shows up in that number. But you don't show up if you're, you know, just browsing the site and haven't engaged. So you may be engaging but not buying. Our customer file stands at about 85 million, I think, in what we last reported. Now, that's not an exact compare to households because you could have, you know, James and his wife may have two different, you know, accounts in the same household. One Kegerator. Yes. Exactly. Well, you never know. So it's not an exact compare, but it's directionally, you know, helpful. And so a lot of our work, you know, we were talking about growth vectors on, you know, Wayfair.com. And James is speaking to the frequency piece. A lot of our work is how do we, you know, go back to those, you know, 60 million customers that we have the data on? And to your point at the beginning, we have a rich amount of data on. And even if you're on the site, we know what you're doing, which is why we can send you, you know, the beanbag email. How do we go back and get those folks to come in and convert and purchase again? And what tools do we have to, you know, incentivize them to come? Part of the work in 2023 was being more promotional. You know, we are very mindful of not overdoing that and trying to not, you know, train the customer. But we did see that as a marketing tool that, you know, we needed to use at a period where the categories we talked about was, you know, depressed. And we wanted to use that as a way to sort of get people reengaged and to land on the site. You know, part of the work in 2024 is, you know, around the brand refresh, around loyalty, around continuing communication of that price, availability, speed, value prop. And really, you know, someone was asking earlier, you know, how do you think about the balance of sort of truly net new customers versus lapsed customers? Well, to the point that you make, we have a large file of lapsed customers. That's a very valuable file for us. We uniquely have that 1P data on them. We really want to get those folks reengaged and back in. How do you think about the promotional lever as a tool to bring some of those back in now? So I think it's been a very effective lever throughout 2023, and was, again, very necessary at a time where the category maybe wasn't top of mind and you were sort of shifting your spend to services or, you know, even to other discretionary categories. It's great to have the promotion as a way to sort of get in front of you and get your attention. And we actually said on, I think, our Q2 and Q3 call in 2023 that, in a promotional activity, a customer actually, the majority of the product is actually not that's bought is not product that's on promotion. It's the old classic, you know, end cap aisle strategy, right? So bring them into the aisle, and they will spend somewhere else. And so I think that has been an important lever in 2023. As we go into 2024, what we're focused on is taking some of the learnings from the various promotional events in 2023 and making that as targeted as possible. We'll still be incognizant of the environment that we're operating in but trying to be mindful of not overusing that lever. So one thing that you may see from us is, you know, more targeted promotion. So an outdoor sale or a white sale versus, you know, chatting about the whole site being on sale. Got you. Conversely, AOV has gone through the ups and downs. Yes. Where you know, it's, you can't say it without, you know, having some reflection on it. Yep. Where do you think that this goes from here? There's been a lot of inflation and deflation. The customer went from big projects to more modular projects. There's been so many dynamics that have been influencing average order value. Where does it stand today, and where do you see the path unfolding from here? Yeah. James, do you want to give the overview of sort of how that trended? Sure. Happy to. So average order value is really a component of three things, right? You've got items per order. You've got like-for-like pricing. And then you have mix, right? Items per order stayed relatively the same. We've talked about we haven't seen much trade down or any kind of real mix, you know, dynamics. And so it's almost all price. And the AOV inflation that you saw, which was a function of the supply chain inflation that we take in our model given the fact that we're not, you know, owning the inventory, led to the big increases that you saw in kind of late 2021 into 2022. And then that began to diminish in terms of the rate of year-over-year growth to the point where you got to basically flat and then started to turn negative in the beginning of 2023, right, from a year-over-year perspective. So what we've talked about is an expectation that we would continue to see year-over-year declines in AOV for the first part of 2024 just as we completely anniversary that inflation that entered the system, now exiting the system such that by the second half of 2024, you should be back to a place where AOV is more neutralized. We're really hearing that across the board. That the merger has been under this, you know, roller coaster. And it's on the downswing but on its way to stabilization. It seems like Wayfair is just echoing some of what's happening in the industry. I want to pivot again. As a longtime follower of more traditional retailer, I get a little excited that Wayfair has been experimenting with some physical locations for multiple reasons. To me, this unlocks a whole new addressable piece of the market that may not have been willing to buy sight unseen. My folks, for example, Joyce and Bob Lasser, they still don't realize that shag carpeting isn't out yet. But, you know, it could be. It's coming back in, actually. The tweens love the shag carpet. They're not in the tween community, but that's fine. The point is, give us a sense for Wayfair's strategy with physical locations, the first one coming up soon. How do you see that unfolding from here? Yeah. Great question. So we're also quite excited about it. You know, a little bit around the framing, to your point, there is a segment of this market that is obviously still offline today but we think remains offline over time. So today, we put online penetration at roughly sort of 25%-ish in the U.S. And then take your pick on where that, you know, matures to. You know, other categories show up to 50%. But wherever you pick, whether it's 40%, 50%, 60%, some chunk of this, you know, remains offline. And we think, you know, that's an important part of the market to be in. And when we think about the things that are necessary to go in in this category into offline retail, those are actually things that we've invested in over the last 20 years. So it's the brand. It's the supplier relationships. It's that customer file that we talked about. And really critically in this space, it's the logistics infrastructure. So in, you know, a space with big and bulky items, our ability to get that to you and get that to you, you know, quickly after you come into the store, we've already built that out. So some of the components that we think are quite necessary to be successful, we already have. And we get very excited about then applying that to meet the customer where she's at. And in some cases, that's probably, you know, new customers, maybe like your parents. But that's probably customers that also already shop with us but, you know, want to test out some of it in store or, you know, maybe don't know actually the full breadth of offering, you know, that we offer and, you know, go into the store and really understand that we do have a full appliances selection or we do have a full plumbing selection. As we think about how we get into physical retail, because I think that's quite important, we really started out by testing in these smaller format stores. So I mentioned the Birch Lane stores that we opened in Florida. We have a handful of Birch Lane, AllModern, and Joss & Main stores. Those are our Specialty Retail Brands. These are 10,000 sq ft stores. So they're much smaller than what we're building in Chicago. And really, the intent there was to get an understanding of how the technology was working in the store, to understand how to staff these stores, how to train the staff, what qualities we should look for in a store manager, you know, how we might think about merchandising the store, the mix of cash and carry versus, you know, larger items. And so it's been a great way for us to, in a much lower cost, lower commitment way, you know, learn quite a bit. And now in May, we'll open outside of Chicago the first Wayfair store. That'll be a 150,000 sq ft store. So it's a big store. It shows the full range of what we offer. And we're really excited to get that open and then start learning from that, you know, as we think about next steps in physical retail. A lot of traditional retailers will say that whenever they move into a geography, they see a nice lift to their e-commerce business. In the early learnings from some of the tests you've done or your broad-based expectation, is this how you expect it to play out from here? Yeah. Definitely. I would clarify that we want the stores to, you know, hit EBITDA thresholds and payback thresholds on their own merits without sort of benefiting that what we would call the halo benefit. But we also do see a halo benefit. And that's an important part of the story. So if we look at the stores that we've already rolled out, we've been able to get much tighter on our attribution models and understand really, you know, what the halo benefit is for those stores. We've always been very technically and quantitative focused on our marketing. And this is just another element of that. And part of the benefit of rolling out these smaller stores first was to get some of that testing. And so we certainly think that there'll be, you know, the sort of four-wall economics of the store but also a lift in the surrounding region. How fast are you willing to push this initiative? Is the capacity in place to, once you figure it out, to move pretty quickly? Yeah. I mean, the first thing I would say is we do want to take some time to figure it out. So, you know, given the sort of investments and how new this initiative is for us, it's quite important that we understand how these stores are working before we go and stamp out a bunch of stores. We, you know, think that there's a lot of opportunity for these stores. But we do intend to be quite thoughtful and prudent about that. So I would say the gating factor is less the team. You know, we have a physical retail team that's built that's getting this store up and running and more, we want to see some real-time data of how this is all playing out so that we can go into, you know, ongoing growth and in a very informed way. When there's crowds outside the door waiting open, that'll be the sign just like in the Apple locations. Well, we look forward to seeing them. So it was very helpful. And I would attribute—I don't know if it's all Kate or all James. Maybe it's Ryan. But these scenarios that you've offered, you know. That Ryan gets the blame for that. Ryan. No. He gets the attribution. You know, it's very helpful to help, you know, the market understand just the cadence of the business. You talked about, you know, $450 million as being, you know, a real low case that you feel like under a tough scenario, I think mid-single digit type decline, you feel confident that you could hit flat. You could get to $600 million of EBITDA. Are those the right benchmarks to think about? And what pushes you within those benchmarks to, you know, one end or the other outside of sales? Yeah. That's a great question. So let's start with that $600 million number because I think that's sort of the easiest to understand in the framework that we provide. And to your point, these are scenarios. We're not in space to give guidance. No guidance. So the intent of explaining that $600 million was really to say, think about the full impact of the cost savings that we did throughout 2023 and that January RIF. If you look at that and you, you know, apply that to the 2023 revenues, that would get you to $600 million of Adjusted EBITDA. So the idea there is that's just the full run rate of the cost savings that have already happened. And importantly, you know, when we talk about that January RIF, we talked about a net savings number because we do intend to do some hiring back at the junior levels where we want to invest to, you know, keep having that pyramid. So that's the net savings there. Then we said, you know, we have confidence in delivering on this, you know, $450 million of adjusted EBITDA somewhat irrespective of the top line. The intent there is to explain, one, again, the sort of enormity of the savings. But two, some of the leverage that we have to pull, you know, in a scenario where the top line remains under pressure. For example, on the gross margin line, we've talked a bit in the past around, you know, how we think about the pocketing versus the pass-through of cost savings there. Pocketing being putting it in the gross margin line. The pass-through being giving that value to the consumer in some way, often in the form of price. That's a lever that we can, you know, pull throughout 2024. Then I just spoke to that hiring. We can meter out that hiring in different ways depending on where the top line is. We do feel like we have enough levers at our disposal to, you know, get to that $450 million point. Then, of course, on a like-for-like basis, get to that $600 million point. In the longer term, one of the debates on Wayfair has been, can it grow its top line at the same time as it improves its profitability? There would be initiatives like, we want to get deeper into the flooring category. You'd have to build up a product management team, an engineering team, some merchants. And they would drive growth. But those investments would weigh on the margins. So what does the longer-term vision look like? And why is now there an inflection point where Wayfair can grow its sales and its profitability simultaneously over the long term? Yeah. Great question. You know, I think the easiest way to sort of talk through that is to reference actually a line from the shareholder letter where Niraj wrote that for the next $1 billion of sales, that should come in as sort of a mid to high teens flow-through. And what we're trying to articulate there is that actually, we think we have the headcount in place today for all of the initiatives that we're working on. And so after going through that thorough review in January, we feel very good about where that headcount sits. And that means that we can continue to grow the business without adding headcount on that SOTG&A line. Now, at some point, yes, you need to add. But, you know, we talked about that $1 billion incremental. You know, for some period of time, we would not need to add there. And so then what you're thinking about is, well, what's the flow-through then of SOTG&A we're just getting leverage on and that's staying flat? Then we're looking at that 30-31. That's the selling administrative. Oh, yeah. It's a terrible acronym. It's OpEx cost. Thank you. As that remains, you know, flat, what are we doing? You know, what do you see for the flow-through then of that incremental revenue? And that's really just, you know, our gross margin where it is today, that 30%-31%, less the CS&M, customer service, and merchant fees at, you know, that 4%-4.5% where it is today, less the, you know, AC&R at that 11%-12%. You get to that mid-teens number. That can push up a little bit higher as you put more volume, frankly, through the logistics network. That can come in at, you know, a slightly higher gross margin. So that's without incremental savings. And, you know, we obviously always want to be looking towards ongoing opportunities for optimization, particularly in the supply chain. So we feel very confident that, you know, over the sort of near term, there is not a need to add to that line. We've also said publicly that going forward, that line would grow at a much moderated pace relative to top line. Got you. It does seem like there's a lot of opportunities still on the gross margin side, whether it's through the supply chain. You know, there's been a lot of investment in the supply chain over the last few years. Advertising is another opportunity. Definitely. Can you give us a sense for how these gross margin opportunities line up and where the cadence of how they would roll in over time? Yeah. Great question. So we've spoken in the past, we actually started talking about it several years ago, this path of getting we actually had the time where I sort of 24-25 gross margins. And we said, we think we have 1,000 basis points of gross margin. And we can get to mid-30s. And probably when we said that in 2017, 2018, people didn't give us much credit for it. But, you know, now we've achieved half of that. And as we sit here at 30-31, we absolutely see very clearly the path to that 35%-ish gross margin. It's really three primary levers. One is the supplier advertising piece that you just spoke about. So today, and sort of the last out we gave on that, I think, was August of 2023. That's a relatively small portion of the business, about 1% of revenue today. So quite small. We see opportunity there. We size that sort of two to three points on that gross margin line. And that's, you know, really increasing the penetration that we have. And we intend to do that. We opened up supply in 2023 after testing. But we have a very considered purchase. The customer is browsing. So we want to make sure that with something like sponsored SKUs, we weren't negatively impacting her experience. So we've opened up supply. And we've improved the tech there for the suppliers on the bidding side. So two to three points there. We said another one to two points on the logistics side. And then another one to two points on we called it other. But think about that as really merchandising and mix. So if you think about how those things phase in, some of that can come without, you know, ongoing top line growth. So again, you can get some penetration on ad sales without, you know, significant top line growth. You can get, you know, some improvement in the supply chain without significant top line growth. And then to, you know, achieve the sort of fullness of those estimates, you would want some top line growth on top of that to get the real leverage. And obviously, on the mix side, that's really things like Perigold, the Specialty Retail Brands that come in at a higher gross margin, you know, sort of making more of the whole combined with, you know, ongoing sort of pricing power and leverage with our suppliers. Amazon has 8%-9% of its GMV converted into advertising. Is there any reason why Wayfair would have a different model or a different level of penetration over time? Yeah. You know, when we estimated it for the Investor Day, when we showed sort of where we had it going relative to, you know, where it is today, we put it at like three to four points of revenue. And I do think it is a bit of a different customer experience. And that probably does impact, you know we think three to four is very achievable. And one of the compares is when you compare it to an Amazon or an Etsy or others in the space, it's obviously less than where they are already at. On the other hand, it's less of a branded category. There are, you know, brands. But that's really in plumbing, appliances, that sort of thing. So on a lot of the core F&D, there isn't a brand there. So then you're talking sponsored SKUs. Again, we want to be mindful of what that customer experience is. We see it as an important lever. I think it would probably play out, you know, a little bit differently than perhaps how it's played out at Amazon and others. F&D, furniture, and decor. Furniture and decor. Thank you. So many acronyms today. A couple of last questions. Number one is, if tariffs on imported goods come back, how would that impact Wayfair? And what was the lesson last time from? Yeah. Yeah. Great question. So I think there's been some industry changes from last time. And then also, they're sort of Wayfair specific. So 2018, what we saw at the time was prices, of course, went up for us because, as you know, again, as we talked about with inflation, when prices go up rapidly, when wholesale economics change and wholesale prices went up, you know, our retail prices went up relatively speaking because we didn't have inventory that we were sitting on under an old tariff regime. And so that moves up quite quickly. On the other hand, though, we are able to move to other suppliers faster and other bases of supply faster than our peers. So, you know, we may not have the exact you know, this exact chair, although we probably do have well, this is a proprietary chair. But that chair, we probably have many versions of that chair. Maybe some of them are manufactured outside of China. Perigold. Yeah. Love it. Love it. We can, you know, shift to suppliers that are based in different locations that are not burdened by the tariff regimes. And the model that we have allows us that agility in a different way, I think, than a, you know, a retailer that is having product designed to their spec at a specific factory and then needs to go find another factory. So that's sort of how we react to it and how we'll be mindful of it. There is a period of digestion. But then, you know, we think we can react quite well. The other thing I would say is that the industry has evolved from 2018. So the industry as a whole has changed some. So I think 2018 and then again, you had a shock in 2020 with China being shut down for COVID. And so there has been a push to diversify manufacturing. You have seen Southeast Asia, you know, come online more from a manufacturing perspective. You've seen Chinese-based suppliers, you know, open up locations there. And so I think the industry is a little bit more nimble and a little bit better, you know, prepared. Got you. Rapid fire. We got some questions from the best-looking and smartest crowd around. Number one, are you seeing or anticipating emerging competition from Bed Bath & Beyond in terms of market share dynamics? Yeah. The thing I would say about we followed both Overstock and Bed Bath & Beyond. We've competed against the two of them for years. You know, we'll certainly compete against them as a combined entity. They are a very small part of what is a large market. Certainly, we pay attention and focus to it. I don't want to overestimate, you know, where their scale is today versus the category as a whole. Got you. Ashley, when you launched Wayfair, creating a digital front end or e-commerce channel was difficult. Today is commonplace and easy. Does that limit your value add to furniture retailers? And do you think you might add a private label effort to leverage your position? So we do have private label, just to be clear. We actually have a number of different private label brands on the site that we curate product in. I would agree that standing up a front end customer-facing site is probably easier than it was 20 years ago. What I don't think is that easier is the back end piece of it. So the logistics, the customer experience, you know, how you service that customer, how you find that customer. You know, for example, we work with suppliers today. In some cases, we will pass off a customer. If they have a particular problem with an issue, sometimes we will pass off that customer directly to the supplier because the supplier can resolve it better. The supplier, though, generally is not prepared for that. They don't really want that call. So we usually end up taking it because they don't want to do the customer service. They don't know how to do that. That's not what their business is. So it's less that you would see, you know, suppliers standing up their own websites. They don't have the brand. They don't have the sort of back end logistics to actually be able to manage that. So that's not really something that I would say we're overly focused on. Could we not do this all day? This was so fun. Please join me in thanking Kate, James, and Ryan for a wonderful discussion. Thank you, Michael. Thank you. Thank you, everybody.