Farfetch(FTCH) - 2022 Q3 - Quarterly Report

Financial Performance - Q3 2022 revenue increased by 1.9% year-over-year to $593.4 million, or 14.1% growth at constant currency[5] - Q3 2022 Gross Merchandise Value (GMV) decreased by 4.9% year-over-year to $967.4 million, but increased by 4.2% at constant currency[5] - Digital Platform GMV decreased by 5.0% year-over-year to $787.4 million, with a constant currency increase of 2.6%[5] - Brand Platform GMV declined by 10.4% year-over-year to $148.1 million, but increased by 4.9% at constant currency[5] - Revenue for Q3 2022 was $593,357 thousand, a slight increase from $582,565 thousand in the same period of 2021, representing a year-over-year growth of approximately 1.4%[54] - Revenue for Q3 2022 was $593.4 million, a 1.9% increase year-over-year, while Digital Platform Services revenue rose by 1.7% to $324.7 million[49] - Adjusted Revenue for Q3 2022 was $514,654 thousand, compared to $504,670 thousand in Q3 2021, showing a growth of 2.0%[73] Profitability and Margins - Q3 2022 gross profit margin improved to 44.9%, an increase of 160 basis points year-over-year[5] - Gross profit increased by $14.4 million, or 5.7%, year-over-year to $266.6 million in Q3 2022, with a gross profit margin of 44.9%[22] - Digital Platform Gross Profit Margin rose 160 bps to 51.4% in Q3 2022, driven by higher revenue growth compared to costs[23] - Brand Platform Gross Profit Margin increased 120 bps year-over-year to 49.8%, influenced by foreign exchange rate changes and the recognition of the Reebok net economic benefit[24] - Adjusted EBITDA declined by $9.4 million to $(4.1) million, with an Adjusted EBITDA Margin decrease from 1.1% to (0.8)%[41] - Profit after tax decreased from a profit of $769.1 million in Q3 2021 to a loss of $(274.9) million in Q3 2022, primarily due to fair value losses and an impairment charge[39] - Profit after tax for Q3 2022 was $(274,902) thousand, compared to a profit of $769,129 thousand in Q3 2021, resulting in a profit margin of (46.3%) versus 132.0%[70] - Adjusted EBITDA for Q3 2022 was $(4,111) thousand, down from $5,310 thousand in Q3 2021, indicating a decline in operational performance[70] Consumer Metrics - Active consumers increased to 3.9 million, up from 3.6 million in the previous year[6] - Active Consumers increased, indicating the company's ability to attract and retain its consumer base, although specific numbers were not disclosed[78] Liquidity and Capital Structure - Cash and cash equivalents stood at $487.4 million as of September 30, 2022[5] - Liquidity as of September 30, 2022, included cash and cash equivalents of $487.4 million, down $875.7 million from the previous year[42] - A $400 million term loan facility was secured on October 20, 2022, with net cash proceeds of approximately $369.1 million after fees[44] - Cash and cash equivalents at the end of the period were $487,388 thousand, down from $1,363,128 thousand at the beginning of the period, indicating a significant decrease in liquidity[57] Operational Challenges - Selling, general and administrative expenses increased by $88.8 million, or 24.8%, year-over-year to $446.8 million in Q3 2022[25] - The operating loss for the three months ended September 30, 2022, was $218,482 thousand, compared to a loss of $105,735 thousand in the same period of 2021, reflecting a deterioration in performance[54] - The company experienced a net cash outflow from operating activities of $518,190 thousand for the nine months ended September 30, 2022, compared to a net outflow of $409,703 thousand in the same period of 2021[57] - The company experienced a loss after tax of $530,623 thousand for the period ending September 30, 2022, leading to a total comprehensive loss of $432,978 thousand[58] Future Outlook - The company aims to return to profitable growth in 2023, supported by ongoing cost rationalization initiatives[4] - The Digital Platform GMV is expected to decline by 5% to 7% year-over-year, while the Brand Platform GMV is projected to remain broadly flat[53] - The company is targeting an Adjusted EBITDA margin of between (3)% to (5)% for the upcoming fiscal year[53] - The company anticipates growth and improved performance for the fiscal years ending December 31, 2022, and December 31, 2023, despite macroeconomic uncertainties[60] Strategic Initiatives - The company is focused on strategic initiatives, including partnerships and market expansion, to enhance its competitive position in the luxury fashion industry[60] - The company highlighted the impact of regional COVID-19 restrictions on orders in mainland China, which may affect future performance[60] - The company noted reliance on a limited number of luxury sellers for product supply, which poses risks to its operational stability[60] - The company emphasized the importance of Non-IFRS measures for evaluating performance, including Adjusted EBITDA and Adjusted Revenue, to provide a clearer picture of operational efficiency[62] Market Performance - The share price at the end of Q3 2022 was $7.45, down from $37.48 at the end of Q3 2021, indicating a significant decline in market valuation[76] Revenue Streams - Media solutions revenue is derived from advertising products and solutions provided to luxury sellers, leveraging first-party data on the Farfetch Marketplace[96] - Order Contribution indicates gross profit after deducting demand generation expenses, reflecting the company's ability to extract consumer value from marketing costs[97] - Third-Party Take Rate represents Digital Platform Services Revenue as a percentage of Digital Platform GMV, excluding first-party sales[98] - Farfetch connects customers in over 190 countries with items from more than 1,400 luxury brands, boutiques, and department stores[100] - The Luxury New Retail initiative includes Farfetch Platform Solutions, which provides e-commerce and technology capabilities to enterprise clients[100] - Future Retail develops innovations such as Connected Retail solutions to enhance the shopping experience[100]