• 2020 Gross Merchandise Value Exceeds $3 billion, up 49% year-over-year
• 2020 Revenue increases 64% year-over-year to $1.7 billion
• Strong Q4 2020 Gross Merchandise Value and Digital Platform GMV growth - up 43% and 49% year-over-year, respectively, to record highs of $1.1 billion and $939 million, respectively
• Q4 2020 Revenue increases 41% year-over-year to $540 million
• Q4 2020 Digital Platform Order Contribution Margin improves 310 bps year-over-year to 35%; Gross Profit Margin remains flat year-over-year at 46%
• Q4 2020 Loss After Tax of $2.3 billion includes $2.1 billion non-cash impact of higher share price on items held at fair value and remeasurements
• Achieves first ever quarter of positive Adjusted EBITDA; Q4 2020 Adjusted EBITDA increases to $10 million, up from $(18) million in Q4 2019

LONDON--(BUSINESS WIRE)-- Farfetch Limited (NYSE: FTCH), the leading global platform for the luxury fashion industry, today reported financial results for the fourth quarter and full year ended December 31, 2020.

José Neves, Farfetch Founder, Chairman and CEO said: “2020 put the Farfetch platform to the test, but thanks to our robust capabilities, resilient operations and utmost perseverance from our more than 5,000 Farfetchers, we rose to the challenge and enabled our nearly 1,400 Marketplace sellers and Farfetch Platform Solutions clients to continually serve millions of luxury consumers across the globe. We cemented our leadership as the largest global online destination for luxury fashion, accelerated our Chapter 2 initiatives with strategic partnerships advancing our position to be the global platform for the luxury industry, and demonstrated the scale and attractiveness of our business model as we achieved the key milestone of Adjusted EBITDA profitability in the fourth quarter.

“As we enter 2021, I am more energized than ever by the prospects of leveraging our incredible achievements to date and our unique platform capabilities to go after the significant growth opportunities we see in our vision to be a digital enabler connecting the creators, curators and consumers of the global luxury industry, both online and offline – a nearly $300 billion opportunity we remain laser-focused on and plan to continue investing behind to deliver significant value over the long-term.”

Elliot Jordan, CFO of Farfetch, said: “The strong performance of Farfetch in the fourth quarter completes a remarkable year and is the result of our focused execution against the long-term strategy and the leveraging of our investments to date. We exceeded our own initial expectations for the year; accelerating growth in our digital platform, improving margins across all areas of the business and delivering strong operating cash flows. As a result, we delivered our first ever quarter of positive Adjusted EBITDA. Our industry partnerships and strategic alliances, as well as our $1.6 billion of liquidity, position us well to continue investing behind the long-term growth opportunities we see in digitally enabling the luxury industry.”

Consolidated Financial Summary and Key Operating Metrics (in thousands, except per share data, Average Order Value, or otherwise stated):

See “Notes and Disclosures” on page 21 for further explanations. See “Non-IFRS and Other Financial and Operating Metrics” on page 21 for reconciliations of non-IFRS measures to IFRS measures. As we acquired New Guards in August 2019, our results for full year 2019 include only five months of New Guards’ performance.

Recent Business Highlights

COVID-19

• Maintained continuity of operations with health and wellbeing of Farfetch employees, partners and consumers continuing to be our top priority – rolled out localized initiatives focused on employee wellbeing throughout the pandemic
• Continued to collaborate with boutique and brand partners to drive growth of their digital sales via the Marketplace
• Continued to work closely with our global logistics partners to preserve continuity of fulfilment and delivery operations, with no material disruptions during fourth quarter 2020
• Following new lockdown measures announced by European governments towards the end of the fourth quarter, closed our retail stores in affected locations and postponed the opening of our newly relocated Browns boutique in London; our retail stores in the United States and Japan remained open

Digital Platform

• Third-party transactions generated 84% of Digital Platform GMV at a take rate of 28.8% in fourth quarter 2020

• Over 1,350 total Farfetch Marketplace (or Marketplace) sellers offered a record number of stock units across more than 3,500 brands
  • Signed new seller, Russian luxury group Bosco di Ciliegi, owner of 40+ mono-brand and four department stores, including historic department store Gum
  • Drove strong momentum in newer categories in 2020
    • Watches and Jewelry grew nearly three times as fast as the Farfetch Marketplace
    • Became the global destination with the broadest assortment for kids’ luxury fashion
• Added new features to enhance customer experience
  • Launched order status push notifications for app, globally, and live customer service chat on our China iOS app
  • Offered Gold and Platinum ACCESS members in the United Kingdom and the United States, a style advisor service in a pilot with Wishi
  • Expanded virtual try-on beyond sneakers and sunglasses, to luxury watches
• Partnered with brands to market new collections and increase brand awareness through engaging experiences on the Farfetch Marketplace
  • In January 2021, in our first partnership with a Richemont-backed brand, launched the global digital premier of Alber Elbaz’s AZ Factory, consisting of immersive and interactive experiences with content from the collection
  • In February 2021, exclusively partnered with Dolce & Gabbana to broadcast its men’s Fall-Winter 2021 Digital Show
• Furthered Luxury New Retail initiatives:
  • Expanded on the successful Store of the Future roll-out in CHANEL’s Rue Cambon flagship boutique with the implementation of Store of the Future in two additional CHANEL boutiques in Paris
  • In February 2021, soft launched Farfetch’s storefront on Tmall’s Luxury Pavilion, offering Alibaba’s 779 million consumers access to the broad selection of luxury products available on the Farfetch Marketplace
• Farfetch Platform Solutions re-platformed e-commerce site for New Guards brand, Ambush
• Broadened Fulfilment by Farfetch logistics network with signing of a new third-party warehouse in the Netherlands, expected to become operational in April 2021

New Guards

• New Guards’ brand portfolio continued to create culturally relevant collections
  • Off-Whitelaunched a capsule collection for the China Region, exclusively available through Off-White’s WeChat mini program
  • In February 2021, Off-White
    • Revealed its Spring-Summer 2021 Collection via an immersive digital experience labeled ‘Imaginary TV’
    • Launched its first ever skincare kit ‘The Protection Box’, in collaboration with South Korean brandAMOREPACIFIC
  • Ambushcontinued its expansion into the fashion category with the unveiling of its first ever campaign for its Spring-Summer 2021 collection

     

Environmental, Social and Governance (ESG)

• Unveiled 2030 Positively Farfetch sustainability goals focused on becoming climate positive, driving revenues from ‘Conscious’ products, selling more circular products, and being a leader in conscious inclusion
• Significantly reduced logistics carbon emissions per order from our largest transportation provider through a range of efficiency measures including better sized packaging and, since April 2020, committed to offset the carbon impact of every delivery and return through investments in independently certified and verified environmental projects
• Delivered on strong consumer demand for ‘Conscious’ products, which experienced over three times higher GMV growth as compared to the Farfetch Marketplace in 2020
• Launched Second Life in the United States, following a successful pilot in the United Kingdom and the European Union
• Delivered on our commitment to employees – achieved improved happiness and retention results in our annual company-wide Humu employee survey

Liquidity

• Ended year with Cash and Cash Equivalents of $1.6 billion
• Completed issuance to Alibaba and Richemont of $600 million aggregate principal amount ($300 million each) of 0% Convertible Senior Notes due 2030
• Issued 1.89 million Class A ordinary shares to Artemis for total gross proceeds of approximately $50 million

   

Fourth Quarter and Full Year 2020 Results Summary

Gross Merchandise Value (in thousands):

Gross Merchandise Value (“GMV”) increased by $317.1 million from $739.9 million in fourth quarter 2019 to $1,057.0 million in fourth quarter 2020, representing year-over-year growth of 42.8%. Digital Platform GMV increased by $310.8 million from $628.6 million in fourth quarter 2019 to $939.4 million in fourth quarter 2020, representing year-over-year growth of 49.4%. Excluding the impact of changes in foreign exchange rates, Digital Platform GMV would have increased by approximately 48.8%.

The increase in GMV primarily reflects the growth in Digital Platform GMV driven by strong order growth and new consumer acquisition. This was partially offset by a slight decrease in the Marketplace AOV within the Digital Platform from $636 to $626 due to a higher mix of sales with fewer items per basket, partially offset by a higher full price mix. During fourth quarter 2020, we also saw year-over-year growth in transactions through websites managed by Farfetch Platform Solutions, primarily driven from incremental activity from new e-commerce sites launched throughout 2020, including Harrods.com, Off---White.com and Palmangels.com, among others.

Revenue (in thousands):

Revenue increased by $157.9 million year-over-year from $382.2 million in fourth quarter 2019 to $540.1 million in fourth quarter 2020, representing growth of 41.3%. The increase was primarily driven by 56.0% growth in Digital Platform Revenue to $422.6 million. Brand Platform Revenue increased by 2.3%, reflecting a year-over-year shift in timing of Spring-Summer collection shipments.

The increase in Digital Platform Services Revenue of 53.4% was driven by 49.4% overall growth in Digital Platform GMV, which had an increased mix of Digital Platform Services first-party 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 revenue increased 96.1% year-over-year to $138.0 million, primarily driven by a strategic focus on increasing New Guards’ direct-to-consumer distribution since acquiring the business in August 2019. Growth in Browns digital sales, primarily driven by higher sell-through of full-price products also contributed to this increase.

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 fourth quarter 2020, Digital Platform Fulfilment Revenue increased 69.1% year-over-year, a higher rate as compared to Digital Platform Services cost growth, due to a slower growth in Farfetch funded promotion cost and pass through of a higher cost per order for shipping and duties.

In-Store Revenue increased by 39.6% to $13.7 million and was primarily driven by the opening of New Guards stores throughout the year, partially offset by store closures and reduced foot traffic across our retail store network as a result of COVID-19 restrictions.

Cost of Revenue (in thousands):

Cost of revenue increased by $84.9 million, or 41.2%, year-over-year from $206.1 million in fourth quarter 2019 to $291.0 million in fourth quarter 2020 in line with Revenue growth. The increase was driven by 53.9% growth in Digital Platform Services cost of revenue to $158.2 million, and partially offset by a slight reduction in Brand Platform cost of revenue due to a shift in timing of Spring-Summer collection shipments year-over-year and higher margin year-over-year.

Digital Platform Services cost of revenue increased at a higher rate than Digital Platform Services Revenue primarily driven by the increased mix of first-party revenue where the related cost of revenue includes the production and purchase cost of products.

We rely on third-parties to provide shipping services, and changes in their operations due to the ongoing impacts of COVID-19 as well as the impacts of the United Kingdom’s withdrawal from the European Union starting in January 2021 may impact our service levels or cost of revenue. There were no such material adverse impacts to our service levels or cost of revenue in fourth quarter 2020, where our increased costs were primarily duty-related, driven by a mix shift in regional sales. However, we may experience an increase in certain unit costs of operating a global e-commerce business as the increasing adoption of e-commerce by the global retail industry creates the potential for cost increases.

Gross profit (in thousands):

Gross profit increased by $73.0 million, or 41.5% year-over-year in line with Revenue growth, to $249.1 million in fourth quarter 2020. As a result, Gross Profit margin remained stable year-over-year at 46.1%.

Digital Platform Gross Profit Margin declined slightly to 54.4% in fourth quarter 2020, from 54.6% in the fourth quarter 2019 as a result of a decrease in Digital Platform third-party gross profit margin, increase in first-party mix and an increase in unit costs of logistics, which were mostly offset by increased first-party margin.

Brand Platform Gross Profit Margin increased 310bps year-over-year to 49.9%. However, this improvement was more than offset by the increased mix towards Digital Platform Services Revenue over the same period, resulting in total Gross Profit Margin remaining flat at 46.1%.

Selling, general and administrative expenses by type (in thousands):

Demand generation expense increased $16.1 million year-over-year to $67.3 million in fourth quarter 2020. As a percentage of Digital Platform Service Revenue, fourth quarter 2020 demand generation expense improved from 22.6% to 19.4%. The improvement reflects our underlying strategy to gain efficiencies in demand generation spend by leveraging data insights to drive more targeted digital marketing, shifting away from lower performing channels.

Technology expense primarily relates to maintenance and operations of our platform features and services, as well as software, hosting and infrastructure expenses, which includes three globally distributed data centers, including one in Shanghai, which support the processing of our growing base of transactions. Technology expense increased by $7.2 million, or 31.7%, in fourth quarter 2020 year-over-year. The increase was mainly driven by an increase in technology staff headcount. Fourth quarter 2020 technology expense continued to scale as a percentage of Adjusted Revenue, decreasing from 6.7% to 6.4% year-over-year as Adjusted Revenue growth outpaced growth of our underlying technology costs.

Depreciation and amortization expense increased by $10.1 million, or 20.1%, year-over-year from $50.1 million in fourth quarter 2019 to $60.1 million in fourth quarter 2020. Amortization expense increased principally due to a $5.5 million increase in amortization of our technology investments, where qualifying technology development costs are capitalized and amortized over their useful lives. Depreciation expense primarily increased as a result of new leases entered into during the last 12 months.

Share based payments increased by $78.9 million or 186.8% year-over-year in fourth quarter 2020. The increase was mainly due to the impact of share price changes on our provisions for employment-related taxes and the cost of cash-settled awards. During fourth quarter 2020, our share price increased by $38.65, significantly more than the $1.71 increase in our share price during fourth quarter 2019. This resulted in a year-over-year increase in our provisions, primarily for employment related taxes and also cost of cash-settled awards. Grants of additional equity-settled awards in 2020 also contributed to the year-over-year increase to a lesser extent.

General and administrative expense increased by $21.4 million, or 17.8%, year-over-year in fourth quarter 2020, primarily due to an increase in non-technology headcount and Digital Platform operational costs across a number of areas to support the expansion of our business. General and administrative expense decreased as a percentage of Adjusted Revenue to 30.5% compared to 35.6% in fourth quarter 2019 as we continued to leverage our operations base to efficiently grow Adjusted Revenue.

Other items of $17.1 million in fourth quarter 2020 primarily reflect transaction-related legal and advisory expenses, largely associated with our issuance of the $600 million convertible note to Alibaba and Richemont.

Gains/(losses) on items held at fair value and remeasurements (in thousands):

The $1,890.6 million fair value losses on embedded derivative liabilities in fourth quarter 2020 was primarily driven by the increase in our share price. The fair value losses on embedded derivative liabilities in fourth quarter 2020 is comprised of the following revaluation losses on our convertible senior notes: (i) $749.0 million fair value loss related to $250 million 5.00% notes due 2025; (ii) $869.1 million fair value loss related to $400 million 3.75% notes due 2027; and (iii) $272.5 million fair value loss related to $600 million 0.00% notes due 2030. These notes provide us with strong liquidity to fund ongoing capital need and invest in various growth initiatives. There were no fair value losses on embedded derivatives in fourth quarter 2019. In addition, remeasurement losses on put and call option liabilities in fourth quarter 2020 primarily related to a $165.8 million remeasurement loss in connection with Chalhoub Group’s put option over their non-controlling interest in Farfetch International Limited, compared to a $9.0 million remeasurement loss in fourth quarter 2019. The Chalhoub partnership has underpinned our strong growth in the Middle East, which has outpaced the Farfetch Marketplace GMV growth for four consecutive quarters.

Impairment losses on tangible and intangible assets (in thousands):

The impairment charge of $36.3 million on intangible assets and $0.7 million on tangible assets in fourth quarter 2020 is primarily comprised of a $30.5 million charge related to a reduction in the carrying value of one of the smaller intangible brand assets within New Guards portfolio, as well as a $0.7 million reduction in the carrying value of the corporate right-of-use assets associated with that same brand. The remaining $5.8 million impairment charge on intangible assets related to the closure of our direct consumer-facing channels on JD.com and the associated intangible asset held for the Farfetch Level 1 access button. This resulted from our annual considerations of potential impairment of assets, including our intangible assets, whereby indicators of impairment were present. For fourth quarter 2020, our impairment assessment incorporated current and potential ongoing impacts of COVID-19 across the broader economy. There were no impairment losses in fourth quarter 2019.

Loss After Tax

Loss after tax increased by $2,170.9 million year-over-year to $2,281.0 million in fourth quarter 2020, which in addition to losses during the year, drove total equity from $1,337.8 million at December 31, 2019 to $(1,676.1) million as at December 31, 2020. The increase was primarily driven by losses on items held at fair value and remeasurements, which increased $2,046.7 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.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA improved by $28.3 million, to $10.4 million in fourth quarter 2020 as a result of our growth, improving unit economics and scaling of the fixed cost base. Adjusted EBITDA Margin improved from (5.3)% to 2.2% year-over-year, primarily reflecting lower demand generation expense, lower general and administrative expenses, and the decline in technology expense as percentages of Adjusted Revenue.

Liquidity

At December 31, 2020 cash and cash equivalents were $1,573.4 million, an increase of $1,251.0 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 during 2020, as well as a net cash inflow from operating activities, and partially offset by a net cash outflow from investing activities as New Guards continued to invest in its brand portfolio. Unless earlier converted, redeemed or repurchased in accordance with their terms, the notes issued in 2020 may be settled, at Farfetch's election and subject to certain exceptions and conditions, in Class A ordinary shares of Farfetch, cash, or a combination of cash and Class A ordinary shares of Farfetch.

Outlook

The following forward-looking statements reflect Farfetch’s expectations as of February 25, 2021.

For Full Year 2021:

• Digital Platform GMV of $3.6 billion to $3.7 billion, representing growth of 30% to 35% year-over-year
• Adjusted EBITDA margin of 1% to 2%

For First Quarter 2021:

• Digital Platform GMV of $740 million to $770 million, representing growth of 50% to 55% year-over-year
• Brand Platform GMV of $95 million to $105 million
• Adjusted EBITDA of $(19) million to (21) million

Uncertainties resulting from the spread of 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, and 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
• incurring additional costs to support our operations

Conference Call Information

Farfetch will host a conference call today, February 25, 2021 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.