- Strong momentum in business fueled by acceleration of online
adoption drives significant market share gains and record new
customers
- Q2 2020 Gross Merchandise Value and Digital Platform GMV
growth rates accelerate - up 48% and 34% year-over-year,
respectively
- Q2 2020 Revenue increases 74% year-over-year to $365
million
- Delivers improved unit economics in Q2 2020 with 44% Gross
Profit Margin and 35% Digital Platform Order Contribution Margin,
up 290bps and 690bps year-over-year, respectively
- Q2 2020 Loss After Tax of $436 million increases
year-over-year, primarily due to a non-cash impact of higher share
price on items held at fair value
- Demonstrates progress towards Adjusted EBITDA profitability
targeted for full year 2021 - Q2 2020 Adjusted EBITDA improved
year-over-year to $(25) million; Adjusted EBITDA Margin improved to
(8)%
- Cash and cash equivalents of $802 million at quarter-end;
includes net proceeds from April 2020 issuance of $400 million
Convertible Senior Notes
- Continues to expand partnerships within the luxury industry
- legendary department store, Printemps, to participate in Farfetch
Marketplace; now up to 1,300 third-party sellers
- Announces strategic evolution of Board of Directors and
formation of an ESG Committee of the Board
Farfetch Limited (NYSE: FTCH), the leading global platform for
the luxury fashion industry, today reported its financial results
for the second quarter ended June 30, 2020.
José Neves, Farfetch Founder, Chairman and CEO said: “Second
quarter 2020 was record-breaking for Farfetch. Digital Platform GMV
was an all-time high $651 million, we attracted more than half a
million new consumers - our highest ever, and brands and retailers
leaned in to offer the broadest selection of luxury fashion we have
ever seen on the Marketplace. We’re pleased to support such a large
number of the world’s leading luxury brands who are leveraging our
global platform to navigate the current landscape, including our
top 20 direct brand e-concessions who, together, have benefitted
from a doubling of sales year-on-year. I believe this ongoing
acceleration behind our business results from a paradigm shift in
luxury shopping, as the industry undergoes a major acceleration of
the secular online adoption I envisioned in founding Farfetch. We
at Farfetch remain dedicated towards helping the global fashion
community navigate these unprecedented times, connecting luxury’s
curators, creators and consumers now, and in the years to
come.”
Elliot Jordan, CFO of Farfetch, said: “I am delighted by
Farfetch’s results this quarter, which highlight the accelerating
momentum behind the Farfetch platform. During the period, we saw
unprecedented levels of user engagement, mobile app downloads and
transactions driven by new consumers, and our ACCESS loyalty
program ramped up to 2 million members, which all bodes well for
opportunities to drive sustained growth in the future. The strong
trajectory of the business, our expanding unit economics and
scaling of costs delivered in second quarter 2020 puts us squarely
on the path towards achieving our targeted Adjusted EBITDA
profitability in 2021, particularly as we have seen the
acceleration behind the business continue into the third
quarter.”
Consolidated Financial Summary and Key Operating Metrics
(in thousands, except per share data, Average Order Value, or
otherwise stated):
Three months ended June
30,
2019
2020
Consolidated Group:
Gross Merchandise Value (“GMV”)
$
488,475
$
721,310
Revenue
209,260
364,680
Adjusted Revenue
180,738
307,877
Gross profit
85,280
159,375
Gross profit margin
40.8%
43.7%
Loss after tax
$
(95,392
)
$
(435,899
)
Adjusted EBITDA
(37,576
)
(25,175
)
Adjusted EBITDA Margin
(20.8)%
(8.2)%
Earnings per share (“EPS”)
$
(0.31
)
$
(1.29
)
Adjusted EPS
(0.16
)
(0.20
)
Digital Platform:
Digital Platform GMV
$
484,255
$
651,036
Digital Platform Services Revenue
176,518
237,603
Digital Platform Gross Profit
84,106
130,579
Digital Platform Gross Profit Margin
47.6%
55.0%
Digital Platform Order Contribution
$
49,662
$
83,201
Digital Platform Order Contribution
Margin
28.1%
35.0%
Active Consumers
1,773
2,524
Average Order Value (“AOV”) -
Marketplace
$
600
$
493
AOV - Stadium Goods
336
304
Brand Platform:
Brand Platform GMV
$
-
$
66,348
Brand Platform Revenue
-
66,348
Brand Platform Gross Profit
-
27,729
Brand Platform Gross Profit Margin
-
41.8%
See “Metrics Definitions” on page 21 for further explanations.
See “Non-IFRS and Other Financial and Operating Metrics” on page 22
for reconciliations of non-IFRS measures to IFRS measures.
Recent Business Highlights
COVID-19
- Acceleration of online adoption driving significant volume
growth in second quarter 2020 with traffic up more than 60%, more
than doubling of app installs, and addition of largest ever cohort
of more than 500,000 new customers
- Continued to support our brand and retail partners whose
physical stores were closed for most of the quarter, including
through our #SupportBoutiques campaign aimed at driving customer
engagement with boutique supply and strategic efforts to help brand
partners increase direct-to-consumer e-concession sales via the
Marketplace; in-season stock levels were a record high in second
quarter 2020, and to date, brand and retail partner closures have
not had a material impact on GMV or revenue due to our
geo-diversified and distributed model; sellers have increasingly
resumed operations on their physical channels
- Continued to work with our logistics partners to maintain
continuity of fulfilment operations, with no material disruptions
during second quarter 2020
- Second quarter 2020 Brand Platform Revenue of $66 million
reflects some delays in Fall-Winter 2020 shipments, as retailers
focused on selling through Spring-Summer 2020 inventory ahead of
receiving new season product
- Continued to pursue discretionary cost reduction initiatives
that are not expected to adversely impact our operations or growth
capacity
- Continued to prioritize health and wellbeing of Farfetch
employees, partners and customers by meeting or exceeding
government guidelines in all our locations
- In accordance with local regulations and guidelines, began to
reopen retail store locations including Browns and Stadium Goods in
June and July, respectively
- Farfetch offices in Portugal partially reopened in July, and
offices in China region have been operational since late March;
employees in other offices, which largely remained closed,
continued to productively work from home
Digital Platform
- Continued to capture significant market share of the online
luxury fashion industry, with accelerated GMV growth in second
quarter 2020 driven by outsized market performance in major
European countries, Mainland China and other emerging markets,
including the Middle East, as well as early signs of recovery in
the US at the end of the quarter
- Digital Platform Order Contribution Margin increased
year-over-year to 35% driven by a significant decrease in funded
promotions and an improvement in 1P gross profit margin
- Third-party transactions generated 86% of Digital Platform GMV
at a take rate of 29.9% in second quarter 2020
- High levels of customer engagement, with record new customers
driving increased year-over-year transactions to more than offset a
decrease in AOV
- Active Consumers increased 42% year-over-year and App installs
more than doubled, with customers who purchase through the app
typically having higher lifetime value on average
- ACCESS loyalty program accelerated to 2 million enrolled
customers at the end of June 2020
- Continued to offer consumers an exceptionally broad selection
of luxury fashion through partnerships with nearly 1,300 sellers,
including over 500 direct brand e-concessions
- Second quarter 2020 in-season stock was our highest recorded,
with more than 380,000 SKUs from over 3,500 brands
- Maintained 100% three-year retention of top 100 direct brand
and top 100 boutique partners
- Signed legendary luxury French department store, Printemps, as
well as additional fashion labels, as new e-concession sellers on
the Marketplace
- Increased pace of exclusive collections being offered on the
Marketplace:
- Entered into partnership with LVMH’s FENTY by Rihanna, to be
their exclusive multi-brand digital partner channel and launched
the brand’s third drop of its summer collection
- Partnered with Marni for the launch of the exclusive ZOOTERICO
collection, continuing our expansion into newer categories, such as
homeware
- Launched Burberry's new TB Summer Monogram pieces and Gucci’s
“off-The Grid” sustainable collection, exclusively on Farfetch
- Significant growth generated by Farfetch Platform Solutions
clients, including from the addition of Harrods onto the platform
in February 2020; launched re-platformed e-commerce site for
Opening Ceremony
- Stadium Goods collaborated with Christie’s to auction Michael
Jordan game-worn and player exclusive Air Jordan sneakers
New Guards
- For the fifth consecutive quarter, GMV from New Guards brands,
in aggregate, exceeded GMV for any other single brand on the
Farfetch Marketplace in second quarter 2020
- New Guards’ brand portfolio continued to create culturally
relevant collections
- Off-White - was the highest-ranked luxury brand in the “Lyst
Index Q2 2020” list of fashion’s hottest brands and products for
the fourth consecutive quarter; released Air Jordan 4 x Off-White
‘Sail’ on July 25, 2020, which sold out the same day and generated
800 million hits on the Farfetch platform within the first
hour
- Palm Angels gained traction and became one of the top 20 brands
on the Farfetch Marketplace, based on GMV
- Ambush was listed among Lyst and Highsnobiety’s “The NEXT 20”
compilation of next-generation brands and cultural pioneers
Environmental, Social and Governance
(ESG)
- Announced the addition of four new members to our Board of
Directors (the “Board”) - Stephanie Horton, Diane Irvine, Victor
Luís, Gillian Tans - who bring extensive experience across
technology, ecommerce, luxury fashion and finance to join current
directors, José Neves, Dana Evan and David Rosenblatt in overseeing
and advising the Company; co-Chair Natalie Massenet, Jon
Kamaluddin, Jon Jianwen Liao, Danny Rimer, and Mike Risman will
step down in order to make way for the new directors
- Approved formation of an additional Board committee, the ESG
committee, to oversee the establishment of a unified vision and
promotion and furtherance of ESG standards across Farfetch
including our diversity and inclusion initiatives
- Continued to advance our ‘Positively Farfetch’ sustainability
initiative
- Published an initial report on the environmental benefits of
buying pre-owned fashion
- Launched a fashion footprint tool on the Farfetch Marketplace
to help consumers easily identify how they can help the planet with
their wardrobes
Liquidity
- Further strengthened liquidity position with issuance of $400
million 3.75% convertible senior notes due 2027 to end second
quarter 2020 with $802 million cash and cash equivalents
Second Quarter 2020 Results Summary
Gross Merchandise Value (in thousands):
Three months ended June
30,
2019
2020
Digital Platform GMV
$
484,255
$
651,036
Brand Platform GMV
-
66,348
In-Store GMV
4,220
3,926
GMV
$
488,475
$
721,310
Gross Merchandise Value (“GMV”) increased by $232.8 million from
$488.5 million in second quarter 2019 to $721.3 million in second
quarter 2020, representing year-over-year growth of 47.7%. Digital
Platform GMV increased by $166.7 million from $484.3 million in
second quarter 2019 to $651.0 million in second quarter 2020,
representing year-over-year growth of 34.4%. Excluding the impact
of changes in foreign exchange rates, Digital Platform GMV would
have increased by approximately 39.2%.
The increase in GMV primarily reflects the growth in Digital
Platform GMV and the addition of $66.3 million of Brand Platform
GMV from New Guards which we acquired in August 2019. The increase
in Digital Platform GMV was principally driven by growth in Active
Consumers to 2.5 million in second quarter 2020, increased supply
available from nearly 1,300 partners, and the addition of
direct-to-consumer brand sales from New Guards following its
acquisition. This was partially offset by a decrease in the
Marketplace Average Order Values across the Digital Platform from
$600 to $493 due to a higher mix of new customers, who historically
have lower than average AOV’s initially, a higher mix of sales of
lower price products and categories as most consumers remained in
some phase of lockdown, and the impact of foreign currency exchange
fluctuations. During second quarter 2020, we also saw a
year-over-year growth in transactions through third-party websites
supported by Farfetch Platform Solutions, mainly driven by the
launch of the Harrods e-commerce site at the end of February
2020.
Revenue (in thousands):
Three months ended June
30,
2019
2020
Digital Platform Services third-party
revenue
$
127,708
$
151,861
Digital Platform Services first-party
revenue
48,810
85,742
Digital Platform Services Revenue
176,518
237,603
Digital Platform Fulfilment Revenue
28,522
56,803
Brand Platform Revenue
-
66,348
In-Store Revenue
4,220
3,926
Revenue
$
209,260
$
364,680
See “Digital Platform Segment” on page 19 for further
explanations of Digital Platform Services third-party and
first-party revenue.
Revenue increased by $155.4 million year-over-year from $209.3
million in second quarter 2019 to $364.7 million in second quarter
2020, representing growth of 74.2%. The increase was driven by
34.6% growth in Digital Platform Services Revenue to $237.6
million, plus the addition of Brand Platform Revenue from New
Guards. In-Store Revenue decreased by (7.1)% to $3.9 million
primarily due to COVID-19-related store closures for the majority
of the quarter, partially offset by the addition of revenue from
New Guards.
The increase in Digital Platform Services Revenue of 34.6% was
driven by 34.4% overall growth in Digital Platform GMV. This
increase includes 75.7% growth of our Digital Platform Services
first-party GMV, which is composed of our sales of owned-inventory,
together with sales from New Guards brands sold direct-to-consumers
through our platform, and is included in Digital Platform Services
Revenue at 100% of the GMV because we act as principal in these
transactions and, therefore, related sales are not commission
based.
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
second quarter 2020, Digital Platform Fulfilment Revenue increased
99.3% 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 June
30,
2019
2020
Digital Platform Services third-party cost
of revenue
$
47,150
$
46,699
Digital Platform Services first-party cost
of revenue
45,262
60,325
Digital Platform Services cost of
revenue
92,412
107,024
Digital Platform Fulfilment cost of
revenue
28,522
56,803
Brand Platform cost of revenue
-
38,619
In-Store cost of goods sold
3,046
2,859
Cost of revenue
$
123,980
$
205,305
See “Digital Platform Segment” on page 19 for further
explanations of Digital Platform Services third-party and
first-party cost of revenue.
Cost of revenue increased by $81.3 million, or 65.6%
year-over-year from $124.0 million in second quarter 2019 to $205.3
million in second quarter 2020. The increase was primarily driven
by the addition of Brand Platform cost of revenue related to New
Guards and growth in first-party GMV and the associated cost of
goods, as well as delivery costs and duties on an increased volume
of transactions, offset by a reduction in costs of goods sold
associated with our In-Store revenue.
We are reliant on third-parties to provide shipping and delivery
services, 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 second
quarter.
Gross profit (in thousands):
Three months ended June
30,
2019
2020
Digital Platform third-party gross
profit
$
80,558
$
105,162
Digital Platform first-party gross
profit
3,548
25,417
Digital Platform Gross Profit
84,106
130,579
Brand Platform Gross Profit
-
27,729
In-Store Gross Profit
1,174
1,067
Gross profit
$
85,280
$
159,375
See “Digital Platform Segment” on page 19 for Digital Platform
third-party and first-party gross profit for the last six
quarters.
Gross profit increased by $74.1 million, or 86.9%
year-over-year, from $85.3 million in second quarter 2019 to $159.4
million in second quarter 2020, principally due to growth in our
Digital Platform Services Revenue and the addition of New Guards
Brand Platform operations. Gross profit margin increased from 40.8%
to 43.7% year-over-year, primarily driven by a higher Digital
Platform Gross Profit Margin as well as the addition of New Guards
Brand Platform. Digital Platform Gross Profit Margin increased from
47.6% to 55.0% year-over-year driven by increases in both
third-party and first-party gross profit margin. A decrease in
Farfetch-funded consumer promotions resulted in improved
third-party and first-party gross margins. The increase in
first-party gross margin also reflects an increased mix of
full-price sales, and the addition of higher margin first-party
revenues from sales of New Guards brands’ owned-product sold
direct-to-consumers through our platform.
Selling, general and administrative expenses by type (in
thousands):
Three months ended June
30,
2019
2020
Demand generation expense
$
34,444
$
47,378
Technology expense
19,073
29,284
Share based payments
45,710
61,915
Depreciation and amortization
14,323
51,758
General and administrative
69,339
107,888
Other items
(1,764
)
1,302
Selling, general and administrative
expense
$
181,125
$
299,525
Second quarter 2020 demand generation expense increased 37.8%
year-over-year to $47.4 million, while slightly increasing as a
percentage of Digital Platform GMV at 7.3%, as we drove an
increased mix of GMV through unpaid channels, and continued to
invest in paid channels to engage new customers on the Farfetch
Marketplace.
Technology expense, which is primarily related to development
and operations of our platform features and services, and also
includes software, hosting and infrastructure expenses, increased
by $10.2 million, or 53.4%, in second quarter 2020 from second
quarter 2019, 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. Second quarter 2020 technology expense as a
percentage of Adjusted Revenue decreased from 10.6% to 9.5%
year-over-year as Adjusted Revenue grew at a rate greater than the
underlying costs.
Depreciation and amortization expense increased by $37.5
million, or 262.2%, year-over-year from $14.3 million in second
quarter 2019 to $51.8 million in second quarter 2020. Amortization
expense increased principally due to $31.4 million of amortization
recognized on intangible assets acquired in historical
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 principally 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.
Share based payments increased by $16.2 million, or 35.4%,
year-over-year in second quarter 2020. The increase was mainly due
to an increase in our share price during second quarter 2020 as
compared to a decrease in our share price during second quarter
2019, which had the impact of increasing our employment related
taxes by $9.8 million, and increasing our liability for
cash-settled awards. Grants of additional equity-settled awards
over the last 12 months also contributed to the year-over-year
increase.
General and administrative expense increased by $38.6 million,
or 55.7%, year-over-year in second quarter 2020, primarily due to
the addition of New Guards following our August 2019 acquisition,
and an increase in non-technology headcount across a number of
areas to support the expansion of our business. General and
administrative costs decreased as a percentage of Adjusted Revenue
to 35.0% compared to 38.4% in second quarter 2019 as we continue to
leverage our operating cost base, and due to the addition of New
Guards, which operates with lower general and administrative costs
as a percentage of Adjusted Revenue.
Other items of $1.3 million in second quarter 2020 primarily
reflects transaction-related legal and advisory expenses.
Losses on items held at fair value and remeasurements (in
thousands):
Three months ended June
30,
2019
2020
Remeasurement losses on put and call
option liabilities
$
-
$
65,771
Fair value losses on embedded derivative
liabilities
-
212,851
Losses on items held at fair value and
remeasurements
$
-
$
278,622
In second quarter 2020 the $65.8 million present value
remeasurement loss related to Chalhoub Group’s put option over
their non-controlling interest in Farfetch International Limited
was primarily driven by the increase in our share price from $7.90
at the end of first quarter 2020 to $17.27 at the end of second
quarter 2020. The $212.9 million fair value losses on embedded
derivative liabilities comprised $135.1 million fair value
revaluation loss related to $250 million 5.00% convertible senior
notes issued in February 2020, and $77.8 million fair value
revaluation loss related to $400 million 3.75% convertible senior
notes issued in April 2020. There were no such items in second
quarter 2019.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA improved by $12.4 million, to $(25.2) million in
second quarter 2020, for the reasons described above. Adjusted
EBITDA Margin improved from (20.8)% to (8.2)% year-over-year,
mainly due to an increase in gross profit margin, as well as lower
general and administrative expenses and technology expenses as
percentages of Adjusted Revenue.
Loss After Tax
Loss after tax increased by $340.5 million to $435.9 million in
second quarter 2020. The increase was driven by losses on items
held at fair value and remeasurements and, to a lesser extent, due
to increases in general and administrative expense, depreciation
and amortization expense, and partially offset by an increase in
gross profit, as explained above.
Liquidity
At June 30, 2020 cash and cash equivalents were $802.1 million,
an increase of $479.7 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 $250 million 5.00%
convertible senior notes (excluding transaction-related legal and
advisory expenses) in first quarter 2020, and the private placement
of $400 million 3.75% convertible senior notes (excluding
transaction-related legal and advisory expenses) in second quarter
2020. This was partially offset by a net cash outflow from
operating activities, mainly due to the funding of our operations
in first half 2020, as well as New Guards’ investments into its
brand portfolio.
Outlook
The following forward-looking statements reflect Farfetch’s
expectations as of August 13, 2020.
For Third Quarter 2020:
- Digital Platform GMV of $588 million to $609 million,
representing growth of 40% to 45% year-over-year
- Brand Platform GMV of $90 million to $95 million
- Adjusted EBITDA of $(20) million to $(25) million
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
Board Update
Farfetch is pleased to announce today changes to its Board of
Directors. These changes reflect the planning the Board and its
Nominating and Corporate Governance committee have undertaken in
anticipation of the natural evolution of the Company’s Board
following its initial public offering.
This marks the first strategic evolution of the Board since the
Company’s inception 13 years ago and has been designed with an eye
toward continuing strong governance practices, rounding out
skillsets on the Company’s Board to support Farfetch’s ongoing
growth trajectory and strategic planning and further enhancing the
diversity of the Farfetch Board in line with the Company’s core
values.
Four new directors – Stephanie Horton, Diane Irvine, Victor
Luís, Gillian Tans – each of whom bring extensive experience across
technology, luxury fashion and finance, joined the Board today. In
connection with these appointments and to make way for the new
directors, today, co-Chair Natalie Massenet, Jon Kamaluddin, Jon
Jianwen Liao, Danny Rimer, and Mike Risman have stepped down from
the Board. Current directors, José Neves, Dana Evan and David
Rosenblatt will continue serving on the Board.
Stephanie Horton brings many years of experience in the luxury
fashion industry to the Farfetch Board. Currently, Stephanie is the
Director of Marketing for Google Shopping. Previously, she was the
CEO of Hemp Tailor, a designer of sustainable hemp clothing, and
prior to that, she was the Chief Strategy Officer of luxury fashion
brand, Alexander Wang. She also served as Farfetch’s Chief
Marketing Officer between 2013 and 2017. She has further global
platform experience from her time at ShopBop, an Amazon
subsidiary.
Diane Irvine brings extensive e-commerce and financial
experience to the Farfetch Board, currently serving on boards of
several public companies, including Yelp Inc., where she chairs its
board of directors as well as its audit and nominating and
corporate governance committees. She also serves on the board of
Casper Sleep Inc., the online sleep products company, and Funko,
Inc., the pop-culture consumer products company, where she chairs
the audit committees of both companies. From 2008 to 2011, Diane
was the CEO of Blue Nile Inc., an online retailer of diamonds and
fine jewelry, where she served as the company’s CFO for eight years
prior to being named CEO.
Victor Luís brings extensive luxury fashion experience to the
Farfetch Board. He currently serves on the board of Deckers Outdoor
Corporation and, from 2006 to 2019, held several executive roles at
Tapestry, Inc. (previously known as Coach), including most recently
as CEO and as a member of its board of directors from 2014 to 2019.
Prior to joining Tapestry, Victor held executive roles at the
Moët-Hennessy Louis Vuitton (LVMH) Group and Baccarat and,
throughout his career, has had significant operational experience
in luxury companies in key regions including Asia-Pacific,
particularly China and Japan, and North America.
Gillian Tans joins the Farfetch Board from Booking.com, Booking
Holdings’ primary subsidiary and one of the world’s leading digital
travel companies, where she currently serves as Chairwoman. Having
held several executive and leadership roles at Booking.com since
2011, including most recently as CEO from 2016 to 2019, Gillian
brings exceptional experience in operating global marketplaces.
José Neves, Farfetch Founder, Chairman and CEO said: “Our
departing Board directors have been absolutely instrumental in our
success to date. I want to thank each and every one of them for the
insight, support and friendship that they’ve given me and the
Farfetch management team during their tenure. I’d also like to say
a special thank you to my co-Chair, Natalie Massenet. Natalie has
played an invaluable role in Farfetch’s growth and transformation,
particularly driving our focus on putting the customer at the heart
of everything we do. Natalie, along with Jon, Jon, Danny, and Mike
leave with our very warmest wishes and thanks.”
“I’m delighted to welcome our new board members. Each of them
brings valuable perspective and complementary skillsets to take us
forward. I’m also pleased that the importance we place on diversity
and representation is progressing throughout our business,
including at the Board leveI. I look forward to working with each
of them as we continue to solidify our position as the global
platform for the luxury industry.”
Natalie Massenet said: “I am proud of having been involved in
Farfetch, and of the work we have done together. When I first met
José, I strongly believed in his vision and felt Farfetch would
offer a winning business model for the luxury fashion industry. I
believe this even more today. It has been an honor to serve on the
Board with José and so many talented fellow directors, and I have
enjoyed helping find the new Board directors, who I know will serve
the Company well in its next exciting chapter. I know I am leaving
Farfetch in an incredible position, and I will remain an ongoing
supporter.”
As part of our on-going corporate governance efforts, and
reflecting the Company’s commitment to sustainability and corporate
and social responsibility, the Board has also approved the
formation of an ESG committee of the Board of Directors, which will
be responsible for establishing and directing the implementation of
ESG standards across Farfetch.
Conference Call Information
Farfetch will host a conference call today, August 13, 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 June
30
(in $ thousands, except share and per
share data)
2019
2020
Revenue
209,260
364,680
Cost of revenue
(123,980
)
(205,305
)
Gross profit
85,280
159,375
Selling, general and administrative
expenses
(181,125
)
(299,525
)
Operating loss
(95,845
)
(140,150
)
Losses on items held at fair value and
remeasurements
-
(278,622
)
Share of results of associates
17
(494
)
Finance income
4,292
2,360
Finance costs
(3,043
)
(23,111
)
Loss before tax
(94,579
)
(440,017
)
Income tax (expense)/benefit
(813
)
4,118
Loss after tax
(95,392
)
(435,899
)
(Loss)/profit after tax attributable
to:
Equity holders of the parent
(95,427
)
(439,639
)
Non-controlling interests
35
3,740
(95,392
)
(435,899
)
Loss per share attributable to equity
holders of the parent
Basic and diluted
(0.31
)
(1.29
)
Weighted-average ordinary shares
outstanding
Basic and diluted
308,931,390
341,223,981
Unaudited interim condensed
consolidated statements of comprehensive loss
for the three months ended June
30
(in $ thousands, except share and per
share data)
2019
2020
Loss after tax
(95,392
)
(435,899
)
Other comprehensive
(loss)/income:
Items that may be subsequently
reclassified to the consolidated
statement of operations (net of tax):
Exchange differences on translation of
foreign operations
(7,655
)
2,700
(Loss)/gain on cash flow hedges
(4,813
)
5,723
Other comprehensive (loss)/income for
the period, net of tax
(12,468
)
8,423
Total comprehensive loss for the
period, net of tax
(107,860
)
(427,476
)
Total comprehensive (loss)/income
attributable to:
Equity holders of the parent
(107,895
)
(431,216
)
Non-controlling interests
35
3,740
(107,860
)
(427,476
)
Unaudited interim condensed
consolidated statements of operations
for the six months ended June
30
(in $ thousands, except share and per
share data)
2019
2020
Revenue
383,324
696,117
Cost of revenue
(214,753
)
(383,366
)
Gross profit
168,571
312,751
Selling, general and administrative
expenses
(349,965
)
(558,328
)
Impairment losses on tangible assets
-
(2,292
)
Operating loss
(181,394
)
(247,869
)
Losses on items held at fair value and
remeasurements
-
(213,188
)
Share of results of associates
32
(524
)
Finance income
13,459
3,601
Finance costs
(3,801
)
(58,708
)
Loss before tax
(171,704
)
(516,688
)
Income tax (expense)/benefit
(1,374
)
1,612
Loss after tax
(173,078
)
(515,076
)
(Loss)/profit after tax attributable
to:
Equity holders of the parent
(173,113
)
(521,706
)
Non-controlling interests
35
6,630
(173,078
)
(515,076
)
Loss per share attributable to owners
of the company
Basic and diluted
(0.56
)
(1.53
)
Weighted-average ordinary shares
outstanding
Basic and diluted
306,748,971
340,747,663
Unaudited interim condensed
consolidated statements of comprehensive loss
for the six months ended June
30
(in $ thousands)
2019
2020
Loss after tax
(173,078
)
(515,076
)
Other comprehensive
income/(loss):
Items that may be subsequently
reclassified to the consolidated
statement of operations (net of tax):
Exchange differences on translation of
foreign operations
21,793
15,597
Loss on cash flow hedges
(5,080
)
(8,483
)
Items that will not be subsequently
reclassified to the consolidated statement of operations (net of
tax):
Remeasurement loss on severance plan
-
(3
)
Other comprehensive income for the
period, net of tax
16,713
7,111
Total comprehensive loss for the
period, net of tax
(156,365
)
(507,965
)
Total comprehensive (loss)/income
attributable to:
Equity holders of the parent
(156,400
)
(514,595
)
Non-controlling interests
35
6,630
(156,365
)
(507,965
)
Unaudited interim condensed
consolidated statements of financial position
(in $ thousands)
December 31,
2019
June 30,
2020
Non-current assets
Other receivables
12,388
13,277
Deferred tax assets
5,324
5,269
Intangible assets, net
1,362,967
1,348,864
Property, plant and equipment, net
67,999
72,346
Right-of-use assets
115,176
142,532
Investments
16,229
8,344
Investments in associates
2,466
1,869
Total non-current assets
1,582,549
1,592,501
Current assets
Inventories
128,107
115,967
Trade and other receivables
189,897
211,501
Current tax assets
1,873
10,574
Derivative financial assets
3,024
3,025
Cash and cash equivalents
322,429
802,113
Total current assets
645,330
1,143,180
Total assets
2,227,879
2,735,681
Liabilities and equity
Non-current liabilities
Provisions
23,704
30,349
Deferred tax liabilities
219,789
206,830
Lease liabilities
100,833
129,786
Employee benefit obligations
16,455
23,915
Derivative financial liabilities
-
364,259
Borrowings
-
459,874
Put and call option liabilities
61,268
104,487
Total non-current liabilities
422,049
1,319,500
Current liabilities
Trade and other payables
413,696
450,061
Provisions
-
9,048
Current tax liability
28,289
33,487
Lease liabilities
18,485
20,018
Derivative financial liabilities
5,601
14,637
Put and call option liabilities
1,118
1,125
Other financial liabilities
809
168
Total current liabilities
467,998
528,544
Total liabilities
890,047
1,848,044
Equity
Share capital
13,584
13,663
Share premium
878,007
878,007
Merger reserve
783,529
783,529
Foreign exchange reserve
(30,842
)
(15,245
)
Other reserves
349,463
383,947
Accumulated losses
(826,135
)
(1,312,605
)
Equity attributable to the
parent
1,167,606
731,296
Non-controlling interests
170,226
156,341
Total equity
1,337,832
887,637
Total equity and liabilities
2,227,879
2,735,681
Unaudited interim condensed
consolidated statements of cash flows
for the six months ended June
30
(in $ thousands)
2019
2020
Cash flows from operating
activities
Operating loss
(181,394
)
(247,869
)
Adjustments to reconcile operating loss to
net cash provided by operating activities:
Depreciation
11,902
18,243
Amortization
16,527
84,838
Non-cash employee benefits expense
61,218
76,175
Net loss on sale of non-current assets
77
-
Net exchange differences
(22
)
-
Impairment losses on tangible assets
-
2,292
Impairment of investments
-
169
Change in working capital
Increase in receivables
(21,407
)
(28,184
)
(Increase)/decrease in inventories
(14,704
)
11,925
Increase in payables
27,193
39,730
Change in other assets and
liabilities
Increase in non-current receivables
(1,239
)
(517
)
(Decrease)/increase in other
liabilities
(516
)
6,724
Increase in provisions
-
14,833
Decrease in derivative financial
instruments
-
(14,581
)
Income taxes paid
(777
)
(16,016
)
Net cash outflow from operating
activities
(103,142
)
(52,238
)
Cash flows from investing
activities
Acquisition of subsidiary, net of cash
acquired
(205,616
)
(12,016
)
Payments for property, plant and
equipment
(30,085
)
(9,106
)
Payments for intangible assets
(34,689
)
(43,102
)
Payments for investments
(19,719
)
(2,872
)
Interest received
7,999
2,176
Dividends received from associate
-
58
Net cash outflow from investing
activities
(282,110
)
(64,862
)
Cash flows from financing
activities
Repayment of the principal elements of
lease payments
(6,682
)
(7,926
)
Interest paid and fees paid on loans
(307
)
(17,288
)
Dividends paid to holders of
non-controlling interests
-
(20,515
)
Proceeds from issue of shares, net of
issue costs
7,229
4,472
Proceeds from borrowings, net of issue
costs
21,006
641,861
Net cash inflow from financing
activities
21,246
600,604
Net (decrease)/increase in cash and
cash equivalents
(364,006
)
483,504
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
(1,873
)
(3,820
)
Cash and cash equivalents at end of
period
678,907
802,113
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
interest
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
-
-
-
-
-
(173,113
)
(173,113
)
35
(173,078
)
Other comprehensive income/(loss)
-
-
-
21,793
(5,080
)
-
16,713
-
16,713
Issue of share capital, net of transaction
costs
468
51,975
-
-
26,920
-
79,363
-
79,363
Share based payment – equity settled
-
-
-
-
41,643
21,961
63,604
-
63,604
Share based payment – reverse vesting
shares
-
-
-
-
(45,583
)
-
(45,583
)
-
(45,583
)
Acquisition of non-controlling
interest
-
-
-
-
-
-
-
210
210
Non-controlling interest put option
-
-
-
-
-
(4,322
)
(4,322
)
-
(4,322
)
Balance at June 30, 2019
12,462
824,275
783,529
(1,716
)
85,374
(638,831
)
1,065,093
245
1,065,338
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
-
-
-
-
-
(521,706
)
(521,706
)
6,630
(515,076
)
Other comprehensive (loss)/income
-
-
-
15,597
(8,486
)
-
7,111
-
7,111
Issue of share capital, net of transaction
costs
79
-
-
-
-
-
79
-
79
Share based payment – equity settled
-
-
-
-
29,924
35,236
65,160
-
65,160
Share based payment – reverse vesting
shares
-
-
-
-
13,046
-
13,046
-
13,046
Dividends paid to non-controlling
interests
-
-
-
-
-
-
-
(20,515
)
(20,515
)
Balance at June 30, 2020
13,663
878,007
783,529
(15,245
)
383,947
(1,312,605
)
731,296
156,341
887,637
Supplemental Metrics 1
2018
2019
2020
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
(in thousands, except per share
data or otherwise stated)
Consolidated Group:
Gross Merchandise Value (“GMV”)
$
309,973
$
466,490
$
419,273
$
488,475
$
492,014
$
739,937
$
610,874
$
721,310
Revenue
134,541
195,533
174,064
209,260
255,481
382,232
331,437
364,680
Adjusted Revenue
112,742
170,089
146,374
180,738
228,227
337,738
301,152
307,877
In-Store Revenue
4,090
4,314
4,536
4,220
9,077
9,788
8,516
3,926
Gross profit
67,387
94,197
83,291
85,280
115,139
176,136
153,376
159,375
Gross profit margin
50.1%
48.2%
47.9%
40.8%
45.1%
46.1%
46.3%
43.7%
Demand generation expense
$
(22,103
)
$
(33,934
)
$
(31,423
)
$
(34,444
)
$
(34,321
)
$
(51,162
)
$
(37,966
)
$
(47,378
)
Technology expense
(19,034
)
(18,159
)
(20,159
)
(19,073
)
(22,322
)
(22,653
)
(26,307
)
(29,284
)
Share based payments
(38,475
)
(2,821
)
(38,714
)
(45,710
)
(31,760
)
(42,238
)
(26,760
)
(61,915
)
Depreciation and amortization
(6,014
)
(7,185
)
(14,106
)
(14,323
)
(35,097
)
(50,065
)
(51,323
)
(51,758
)
General and administrative
(58,561
)
(56,679
)
(61,945
)
(69,339
)
(94,134
)
(120,247
)
(111,422
)
(107,888
)
Other items
-
-
(2,493
)
1,764
(10,061
)
(5,584
)
(5,025
)
(1,302
)
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
)
Loss after tax
(77,255
)
(9,912
)
(77,686
)
(95,392
)
(90,484
)
(110,126
)
(79,177
)
(435,899
)
Adjusted EBITDA
(32,311
)
(14,575
)
(30,236
)
(37,576
)
(35,638
)
(17,926
)
(22,319
)
(25,175
)
Adjusted EBITDA Margin
(28.7)%
(8.6)%
(20.7)%
(20.8)%
(15.6)%
(5.3)%
(7.4)%
(8.2)%
Earnings per share (“EPS”)
$
(0.30
)
$
(0.03
)
$
(0.26
)
$
(0.31
)
$
(0.30
)
$
(0.34
)
$
(0.24
)
$
(1.29
)
Adjusted EPS
(0.15
)
(0.02
)
(0.11
)
(0.16
)
(0.20
)
(0.08
)
(0.24
)
(0.20
)
Digital Platform:
Digital Platform GMV
$
305,883
$
462,176
$
414,737
$
484,255
$
420,266
$
628,610
$
494,899
$
651,036
Digital Platform Services Revenue
108,652
165,775
141,838
176,518
156,479
226,411
185,177
237,603
Digital Platform Fulfilment Revenue
21,799
25,444
27,690
28,522
27,254
44,494
30,285
56,803
Digital Platform Gross Profit
65,487
92,632
80,941
84,106
83,294
123,572
97,207
130,579
Digital Platform Gross Profit Margin
60.3%
55.9%
57.1%
47.6%
53.2%
54.6%
52.5%
55.0%
Digital Platform Order Contribution
$
43,384
$
58,698
$
49,518
$
49,662
$
48,973
$
72,410
$
59,241
$
83,201
Digital Platform Order Contribution
Margin
39.9%
35.4%
34.9%
28.1%
31.3%
32.0%
32.0%
35.0%
Active Consumers
1,240
1,382
1,699
1,773
1,889
2,068
2,149
2,524
AOV - Marketplace
$
585
$
637
$
601
$
600
$
582
$
636
$
571
$
493
AOV - Stadium Goods
-
-
300
336
327
301
314
304
Brand Platform:
Brand Platform GMV
$
-
$
-
$
-
$
-
$
62,671
$
101,539
$
107,459
$
66,348
Brand Platform Revenue
-
-
-
-
62,671
101,539
107,459
66,348
Brand Platform Gross Profit
-
-
-
-
27,464
47,543
52,480
27,729
Brand Platform Gross Profit Margin
-
-
-
-
43.8%
46.8%
48.8%
41.8%
1See “Metrics Definitions” on page 21 for further explanations.
See “Non-IFRS and Other Financial and Operating Metrics” on page 22
for reconciliations of non-IFRS measures to IFRS measures.
Digital Platform Segment
Our Digital Platform segment is composed of the Farfetch
Marketplace, FPS, BrownsFashion.com, StadiumGoods.com, Farfetch
Store of the Future, and any other online sales channel operated by
the Group, including the respective websites of the brands in the
New Guards portfolio.
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 products, including
from New Guards brands sold direct-to-consumers through our
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 and 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.
The following table shows Digital Platform Services third-party
and first-party revenue and cost of revenue, as well as Digital
Platform third-party and first-party gross profit for the last six
quarters:
(in $ thousands, except as otherwise
noted)
2019
2020
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Digital Platform Services third-party
revenue
$
105,321
$
127,708
$
106,983
$
156,028
$
119,201
$
151,861
Digital Platform Services first-party
revenue
36,517
48,810
49,496
70,383
65,976
85,742
Digital Platform Services
Revenue
$
141,838
$
176,518
$
156,479
$
226,411
$
185,177
$
237,603
Digital Platform Services third-party cost
of revenue
$
(36,711
)
$
(47,150
)
$
(36,314
)
$
(49,486
)
$
(38,677
)
$
(46,699
)
Digital Platform Services first-party cost
of revenue
(24,186
)
(45,262
)
(36,871
)
(53,353
)
(49,293
)
(60,325
)
Digital Platform Services cost of
revenue
$
(60,897
)
$
(92,412
)
$
(73,185
)
$
(102,839
)
$
(87,970
)
$
(107,024
)
Digital Platform third-party gross
profit
$
68,610
$
80,558
$
70,669
$
106,542
$
80,524
$
105,162
Digital Platform first-party gross
profit
12,331
3,548
12,625
17,030
16,683
25,417
Digital Platform Gross Profit
$
80,941
$
84,106
$
83,294
$
123,572
$
97,207
$
130,579
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, our expected performance
for third quarter 2020, statements regarding our profitability for
2021, the anticipated impact of the COVID-19 pandemic on our
operations and supply chain and the broader luxury industry, 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.
Metrics Definitions
The introduction of the term “Digital Platform” with reference
to GMV, Revenue and other metrics is intended to distinguish
between activities that occurred through our owned and operated
e-commerce platforms (e.g. Farfetch.com, BrownsFashion.com,
off---white.com) and the Brand Platform operations of New Guards,
where GMV and Revenue are derived from our transactions with
independent third party retailers or wholesalers. Such metrics were
previously referred to as “Platform.” No changes have been made to
how we calculate the Digital Platform metrics from how we
calculated Platform metrics.
We acquired New Guards in August 2019, therefore our results for
first and second quarter 2019 do not include New Guards’
performance.
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.
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.
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
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Loss after tax
$
(77,255
)
$
(9,912
)
$
(77,686
)
$
(95,392
)
$
(90,484
)
$
(110,126
)
$
(79,177
)
$
(435,899
)
Net finance (income)/expense
(733
)
(14,915
)
(8,408
)
(1,249
)
10,689
(16,182
)
34,355
20,751
Income tax expense/(benefit)
1,183
261
560
813
(104
)
(108
)
2,506
(4,118
)
Depreciation and amortization
6,014
7,185
14,106
14,323
35,097
50,065
51,323
51,758
Share based payments (a)
38,475
2,821
38,714
45,710
31,760
42,238
26,760
61,915
(Gains)/losses on items held at fair value
and remeasurements (b)
-
-
-
-
(32,286
)
10,565
(65,434
)
278,622
Other items (c)
-
-
2,493
(1,764
)
10,061
5,584
5,025
1,302
Impairment losses on tangible assets
-
-
-
-
-
-
2,292
-
Share of results of associates
5
(15
)
(15
)
(17
)
(371
)
38
31
494
Adjusted EBITDA
$
(32,311
)
$
(14,575
)
$
(30,236
)
$
(37,576
)
$
(35,638
)
$
(17,926
)
$
(22,319
)
$
(25,175
)
(a) Represents share based payment expense.
(b) Represents (gains)/losses on items held at fair value and
remeasurements. See “gains/(losses) on items held at fair value and
remeasurements” on page 26 for a breakdown of these items.
(c) Represents other items, which are outside the normal scope
of our ordinary activities. See “Other items” on page 26 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
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Revenue
$
134,541
$
195,533
$
174,064
$
209,260
$
255,481
$
382,232
$
331,437
$
364,680
Less: Digital Platform Fulfilment
Revenue
(21,799
)
(25,444
)
(27,690
)
(28,522
)
(27,254
)
(44,494
)
(30,285
)
(56,803
)
Adjusted Revenue
$
112,742
$
170,089
$
146,374
$
180,738
$
228,227
$
337,738
$
301,152
$
307,877
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
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Digital Platform Gross Profit
$
65,487
$
92,632
$
80,941
$
84,106
$
83,294
$
123,572
$
97,207
$
130,579
Less: Demand generation expense
(22,103
)
(33,934
)
(31,423
)
(34,444
)
(34,321
)
(51,162
)
(37,966
)
(47,378
)
Digital Platform Order
Contribution
$
43,384
$
58,698
$
49,518
$
49,662
$
48,973
$
72,410
$
59,241
$
83,201
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
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Earnings per share
$
(0.30
)
$
(0.03
)
$
(0.26
)
$
(0.31
)
$
(0.30
)
$
(0.34
)
$
(0.24
)
$
(1.29
)
Share based payments (a)
0.15
0.01
0.13
0.15
0.11
0.12
0.08
0.18
Amortization of acquired intangible
assets
0.00
0.00
0.01
0.01
0.06
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
Other items (c)
-
-
0.01
(0.01
)
0.03
0.02
0.01
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
$
(0.15
)
$
(0.02
)
$
(0.11
)
$
(0.16
)
$
(0.20
)
$
(0.08
)
$
(0.24
)
$
(0.20
)
(a) Represents share based payment expense on a per share
basis.
(b) 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 26 for a breakdown
of these items.
(c) Represents other items on a per share basis, which are
outside the normal scope of our ordinary activities. See “Other
items” on page 26 for a breakdown of these expenses. Other items is
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
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
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
)
$400 million 3.75% Notes due 2027 embedded
derivative
-
-
-
-
-
-
-
(77,758
)
Present value remeasurements:
Chalhoub put option
-
-
-
-
53,812
(8,959
)
21,420
(65,771
)
CuriosityChina call option
-
-
-
-
-
(1,606
)
-
-
Gains / (losses) on items held at fair
value and remeasurements
$
-
$
-
$
-
$
-
$
32,286
$
(10,565
)
$
65,434
$
(278,622
)
Farfetch share price (end of day)
$
27.23
$
17.71
$
26.91
$
20.80
$
8.64
$
10.35
$
7.90
$
17.27
The following table represents other items:
(in $ thousands, except as otherwise
noted)
2018
2019
2020
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Transaction-related legal and advisory
expenses
$
-
$
-
$
(2,493
)
$
(2,236
)
$
(5,061
)
$
(5,584
)
$
(4,925
)
$
(1,799
)
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
)
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 and Stadium Goods. Due to
technical limitations, Active Consumers is unable to fully de-dupe
Stadium Goods consumers from Farfetch Marketplace or
BrownsFashion.com consumers. Active Consumers does not currently
include those generated from New Guards owned and operated 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 revenue from first-party sales, and
commissions 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. Digital Platform Services Revenue was also
referred to as Adjusted Platform Revenue or Platform Services
Revenue in previous filings with the SEC.
“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 nearly 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/20200813005764/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
Farfetch (NYSE:FTCH)
Historical Stock Chart
From Apr 2024 to May 2024
Farfetch (NYSE:FTCH)
Historical Stock Chart
From May 2023 to May 2024