- Q3 2020 Gross Merchandise Value and Digital Platform GMV
growth rates accelerate – up 62% and 60% year-over-year,
respectively, to record highs of $798 million and $674 million,
respectively
- Q3 2020 Revenue increases 71% year-over-year to $438
million
- Q3 2020 Gross Profit and Digital Platform Order Contribution
up 82% and 98% year-over-year, respectively
- Gross Profit Margin of 48% and Digital Platform Order
Contribution Margin of 37%
- Q3 2020 Loss After Tax of $537 million
- Q3 2020 Adjusted EBITDA improved to $(10) million from $(36)
million in Q3 2019
- Announced global partnership with Alibaba and Richemont to
accelerate the digitization of luxury industry; strategic partners
to invest total $1.15 billion in Farfetch Limited and new Farfetch
China joint venture
Farfetch Limited (NYSE: FTCH), the leading global platform for
the luxury fashion industry, today reported its financial results
for the third quarter ended September 30, 2020.
José Neves, Farfetch Founder, Chairman and CEO said: “The
Farfetch platform continued to accelerate in third quarter 2020,
setting another quarterly GMV record and further indicating we are
witnessing a paradigm shift in favor of online luxury. The Farfetch
platform is not only capturing this opportunity but is helping
drive this paradigm shift both for luxury consumers and brands.
“What we are seeing is the acceleration of the secular trend of
online adoption in luxury – an industry that is still very
underpenetrated. The capabilities developed across the Farfetch
platform over the past 13 years in anticipation of the eventual
digitization of the luxury industry uniquely position Farfetch to
capture this opportunity today. And our recently announced
partnership with Alibaba and Richemont further position us to seize
the opportunity to bring the luxury industry into the next
generation and drive sustained growth and market share for many
years to come.”
Elliot Jordan, CFO of Farfetch, said: “I’m delighted by the
results of our third quarter, reflecting strong momentum behind the
Farfetch platform and an acceleration of growth on the marketplace.
This strong growth in revenue, steady improvement in unit economics
and further operating cost efficiencies means we are another step
closer to achieving the key milestone of operational profitability
in the near-term.
“The strong underlying financial profile of Farfetch and recent
investments by our new strategic partners who form part of Luxury
New Retail initiative means we are well placed to support the
global luxury industry in navigating the continued growth in online
over the coming years.”
Consolidated Financial Summary and Key Operating Metrics
(in thousands, except per share data, Average Order Value, or
otherwise stated):
Three months ended September
30,
2019
2020
Consolidated Group:
Gross Merchandise Value
(“GMV”)
$
492,014
$
797,840
Revenue
255,481
437,700
Adjusted Revenue
228,227
386,778
Gross profit
115,139
209,029
Gross profit margin
45.1%
47.8%
Loss after tax
$
(90,484
)
$
(536,960
)
Adjusted EBITDA
(35,638
)
(10,314
)
Adjusted EBITDA Margin
(15.6)%
(2.7)%
Earnings per share (“EPS”)
$
(0.30
)
$
(1.58
)
Adjusted EPS
(0.20
)
(0.17
)
Digital Platform:
Digital Platform GMV
$
420,266
$
674,097
Digital Platform Services
Revenue
156,479
263,035
Digital Platform Gross
Profit
83,294
143,318
Digital Platform Gross Profit
Margin
53.2%
54.5%
Digital Platform Order
Contribution
$
48,973
$
97,133
Digital Platform Order
Contribution Margin
31.3%
36.9%
Active Consumers
1,889
2,742
Average Order Value (“AOV”) -
Marketplace
$
582
$
574
AOV - Stadium Goods
327
340
Brand Platform:
Brand Platform GMV
$
62,671
$
112,327
Brand Platform Revenue
62,671
112,327
Brand Platform Gross Profit
27,464
58,738
Brand Platform Gross Profit
Margin
43.8%
52.3%
See “Notes and Disclosures” on page 19 for further explanations.
See “Non-IFRS and Other Financial and Operating Metrics” on page 19
for reconciliations of non-IFRS measures to IFRS measures. As we
acquired New Guards in August 2019, our results for third quarter
2019 include only two months of New Guards’ performance.
Recent Business Highlights
COVID-19
- Maintained continuity of operations with health and wellbeing
of Farfetch employees, partners and customers continuing to be our
top priority
- Collaborated with boutique and brand partners to drive
continued growth of their digital sales via the Marketplace;
Autumn-Winter 2020 supply reached previous year levels despite
initial delays at the beginning of the quarter
- Maintained and expanded our relationships with logistics
partners, preserving continuity of fulfilment and delivery
operations, with no material disruptions to lead times or customer
service levels during third quarter 2020
- Following the heightened restrictions recently announced by
European governments, we have closed our retail stores in affected
locations and will continue to comply as these measures evolve
Luxury New Retail
- Announced a global partnership with Alibaba and Richemont to
accelerate the digitization of the luxury industry
- Alibaba to launch Farfetch luxury shopping channels on Tmall
Luxury Pavilion and Luxury Soho
- New China joint venture to be formed to operate Farfetch
marketplace in China; to be 75% owned by Farfetch, with remaining
25% owned equally by Alibaba and Richemont
- Farfetch and Alibaba to leverage their platforms and augmented
retail technologies to pursue Luxury New Retail initiative to
accelerate the digitization of the global luxury industry
- Farfetch and Alibaba form Luxury New Retail steering group; to
be joined by Richemont Chairman, Johann Rupert, and Artemis
Chairman, François-Henri Pinault
- Alibaba, Richemont and Artemis to invest in Farfetch Limited
and new Farfetch China joint venture a total of $1.15 billion
Digital Platform
- Re-branded Farfetch.com in conjunction with global ‘Open Doors
to a World of Fashion’ brand campaign in September 2020, designed
to build brand awareness and to continue capturing market share of
the online luxury fashion industry
- Accelerated GMV growth to 60% in third quarter 2020 driven by
acceleration across all three geographic regions – the Americas,
EMEA and APAC, including each of our top 5 countries, which grew
faster than during second quarter 2020
- Third-party transactions generated 83% of Digital Platform GMV
at a take rate of 30.4% in third quarter 2020
- AOV recovered to a (1)% year-over-year change from an (18)%
year-over-year decline reported last quarter driven by increases in
sales of full-priced and higher-priced items, despite continued
shift into lower-price categories
- Digital Platform Order Contribution Margin increased to 37%
year-over-year, driven by a significant decrease in funded
promotions and efficiencies in demand generation spending
- Continued high levels of customer engagement, with an increase
in Active Consumers of 45% year-over-year; app installs increased
over 70% year-over-year, increasingly becoming a preferred channel
for consumers
- Continued to build membership in our loyalty program to 2.5
million enrolled ACCESS members, and enhanced features to increase
awareness of program benefits
- Expanded offering to Marketplace consumers with signings of new
e-concession partners Moncler, Dolce & Gabbana, Ralph Lauren
and watch maker RADO, our first e-concession from the Swatch Group,
among other labels; also added new supply points from existing
brand partners
- Added new features to enhance customer experience
- Launched new iOS and Android app in China, providing a more
localized experience
- Initiated rollout of improved delivery features in select
markets
- Expanded shipping capabilities to enable multi-leg logistics,
which incorporate services from multiple providers and increase
flexibility of our fulfilment operations
- Piloted new customer communication solution in Germany and the
Middle East with ParcelLab aimed at providing customers increased
transparency in their shopping experience, from check-out to
delivery, including returns
- New virtual sneaker try-on available on the Farfetch app,
allowing customers to simulate the experience of trying-on their
new favorite sneakers
- Farfetch Platform Solutions re-platformed e-commerce sites for
Palm Angels, Marcelo Burlon County of Milan and Ambush
- Celebrated the 50th anniversary of Browns with a combination of
online and offline activities, including over 40 exclusive capsule
collections in collaboration with household names such as Givenchy,
Balmain, Fendi, Loewe and Off-White, among others
- Opened second store for Stadium Goods in Chicago, also adding a
new market center for consignment intake and operations
New Guards
- For the sixth consecutive quarter, GMV from New Guards brands,
in aggregate, exceeded GMV for any other single brand on the
Farfetch Marketplace in third quarter 2020
- Generated third quarter 2020 Brand Platform Revenue of $112
million, a year-over-year increase of 79%, reflecting the timing of
New Guards’ acquisition in Q3 2019, as well as strong demand for
New Guards’ brands
- New Guards’ brand portfolio continued to create culturally
relevant collections
- Off-White released second homeware collection, and new sneaker
collaborations – Off-White x Nike rubber dunk in “Green Strike” and
Off-White x Air Jordan 5 "Sail"
- Palm Angels continued to gain traction and became one of the
top 10 brands on the Farfetch Marketplace, based on GMV
Third Quarter 2020 Results Summary
Gross Merchandise Value (in thousands):
Three months ended September
30,
2019
2020
Digital Platform GMV
$
420,266
$
674,097
Brand Platform GMV
62,671
112,327
In-Store GMV
9,077
11,416
GMV
$
492,014
$
797,840
Gross Merchandise Value (“GMV”) increased by $305.8 million from
$492.0 million in third quarter 2019 to $797.8 million in third
quarter 2020, representing year-over-year growth of 62.2%. Digital
Platform GMV increased by $253.8 million from $420.3 million in
third quarter 2019 to $674.1 million in third quarter 2020,
representing year-over-year growth of 60.4%. Excluding the impact
of changes in foreign exchange rates, Digital Platform GMV would
have increased by approximately 61.0%.
The increase in GMV primarily reflects the growth in Digital
Platform GMV and $49.7 million increase in Brand Platform GMV from
New Guards as a result of our August 2019 acquisition and a strong
demand for products within their brand portfolio. The increase in
Digital Platform GMV was primarily driven by growth in Active
Consumers to 2.7 million in third quarter 2020, increased available
supply from over 1,300 partners, and growth of direct-to-consumer
brand sales from New Guards. This was partially offset by a
decrease in the Marketplace AOV within the Digital Platform from
$582 to $574 due to a higher mix of sales of lower price
categories, a trend that has continued since the outset of COVID-19
restrictions, and lower units per order. However, we have seen a
positive trend during third quarter 2020 with consumers purchasing
higher price-point items and a greater mix of items sold at
full-price as we progressed through the quarter. During third
quarter 2020, we also saw year-over-year growth in transactions
through websites managed by Farfetch Platform Solutions, primarily
driven from incremental activity from websites newly launched
throughout 2020, including Harrods.com, Off---White.com, and
Palmangels.com among others.
Revenue (in thousands):
Three months ended September
30,
2019
2020
Digital Platform Services third-party
revenue
$
106,983
$
157,174
Digital Platform Services first-party
revenue
49,496
105,861
Digital Platform Services
Revenue
156,479
263,035
Digital Platform Fulfilment
Revenue
27,254
50,922
Brand Platform Revenue
62,671
112,327
In-Store Revenue
9,077
11,416
Revenue
$
255,481
$
437,700
Revenue increased by $182.2 million year-over-year from $255.5
million in third quarter 2019 to $437.7 million in third quarter
2020, representing growth of 71.3%. The increase was driven by
68.1% growth in Digital Platform Services Revenue to $263.0
million, plus the impact of the acquisition of New Guards during
third quarter 2019. In-Store Revenue increased by 25.8% to $11.4
million, primarily driven by the acquisition of New Guards retail
stores in August 2019, as well as the opening of new stores
throughout the year, partially offset by reduced foot traffic
across our retail store network as a result of COVID-19
restrictions.
The increase in Digital Platform Services Revenue of 68.1% was
driven by 60.4% overall growth in Digital Platform GMV. Digital
Platform Services first-party GMV, which is composed of our sales
of owned-inventory including First-Party Original, is included in
Digital Platform Services Revenue at 100% of the GMV. Digital
Platform Services first-party GMV increased 113.9% year-over-year
to $105.9 million, primarily driven by the integration of New
Guards to the Farfetch Marketplace during fourth quarter 2019, as
well as growth in Browns, primarily driven by a higher sell-through
of full-price products.
Digital Platform Fulfilment Revenue represents the pass-through
of delivery and duties charges incurred by our global logistics
solutions, net of any Farfetch-funded consumer promotions and
incentives. Whilst Digital Platform Fulfilment Revenue would be
expected to grow in line with the cost of delivery and duties,
which increase as Digital Platform GMV and order volumes grow,
variations in the level of Farfetch-funded promotions and
incentives will impact Digital Platform Fulfilment Revenue. In
third quarter 2020, Digital Platform Fulfilment Revenue increased
86.8% year-over-year, a higher rate as compared to Digital Platform
Services Revenue growth, due to a reduced number of Farfetch-funded
promotions year-over-year.
Cost of Revenue (in thousands):
Three months ended September
30,
2019
2020
Digital Platform Services third-party cost
of revenue
$
36,314
$
52,691
Digital Platform Services first-party cost
of revenue
36,871
67,026
Digital Platform Services cost
of revenue
73,185
119,717
Digital Platform Fulfilment
cost of revenue
27,254
50,922
Brand Platform cost of
revenue
35,207
53,589
In-Store cost of goods sold
4,696
4,443
Cost of revenue
$
140,342
$
228,671
Cost of revenue increased by $88.4 million, or 63.0%
year-over-year from $140.3 million in third quarter 2019 to $228.7
million in third quarter 2020. This was primarily driven by the
increased volume of transactions driving up costs associated with
delivery and duties, the addition of Brand Platform cost of revenue
related to New Guards since its acquisition in August 2019, and the
cost of goods associated with the growth in first-party GMV.
We are reliant on third-parties to provide shipping and delivery
services, and potential changes in their operations due to the
ongoing impacts of COVID-19 could result in future impacts to our
service levels or cost of revenue, however there were no such
material adverse impacts to our service levels or cost of revenue
in third quarter 2020.
Gross profit (in thousands):
Three months ended September
30,
2019
2020
Digital Platform third-party gross
profit
$
70,669
$
104,483
Digital Platform first-party gross
profit
12,625
38,835
Digital Platform Gross
Profit
83,294
143,318
Brand Platform Gross Profit
27,464
58,738
In-Store Gross Profit
4,381
6,973
Gross profit
$
115,139
$
209,029
Gross profit increased by $93.9 million, or 81.6%
year-over-year, from $115.1 million in third quarter 2019 to $209.0
million in third quarter 2020, primarily due to growth in our
Digital Platform Services Revenue and the addition of New Guards
gross profit starting from August 2019. Gross profit margin
increased from 45.1% to 47.8% year-over-year, primarily driven by a
higher Digital Platform Gross Profit Margin as well as a higher
Brand Platform Gross Profit Margin. Digital Platform Gross Profit
Margin increased from 53.2% to 54.5% year-over-year driven by
increases in both third-party and first-party gross profit margins,
partially due to fewer Farfetch-funded consumer promotions during
the period. The increase in first-party gross profit margin also
reflects an increased mix of full-price sales, and higher margin
first-party revenues from sales of New Guards brands’
owned-products sold direct-to-consumers through our platform.
Selling, general and administrative expenses by type (in
thousands):
Three months ended September
30,
2019
2020
Demand generation expense
$
34,321
$
46,185
Technology expense
22,322
29,809
Share based payments
31,760
81,840
Depreciation and amortization
35,097
54,007
General and administrative
94,134
143,349
Other items
10,061
860
Selling, general and
administrative expense
$
227,695
$
356,050
Third quarter 2020 demand generation expense increased 34.6%
year-over-year to $46.2 million, driven by the increase in GMV.
However, in third quarter 2020, demand generation expense as a
percentage of Digital Platform GMV improved from 8.2% to 6.9%
year-over-year, as we saw the benefit of our focus on mobile app
installations help drive a lower paid digital marketing mix
compared to third quarter 2019. In addition, we saw lower paid
digital marketing costs as a percentage of Digital Platform GMV
year-over-year, with a less competitive digital advertising
environment due to COVID-19 leading to efficiencies in our paid
channels, alongside other incremental demand generation
efficiencies.
Technology expense, which primarily relates to development and
operations of our platform features and services, and also includes
software, hosting and infrastructure expenses, increased by $7.5
million, or 33.5%, year-over-year in third quarter 2020, mainly
driven by an increase in technology staff headcount. We continue to
operate three globally distributed data centers, which support the
processing of our growing base of transactions, including one in
Shanghai dedicated to serving our Chinese customers. Third quarter
2020 technology expense as a percentage of Adjusted Revenue
decreased from 9.8% to 7.7% year-over-year as Adjusted Revenue
growth outpaced growth of our underlying technology costs.
Share based payments increased by $50.1 million, or 157.7%,
year-over-year in third quarter 2020. The increase was mainly due
to an increase in our share price during third quarter 2020 as
compared to a decrease in our share price during third quarter
2019. Employment related taxes and the cost of cash-settled awards
increased by $33.8 million and $18.9 million, respectively,
primarily as a result of the change in share price and quarterly
revaluation. Grants of additional equity-settled awards also
contributed to the year-over-year increase.
Depreciation and amortization expense increased by $18.9
million, or 53.8%, year-over-year from $35.1 million in third
quarter 2019 to $54.0 million in third quarter 2020. Amortization
expense increased primarily due to $31.4 million of amortization
recognized on intangible assets acquired in recent acquisitions.
Amortization expense also increased as a result of the historical
investment into technology, where qualifying technology development
costs are capitalized and amortized over a three-year period.
Depreciation expense primarily increased as a result of new leases
entered into across the group during the last 12 months and, to a
lesser extent, due to depreciation on property, plant and equipment
from recent acquisitions.
General and administrative expense increased by $49.2 million,
or 52.3%, year-over-year in third quarter 2020, primarily due to
additional performance-based employee compensation accrued in third
quarter 2020, the addition of New Guards starting in August 2019,
marketing spend related to our brand campaign launch in September
2020, and an increase in non-technology headcount across a number
of areas to support the expansion of our business. General and
administrative expense decreased as a percentage of Adjusted
Revenue to 37.1% compared to 41.2% in third quarter 2019 primarily
due to Adjusted Revenue growing more than the general and
administrative expense as a percentage of Adjusted Revenue.
Other items of $0.9 million in third quarter 2020 primarily
reflects transaction-related legal and advisory expenses.
Gains/(losses) on items held at fair value and remeasurements
(in thousands):
Three months ended
September 30,
2019
2020
Remeasurement gains/(losses) on put and
call option liabilities
$
53,812
$
(77,800
)
Fair value losses on embedded derivative
liabilities
-
(295,279
)
Change in fair value of acquisition
related consideration
(21,526
)
-
Gains/(losses) on items held at fair
value and remeasurements
$
32,286
$
(373,079
)
In third quarter 2020, we recorded a $77.8 million present value
remeasurement loss related to Chalhoub Group’s put option over
their non-controlling interest in Farfetch International Limited,
compared to a $53.8 million present value remeasurement gain
related to the put option in third quarter 2019. The $295.3 million
fair value losses on embedded derivative liabilities comprised
$138.2 million fair value revaluation loss related to $250 million
5.00% convertible senior notes due 2025, and $157.1 million fair
value revaluation loss related to $400 million 3.75% convertible
senior notes due 2027. There were no fair value losses on embedded
derivatives in third quarter 2019 and no change in the fair value
of acquisition related consideration in third quarter 2020.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA improved by $25.3 million, to $(10.3) million in
third quarter 2020, for the reasons described above. Adjusted
EBITDA Margin improved from (15.6)% to (2.7)% over the same prior
year period, primarily reflecting higher gross profit, lower
general and administrative expenses, lower demand generation
expense and technology expenses as percentages of Adjusted
Revenue.
Loss After Tax
Loss after tax increased by $446.5 million to $537.0 million in
third quarter 2020. The increase was primarily driven by losses on
items held at fair value and remeasurements, which increased $405.4
million year-over-year, as well as increases in share-based
payments, general and administrative expenses, and depreciation and
amortization expense, partially offset by an increase in gross
profit, as explained above.
Liquidity
At September 30, 2020 cash and cash equivalents were $756.7
million, an increase of $434.3 million compared to $322.4 million
at December 31, 2019. The increase in cash and cash equivalents is
primarily due to the private placement of convertible senior notes
in first half 2020, partially offset by a net cash outflow from
operating activities, mainly due to the funding of our operations
in the nine months to September 2020, as well as New Guards’
investments into its brand portfolio.
Events After the Reporting Period
As part of the November 5, 2020 agreement between Farfetch
Limited (the “Company”), Alibaba Group (“Alibaba”) and Cie
Financiere Richemont SA (“Richemont”), Alibaba and Richemont have
each agreed to purchase $300 million of 0% convertible senior notes
due 2030 (the “Notes”) issued by Farfetch Limited for total gross
proceeds of $600 million. The additional capital will support
Farfetch’s long-term strategy of delivering a global technology
platform for the luxury fashion industry and facilitate the
Company’s continued focus on executing its growth plans and driving
towards operational profitability. Additionally, Artemis has agreed
to purchase 1,889,338 of our Class A ordinary shares for total
gross proceeds of approximately $50 million. The sale of the Notes
to Alibaba and Richemont, and the issuance of shares to Artemis, is
expected to settle on or about November 17, 2020, subject to
customary closing conditions.
Alibaba and Richemont will also invest in Farfetch China, taking
a combined 25% stake in the new joint venture that will include
Farfetch's marketplace operations in the China region for $500
million ($250 million each). The investments by Alibaba and
Richemont in Farfetch China and the establishment of the joint
venture are expected to be completed during the first half of
calendar year 2021, subject to the satisfaction of closing
conditions.
In conjunction with the above strategic developments, Farfetch
has agreed to close its consumer-facing channels on JD.com, Inc.’s
(“JD.com”) platform. The Level 1 access button, acquired in 2019 as
part of the acquisition of Toplife, provides direct access to
Farfetch’s direct consumer-facing channels on JD.com. As at
September 30, 2020, the carrying value of the Level 1 access button
was $6.0 million. As a result of our agreement to terminate this
channel, management impaired the full value of the Level 1 access
button from the execution date of the binding agreement, in line
with the requirements of IAS 36 Impairment of Assets. An impairment
loss on intangible assets of $5.8 million, which is outside of the
normal scope of our ordinary activities, will be recognized in our
fourth quarter 2020 results on the consolidated statement of
operations.
Outlook
The following forward-looking statements reflect Farfetch’s
expectations as of November 12, 2020.
For the Fourth Quarter 2020:
- Digital Platform GMV of $880 million to $910 million,
representing growth of 40% to 45% year-over-year
- Brand Platform GMV of $85 million to $90 million
- Positive Adjusted EBITDA
Uncertainties resulting from the spread COVID-19 and the
evolving nature of the situation could have material impacts on our
future performance and projections. Factors involving COVID-19 that
could potentially impact our future performance include, among
others:
- disruptions to our operations, fulfilment network,
shipments
- reduced or delayed supply from potential factors, including
reduced inventory from brands and retailers, as well as additional
shutdowns
- weakened consumer sentiment and discretionary income
potentially arising from a prolonged shutdown and declining
macro-economic conditions
Conference Call Information
Farfetch will host a conference call today, November 12, 2020 at
4:30 p.m. Eastern Time to discuss the Company’s results as well as
expectations 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 statements of operations
for the three months ended September
30
(in $ thousands, except share and per
share data)
2019
2020
Revenue
255,481
437,700
Cost of revenue
(140,342
)
(228,671
)
Gross profit
115,139
209,029
Selling, general and administrative
expenses
(227,695
)
(356,050
)
Operating loss
(112,556
)
(147,021
)
Gains/(losses) on items held at fair value
and remeasurements
32,286
(373,079
)
Share of results of associates
371
385
Finance income
1,672
1,033
Finance costs
(12,361
)
(15,396
)
Loss before tax
(90,588
)
(534,078
)
Income tax benefit/(expense)
104
(2,882
)
Loss after tax
(90,484
)
(536,960
)
(Loss)/profit after tax attributable
to:
Equity holders of the parent
(95,277
)
(544,320
)
Non-controlling interests
4,793
7,360
(90,484
)
(536,960
)
Loss per share attributable to equity
holders of the parent
Basic and diluted
(0.30
)
(1.58
)
Weighted-average ordinary shares
outstanding
Basic and diluted
322,226,776
344,185,603
Unaudited interim condensed
consolidated statements of comprehensive loss
for the three months ended September
30
(in $ thousands)
2019
2020
Loss after tax
(90,484
)
(536,960
)
Other comprehensive
(loss)/income:
Items that may be subsequently
reclassified to the consolidated
statement of operations (net of tax):
Exchange differences (loss)/gain on
translation of foreign operations
(3,286
)
6,668
(Loss)/gain on cash flow hedges
(3,082
)
4,839
Items that will not be subsequently
reclassified to the consolidated statement of operations (net of
tax):
Impairment loss on investments
(100
)
-
Remeasurement loss on severance plan
(31
)
-
Other comprehensive (loss)/income for
the period, net of tax
(6,499
)
11,507
Total comprehensive loss for the
period, net of tax
(96,983
)
(525,453
)
Total comprehensive (loss)/income
attributable to:
Equity holders of the parent
(101,776
)
(532,813
)
Non-controlling interests
4,793
7,360
(96,983
)
(525,453
)
Unaudited interim condensed
consolidated statements of operations
for the nine months ended September
30
(in $ thousands, except share and per
share data)
2019
2020
Revenue
638,805
1,133,817
Cost of revenue
(355,095
)
(612,037
)
Gross profit
283,710
521,780
Selling, general and administrative
expenses
(577,660
)
(914,378
)
Impairment losses on tangible assets
-
(2,292
)
Operating loss
(293,950
)
(394,890
)
Gains/(losses) on items held at fair value
and remeasurements
32,286
(586,267
)
Share of results of associates
404
(140
)
Finance income
15,131
2,734
Finance costs
(16,163
)
(72,203
)
Loss before tax
(262,292
)
(1,050,766
)
Income tax expense
(1,270
)
(1,270
)
Loss after tax
(263,562
)
(1,052,036
)
(Loss)/profit after tax attributable
to:
Equity holders of the parent
(268,390
)
(1,066,026
)
Non-controlling interests
4,828
13,990
(263,562
)
(1,052,036
)
Loss per share attributable to owners
of the company
Basic and diluted
(0.86
)
(3.12
)
Weighted-average ordinary shares
outstanding
Basic and diluted
311,858,726
341,896,665
Unaudited interim condensed
consolidated statements of comprehensive loss
for the nine months ended September
30
(in $ thousands)
2019
2020
Loss after tax
(263,562
)
(1,052,036
)
Other comprehensive
income/(loss):
Items that may be subsequently
reclassified to the consolidated
statement of operations (net of tax):
Exchange differences gain on translation
of foreign operations
18,507
22,264
Loss on cash flow hedges
(8,162
)
(3,643
)
Items that will not be subsequently
reclassified to the consolidated statement of operations (net of
tax):
Impairment loss on investments
(100
)
-
Remeasurement loss on severance plan
(31
)
(3
)
Other comprehensive income for the
period, net of tax
10,214
18,618
Total comprehensive loss for the
period, net of tax
(253,348
)
(1,033,418
)
Total comprehensive (loss)/income
attributable to:
Equity holders of the parent
(258,176
)
(1,047,408
)
Non-controlling interests
4,828
13,990
(253,348
)
(1,033,418
)
Unaudited interim condensed
consolidated statements of financial position
(in $ thousands)
December 31,
2019
September 30,
2020
Non-current assets
Other receivables
12,388
14,041
Deferred tax assets
5,324
5,923
Intangible assets, net
1,362,967
1,334,397
Property, plant and equipment, net
67,999
79,338
Right-of-use assets
115,176
140,803
Investments
16,229
8,344
Investments in associates
2,466
2,253
Total non-current assets
1,582,549
1,585,099
Current assets
Inventories
128,107
128,071
Trade and other receivables
189,897
190,421
Current tax assets
1,873
42,577
Derivative financial assets
3,024
3,242
Cash and cash equivalents
322,429
756,713
Total current assets
645,330
1,121,024
Total assets
2,227,879
2,706,123
Liabilities and equity
Non-current liabilities
Provisions
23,704
55,252
Deferred tax liabilities
219,789
200,156
Lease liabilities
100,833
129,833
Employee benefit obligations
16,455
19,204
Derivative financial liabilities
-
659,576
Borrowings
-
469,430
Put and call option liabilities
61,268
182,249
Total non-current liabilities
422,049
1,715,700
Current liabilities
Trade and other payables
413,696
459,036
Provisions
-
12,597
Current tax liability
28,289
35,735
Lease liabilities
18,485
21,783
Derivative financial liabilities
5,601
10,825
Put and call option liabilities
1,118
1,125
Other financial liabilities
809
1,374
Total current liabilities
467,998
542,475
Total liabilities
890,047
2,258,175
Equity
Share capital
13,584
13,842
Share premium
878,007
890,116
Merger reserve
783,529
783,529
Foreign exchange reserve
(30,842
)
(8,578
)
Other reserves
349,463
415,850
Accumulated losses
(826,135
)
(1,810,512
)
Equity attributable to the
parent
1,167,606
284,247
Non-controlling interests
170,226
163,701
Total equity
1,337,832
447,948
Total equity and liabilities
2,227,879
2,706,123
Unaudited interim condensed
consolidated statements of cash flows
for the nine months ended September
30
(in $ thousands)
2019
2020
Cash flows from operating
activities
Operating loss
(293,950
)
(394,890
)
Adjustments to reconcile operating loss to
net cash outflow from operating activities:
Depreciation
19,533
28,113
Amortization
43,993
128,975
Non-cash employee benefits
expense
75,525
124,644
Net loss on sale of non-current
assets
5
-
Impairment losses on tangible
assets
-
2,292
Impairment of investments
5,000
169
Net exchange differences
(1,966
)
-
Change in working capital
Increase in receivables
(2,124
)
(2,168
)
(Increase)/decrease in
inventories
(6,746
)
961
Increase in payables
5,824
41,449
Change in other assets and
liabilities
Increase in non-current
receivables
(2,558
)
(1,203
)
Increase in other
liabilities
16,936
15,749
Increase in provisions
-
42,616
Decrease in derivative
financial instruments
(5,011
)
(13,549
)
Income taxes paid
(1,947
)
(57,790
)
Net cash outflow from operating
activities
(147,486
)
(84,632
)
Cash flows from investing
activities
Acquisition of subsidiary, net of cash
acquired
(461,690
)
(12,016
)
Payments for property, plant and
equipment
(38,013
)
(16,732
)
Payments for intangible assets
(58,497
)
(65,525
)
Payments for investments
(18,733
)
(2,872
)
Interest received
10,701
3,345
Dividends received from associate
-
58
Net cash outflow from investing
activities
(566,232
)
(93,742
)
Cash flows from financing
activities
Repayment of the principal elements of
lease payments
(13,597
)
(12,695
)
Interest paid and fees paid on loans
(2,807
)
(20,662
)
Dividends paid to holders of
non-controlling interests
-
(20,515
)
Proceeds from issue of shares, net of
issue costs
8,249
27,687
Proceeds from borrowings, net of issue
costs
-
641,861
Net cash (outflow)/inflow from
financing activities
(8,155
)
615,676
Net (decrease)/increase in cash and
cash equivalents
(721,873
)
437,302
Cash and cash equivalents at the beginning
of the period
1,044,786
322,429
Effects of exchange rate changes on cash
and cash equivalents
(4,538
)
(3,018
)
Cash and cash equivalents at end of
period
318,375
756,713
Unaudited interim condensed
consolidated statements of changes in equity
(in $ thousands)
Share
capital
Share
premium
Merger
reserve
Foreign
exchange reserve
Other
reserves
Accumulated
losses
Equity
attributable to
the parent
Non- controlling
interests
Total
equity
Balance at January 1, 2019
11,994
772,300
783,529
(23,509
)
67,474
(483,357
)
1,128,431
-
1,128,431
Changes in equity
(Loss)/income after tax for the period
-
-
-
-
-
(268,390
)
(268,390
)
4,828
(263,562
)
Other comprehensive income/(loss)
-
-
-
18,507
(8,293
)
-
10,214
-
10,214
Issue of share capital, net of transaction
costs
1,576
104,144
-
-
389,879
-
495,599
-
495,599
Share based payment – equity settled
-
-
-
-
51,364
45,743
97,107
-
97,107
Share based payment – reverse vesting
shares
-
-
-
-
(92,425
)
-
(92,425
)
-
(92,425
)
Transaction with non- controlling
interests
-
-
-
-
(101,311
)
-
(101,311
)
-
(101,311
)
Non-controlling interest arising from a
business combination
-
-
-
-
-
-
-
158,616
158,616
Non-controlling interest put option
-
-
-
-
-
(4,322
)
(4,322
)
-
(4,322
)
Balance at September 30, 2019
13,570
876,444
783,529
(5,002
)
306,688
(710,326
)
1,264,903
163,444
1,428,347
Balance at January 1, 2020
13,584
878,007
783,529
(30,842
)
349,463
(826,135
)
1,167,606
170,226
1,337,832
Changes in equity
(Loss)/income after tax for the period
-
-
-
-
-
(1,066,026
)
(1,066,026
)
13,990
(1,052,036
)
Other comprehensive income/(loss)
-
-
-
22,264
(3,646
)
-
18,618
-
18,618
Issue of share capital, net of transaction
costs
258
12,109
-
-
4,808
-
17,175
-
17,175
Share based payment – equity settled
-
-
-
-
45,655
81,649
127,304
-
127,304
Share based payment – reverse vesting
shares
-
-
-
-
19,570
-
19,570
-
19,570
Dividends paid to non-controlling
interests
-
-
-
-
-
-
-
(20,515
)
(20,515
)
Balance at September 30, 2020
13,842
890,116
783,529
(8,578
)
415,850
(1,810,512
)
284,247
163,701
447,948
Supplemental Metrics 1
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
(in thousands, except per share
data or otherwise stated)
Consolidated Group:
Gross Merchandise Value (“GMV”)
$
466,490
$
419,273
$
488,475
$
492,014
$
739,937
$
610,874
$
721,310
$
797,840
Revenue
195,533
174,064
209,260
255,481
382,232
331,437
364,680
437,700
Adjusted Revenue
170,089
146,374
180,738
228,227
337,738
301,152
307,877
386,778
In-Store Revenue
4,314
4,536
4,220
9,077
9,788
8,516
3,926
11,416
Gross profit
94,197
83,291
85,280
115,139
176,136
153,376
159,375
209,029
Gross profit margin
48.2%
47.9%
40.8%
45.1%
46.1%
46.3%
43.7%
47.8%
Demand generation expense
$
(33,934
)
$
(31,423
)
$
(34,444
)
$
(34,321
)
$
(51,162
)
$
(37,966
)
$
(47,378
)
$
(46,185
)
Technology expense
(18,159
)
(20,159
)
(19,073
)
(22,322
)
(22,653
)
(26,307
)
(29,284
)
(29,809
)
Share based payments
(2,821
)
(38,714
)
(45,710
)
(31,760
)
(42,238
)
(26,760
)
(61,915
)
(81,840
)
Depreciation and amortization
(7,185
)
(14,106
)
(14,323
)
(35,097
)
(50,065
)
(51,323
)
(51,758
)
(54,007
)
General and administrative
(56,679
)
(61,945
)
(69,339
)
(94,134
)
(120,247
)
(111,422
)
(107,888
)
(143,349
)
Other items
-
(2,493
)
1,764
(10,061
)
(5,584
)
(5,025
)
(1,302
)
(860
)
Impairment losses on tangible assets
-
-
-
-
-
(2,292
)
-
-
Gains / (losses) on items held at fair
value and remeasurements
-
-
-
32,286
(10,565
)
65,434
(278,622
)
(373,079
)
Loss after tax
(9,912
)
(77,686
)
(95,392
)
(90,484
)
(110,126
)
(79,177
)
(435,899
)
(536,960
)
Adjusted EBITDA
(14,575
)
(30,236
)
(37,576
)
(35,638
)
(17,926
)
(22,319
)
(25,175
)
(10,314
)
Adjusted EBITDA Margin
(8.6)%
(20.7)%
(20.8)%
(15.6)%
(5.3)%
(7.4)%
(8.2)%
(2.7)%
Earnings per share (“EPS”)
$
(0.03
)
$
(0.26
)
$
(0.31
)
$
(0.30
)
$
(0.34
)
$
(0.24
)
$
(1.29
)
$
(1.58
)
Adjusted EPS
(0.02
)
(0.11
)
(0.16
)
(0.20
)
(0.08
)
(0.24
)
(0.20
)
(0.17
)
Digital Platform:
Digital Platform GMV
$
462,176
$
414,737
$
484,255
$
420,266
$
628,610
$
494,899
$
651,036
$
674,097
Digital Platform Services Revenue
165,775
141,838
176,518
156,479
226,411
185,177
237,603
263,035
Digital Platform Fulfilment Revenue
25,444
27,690
28,522
27,254
44,494
30,285
56,803
50,922
Digital Platform Gross Profit
92,632
80,941
84,106
83,294
123,572
97,207
130,579
143,318
Digital Platform Gross Profit Margin
55.9%
57.1%
47.6%
53.2%
54.6%
52.5%
55.0%
54.5%
Digital Platform Order Contribution
$
58,698
$
49,518
$
49,662
$
48,973
$
72,410
$
59,241
$
83,201
$
97,133
Digital Platform Order Contribution
Margin
35.4%
34.9%
28.1%
31.3%
32.0%
32.0%
35.0%
36.9%
Active Consumers
1,382
1,699
1,773
1,889
2,068
2,149
2,524
2,742
AOV - Marketplace
$
637
$
601
$
600
$
582
$
636
$
571
$
493
$
574
AOV - Stadium Goods
-
300
336
327
301
314
304
340
Brand Platform:
Brand Platform GMV
$
-
$
-
$
-
$
62,671
$
101,539
$
107,459
$
66,348
$
112,327
Brand Platform Revenue
-
-
-
62,671
101,539
107,459
66,348
112,327
Brand Platform Gross Profit
-
-
-
27,464
47,543
52,480
27,729
58,738
Brand Platform Gross Profit Margin
-
-
-
43.8%
46.8%
48.8%
41.8%
52.3%
- See “Notes and Disclosures” which includes “Non-IFRS and Other
Financial and Operating Metrics” on page 19 for reconciliations of
non-IFRS measures to IFRS measures.
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, the expected timing of
the sale of the Notes to Alibaba and Richemont, the issuance of
shares to Artemis, the establishment of and investment in the
Farfetch China joint venture and our expected performance for
fourth quarter 2020, statements regarding our profitability for
2021, 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, in particular in light of COVID-19 and its
impact on consumer spending patterns; 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 rates; 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 acquisition and integration of other
companies or technologies, for example, Stadium Goods and New
Guards, could divert management’s attention and otherwise disrupt
our operations and harm our operating results; we may be
unsuccessful in integrating any acquired businesses or realizing
any anticipated benefits of such acquisitions; 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; the effect of the COVID-19
pandemic on our business and results of operations, as well as on
the luxury fashion industry and consumer spending more broadly, and
our ability to successfully implement our business plan during a
global economic downturn caused by the COVID-19 pandemic; 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
Annual Report on Form 20-F filed with the U.S. Securities and
Exchange Commission (“SEC”) for the fiscal year ended December 31,
2019 and in Exhibit 99.2 to our Current Report on Form 6-K filed
with the SEC on April 27, 2020, 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 and on our website
at http://farfetchinvestors.com. 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 our 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.
NOTES AND DISCLOSURES
Segment Realignment
Following the acquisition of New Guards in August 2019,
management determined that it had three operating segments: (i)
Digital Platform, (ii) Brand Platform and (iii) In-Store, given our
new organizational structure and the manner in which our business
is reviewed and managed. In fourth quarter 2019, we realigned our
reportable operating segments to reflect how our Chief Operating
Decision-Maker was making operating decisions, allocating resources
and evaluating operating performance. The comparative periods have
been revised to reflect this segment realignment.
Our results for first, second, and part of third quarter 2019 do
not include New Guards’ performance.
Revisions to Previously Reported Financial
Information
We have revised previously reported finance income and costs,
loss after tax, and loss per share for each of the first three
quarters of 2019. Refer to fourth quarter 2019 earnings release
furnished on February 27, 2020 for further information.
Presentation Change
Beginning in second quarter 2020, we changed the presentation of
our operating loss to reflect losses on items held at fair value
and remeasurements, and share of results of associates, as
non-operating items in the consolidated statement of operations.
These items are now presented below operating loss, and all prior
periods in this release reflect this change. We have made this
presentation change in order to improve comparability of our
period-over-period operating loss, particularly given the increased
volatility of the items with a valuation dependent on our market
share prices. As a result of this presentation change, the
consolidated statement of cash flows now starts with operating loss
rather than loss before tax as previously reported. This change had
no impact on our historical loss after tax or on any of our
historical unaudited condensed consolidated statements of financial
position, changes in equity, cash flows or on our previously
provided non-IFRS and operational measures. We determined that
these presentation changes had no material impact on the previously
reported financial information or on any previously issued annual
financial statements.
Non-IFRS and Other Financial and Operating Metrics
This release includes certain financial measures not based on
IFRS, including Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted
EPS, Adjusted Revenue, Digital Platform Order Contribution, and
Digital Platform Order Contribution Margin (together, the “Non-IFRS
Measures”), as well as operating metrics, including GMV, Digital
Platform GMV, Brand Platform GMV, In-Store GMV, Active Consumers
and Average Order Value. See the “Definitions” section below for a
further explanation of these terms.
Management uses the Non-IFRS Measures:
- 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.
The Non-IFRS Measures 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
the Non-IFRS Measures 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 the Non-IFRS 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 the Non-IFRS
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 the Non-IFRS Measures are significant
components in understanding and assessing financial performance.
The Non-IFRS Measures 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 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, and Adjusted 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 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
compensate for these limitations by relying primarily on our IFRS
results and using the Non-IFRS Measures only as supplemental
measures.
Digital Platform Order Contribution and Digital 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 Digital Platform Order Contribution and Digital
Platform Order Contribution Margin are useful measures in
evaluating our operating performance within our industry because
they permit the evaluation of our digital platform productivity,
efficiency and performance. We also believe that Digital Platform
Order Contribution and Digital 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 digital
platform for the periods presented.
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)
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Loss after tax
$
(9,912
)
$
(77,686
)
$
(95,392
)
$
(90,484
)
$
(110,126
)
$
(79,177
)
$
(435,899
)
$
(536,960
)
Net finance (income)/expense
(14,915
)
(8,408
)
(1,249
)
10,689
(16,182
)
34,355
20,751
14,363
Income tax expense/(benefit)
261
560
813
(104
)
(108
)
2,506
(4,118
)
2,882
Depreciation and amortization
7,185
14,106
14,323
35,097
50,065
51,323
51,758
54,007
Share based payments (a)
2,821
38,714
45,710
31,760
42,238
26,760
61,915
81,840
(Gains)/losses on items held at fair value
and remeasurements (b)
-
-
-
(32,286
)
10,565
(65,434
)
278,622
373,079
Other items (c)
-
2,493
(1,764
)
10,061
5,584
5,025
1,302
860
Impairment losses on tangible assets
-
-
-
-
-
2,292
-
-
Share of results of associates
(15
)
(15
)
(17
)
(371
)
38
31
494
(385
)
Adjusted EBITDA
$
(14,575
)
$
(30,236
)
$
(37,576
)
$
(35,638
)
$
(17,926
)
$
(22,319
)
$
(25,175
)
$
(10,314
)
- Represents share based payment expense.
- Represents (gains)/losses on items held at fair value and
remeasurements. See “gains/(losses) on items held at fair value and
remeasurements” on page 24 for a breakdown of these items.
- Represents other items, which are outside the normal scope of
our ordinary activities. See “Other items” on page 24 for a
breakdown of these expenses. Other items is included within
selling, general and administrative expenses.
The following table reconciles Adjusted Revenue to the most
directly comparable IFRS financial performance measure, which is
revenue:
(in $ thousands, except as otherwise
noted)
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Revenue
$
195,533
$
174,064
$
209,260
$
255,481
$
382,232
$
331,437
$
364,680
$
437,700
Less: Digital Platform Fulfilment
Revenue
(25,444
)
(27,690
)
(28,522
)
(27,254
)
(44,494
)
(30,285
)
(56,803
)
(50,922
)
Adjusted Revenue
$
170,089
$
146,374
$
180,738
$
228,227
$
337,738
$
301,152
$
307,877
$
386,778
The following table reconciles Digital Platform Order
Contribution to the most directly comparable IFRS financial
performance measure, which is Digital Platform Gross Profit:
(in $ thousands, except as otherwise
noted)
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Digital Platform Gross Profit
$
92,632
$
80,941
$
84,106
$
83,294
$
123,572
$
97,207
$
130,579
$
143,318
Less: Demand generation expense
(33,934
)
(31,423
)
(34,444
)
(34,321
)
(51,162
)
(37,966
)
(47,378
)
(46,185
)
Digital Platform Order
Contribution
$
58,698
$
49,518
$
49,662
$
48,973
$
72,410
$
59,241
$
83,201
$
97,133
The following table reconciles Adjusted EPS to the most directly
comparable IFRS financial performance measure, which is Earnings
per share:
(per share amounts)
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Earnings per share
$
(0.03
)
$
(0.26
)
$
(0.31
)
$
(0.30
)
$
(0.34
)
$
(0.24
)
$
(1.29
)
$
(1.58
)
Share based payments (a)
0.01
0.13
0.15
0.11
0.12
0.08
0.18
0.24
Amortization of acquired intangible
assets
0.00
0.01
0.01
0.06
0.09
0.09
0.09
0.09
(Gains)/losses on items held at fair value
and remeasurements (b)
-
-
-
(0.10
)
0.03
(0.19
)
0.82
1.08
Other items (c)
-
0.01
(0.01
)
0.03
0.02
0.01
0.00
0.00
Impairment losses on tangible assets
-
-
-
-
-
0.01
-
-
Share of results of associates
(0.00
)
(0.00
)
(0.00
)
(0.00
)
(0.00
)
(0.00
)
(0.00
)
(0.00
)
Adjusted EPS
$
(0.02
)
$
(0.11
)
$
(0.16
)
$
(0.20
)
$
(0.08
)
$
(0.24
)
$
(0.20
)
$
(0.17
)
- Represents share based payment expense on a per share
basis.
- Represents (gains)/losses on items held at fair value and
remeasurements on a per share basis. See “gains/(losses) on items
held at fair value and remeasurements” on page 24 for a breakdown
of these items.
- Represents other items on a per share basis, which are outside
the normal scope of our ordinary activities. See “Other items” on
page 24 for a breakdown of these expenses. Other items included
within selling, general and administrative expenses.
The following table represents gains/(losses) on items held at
fair value and remeasurements:
(in $ thousands, except as otherwise
noted)
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fair value remeasurements:
Shares issued as part of New Guards
acquisition
$
-
$
-
$
-
$
(21,526
)
$
-
$
-
$
-
$
-
$250 million 5.00% Notes due 2025 embedded
derivative
-
-
-
-
-
44,014
(135,093
)
(138,171
)
$400 million 3.75% Notes due 2027 embedded
derivative
-
-
-
-
-
-
(77,758
)
(157,108
)
Present value remeasurements:
Chalhoub put option
-
-
-
53,812
(8,959
)
21,420
(65,771
)
(77,800
)
CuriosityChina call option
-
-
-
-
(1,606
)
-
-
-
Gains / (losses) on items
held at fair value and remeasurements
$
-
$
-
$
-
$
32,286
$
(10,565
)
$
65,434
$
(278,622
)
$
(373,079
)
Farfetch share price (end of day)
$
17.71
$
26.91
$
20.80
$
8.64
$
10.35
$
7.90
$
17.27
$
25.16
The following table represents other items:
(in $ thousands, except as otherwise
noted)
2018
2019
2020
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Transaction-related legal and advisory
expenses
$
-
$
(2,493
)
$
(2,236
)
$
(5,061
)
$
(5,584
)
$
(4,925
)
$
(1,799
)
$
(860
)
Release of tax provisions
-
-
4,000
-
-
-
-
-
Loss on impairment of investments carried
at fair value
-
-
-
(5,000
)
-
(100
)
(69
)
-
Other
-
-
-
-
-
-
566
-
Other items
$
-
$
(2,493
)
$
1,764
$
(10,061
)
$
(5,584
)
$
(5,025
)
$
(1,302
)
$
(860
)
Definitions
We define our non-IFRS and other financial and operating metrics
as follows:
“Active Consumers” means active consumers on our directly owned
and operated sites and related apps. A consumer is deemed to be
active if they made a purchase within the last 12-month period,
irrespective of cancellations or returns. Active Consumers includes
Farfetch Marketplace, BrownsFashion.com, Stadium Goods, and New
Guards-owned sites operated by Farfetch Platform Solutions. Due to
technical limitations, Active Consumers is unable to fully de-dupe
Stadium Goods consumers from consumers on our other sites. The
number of Active Consumers is an indicator of our ability to
attract and retain our 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
expense/(income), income tax expense/(benefit) and depreciation and
amortization, further adjusted for share based compensation
expense, share of results of associates and items outside the
normal scope of our ordinary activities (including other items,
within selling, general and administrative expenses, losses/(gains)
on items held at fair value and remeasurements through profit and
loss, and impairment losses on tangible assets). 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
other companies.
“Adjusted EBITDA Margin” means Adjusted EBITDA calculated as a
percentage of Adjusted Revenue.
“Adjusted EPS” means earnings per share further adjusted for
share based payments, amortization of acquired intangible assets,
items outside the normal scope of our ordinary activities
(including other items, within selling, general and administrative
expenses, losses/(gains) on items held at fair value and
remeasurements through profit and loss, and impairment losses on
tangible assets) and the related tax effects of these adjustments.
Adjusted EPS 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 EPS may not be comparable to other similarly
titled metrics of other companies.
“Adjusted Revenue” means revenue less Digital Platform
Fulfilment Revenue.
“Average Order Value” (“AOV”) means the average value of all
orders excluding value added taxes placed on either the Farfetch
Marketplace or the Stadium Goods Marketplace, as indicated.
“Brand Platform Gross Profit” means Brand Platform Revenue less
the direct cost of goods sold relating to Brand Platform
Revenue.
“Brand Platform GMV” and “Brand Platform Revenue” mean revenue
relating to the New Guards operations less revenue from New
Guards’: (i) owned e-commerce websites, (ii) direct to consumer
channel via our Marketplaces and (iii) directly operated stores.
Revenue realized from Brand Platform is equal to GMV as such sales
are not commission based.
“Digital Platform Fulfilment Revenue” means revenue from
shipping and customs clearing services that we provide to our
digital consumers, net of Farfetch-funded consumer promotional
incentives, such as free shipping and promotional codes. Digital
Platform Fulfilment Revenue was referred to as Platform Fulfilment
Revenue in previous filings with the SEC.
“Digital Platform GMV” means GMV excluding In-Store GMV and
Brand Platform GMV. Digital Platform GMV was referred to as
Platform GMV in previous filings with the SEC.
“Digital Platform Gross Profit” means gross profit excluding
In-Store Gross Profit and Brand Platform Gross Profit. Digital
Platform Gross Profit was referred to as Platform Gross Profit in
previous filings with the SEC.
“Digital Platform Gross Profit Margin” means Digital Platform
Gross Profit calculated as a percentage of Digital Platform
Services Revenue. We provide fulfilment services to Marketplace
consumers and receive revenue from the provision of these services,
which is primarily a pass-through cost with no economic benefit to
us. Therefore, we calculate our Digital Platform Gross Profit
Margin, including Digital Platform third-party and first-party
gross profit margin, excluding Digital Platform Fulfilment
Revenue.
“Digital Platform Order Contribution” means Digital Platform
Gross Profit after deducting demand generation expense, which
includes fees that we pay for our various marketing channels.
Digital Platform Order Contribution provides an indicator of our
ability to extract digital consumer value from our demand
generation expense, including the costs of retaining existing
consumers and our ability to acquire new consumers. Digital
Platform Order Contribution was referred to as Platform Order
Contribution in previous filings with the SEC.
“Digital Platform Order Contribution Margin” means Digital
Platform Order Contribution calculated as a percentage of Digital
Platform Services Revenue. Digital Platform Order Contribution
Margin was referred to as Platform Order Contribution Margin in
previous filings with the SEC.
“Digital Platform Revenue” means the sum of Digital Platform
Services Revenue and Digital Platform Fulfilment Revenue. Digital
Platform Revenue was referred to as Platform Revenue in previous
filings with the SEC.
“Digital Platform Services Revenue” means Revenue less Digital
Platform Fulfilment Revenue, In-Store Revenue and Brand Platform
Revenue. Digital Platform Services Revenue is driven by our Digital
Platform GMV, including commissions from third-party sales and
revenue from first-party sales.
“Digital Platform Services third-party
revenues” represent commissions and other income generated from the
provision of services to sellers in their transactions with
consumers conducted on our dematerialized platforms, as well as
fees for services provided to brands and retailers.
“Digital Platform Services first-party
revenues” represents sales of owned-product, including First-Party
Original through our digital platform. The revenue realized from
first-party sales is equal to the GMV of such sales because we act
as principal in these transactions and, therefore, related sales
are not commission based.
“Digital Platform Services third-party cost
of revenues” and “Digital Platform Services first-party cost of
revenues" include packaging costs, credit card fees, and
incremental shipping costs provided in relation to the provision of
these services. Digital Platform Services first-party cost of
revenues also includes the cost of goods sold of the owned
products.
“First-Party Original” refers to brands developed by New Guards
and sold direct to consumers on the digital platform.
“Gross Merchandise Value” (“GMV”) means the total dollar value
of orders processed. GMV 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 Gross Profit” means In-Store Revenue less the direct
cost of goods sold relating to In-Store Revenue.
“In-Store GMV” and “In-Store Revenue” mean revenue generated in
our retail stores which include Browns, Stadium Goods and New
Guards’ directly operated stores. Revenue realized from In-Store
sales is equal to GMV of such sales because such sales are not
commission based.
“Third-Party Take Rate” means Digital Platform Services Revenue
excluding revenue from first-party sales, as a percentage of
Digital Platform GMV excluding GMV from first-party sales and
Digital 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 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 Marketplace connects customers in over 190 countries with
items from more than 50 countries and over 1,300 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. Farfetch’s additional
businesses include Farfetch Platform Solutions, which services
enterprise clients with e-commerce and technology capabilities;
Browns and Stadium Goods, which offer luxury products to consumers;
and New Guards, a platform for the development of global fashion
brands. Farfetch also invests in innovations such as its Store of
the Future augmented retail solution, and develops key
technologies, business solutions, and services for the luxury
fashion industry.
For more information, please visit www.farfetchinvestors.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201112006062/en/
Investor Relations: Alice
Ryder VP Investor Relations IR@farfetch.com
Media: Susannah Clark VP
Communications, Global susannah.clark@farfetch.com +44 7788
405224
Brunswick Group farfetch@brunswickgroup.com US: +1 (212) 333
3810 UK: +44 (0) 207 404 5959
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