Q3 2020 Farfetch Ltd Earnings Call
[music].
At this time I would like to welcome everyone to far fetched third quarter 2000.
<unk> results conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session.
We would like to ask a question. During this time so they press Star then the number one on your telephone keypad if.
If youd like to withdraw your question, that's the pound or hash key thank you.
I now like to turn the call over to Al. This writer VP of Investor Relations Ms. writer you may begin your conference.
Hello, and welcome to Farfetch is third quarter and 20 trade conference call. Joining me today to discuss our results are getting nervous our founder Chairman and Chief Executive Officer, and Elliot Jordan, Our chief financial.
Actual officer.
Before we begin we would like to remind you that our discussion today will include forward looking statements.
Actual results could differ materially from those indicated in the forward looking statements and forward looking statements made today speak only to our expectations as of today, we undertake no obligation to publicly update or revise that.
For a discussion of some of the important factors that could cause actual results to differ please see the risk factor section of our form 20-F filed with the SEC on March 11, 2020, and in exhibit 99.2 to our form 6K filed with the SEC on April 27 2020.
In addition, we will refer to certain.
And financial measures not reported in accordance with IR for us on this call.
You can find reconciliations of these non IRS financial measures to the IRS financial measures in our earnings press release, and the slide presentation, both of which are available on our website at Farfetch investors Dot com.
And now I'd like to turn the call over to Joseph.
Yes.
Thank you Alice and thank you all for blogging is today.
I'm very pleased to be speaking to you about half that she's Q3 Twentytwenty results.
Our business accelerated in Q3 to Delever rack his group.
Mgd of $798 million.
This record performance was underpinned by the digital platform.
Which accelerated to generate CMG growth of 60% year over year.
Our highest digital platform TMZ growth in 10.
Gee qualities.
We believe we are witnessing a paradigm shift in the way people buy luxury.
From day, one process that coupled with the differentiated vision to minimal the luxury industry by building a full suite of capabilities.
Okay, and then because of creators to racism consumers, who are the life blood of the luxury industry.
It has not only positions have hedged to capture the accelerating online demand, resulting from increased consumer adoption in light of the continuing global pandemic.
And that.
Actually helping drive this paradigm shift for consumers as well as for brands.
Our Q3 performance was achieved during a quarter when most of the world had reopened physical retail following widespread lockdown.
In Q1, and Q2 and when most consumers have the option of returning to their local luxury boutiques and department stores.
And you saw lines adoption is consistent we love our recently acquired customers are telling us.
In a recent survey of our newer customers.
55% said they will continue to do more of their shopping online now that they are used to it.
And 23% said they would do most of their shopping online from now on.
This clearly indicates that the lecture industry will not go back to the.
Same normal LCD with pre Coke is 19.
And affirms my belief that we are witnessing a major acceleration of the sustained online adoption I have anticipated when I founded size hedged 30 years ago.
Keith Cgmp further facets marketplace, which represents the.
Significant maturity of our GMT from consumers.
More than twice as fast as feature to 20.
Largely driven by active consumer growth as.
As we lead into a lower customer acquisition costs, our capex environment to drive efficient growth of our luxury consumer.
Base.
Particularly via mobile App downloads.
Comparable of these will continue to focus on retention by leveraging our vast data resources to offer a more relevant experience Andy.
And the team delivering results.
Conversion rates.
For our data driven personalized communications.
1.5 times higher than non personalized messages on average.
Our implementation of machine learning technology, such as our proprietary inspired algorithm around.
Also driving engagement.
We believe consumer communications.
Which is on average five times higher.
We have contributed to a month over month improvement in retention rate from March through the end of Q3.
To date, we have driven online.
Introduction to our performance pricing, let customer acquisition assets and in Q3, we also set out to complement these assets by building awareness of the passage sprint to ultimately increase organic engagement.
You heard me say before the transaction is a bigger company that it is Brian.
And while we've managed to build a leading global luxury fashion platform without meaningful brand investments luxury is an industry of brands.
And we see significant opportunity ahead in building awareness of assets.
We the industry in the critical phase of online.
And transition now is the right time.
In September we launched a new upper funnel marketing campaign, Marty a key milestone in our chapter two growth strategy.
The campaign tagline opened doors to other fashion, we focused on building.
In brand love and the emotional connection to clarify its by communicating what makes us unique who we are and what we do.
The campaign was rolled out in Shanghai, New York, London, and the middle east across out of home cleaning social and online channels.
As well as our first foray into addressable TV.
We continue to believe we also launched a new brand identity for Capex and refresh the look and feel of all external and internal facing touch points, including the marketplace.
Not only are we seeing.
The reaction from consumers, who are saying that the new clean modern analytic Sherri look and she'll allows them to focus more on their shopping journey, but.
But the luxury brands have also remark on the.
Elevating the image of our marketplace following our rebranding.
We're very pleased with the initial.
Okay and will amplify our campaign over the coming months continue driving our unique brand positioning.
In addition to driving online adoption by consumers Capex is also powering the digital transformation for luxury brands and retailers.
The accelerate.
Demand, we have seen across the process marketplace is driving heightened interest from brands and retailers, who have taken note of luxury consumers increased adoption of all our channels.
And fivex consumers.
Particularly attractive to brands and retailers.
They represent one of the largest global audiences of luxury shoppers.
And about two thirds of our consumers and millennials our generation said that.
The higher proportion than the overall luxury industry, which offers our brand and retail partners increased exposure.
Those are two the customer segments had to fuel the future growth of the luxury industry.
Additionally, our focus on delivering to drive sales have made facets are particularly attractive channel for new and existing partners.
Many of whom CDP a challenging environment.
As an opportunity to take the actions needed to tilt their distribution strategy away from wholesale towards direct to consumer including by leveraging potash is multi brand concession model.
Our record Q3 digital platform GMP. Please.
Flights, an increased mix of product sold at full price.
Capex sold without any promo.
In fact, we had a 70% year on year reduction in promotional days during the period.
And as we head into the Q4 promotional period.
During which time, we expect to see an aggressive push by our competitors in response to further physical shopping restrictions and concerns in light of the current resurgence of COVID-19 infections. Our plan is to continue executing on the strategy with respect to less promotions.
The state has strengthened our ties with our existing you concession brands and attractive some of the most desirable brands to the Capex marketplace.
We are thrilled to welcome Montclair.
Top 10 brands on the marketplace.
Hey.
Out of reasonable size poaching Cabana, Ralph Lauren and our first brand from the Swatch Group Rialto.
Anthony we confessions.
In addition to integrating additional supply pipelines from existing brand partners, who leaned in to the marketplace proposition.
As a result, we saw our highest ever depth of inventory in Q3, and our overall supply partnerships have expanded to more than 1303rd party filers now participating on the passage marketplace, including more than 550 brandy concessions.
And over 750 retailers.
The strong results for both consumers and grains demonstrate the unique positioning of our global platform.
Which I believe will emerge from the current environment structurally stronger.
And last week, we announced.
Plans to work together with Alibaba and finish more to build on fire fetches existing platform capabilities to realize the luxury retail division.
Which is an extension of our factories long held strategy to be the global platform fertilizer industry.
I am excited.
By the prospects of leveraging the leading edge expertise alibaba processes in the areas of Omnichannel and install technologies for accelerated the digitization of luxury buyer.
By offering a suite of products powers Vice assets.
Which will encompass both online and in stores.
Our technologies in both multi brand and model rate environments.
In doing so luxury retail will enable leading luxury brand with one single platform integration to achieve a global omnichannel presence.
Hi, a mono brand destination.
Thanks is retail stores, we chat and the two leading online luxury fashion destinations.
Patrick marketplace and Timo fluctuate Brazilian.
I'm also thrilled to be partnering with Alibaba to from the luxury retail steering group.
And that we will be signed by additional.
Small chairman Yellen, Rupert Anatomies chairman since while no.
Additionally, the formation of our China, JV and our launch of a fast start on T mobile Sri Pavilion.
Which we are expecting for me, maybe 21 will boost.
Our exposure to include the 757 million consumers across the Alibaba group.
These initiatives will be underpinned by one point $15 billion of total investments by our strategic partners into Farfetch.
Providing additional.
Fickle, which further strengthened five hedged position to go after the opportunity of powering the future of luxury retail.
And with that I'd now like to turn the call over 12 years for our financial review.
Thank you George and Hello, everyone.
Okay profits continues to operate from a position of strength.
Operationally as drug that has been outlining and from a financial perspective.
Across the group in Q3, GMP grew 62% year on year to $798 million.
Adjusted revenue increased 69% year on year to $387 million.
Adjusted EBITDA, our measure of underlying operating profitability improved $26 million compared to Q3 29 team to minus $10 million.
Looking now at.
EBITDA margin to minus 3.7%.
And finally.
<unk> cash position closed the quarter at $757 million with a further working capital benefit offset by $43 million tax payments in the current quarter.
These results represent a big step forward for Farfetch with strong growth across the business improving gross margins further operating cost leverage and substantial progress towards achieving our goal of full year adjusted EBITDA profitability and Twentytwenty one.
I would like to share some specific insights about the Q3 performance from our three business segments.
First our digital platform.
This platform delivered GMB of $674 million, representing 60% year on year growth on report.
Quarterly results and 61% growth on a constant currency basis.
Our marketplace growth accelerated as we continue to see strong demand from new customers and strong retention of existing customers.
This growth also accelerated with strong results.
Those across all our ISP as clients.
The addition of Harrods dot com and of what Dot com earlier in the year.
As well as three new branded web sites to the new Guards group in the quarter.
These new first party original site as well.
Well as high demand on the marketplace have driven first party GMB growth of 116% year on year to 17% of platform GMB.
GMB growth from third party sellers also accelerated to 50% year over year at 83% of platform Jim.
They and we achieved a sequentially higher take rate of 30.4%.
As a result digital platform services revenue grew ahead of GMB at 68% year on year to $263 million.
Margins on the digital platform and.
Improved significantly in Q3 with order contribution nearly doubling year on year to $97 million and order contribution margin, increasing to 37% compared to 31% a year ago and 35% in Q2 2020.
Permit for key drivers of the 560 basis point year on year improvement to digital platform for the contribution margin.
Just 280 basis points improvement from reduced funding of customer promotions year on year.
100 basis.
Payments of improved contribution from our first party business being a combination of increased full price mix and growth in our direct to consumer first party original products.
Partially offset by the mix effect of the lower absolute first priority gross margins versus the third party.
Business.
A negative 260 basis points impact from charges associated with the introduction of digital services Capex that we are currently absorbing.
And an increase of 440 basis points through an improvement in demand generation cost.
Year on year.
This significant improvement in terms of demand generation for the costs dropped down to 6.9% of digital platform GMB.
Its lowest level in the last two years and was primarily due to increased efficiency in our bidding engine.
Jim.
Improved efforts to drive reengagement from existing customers through lower cost channels, such as our App.
And a lease competitive digital advertising environment.
This has resulted in a remarkable results in the marketplace.
New customers.
Continue to drive a stronger mix of GMB than in previous years, and we added 400000, new customers in Q3, following the 500000, new customers acquired in Q2.
This is walter achieving lower customer acquisition costs year on year.
Overall traffic grew at approximately 50% year on year on a lower cost per visit and high conversion rate.
And tools grew more than 70% year on year with at now driving our the 50% of GMP with higher engagement than desktop users.
In mobile we have represented more than 75% of transactions within the quarter.
A higher full price next year on year contributed to the highest quarterly average order value year to date of $574.
Although this was two down.
Year by 1% as we continue to see more units sold and lower price point categories. This.
This work remains we are achieving very strong economics from our customer cohorts.
The Q1 2020 cohort now six months old has recovered.
CAC and is now fully paid back.
The three month LTV of the Q2 cohort is higher than the past seven quarters of cohorts. This.
This LPV combined with a lower customer acquisition costs and primary themed means the cohort generated our highest three.
Three month LTV to CAC ratio in 11 quarters.
And our more mature cohorts are delivering greater than 60% order contribution margin.
Turning now to our brand platform representing out connected hotel business.
We generated.
Hundred $12 million of GMP and $59 million of gross profit for a 52% gross margin.
This margin reflects the phasing of deliveries across Q2, and Q3 and reverses the dip in margin. We saw in Q2 to achieve a year to date gross margin of 14.
The 9%.
In line with our expectations.
Finally, our in store segment saw a slight year on year increase in GMB to $11 million with the addition of new flagship stores for our flight and stadium goods.
Clearly through our cost base, we have continued to drive strong operating leverage and efficiencies year on year.
Our DNA cost and the operating costs of our technology platform totaled 45% of adjusted revenue in Q3 23 in city compared to 51%.
In Q3 2019.
We have delivered substantial leverage from our technology platform.
Services platform and from our corporate functions.
This has allowed us to invest into the refresh of the phosphate spreads and our employees.
Both in terms of their wellbeing as we help them to continue to navigate the challenges coming from the pandemic.
And ensuring we have accrued the all employee annual performance based bonus.
In line with full year expectations.
Q3 depreciation.
And we'll translation was $54 million and our share based payment expense was $82 million, reflecting the change in provision for employment related taxes on the back of the highest profit share price at the end of September 23 cents.
Turning now to.
And outlook for the fourth quarter.
The business is extremely well placed to continue to execute on a strategic and financial goals.
The strong momentum means we now expect that fast fix will achieve its first quarter of profitability as a public company at the adjusted EBITDA.
Valuable in the coming quarter.
Whilst we expect we will achieve this extremely important milestone in the heat of market expectations.
I would like to point out that seasonality and business trends mean, we do not expect to deliver a positive adjusted EBITDA every quarter of 2021.
But we do remain committed to achieving our profitability targets for the full year of Twentytwenty one.
Most of the paradigm shift to online continues in the quarter ahead, we remain committed to supporting the industry to manage any negative impact from existed promotional activity.
And we will continue to work with our partners to optimize for full price sales.
This means for now we are planning for lower promotional spend in Q4 year on year, and we will be actively managing Q4 digital platform GMB growth to be between an estimated four.
30% to 45% over Q4 last year we.
We believe this will deliver digital platform or the contribution margin of 35% to 37%.
A significant improvement year over year.
This was all means we now expect digital.
Type from GMB of over $2.7 billion for the full year of Twentytwenty, approximately 40% growth year on year, which is in line with 2019 and ahead of our initial expectations.
The Grand platform as anticipated to deliver Q4 GMB of 18.
$5 million to $90 million.
Which will result in brand platform GMB of $371 million to $376 million for the full year.
Taking our group GMB and Twentytwenty, two an estimated $3 billion.
These results were delivered.
Favorable working capital movements within the quarter end.
Increasing our underlying cash balance to an estimated $800 million by year end.
This balance will be further increased by the proceeds of the $600 million and total of new convertible notes to be issued to Alibaba and.
Each month.
And $50 million in new shares to be issued to optimists, which were announced last week.
The $500 million investment related to the China joint venture is expected to complete and Twentytwenty one.
We therefore look to start 20.
21, with strong momentum more than 5000 committed five inches and a level of reserves that will ensure we can continue to support the global luxury industry and navigating the continued growth in online over the coming years.
Right.
Thank you Elliot.
Our Q3 results and once incredible momentum behind our business.
We leveraged our platform.
Online adoption by electric consumers worldwide.
As a result, we've attracted in Q2 and Q3.
A combined 900000 new customers.
And our data shows these cohorts are even stickier than cohorts acquired before COVID-19.
Moreover, our survey of these customers revealed almost half of them plans continue to do.
More of their shopping online.
On top of these we are driving accelerated adoption and record results, while significantly reducing promotional activity.
These dynamics are driving better supply as more and more of the most desirable brands choose our.
Nicky concession model.
And we've seen similar strength across our Capex platform solutions enterprise business.
All of which is delivering improved unit economics, and profitability and positioning us to achieve adjusted EBITDA profitability for the first time in Q.
Par.
An exciting milestone ahead of market expectations.
Putting us firmly on the path towards achieving our targeted full year profitability in 2021.
I'm excited to see the Fastmatch platforms drive the digital transformation of the lecturing the trait.
And the total specs.
So while further leveraging our platform to the partnership with Alibaba and the small.
As I said I believe strongly that we have already entered a new paradigm for luxury.
Not only a paradigm shift in consumer behavior.
Our.
Also a paradigm shift in brands adoption.
In an industry that is still very underpenetrated online.
What we are seeing is the acceleration of the secular trend from a very low online penetration in luxury of 12% in 2019.
Our next to maybe 30% penetration in Twentytwenty five.
And we are not only benefiting from the fassler trends.
Thats actively leading it.
Enabling the industry to embrace our vision of luxury new retail.
All of which.
I believe so.
Position us to drive strong sustainable growth.
Further market share capture.
And the expansion of our leadership position.
In the years to come.
Thank you.
We'll now open the call for your questions.
Ladies and gentlemen in order to ask the question you will need to press Star and then one on your telephone.
Stand by what we compiled the Kuni roster.
Our first question comes from Douglas Anmuth with JP Morgan Your line is open.
Great. Thanks for taking the questions Tom I too.
First.
So as a as you see the paradigm shift toward online luxury taking place are you seeing any movement. Among some of the bigger luxury brands that have typically not sold online through the platform. Just curious what the potential is to bring them on over time now that you've seen this inflection and then.
Elliott if you could provide a little bit more color on the Fourk TV guide for digital.
MBT, the 40% to 45% growth relative to the 60% in Threeq you said.
All about kind of managing the growth with with profit or are there other.
Factors, we should be thinking about before Q.
Thanks.
Thanks Scott.
[music].
Yeah, I think it's.
Very clear that.
That range are accelerating.
And fast tracking their digital strategies.
Hi.
500 answers to brands on on the class edge platform and if you can fashion so.
We already have.
If I'm not mistaken older brands from the caring group.
Most of them.
We have LVMH Weve several brand Sandy for example.
Hi, Thank Pete and is a new addition in Q2, where we are an exclusive multi brand.
Platform for them and and.
And this last quarter we ended.
Signing and Bob rains, we signed long player, which is the top 10 brands.
We signed Ralph Lauren we triangulate from the banner.
And that is so.
And so I think you know.
We asked strengthening ties with brands, we already had we're adding brands from Adam Brooks.
Of course, the announcements we've done last week.
And opens the door to conversations with a smallish model, what the cap and in our brand portfolio.
We have so many things we can offer.
The main zones, that's under the small group from marketplace Fps media solutions to Yum, China started the future.
You know that we're excited about.
Continuing conversations.
But only know where we're strengthening in a very very.
Salient way the fantastic relationships, we already have with with most of the industry and.
And and signing new contracts and so absolutely you know you get that.
Paradigm shape.
For brand adoption and rapid adoption of the Capex uniquely concession model in particular, thank you.
And Doug I, just Q4 expectation so.
In a way.
Focusing on the long term here as we always have been really in terms of managing growth and your 40% to 45%.
Mark Beaton and our belief.
In terms, how we see the quarter panel for ongoing growth.
Our troops are ahead of Q.
In Q2. This year, it's ahead of last year's numbers as well and I think it will be an increase.
Pretty much across the board in terms of.
Market expectation. So I think we are continuing to.
Focus on good solid levels of growth, particularly setting ourselves up for.
Run next year and the year after that in terms of sustainable growth rates.
What I will point out in terms of how we do that on the stock value that we have on the platform today, it's hard to see the vein at over $3 billion worth of product available through.
The third party and obviously, our first party but.
Business.
Dominantly, obviously third party.
And thats coming through from a step up actually from brand partners. We see again continued growth in terms of stock and trade as well the last quarter through the shift from GMB towards brand partners and we expect.
In that to continue and the key thing is Jerry day, and I've been saying earlier on and we want to help the industry to maximize full price. During this period, we want to.
Pullback again year on year on promotional spend just as we did in Q3.
And I think that means.
Speeds as I say setting us up for the longer term sustained growth, but I think because we are doing that we have to watch the promotional environment. I think we have towards consumer sentiment. The continued impact of of the pandemic of thing Windsor will be a slightly different season in terms of what customers will do.
In terms of Spain.
During the pandemic, whereas with the summer people was through at least going out too.
Great great for share and things of that we were seeing a purchases coming through so I think we have to watch what thickness category will do.
I think there will also be as we've seen a bit of category mix impact as well. So we are actively managing to these numbers for.
The benefit of all parties on the group.
We're still seeing new customers coming through and retention, but I just don't think.
We want to go for a 60% growth rate when 40 to 45 is a much better place to be in terms of the supporting new applies on the platform.
Our next question is from Stephen Ju with Credit Suisse. Your line is open.
Hi, Joe say, so congratulations on the quarter as well as your your partnership in China.
And so this is the second time.
We are thinking about the opportunity in.
And so.
So as you think about what happened before.
What do you want to see now with your new commercial partner.
What do you think you will do that will be very different.
And also what do you think the addressable fashion shopper population in China can be.
Elliot.
Thanks, Good LTV.
<unk> exposure for the most recent cohorts.
Stepping back a bit Ah I think the market found it very difficult to believe a little over a year ago. When you acquired and GE that it will serve as a differentiated content driven customer acquisition vehicle, but it seems like the high end demand nature of the brand.
After his MD, helping to bring customers and so anyway to quantify the benefits that you are seeing and the command acquisition cost there. Thank you.
Thanks Steven.
I think.
We obviously.
And can see the China.
Very very strategic Mac.
As we updated.
Several earnings calls in the last few quarters.
The JV star.
It's taking more time to ramp up than what we expected it's Oregon.
Coming to the level that both companies are excited and we you know we both try.
Twond Tonight.
And we started looking at data as well so as we acquired stadium good.
We also acquirers.
Demo started in boots have the Timo channel.
So we could see the same skew.
Exactly the same skew on Timo understand skew.
On the JD Star bypass HIV wake of staging goods assortment is also on Capex.
And we could see the difference and with wells complied.
[music].
You know by the magnitude of difference we also have.
Data from our brands and we'll have data from the market. So we became Adam.
Two wells that.
While both companies are fantastic you know ecommerce companies.
And an incredible platforms.
And we you know full respect to JV and the payment with work.
In credit we have on both sides to really.
Really maximize the show.
I know it wasn't really yielding and and we saw.
The data what the data was clearly showing is that both in our own direct experience and also about the brand for sharing with us.
So that makes us very very confident.
That that the Timo platform.
Luxury pavilion in particular, we're also going to open a start from.
MPLX Soho, which is a new new section of the site they have launch.
And also Timo global for certain brands.
They not only had.
757 million.
Customers so considerably more than then JB.
And they have the intent they have the female customer they have a fashion.
As one of their core categories that we know the Cork at great shape. These electronics.
So clearly we believe intend.
He is there.
And also you know and there is an incredible alignment obligations.
Daniel.
And he was talking about new retail and how check my math in 2016 envision really the convergence of physical and digital retail.
I checked that it was the same year 2016, where we advertise actual lags outlined out maintenance retail 12 hour.
Our own name for that same strategy. We now combined the two main goals luxury new retail power back half edge.
And it's a global initiative so we we.
Immediately saw we have an opportunity here.
Marshall for China, but an opportunity globally to really leverage and Alibaba.
And best in class really there is no other company in the world that has gone into the to the magnitude and extend they've done it at.
To really deliver diffusion and so.
So.
We absolutely.
Fantastic alignment in the global strategy on how we see the world.
You know the data shows the intent and the client base.
It's a much better fit for us quite frankly.
And we also structured.
So in a way that I think aligns incentives.
So we are going to launch a joint venture.
Where alibaba English law will own 25% they can build up.
Each person.
Certain milestones and heat to 49% so that I think are aligned.
Interests operationally on the ground.
In a very very strong way so were.
We're very very confident and.
And of course this will take time, we expect to.
To conclude the JV structuring.
<unk>.
In the first half of 2021, and then Barry and relatively quickly after that.
Launch the Alibaba thoughts around the Timo storefront shall I say and.
And I think obviously it will have fully impacting 2020 two as we then spat swap.
Optimize the channel et cetera, but.
So very excited not just about the China opportunity per se.
But also about the global opportunity that is having thanks.
And David just on.
Okay and in GGB. The first study originally is there.
Absolutely no doubt in my mind that having the brands from the New Guards group on the marketplace is driving down the engagement costs with customers.
Interesting that actually we've talked a lot about of why but Tom Angels has absolutely rocketed up how Mr brands.
Over the last couple of months and is growing very very rapidly within the topics marketplace.
Okay baskets that include an LNG brand and how the brands and the growth of those baskets year on year as in Triple digits. So we're seeing this halo effect coming through.
By having original content on the platform and customs bond into to the other brands. It's also allowing us to speak with real conviction around our editorial and the proposition to customers through the Astro email campaign through the online editorial and.
Is it.
Continuing to drive strong engagement.
Customers.
When I look at the LTV to CAC and again, what I said earlier on around the Q2.
It will that 500000 customer cohort that we acquired.
Three three months ago now.
Okay.
Back to 2017, there were only two quarters in that history Q1, 17 in Q3 17 that has had a higher.
Three months after the attack than this quarter just gone so all through last year all through 2018.
We've been we're now a heat of the answer.
In light of this Q2 cohorts LTV to CAC, so its a phenomenally powerful.
Cohort and it's not only did lower demand generation that garrison. Our team has been doing in terms of using data to really focus in on customers that are going to buy reduce wasted in terms of bidding and retreating from market.
But we don't want to better visibility to shift away from paid search into.
Lower cost channels social media.
Niall and push notifications, but.
But it's also in the Perm our slides the primary reducing significantly year on year has helped push up the lifetime value of the scalable as well so everything is working.
A perfectly for us to be able to engage with customers and the good news is that mean high share of GTV has dropped down.
This quarter year on year versus previous quarters, where it's hovered at a pretty consistent level. So we've been able to drive more organic.
Its engagement as well on the back of all the square that we're doing to engage with customers and of course the.
The re launch of the phosphates brands.
He has also been instrumental to the mix I think it's really.
Originated with our customer base, and we're able to drive customers in more organic way final point and then I.
And for the next question referrals GTV from referrals was up over 100% year on year. So our customers are also telling their friends and recommending.
Hi that referral feature to shop on soft Fitch, and that's driving great engagement as well, so I think everything fit.
US up well for next year.
Our next question is from forward Wamsley with Deutsche Bank. Your line is open.
Thanks, two questions first.
Just on that on that.
Form solutions website launched in 2020 odd contributed to Q.
I will give us a sense for how much.
That tax attribute and kind of what the pipeline looks like for platform solutions and then secondly, just as we think about park.
Joining luxury ability and.
Got it maybe that combined with just the pandemic me capex in luxury brands to develop.
Around price, it's more in the future.
Since you're kind of effectively bringing them on there.
How do you think that there will be an interplay between speaker store on.
Luxury pavilion in versus like others, having a presence there.
Think about it how should we think about it.
Lloyd ill take the first called the win.
If PS and Ali let Jos I take the question on China.
So.
I'm not going to break it out unfortunately, so it's going to be a short on.
To your question around the impact from the brands on the growth rates, but the pipeline is looking for the rest of this.
There is more focusing on through the brown burnt brand from the new jobs grew collection, but.
I think we've got a very strong pipeline of third party.
Brand to launch starting in Q1 next year, but once we close into that I'll give you a better update thing.
Sure I'll take the relationship Brazilian question.
We think its.
Very.
Complimentary so you have that you'll have essentially two.
Two types of range lets say brands that already have a.
Style front on the left with the Dalian our plan.
Open web.
And brands that deals with that scale.
On.
It's not easy to open.
Assembled in China.
Or even if you don't want to open the call to accompany to find that compete with these specific inventory.
And let's not forget that.
Every product this intellectual pavilion.
Easy in China has has crossed the border and using the dedicated stackable chips for that channel.
And that is done by a third parties both TPS timo pattern. That's that's the model.
This model ease.
Two very high cost in terms of Opex.
But very high risk as well because obviously you have that stock.
In a link to that channel.
And so what we do and I think that's that's incredible breakthrough for the industry is bringing to grow will offer.
From from 3500 brands that.
That are on the path at spot on 550 of them he can fashion.
To bring that global inventory too took a luxury pavilion.
What does that mean it means that if you're a brand with our friends.
Frank on blush.
Really and then you have let's say 100 skills by the way you will find that typically.
Thats the number of skews that even the large brands have so they don't have thousands of skills like that have on the potash market place.
So if you're one of those brands you said only capture a much larger share of voice.
In that channel.
Biding on class hedge on the life of the deal in as opposed to not not lot of doing that.
And then you have very exciting.
Medium brand medium sized brand small brands, even brands at about 100 150 Leila.
Brent.
We're trying.
But relatively difficult to.
Two sets of ecommerce operations in China, and even to sell in the marketplace. So for those it's you.
It's a unique opportunity its one single integration and your inventory is available all around the world, including in China or the Bible App.
Now, including in the lecture 2 billion.
And of course to look so timo global in the future as well. So we think it's a it's an incredible proposition.
And this is what part of excited on barcode Alibaba and the brands excited and coffee these announcements.
With.
The endorsement of the small.
Comes with.
And increased shareholding from ACA needs.
And which which shared decision and allow for shuttle actually new retail Global addition, which.
We feel very very.
Positive about.
Our next question is from Louise Singlehurst with Goldman Sachs. Your line is open.
Hi, Good evening, Jay Donnelly I take my questions <unk> absolutely.
Absolutely deliver to these great C pulse to every dollar tiny positive Blinky fool you touched on it.
These questions <unk> ready I wonder.
If you could just dive right a bit more about bottoms and it you will lead to this in terms of he might have been great and the profitability the platform, but obviously I think you'd you'd be pretty much forgive them to spend a bit more to drive even or for the fourth quarter.
Pace pick rice Krispies question and.
A key point, Kevin the end customer today. It now is that turning point.
Platform in terms of customer engagement beyond the actual active user numbers.
No brand awareness of Farfetch, because I think the 2.7 million.
Within across three regions. Its still a is still quite a low number and then secondly related to that I wondered if you would help us think about the regional Grace I know nothing specific in in terms of the detail, but if you could give us a rank I'm, particularly interested in the China number I following.
He tells them last week, then lastly, I wondered if you could just talk about J. Dempsey the benefit just getting some of the brands now direct obviously mone class been long time product has been available platform for some time, but the benefits of having the direct relationship and what that means in terms of inventory and driving trial.
Thank you.
Hi, Louise.
Good speaking to and very good Christians as always thank you for that I think.
Q4, with the momentum that we got behind Us and the amazing work.
The team has been doing to deliver.
Scott you know and the Virginia, if you think about how technology platform. This quarter I used to seem to the adjusted revenue.
Thats driving significant scale and leverage year on year.
We were able to get to profitability on 40 to 45 seeing growth next quarter.
It was higher growth.
I would I would see that flow through to potentially move profitability.
Rather than sort of cutting back on growth rates to try and get to profitability is not known about them at all really its about balancing what we think is the right growth.
Roche for the platform and our suppliers on the platform.
You did this quarter, which I think will be more promotionally.
Heavy not by us, but by the market.
Would we want to spend on promotions just to attract customers that were wanting to bond and promotion to deliver faster.
The growth rate.
Probably not because the history of the customers. The initially buy with us on promotion shows that date.
They are not the strongest cohorts in terms of lifetime value over the long run and we bring down the path before where we keep spending on promotional because we wanted to make.
Actually we didnt Miss a single customer that was.
Visiting us well that didn't work out in terms of Gray LTV. What does work out is the digital marketing thing focusing on.
A customer group that is going to be with us for the longer term and we've seen there over the last couple of quarters lower promotions means.
Higher LTV.
Okay.
In the short term and we believe over the longer term. So although I do agree with you 2.7 million active consumers.
This market is.
A number that leaves us with significant opportunity from here on and is it right to pull the primer hand due in the next 13 weeks will now.
Next sort of six to eight weeks.
Just to acquire them now when they are going to be premier customers or anything. So I think it's better to envied everything we're doing in terms of engagement in the brand work to build a client base that is really strong over the coming quarters and as I said earlier on in a sustainable level of growth, which you know 40 to.
45% is is pretty good in my view in terms, what we're now expecting so it's really more about the customer cohort that we would be shopping that would be shopping with us if we were to change.
Anything there in terms of your regional demand question again, we don't break this out too much but I would say that we saw all three.
Three of our regions accelerate growth. So from Q2 into Q3, all three regions desktop in terms of year on year growth rate.
Actually the Americas stepped up more than any other market.
Any other region.
That was coming through again by the focus.
From the team and to Mexico to US was particularly strong in terms of year on year growth Q3 versus Q2, you remember last time, we spoke to the US headset have woken up towards the back of Q2 and was driving growth in the early parts of Q3.
That delivered a fantastic acceleration under the table.
So other markets accelerated churn or in a very good place, particularly mainland China.
We are still seeing challenges in Hong Kong in terms of growth.
But mainland China is is doing well and then lastly, middle east very strong year on year, UK very strong year year on year.
So I think we've got a broad base of customers from across all three regions.
And ladies I'll take I'll take the question.
Loan Claire and and.
What changes and.
I think you know.
First of all multi wave is one of our top 10 brands Ethan just leave the wholesale channel.
It's very very exciting see this brand is one of the very few.
Brand in our top 20 brands that that was not by right I think we have maybe another one so thats an excellent.
Rackers from our.
Commercial team and.
And I think you know what this opens well first of all.
Ill.
As you know brand has and Moncler has outlined our digital strategy and it has been clear.
Also.
So on how they want to divest from wholesale.
And double down on direct to consumer and.
And this is an example of exactly that so they they're doubling down on.
On direct to consumer channels within the confessional capex.
So that means that.
The direct presence all brands on the platform becomes more and more important as the brand.
Divest from also important to note that all our competitors at wholesale businesses.
Right, so thats actually the only.
Global online leisure destination at scale.
And that operates any concession model.
The number two number three number four of the 10 player.
This is essentially a wholesale account for these brands which means.
What we expect to see our competitors with less and less access to supply.
And and obviously.
We continue to fight to to be able to grow in that with this brand.
Since they are prioritizing our channel, but that's not the end of it I think the most exciting date if we.
We start to develop a different quality of partnership right. So.
[music].
When we what we see when we signed his range as we start to do expose the dispatch to be the packer of five.
Our new products for new launches.
They start to see the incredible power of our platform in terms of reaching.
The millennial customer.
Globally.
We have I can point you to some examples so this year, we launched the Gucci off degrees Casio.
You know.
Before then we will be.
A global event, we believe Canada, including the first chunk show in Shanghai.
Lana physical trade show in China, We believe that our VIP customer base. All of these things are very exciting and they only can obviously.
When you have direct relationships with the brands in the shape of the Confessions then and what is his day side then prioritizing is all.
Over at the multi brand.
Online channels now.
Much of the cost that have doubled the matching let's say, let's put it in.
Double certainly double the revenue and give or take level the matching.
But also is a direct to consumer relationship they get much more granularity in terms of the data they have.
For control of pricing, especially diving.
So there is many advantages beyond the depth of stock, but obviously that will start as we continue this growth of it is.
60% pace in Q3, 40% to 45% into far essential that we have like.
And bottomless.
You know.
Access to inventory in the East Cam 2345 years as Pat described extrapolated it vendor.
I think we see concessions is really important for us.
We have time for one more question.
Final question comes from.
Eric Sheridan with CBS Your line is open.
Thank you for taking the question I'd love to ask a two parter directed at each of you.
With the completion, you're going to have at the end of this year and and raising the capital you are doing on the back of the transactions with Alibaba how should we think maybe for you Joe is a strategically and.
Annually. It for you sort of financially as part of some investment you want to make broadly about deploying that capital how should investors think about what's sort of the priorities are offered to deploying that capital against our growth objectives and driving equity returns. Thanks, so much.
Alex you want to take your questions.
You know the Treasury man.
Yes, absolutely sorry I was.
Just on your classic answer any question over the last six months.
Yes. Thank you Eric as you pointed out we're extremely well capitalized.
Given hundred $57 million at the end of <unk>.
Peter and that should.
You get up to 800 million, but individually working capital and the transactional three wasn't about boosting the balance sheet of about raising money.
It was about making sure we've got meaningful alignment.
Between ourselves and the.
The strategic partners and the cash.
Is the output.
That focus really I.
I do think the investment means we got very aligned interest in China, and the global business and we look forward to working with our partners.
The cash.
As it stands at the moment has got no.
Specific purpose other than continuing to invest behind the great results. We are seeing on the platform as we help the whole industry navigate the shift online we won't be doing.
Do anything other than focusing on our strategy of evolving the business to support.
The growth online.
12% market share now moving to 30% in the next five years Ive topics is going to lead the way with that and the funds that we have will be used to ensure we are.
Taking advantage of any opportunities to drive good return for investors over that time period, I don't think it's an excessive amount of cash to have.
I think it's a good level of reserves for us to be able to deploy as we need to.
But it doesn't take alloy off the ball all continued to drive growth focused on unit economics profitability for the full year next year and.
If anything else comes along we'll see what happens but at this stage.
We will be putting that straight into good investment on the bank and the bank.
[music].
Hi.
I think thats, probably yet unfortunately, Tom is up we look forward to speaking to you again in three months time.
And Alex and Deanna are available of course as always.
Do you have any more questions from the Investor Relations team, thanks, everyone and speak to you in.
February.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
Yeah.
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