- Generated Record Gross Merchandise
Value of $1.4 Billion in 2018 and $466 Million in Q4 2018
- Continued to Capture Share in Online
Personal Luxury Goods Market with Platform GMV Up 56% in 2018 –
Growing More Than Twice as Fast as the Overall Online Industry –
and Up 51% in Q4 2018
- Q4 2018 Revenue Grew 55% with
Platform Services Revenue Up 68% in Q4 2018
- Active Consumers Up 45% and Number
of Orders Increased 58% in Q4 2018
- Expands Partnership with JD.com to
Complete Its "Premier Gateway to China" for Luxury Brands
Farfetch Limited (NYSE: FTCH), the leading global technology
platform for the luxury fashion industry, today reported financial
results for the fourth quarter and full year ended December 31,
2018.
“By all measures, 2018 was a blockbuster year for Farfetch,”
said José Neves, Farfetch Founder, CEO and Co-Chair. "We continued
to lead the online personal luxury goods market, growing GMV 55%
for the year – more than twice as fast as the industry."
"We also exited our first decade as a company with an incredible
foundation for realizing our platform vision globally, including in
China, with the announced acquisition of Toplife solidifying
Farfetch as the Premier Luxury Gateway to China."
"Over the next ten years, the luxury industry is expected to
grow to an estimated $500 billion, and online sales will
potentially grow to represent an incremental $100 billion
opportunity. Farfetch is uniquely positioned to capture the lion's
share of this opportunity."
Elliot Jordan, CFO of Farfetch said, "I am thrilled with our
record GMV performance and the growth of Farfetch during 2018,
which exceeded expectations. Our increasing scale has enabled us to
leverage our efficiencies and lean into our customer proposition
with new initiatives such as our Access loyalty program, to boost
the lifetime value of our customers and enhance long-term
shareholder value."
Consolidated Financial Summary and Key Operating Metrics
(in thousands, except as otherwise noted):
Three months endedDecember
31,
Twelve months endedDecember
31,
2017 2018 2017 2018
Consolidated Group: Gross Merchandise Value (“GMV”) $
310,718 $ 466,490 $ 909,826 $ 1,407,698 Revenue 126,482 195,533
385,966 602,384 Adjusted Revenue 102,486 170,089 311,784 504,590
Adjusted EBITDA (23,409 ) (14,575 ) (58,079 ) (95,960 ) Adjusted
EBITDA Margin (22.8%) (8.6%) (18.6%) (19.0%) Loss After Tax (54,816
) (9,912 ) (112,275 ) (155,575 )
Platform: Platform GMV $
306,954 $ 462,176 $ 894,392 $ 1,392,104 Platform Services Revenue
98,722 165,775 296,350 488,995 Platform Gross Profit 62,829 92,632
196,581 291,706 Platform Order Contribution 39,574 58,698 127,379
194,411 Platform Order Contribution Margin 40.1% 35.4% 43.0% 39.8%
Farfetch Marketplace: Active Consumers 935.8 1,353.4 935.8
1,353.4 Number of Orders 600.1 945.2 1,881.0 2,913.0 Average Order
Value (“AOV”) (actual) $ 670.4 $ 637.3 $ 620.0 $ 618.6
Recent Business Highlights
- The Farfetch Marketplace continued to
increase its share in the online personal luxury market, and all
three geographic regions – Americas, EMEA and APAC – exceeded 50%
GMV growth in 2018
- Entered into an agreement to acquire
and integrate JD.com's Toplife into Farfetch's China platform,
gaining Level 1 access on the JD.com app, which combined with
Farfetch's site, app, WeChat stores, CuriosityChina, and logistics
solutions is set to provide luxury brands a full suite of solutions
for accessing the Chinese market
- Completed the acquisition of premier
sneaker and streetwear marketplace, Stadium Goods, in January 2019,
expanding Farfetch's offering in the fast-growing $70 billion
premium sportswear market
- Farfetch Black & White Solutions
launched six new brand sites in fourth quarter 2018 and ended the
year with 17 clients. Recent launches include two LVMH brands, JW
Anderson and Emilio Pucci. Also entered a strategic partnership
with Harrods, the world's most famous department store, to create a
state-of-the-art global e-commerce destination for their customers
and provide related services
- Initiated the global rollout of Access,
Farfetch’s customer loyalty initiative designed to reward frequent
and increased spend with benefits ranging from early and exclusive
access to various events and sales, free shipping, extended
returns, a personal stylist and Fashion Concierge, among
others
- Added breadth and depth to our
Marketplace offering with the addition of new sellers including
luxury brands, Giuseppe Zanotti, Acne, and Altuzarra. Also expanded
department store partnerships with the launches of Rubaiyat, a
premier luxury fashion retailer in Saudi Arabia, and Tryano, a
specialized concept department store in United Arab Emirates
- Collaborated with Balenciaga to launch
an exclusive capsule collection on Farfetch.com, and teamed up with
Ermenegildo Zegna to launch its Ermenegildo Zegna XXX capsule
collection in the U.S.
- Enhanced Fulfilment by Farfetch
capabilities in Europe with addition of a fourth fully scalable
warehouse in Rome, Italy
- Expanded Browns CEO, Holli Rogers' role
to also oversee Farfetch's fashion strategy as the company's Chief
Fashion Officer
Fourth Quarter 2018 Results Summary
Gross Merchandise Value and Platform GMV
GMV increased by $155.8 million from $310.7 million in fourth
quarter 2017 to $466.5 million in fourth quarter 2018, representing
year-over-year growth of 50.1%. Platform GMV increased by $155.2
million from $307.0 million to $462.2 million, representing
year-over-year growth of 50.6%.
The increases in GMV and Platform GMV were primarily driven by a
57.5% increase in Number of Orders from 600,100 in fourth quarter
2017 to 945,200 in fourth quarter 2018, which primarily resulted
from a 44.6% growth in Active Consumers to 1.4 million, and an
increase in transactions per Active Consumer as we saw strong
demand from consumers across our global markets. These factors were
partially offset by the 4.9% decrease in AOV from $670.4 to $637.3,
which mainly reflects the foreign currency translation impact of
the U.S. dollar appreciation over the past year, as well as
increased investments in our customers, which resulted in a lower
level of fulfilment revenue relative to Platform GMV.
Revenue
Revenue increased by $69.1 million year-over-year from $126.5
million in fourth quarter 2017 to $195.5 million in fourth quarter
2018, representing growth of 54.6%. The increase was primarily
driven by higher platform services revenue. Platform services
revenue increased by $67.1 million or 67.9% year-over-year,
reflecting increased Platform GMV, with higher growth in
first-party as compared to third-party GMV. Third-Party Take Rate
remained relatively flat year-over-year.
Revenue by type of good or service (in thousands):
Three months endedDecember
31,
Twelve months endedDecember
31,
2017 2018 2017
2018 Platform services revenue $ 98,722 $ 165,775 $ 296,350
$ 488,995 Platform fulfilment revenue 23,996 25,444 74,182 97,794
In-store revenue 3,764 4,314 15,434
15,595 Revenue $ 126,482 $ 195,533 $ 385,966 $ 602,384
Cost of Revenue and Gross Profit
Cost of revenue increased by $39.6 million, or 64.1%
year-over-year from $61.8 million in fourth quarter 2017 to $101.3
million in fourth quarter 2018. The increase was primarily driven
by the increases in cost of goods associated with first-party
sales, as well as the delivery, packaging and transaction
processing expenditures incurred as a result of an increased Number
of Orders in fourth quarter 2018 as compared to the prior year
period.
Our gross profit margin decreased from 51.2% in fourth quarter
2017 to 48.2% in fourth quarter 2018 primarily due to lower
fulfillment revenue per order, on average, as Marketplace cost
efficiencies were offset by investments in customer initiatives,
including our loyalty program. Additional factors impacting gross
profit margin include an increased mix of first-party sales, which
have a different gross margin profile than our third-party
business; and the impact of retail pricing, particularly on
first-party gross margin.
Selling, general and administrative expenses by type (in
thousands):
Three months endedDecember
31,
Twelve months endedDecember
31,
2017 2018 2017
2018 Demand generation expense $ 23,255 $ 33,934 $ 69,202 $
97,295 Technology expense 12,148 18,159 31,611 68,224 Depreciation
and amortization 3,029 7,185 10,980 23,537 Share based payments
7,715 2,821 21,486 53,819 General and administrative 52,861
56,679 165,981 228,891
Selling, general and
administrativeexpenses
$ 99,008 $ 118,778 $ 299,260 $ 471,766
Fourth quarter 2018 demand generation expense increased 45.9%
year-over-year to $33.9 million in fourth quarter 2018, or 20.5% of
platform services revenue, representing a year-over-year
improvement of 309 bps, which primarily resulted from performance
marketing efficiencies in driving Platform GMV growth. These
efficiencies partially offset the gross profit margin impact on
Platform Order Contribution Margin which decreased 468 bps from
40.1% in fourth quarter 2017 to 35.4% in fourth quarter 2018.
Technology expense, which is primarily related to research and
development and operations of our Marketplace features and
services, increased by $6.0 million, or 49.5%, in fourth quarter
2018 compared to the same period in 2017, which was primarily
driven by a 54.7% increase in technology staff headcount and higher
software and infrastructure expenses to support the continued
growth of the business.
General and administrative expense increased by $3.8 million, or
7.2%, in fourth quarter of 2018 compared to the same period in
2017. General and administrative costs as a percentage of Adjusted
Revenue decreased from 51.6% in fourth quarter 2017 to 33.3% in
fourth quarter 2018, reflecting improved efficiency of corporate
and platform service costs, as well as a reduction of accrued
employee compensation expense.
Share based payments decreased by $4.9 million, or 63.4%, in
fourth quarter 2018 compared to the same period in 2017, primarily
due to the fair value re-measurement of our cash-settled share
based payment awards and provision for employment related taxes on
share based payment awards.
Adjusted EBITDA
Adjusted EBITDA was ($14.6) million for fourth quarter 2018,
improving by $8.8 million, or 37.7%, compared to the same period in
2017. Adjusted EBITDA margin improved from (22.8%) in fourth
quarter 2017 to (8.6%) in the same period of 2018, reflecting
benefits from our prior period investments to support our growth as
well as improved efficiencies in selling, general and
administrative expenses, which have grown at a slower rate than
Adjusted Revenue.
Loss After Tax
Loss after tax decreased by $44.9 million, or 81.9%
year-over-year in fourth quarter 2018 to $9.9 million. This was
driven by a year-over-year decrease in the operating loss from
$34.3 million to $24.6 million combined with unrealized foreign
exchange gains from the revaluation of our receivables and payables
in fourth quarter 2018.
Outlook
The following forward-looking statement reflects Farfetch’s
expectations as of February 28, 2019 based on the performance of
the Marketplace through the initial first quarter 2019 period:
For the first quarter of 2019, Platform GMV is expected to grow
approximately 40% year-over-year, and Adjusted EBITDA margin is
expected to be approximately (22%) - (24%), prior to any benefit
from the adoption of IFRS 16 which became effective on January 1,
2019.
For full year 2019, Platform GMV is expected to grow
approximately 40%. The company expects to continue to make
investments to grow the business, including for its recent
acquisitions, while also leveraging costs, and estimates full year
2019 Adjusted EBITDA margin of approximately (18%) - (19%), prior
to any benefit from the adoption of IFRS 16.
Conference Call Information
Farfetch will host a conference call today, February 28, 2019 at
4:30 p.m. Eastern Time to discuss the Company’s results as well as
forward-looking information about Farfetch’s business. Listeners
may access the live conference call via audio webcast at
http://farfetchinvestors.com, where listeners can also access
Farfetch’s earnings press release and slide presentation. Following
the call, a replay of the webcast will be available at the same
website for 30 days.
Unaudited interim condensed consolidated statement of
operations for the three months ended December
31 (in $ thousands, except share and per share data)
2017 2018 Revenue 126,482
195,533 Cost of revenue (61,753 )
(101,336 ) Gross profit 64,729 94,197 Selling, general and
administrative expenses (99,008 ) (118,778 ) Share of profits of
associates 8 15 Operating loss (34,271 ) (24,566 )
Net finance (cost)/ income (20,171 ) 14,915
Loss before tax (54,442 ) (9,651 ) Income tax expense
(374 ) (261 )
Loss after tax (54,816 )
(9,912 )
Loss per share attributable to owners of the
parent Basic and diluted (0.23 ) (0.03 )
Weighted-average ordinary shares outstanding Basic and
diluted 241,527,626 299,495,657
Unaudited interim
condensed consolidated statement of comprehensive loss
for the three months ended December 31 (in $
thousands)
2017 2018 Loss for the
period (54,816 ) (9,912 )
Other comprehensive
income/(expense): Items that may be subsequently reclassified
to consolidated
statement of operations (net of tax):
Exchange differences on translation of foreign operations 5,607
(7,305 ) Gains on cash flow hedges - 436
Other comprehensive income/(expense) for the period, net of
tax 5,607 (6,869 )
Total comprehensive loss for the period
attributable to equity holdersof the parent, net of
tax
(49,209 ) (16,781 )
Unaudited interim
condensed consolidated statement of operations
for the twelve months ended December 31 (in $ thousands,
except share and per share data)
2017 2018
Revenue 385,966 602,384 Cost of revenue
(181,200 ) (303,934 ) Gross profit 204,766 298,450
Selling, general and administrative expenses (299,260 )
(471,766 ) Share of profits of associates 31 33
Operating loss (94,463 ) (173,283 ) Net finance (cost)/
income (17,642 ) 19,866 Loss before tax (112,105 )
(153,417 ) Income tax expense (170 ) (2,158 )
Loss after tax (112,275 ) (155,575 )
Loss per share attributable to owners of the parent Basic
and diluted (0.50 ) (0.59 )
Weighted-average ordinary
shares outstanding Basic and diluted 223,465,734 264,432,214
Unaudited interim condensed consolidated statement of
comprehensive loss for the twelve months ended
December 31 (in $ thousands)
2017 2018
Loss for the period (112,275 ) (155,575 )
Other
comprehensive income/(expense): Items that may be subsequently
reclassified to consolidated
statement of operations (net of tax):
Exchange differences on translation of foreign operations 33,504
(24,142 ) Gains on cash flow hedges - 436
Other comprehensive income/(expense) for the period, net of
tax 33,504 (23,706 )
Total comprehensive loss for the period
attributable to equity holdersof the parent, net of
tax
(78,771 ) (179,281 )
Unaudited interim
condensed consolidated statement of financial position
(in $ thousands)
December 31,
2017
December 31,
2018
Non-current assets Trade and other receivables 9,193 10,458
Intangible assets 74,041 103,345 Property, plant and equipment
26,696 37,528 Investments 278 566 Investments in associates
58 86
Total non-current assets 110,266
151,983
Current assets Inventories 50,610 60,954 Trade and
other receivables 18,180 93,670 Cash and cash equivalents
384,002 1,044,786
Total current assets 452,792
1,199,410
Total assets 563,058
1,351,393
Equity and liabilities Equity Share
capital 9,298 11,994 Share premium 677,674 772,300 Merger reserve -
783,529 Foreign exchange reserve 633 (23,509 ) Other reserves
38,475 67,474 Accumulated losses (329,177 ) (483,357
)
Total equity 396,903 1,128,431
Non-current liabilities Provisions 5,142 13,462 Other
liabilities 5,123 15,342
Total non-current
liabilities 10,265 28,804
Current
liabilities Trade and other payables 136,744 194,158 Other
liabilities 19,146 -
Total current liabilities
155,890 194,158
Total liabilities
166,155 222,962
Total equity and liabilities
563,058 1,351,393
Unaudited interim condensed
consolidated statement of cash flows
for the twelve months ended December 31 (in $
thousands)
2017 2018 Cash flows from
operating activities Loss before tax (112,105 ) (153,417
) Adjustments for: Depreciation 3,648 7,338 Amortization 7,332
16,199 Non-cash employee benefits expense – share based payments
16,578 53,819 Net loss on sale of non-current assets 42 1,028 Share
of profits of associates (35 ) (33 ) Net finance income (1,261 )
(19,866 ) Net exchange differences 12,196 7,621 Changes in fair
value of derivatives 44 (506 ) Changes in working capital Increase
in receivables (598 ) (72,151 ) Increase in inventories (35,163 )
(10,345 ) Increase in payables 47,406 57,432 Changes in other
assets and liabilities Increase in non-current receivables (3,826 )
(1,265 ) Increase in other liabilities 7,365 - Increase in
provisions - (701 ) Interest paid (591 ) (536 ) Income taxes paid
(352 ) (822 )
Net cash outflow from operating
activities (59,320 )
(116,205 ) Cash flows from investing
activities Acquisition of subsidiary, net of cash acquired 195
- Payments for property, plant and equipment (12,616 ) (21,137 )
Payments for intangible assets (18,997 ) (50,978 ) Interest
received 2,833 8,865 Payment for equity investments (278 )
(288 )
Net cash outflow from investing activities
(28,863 ) (63,538 )
Cash flows from financing activities Proceeds from
issue of shares, net of issue costs 322,097 859,526 Repayment of
loan notes (21,955 ) -
Net cash inflow from
financing activities 300,142
859,526 Net increase in cash and cash
equivalents 211,959 679,783 Cash and cash
equivalents at the beginning of the period 150,032 384,002 Effects
of exchange rate changes on cash and cash equivalents 22,011
(18,999 )
Cash and cash equivalents at end of period
384,002 1,044,786 Unaudited
interim condensed consolidated statement of changes in equity
(in $ thousands)
Sharecapital
Sharepremium
Mergerreserve
Foreignexchangereserve
Otherreserves
Accumulatedlosses
Equityattributableto
theparent
Non-controllinginterest
Totalequity
Balance at January 1, 2017 7,844 340,988 -
(32,871 ) 19,857 (216,901 )
118,917 (1 ) 118,916 Changes in
equity
Issue of share capital, net oftransaction
costs
1,454 336,686 - - 2,161 - 340,301 -
340,301 Total
comprehensive income/ (loss) - - - 33,504 - (112,275 ) (78,771 ) -
(78,771 )
Share based payment – equitysettled
- - - - 16,457 - 16,457 -
16,457
Transactions with
non-controllinginterests
- - - - - (1 ) (1
) 1
0 Balance at December 31, 2017
9,298 677,674 -
633 38,475 (329,177 )
396,903 - 396,903
Balance at January 1, 2018 9,298
677,674 - 633
38,475 (329,177 ) 396,903
- 396,903 Changes in equity
Capital reorganization 652 (677,674 ) 783,529 - - - 106,507 -
106,507
Issue of share capital, net oftransaction
costs
2,044 772,300 - - - - 774,344 -
774,344 Total comprehensive
loss - - - (24,142 ) 436 (155,575 ) (179,281 ) -
(179,281
)
Share based payment – equitysettled
- - - - 28,563 1,395
29,958 -
29,958 Balance at December
31, 2018 11,994 772,300
783,529 (23,509 ) 67,474
(483,357 ) 1,128,431
- 1,128,431
Farfetch Limited
Supplemental Metrics
2017 2017 First Quarter
Second Quarter Third Quarter Fourth
Quarter Full Year (in thousands, unless stated
otherwise) Consolidated Group: Gross Merchandise Value
(“GMV”) $ 176,701 $ 217,806 $ 204,601 $ 310,718 $ 909,826 Revenue
79,425 93,146 86,913 126,482 385,966 Fulfilment Revenue 16,128
17,632 16,426 23,996 74,182 Adjusted Revenue 63,297 75,514 70,487
102,486 311,784 In-Store Revenue 3,715 3,616 4,339 3,764 15,434
Demand Generation Expense (12,429 ) (16,694 ) (16,824 ) (23,255 )
(69,202 ) Technology Expense (5,078 ) (6,050 ) (8,335 ) (12,148 )
(31,611 ) Share Based Payments (3,770 ) (4,752 ) (5,249 ) (7,715 )
(21,486 ) Depreciation and Amortization (2,313 ) (2,706 ) (2,932 )
(3,029 ) (10,980 ) General and Administrative (29,537 ) (42,433 )
(41,150 ) (52,861 ) (165,981 ) Adjusted EBITDA (4,190 ) (9,860 )
(20,620 ) (23,409 ) (58,079 ) Adjusted EBITDA Margin (6.6%) (13.1%)
(29.3%) (22.8%) (18.6%)
Platform: Platform GMV $ 172,985 $
214,190 $ 200,263 $ 306,954 $ 894,392 Platform Services Revenue
59,582 71,898 66,148 98,722 296,350 Platform Gross Profit 40,759
49,735 43,258 62,829 196,581 Platform Order Contribution 28,330
33,041 26,434 39,574 127,379 Platform Order Contribution Margin
47.5% 46.0% 40.0% 40.1% 43.0%
Farfetch Marketplace: Active
Consumers 728.2 796.3 854.7 935.8 935.8 Number of Orders 385.0
468.2 427.7 600.1 1,881.0 Average Order Value (actual) $ 581.2 $
600.4 $ 605.2 $ 670.4 $ 620.0
Farfetch Limited
Supplemental Metrics
2018 2018 First Quarter
Second Quarter Third Quarter Fourth
Quarter Full Year (in thousands, unless stated
otherwise) Consolidated Group: Gross Merchandise Value
(“GMV”) $ 292,692 $ 338,543 $ 309,973 $ 466,490 $ 1,407,698
Revenue1 125,617 146,693 134,541 195,533 602,384 Fulfilment Revenue
22,535 28,016 21,799 25,444 97,794 Adjusted Revenue1 103,082
118,677 112,742 170,089 504,590 In-Store Revenue 4,021 3,170 4,090
4,314 15,595 Demand Generation Expense (19,363 ) (21,895 ) (22,103
) (33,934 ) (97,295 ) Technology Expense (13,896 ) (17,135 )
(19,034 ) (18,159 ) (68,224 ) Share Based Payments (6,567 ) (5,956
) (38,475 ) (2,821 ) (53,819 ) Depreciation and Amortization (4,875
) (5,463 ) (6,014 ) (7,185 ) (23,537 ) General and Administrative
(51,571 ) (62,080 ) (58,561 ) (56,679 ) (228,891 ) Adjusted EBITDA
(23,657 ) (25,417 ) (32,311 ) (14,575 ) (95,960 ) Adjusted EBITDA
Margin (22.9%) (21.4%) (28.7%) (8.6%) (19.0%)
Platform:
Platform GMV $ 288,671 $ 335,373 $ 305,884 $ 462,176 $ 1,392,104
Platform Services Revenue1 99,061 115,507 108,652 165,775 488,995
Platform Gross Profit 59,365 74,222 65,487 92,632 291,706 Platform
Order Contribution 40,002 52,327 43,384 58,698 194,411 Platform
Order Contribution Margin1 40.4% 45.3% 39.9% 35.4% 39.8%
Farfetch Marketplace: Active Consumers 1,017.8 1,118.0
1,216.8 1,353.4 1,353.4 Number of Orders 578.3 727.0 662.5 945.2
2,913.0 Average Order Value (actual) $ 647.1 $ 602.4 $ 584.6 $
637.3 $ 618.6
1 See “Consolidated statement of
operations classification” below for an explanation regarding
changes to the previously reported metrics the first three quarters
of 2018.
Forward Looking Statements
This release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
All statements contained in this release that do not relate to
matters of historical fact should be considered forward-looking
statements, including, without limitation, statements regarding the
success of our expansion into the China Market and our expected
financial performance and operational performance for the first
quarter of 2019 and full year 2019, as well as statements that
include the words “expect,” “intend,” “plan,” “believe,” “project,”
“forecast,” “estimate,” “may,” “should,” “anticipate” and similar
statements of a future or forward-looking nature. These
forward-looking statements are based on management’s current
expectations. These statements are neither promises nor guarantees,
but involve known and unknown risks, uncertainties and other
important factors that may cause actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements, including, but not limited to:
purchasers of luxury products may not choose to shop online in
sufficient numbers; our ability to generate sufficient revenue to
be profitable or to generate positive cash flow on a sustained
basis; the volatility and difficulty in predicting the luxury
fashion industry; our reliance on a limited number of retailers and
brands for the supply of products on our Marketplace; our reliance
on retailers and brands to anticipate, identify and respond quickly
to new and changing fashion trends, consumer preferences and other
factors; our reliance on retailers and brands to make products
available to our consumers on our Marketplace and to set their own
prices for such products; fluctuation in foreign exchange rate; our
reliance on information technologies and our ability to adapt to
technological developments; our ability to acquire or retain
consumers and to promote and sustain the Farfetch brand; our
ability or the ability of third parties to protect our sites,
networks and systems against security breaches, or otherwise to
protect our confidential information; our ability to successfully
launch and monetize new and innovative technology; our dependence
on highly skilled personnel, including our senior management, data
scientists and technology professionals, and our ability to hire,
retain and motivate qualified personnel; José Neves, our chief
executive officer, has considerable influence over important
corporate matters due to his ownership of us, and our dual-class
voting structure will limit your ability to influence corporate
matters, including a change of control; and the other important
factors discussed under the caption “Risk Factors” in our final
prospectus under Rule 424(b) filed with the U.S. Securities and
Exchange Commission (“SEC”) on September 24, 2018 in connection
with our initial public offering as such factors may be updated
from time to time in our other filings with the SEC, which are
accessible on the SEC’s website at www.sec.gov. In addition, we
operate in a very competitive and rapidly changing environment. New
risks emerge from time to time. It is not possible for our
management to predict all risks, nor can we assess the impact of
all factors on its business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements
that we may make. In light of these risks, uncertainties and
assumptions, the forward-looking events and circumstances discussed
in this release are inherently uncertain and may not occur, and
actual results could differ materially and adversely from those
anticipated or implied in the forward-looking statements.
Accordingly, you should not rely upon forward-looking statements as
predictions of future events. In addition, the forward-looking
statements made in this release relate only to events or
information as of the date on which the statements are made in this
release. Except as required by law, we undertake no obligation to
update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise, after
the date on which the statements are made or to reflect the
occurrence of unanticipated events.
Consolidated Statement of Operations Reclassification
We have revised previously reported revenues and cost of
revenues for each of the first three quarters of 2018 to reflect
certain sales originally reported on a third party basis (i.e. net
revenue presentation), as being on a first party basis (i.e. gross
revenue presentation). These revisions had no impact on gross
profit or loss after tax in those periods, and had no impact on any
of our unaudited condensed consolidated statements of financial
position, changes in equity or cash flows during 2018. The Group
has determined that these revisions are immaterial to the
previously reported financial information, and there is no impact
on any previously issued annual financial statements. There was no
impact to other prior periods.
Non-IFRS and Other Financial and Operating Metrics
This release includes certain financial measures and metrics not
based on IFRS, including Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Revenue, Platform Services Revenue, Platform Gross Profit,
Platform Order Contribution, and Platform Order Contribution
Margin, as well as operating metrics, including GMV, Platform GMV,
Active Consumers, Number of Orders and Average Order Value.
Management uses Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Revenue, Platform Services Revenue, Platform Gross Profit,
Platform Order Contribution, and Platform Order Contribution
Margin
- as measurements of operating
performance because they assist us in comparing our operating
performance on a consistent basis, as they remove the impact of
items not directly resulting from our core operations;
- for planning purposes, including the
preparation of our internal annual operating budget and financial
projections;
- to evaluate the performance and
effectiveness of our strategic initiatives; and
- to evaluate our capacity to fund
capital expenditures and expand our business.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Revenue,
Platform Services Revenue, Platform Gross Profit, Platform Order
Contribution and Platform Order Contribution Margin may not be
comparable to similar measures disclosed by other companies,
because not all companies and analysts calculate these measures in
the same manner. We present Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Revenue, Platform Services Revenue, Platform Gross
Profit, Platform Order Contribution and Platform Order Contribution
Margin because we consider them to be important supplemental
measures of our performance, and we believe they are frequently
used by securities analysts, investors and other interested parties
in the evaluation of companies. Management believes that investors’
understanding of our performance is enhanced by including these
non-IFRS financial measures as a reasonable basis for comparing our
ongoing results of operations. Many investors are interested in
understanding the performance of our business by comparing our
results from ongoing operations period over period and would
ordinarily add back non-cash expenses such as depreciation,
amortization and items that are not part of normal day-to-day
operations of our business. By providing these non-IFRS financial
measures, together with reconciliations to IFRS, we believe we are
enhancing investors’ understanding of our business and our results
of operations, as well as assisting investors in evaluating how
well we are executing our strategic initiatives.
Items excluded from these non-IFRS measures are significant
components in understanding and assessing financial performance.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Revenue and
Platform Services Revenue have limitations as analytical tools and
should not be considered in isolation, or as an alternative to, or
a substitute for loss after tax, revenue or other financial
statement data presented in our consolidated financial statements
as indicators of financial performance. Some of the limitations
are:
- such measures do not reflect revenue
related to fulfilment, which is necessary to the operation of our
business;
- such measures do not reflect our
expenditures, or future requirements for capital expenditures or
contractual commitments;
- such measures do not reflect changes in
our working capital needs;
- such measures do not reflect our share
based payments, income tax (credit)/expense or the amounts
necessary to pay our taxes;
- although depreciation and amortization
are eliminated in the calculation of Adjusted EBITDA, the assets
being depreciated and amortized will often have to be replaced in
the future and such measures do not reflect any costs for such
replacements; and
- other companies may calculate such
measures differently than we do, limiting their usefulness as
comparative measures.
Due to these limitations, Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Revenue and Platform Services Revenue should not
be considered as measures of discretionary cash available to us to
invest in the growth of our business and are in addition to, not a
substitute for or superior to, measures of financial performance
prepared in accordance with IFRS. In addition, the non-IFRS
financial measures we use may differ from the non-IFRS financial
measures used by other companies, and are not intended to be
considered in isolation or as a substitute for the financial
information prepared and presented in accordance with IFRS.
Furthermore, not all companies or analysts may calculate similarly
titled measures in the same manner. We compensative for these
limitation by relying primarily on our IFRS results and using these
non-IFRS measures only as supplemental measures.
Platform Gross Profit, Platform Order Contribution and Platform
Order Contribution Margin are not measurements of our financial
performance under IFRS and do not purport to be alternatives to
gross profit or loss after tax derived in accordance with IFRS. We
believe that Platform Gross Profit, Platform Order Contribution and
Platform Order Contribution Margin are useful measures in
evaluating our operating performance because they take into account
demand generation expense and are used by management to analyze the
operating performance of our platform for the periods presented. We
also believe that Platform Gross Profit, Platform Order
Contribution and Platform Order Contribution Margin are useful
measures in evaluating our operating performance within our
industry because they permit the evaluation of our platform
productivity, efficiency and performance.
Farfetch reports under International Financial Reporting
Standards (“IFRS”). Farfetch provides earnings guidance on a
non-IFRS basis and does not provide earnings guidance on an IFRS
basis. A reconciliation of the Company’s Adjusted EBITDA guidance
to the most directly comparable IFRS financial measure cannot be
provided without unreasonable efforts and is not provided herein
because of the inherent difficulty in forecasting and quantifying
certain amounts that are necessary for such reconciliations,
including adjustments that are made for future changes in the fair
value of cash-settled share based payment liabilities; foreign
exchange gains/(losses) and the other adjustments reflected in our
reconciliation of historical non-IFRS financial measures, the
amounts of which, could be material.
Reconciliations of these non-IFRS measures to the most directly
comparable IFRS measure are included in the accompanying
tables.
The following table reconciles Adjusted EBITDA to the most
directly comparable IFRS financial performance measure, which is
loss after tax:
(in $ thousands, except as otherwise noted)
2017 2017 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full year Loss after tax $ (9,333 ) $ (19,947 ) $ (28,179 )
$ (54,816 ) $ (112,275 ) Net finance costs/(income) (1,085 ) (605 )
(839 ) 20,171 17,642 Income tax expense/(credit) 152 (581 ) 225 374
170 Depreciation and
amortization
2,313 2,706 2,932 3,029 10,980 Share based payments(a) 3,770 4,752
5,249 7,715 21,486 Other items(b) - 3,823 - 126 3,949 Share of
results of
associates
(7 ) (8 ) (8 ) (8 ) (31 )
Adjusted EBITDA $ (4,190 ) $
(9,860 ) $ (20,620 ) $
(23,409 ) $ (58,079 ) (in $
thousands, except as otherwise noted)
2018 2018 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full year Loss after tax $ (50,727 ) $ (17,681 ) $ (77,255 )
$ (9,912 ) $ (155,575 ) Net finance costs/(income) 15,101 (19,319 )
(733 ) (14,915 ) (19,866 ) Income tax expense/(credit) 527 187
1,183 261 2,158 Depreciation and
amortization
4,875 5,463 6,014 7,185 23,537 Share based payments(a) 6,567 5,956
38,475 2,821 53,819 Other items - - - - - Share of results of
associates
- (23 ) 5 (15 ) (33 )
Adjusted EBITDA $ (23,657 ) $
(25,417 ) $ (32,311 ) $
(14,575 ) $ (95,960 ) (a)
Represents share based payment expense. (b)
Represents other items, which are outside
the normal scope of our ordinary activities or non-cash, including
fair value remeasurement of contingent consideration of $3.3
million in secondquarter 2017 and legal fees directly related to
acquisitions of $0.1 million in fourth quarter 2017,all of which
are included within the general and administrative component of
selling, general andadministrative expenses. There were no other
such items in 2018.
The following table reconciles Adjusted Revenue and Platform
Services Revenue to the most directly comparable IFRS financial
performance measure, which is revenue:
(in $ thousands, except as otherwise noted)
2017 2017 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full year Revenue $ 79,425 $ 93,146 $ 86,913 $ 126,482 $
385,966 Less: Platform Fulfilment
Revenue
(16,128 ) (17,632 ) (16,426 ) (23,996 )
(74,182 ) Adjusted Revenue 63,297 75,514 70,487 102,486
311,784 Less: In-Store
Revenue
(3,715 ) (3,616 ) (4,339 ) (3,764 )
(15,434 )
Platform Services
Revenue (a)
$ 59,582 $ 71,898 $
66,148 $ 98,722 $ 296,350 (in $
thousands, except as otherwise noted)
2018 2018 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full year Revenue $ 125,617 $ 146,693 $ 134,541 $ 195,533 $
602,384 Less: Platform Fulfilment
Revenue
(22,535 ) (28,016 ) (21,799 ) (25,444 )
(97,794 ) Adjusted Revenue 103,082 118,677 112,742 170,089
504,590 Less: In-Store
Revenue
(4,021 ) (3,170 ) (4,090 ) (4,314 )
(15,595 )
Platform Services
Revenue (a)
$ 99,061 $ 115,507 $
108,652 $ 165,775 $ 488,995
The following table reconciles Platform Gross Profit and
Platform Order Contribution to the most directly comparable IFRS
financial performance measure, which is gross profit:
(in $ thousands, except as otherwise noted)
2017 2017 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full year Gross profit $ 42,854 $ 51,494 $ 45,689 $ 64,729 $
204,766 Less: In-Store Gross
Profit(a)
(2,095 ) (1,759 ) (2,431 ) (1,900 )
(8,185 ) Platform Gross Profit 40,759 49,735 43,258 62,829
196,581 Less: Demand generation
expense
(12,429 ) (16,694 ) (16,824 ) (23,255 )
(69,202 )
Platform Order
Contribution
$ 28,330 $ 33,041 $
26,434 $ 39,574 $ 127,379 (in $
thousands, except as otherwise noted)
2018 2018 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Full year Gross profit $ 61,173 $ 75,693 $ 67,387 $ 94,197 $
298,450 Less: In-Store Gross
Profit(a)
(1,808 ) (1,471 ) (1,900 ) (1,565 )
(6,744 ) Platform Gross Profit 59,365 74,222 65,487 92,632
291,706 Less: Demand generation
expense
(19,363 ) (21,895 ) (22,103 ) (33,934 )
(97,295 )
Platform Order
Contribution
$ 40,002 $ 52,327 $
43,384 $ 58,698 $ 194,411
(a) In-Store Gross Profit is In-Store
Revenue less the direct cost of goods sold relating to In-Store
Revenue
“Active Consumers” means active consumers on the Farfetch
Marketplace. A consumer is deemed to be active if they made a
purchase on the Farfetch Marketplace within the last 12-month
period, irrespective of cancelations or returns. The number of
Active Consumers is an indicator of our ability to attract and
retain an increasingly large consumer base to our platform and of
our ability to convert platform visits into sale orders.
“Adjusted EBITDA” means loss after taxes before net finance
costs/(income), income tax (credit)/expense and depreciation and
amortization, further adjusted for share based compensation
expense, other items (represents items outside the normal scope of
our ordinary activities) and share of results of associates.
Adjusted EBITDA provides a basis for comparison of our business
operations between current, past and future periods by excluding
items that we do not believe are indicative of our core operating
performance. Adjusted EBITDA may not be comparable to other
similarly titled metrics of others.
“Adjusted EBITDA Margin” means Adjusted EBITDA calculated as a
percentage of Adjusted Revenue.
“Adjusted Revenue” means revenue less Platform Fulfilment
Revenue.
“Average Order Value” (“AOV”) means the average value of all
orders placed on the Farfetch Marketplace excluding value added
taxes.
“Gross Merchandise Value” (“GMV”) means the total dollar value
of orders processed. GMV across our platform is inclusive of
product value, shipping and duty. It is net of returns, value added
taxes and cancellations. GMV does not represent revenue earned by
us, although GMV and revenue are correlated.
“In-Store Revenue” means revenue generated in our Browns retail
stores.
“Number of Orders” means the total number of consumer orders
placed on the Farfetch Marketplace, gross of returns and net of
cancellations, in a particular period. An order is counted on the
day the consumer places the order. The Number of Orders represents
an indicator of our ability to generate sales opportunities for
luxury sellers through our Marketplace. Analyzed in the context of
Active Consumers, the Number of Orders provides an indicator of our
ability to attract recurring purchases on our platform and also,
the effectiveness of our targeted advertising.
“Platform Fulfilment Revenue” means revenue from shipping and
customs clearing services that we provide to our consumers, net of
consumer promotional incentives, such as free shipping and
promotional codes.
“Platform GMV” means GMV excluding In-Store Revenue.
“Platform Gross Profit” means gross profit excluding In-Store
Gross Profit.
“Platform Order Contribution” means gross profit after deducting
demand generation expense, which includes fees that we pay for our
various marketing channels. Platform Order Contribution provides an
indicator of our ability to extract consumer value from our demand
generation expense, including the costs of retaining existing
consumers and our ability to acquire new consumers.
“Platform Order Contribution Margin” means Platform Order
Contribution calculated as a percentage of Platform Services
Revenue.
“Platform Services Revenue” means Adjusted Revenue less In-Store
Revenue. Platform Services Revenue is driven by our Platform GMV,
including revenue from first-party sales, and commission from
third-party sales. The revenue realized from first-party sales is
equal to the GMV of such sales because we act as principal in these
transactions, and thus related sales are not commission-based.
Platform Services Revenue was also referred to as Adjusted Platform
Revenue in previous filings with the SEC.
“Third-Party Take Rate” means Platform Services Revenue
excluding revenue from first-party sales, as a percentage of GMV
excluding GMV from first-party sales and Platform Fulfilment
Revenue. Revenue from first-party sales, which is equal to GMV from
first-party sales, means revenue derived from sales on our platform
of inventory purchased by us.
Certain figures in the release may not recalculate exactly due
to rounding. This is because percentages and/or figures contained
herein are calculated based on actual numbers and not the rounded
numbers presented.
About Farfetch
Farfetch Limited is the leading global technology platform for
the luxury fashion industry. Founded in 2007 by José Neves for the
love of fashion, and launched in 2008, Farfetch began as an
e-commerce marketplace for luxury boutiques around the world. Today
the Farfetch.com Marketplace connects customers in over 190
countries with items from more than 50 countries and over 1,000 of
the world’s best brands, boutiques and department stores,
delivering a truly unique shopping experience and access to the
most extensive selection of luxury on a single platform. Through
its business units, which also include Store of The Future,
Farfetch Black & White Solutions, Browns, and Stadium Goods,
Farfetch continues to invest in innovation and develop key
technologies, business solutions, and services for the luxury
fashion industry.
For more information, please visit www.farfetch.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20190228005990/en/
Investor Relations
Contact:Alice RyderVP Investor
RelationsIR@farfetch.comMedia
Contacts:Susannah ClarkVP Communications,
Globalsusannah.clark@farfetch.com+44 7788 405224Brunswick
Groupfarfetch@brunswickgroup.comUS: +1 (212) 333 3810UK: +44 (0)
207 404 5959
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