Earnings Call: Q3 2020

Nov 12, 2020

Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to Farfetch Third Quarter 2020 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. Thank you. I'd now like to turn the call over to Alice Ryder, VP of Investor Relations. Ms. Ryder, you may begin your conference. Hello, and welcome to Farfetch's Q3 2020 conference call. Joining me today to discuss our results are Jose Neves, our Founder, Chairman and Chief Executive Officer and Elliot Jordan, our Chief Financial Officer. Before we begin, we would like to remind you that our discussions 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 them. For a discussion of some of the important risk factors that could cause actual results to differ, please see the Risk Factors sections of our Form 20 F filed with the SEC on March 11, 2020, and in Exhibit 99.2 to our Form 6 ks filed with the SEC on April 27, 2020. In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non IFRS financial measures to the IFRS financial measures in our earnings press release and the slide presentation, both of which are available on our website ffarfetchinvestors.com. And now, I'd like to turn the call over to Jose. Thank you, Alice, and thank you all for joining us today. I'm very pleased to be speaking to you about Farfetch's Q3 2020 results. Our business accelerated in Q3 to deliver record group GMV of $798,000,000 This record performance was underpinned by the digital platform, which accelerated to generate GMV growth of 60% year over year. Our highest digital platform GMV growth in 10 quarters. We believe we're witnessing a paradigm shift in the way people buy luxury. From day 1, Farfetch set out with a differentiated vision to enable the luxury industry by building a full suite of capabilities to connect the creators, curators and consumers who are the lifeblood of the luxury industry. This has not only positioned Farfetch to capture the accelerating online demand resulting from increased consumer in light of the continuing global pandemic, but we are 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 lockdowns during Q1 and Q2 and when most consumers had the option of returning to their local luxury boutiques and departure stores. This online adoption is consistent with what our recently acquired customer, Satelli, has. In a recent survey of our newer customers, 45% said they will continue to do more of their shopping online now that they are used to it, and 23% said they will do most of their shopping online from now on. This clearly indicates that the luxury industry will not go back to the same normal as we did with pre COVID-nineteen and affirms my belief that we're witnessing a major acceleration of the sustained online adoption I had anticipated when I founded Farfetch 13 years ago. Q3 GMV for the Farfetch marketplace, which represents the significant majority of our GMV from consumers, grew more than twice as fast as in Q2 2020, largely driven by active consumer growth as we leaned into a lower customer acquisition cost or CAC environment to drive efficient growth of our luxury consumer base, particularly via mobile app downloads. On top of this, we've continued to focus on retention by leveraging our vast data resources to offer a more relevant experience, and it is delivering results. Conversion rates for our data driven personalized communications are 1.5 times higher than non personalized messages on average. Our implementation of machine learning technology, such as our proprietary Inspire algorithm, are also driving engagement with these consumer communications, which is on average 5x higher. This has contributed to a month over month improvement in retention rates from March through the end of Q3. To date, we have driven online adoption through our performance marketing led customer acquisition assets. And in Q3, we also set out to complement these efforts by building awareness of the Farfetch brand to ultimately increase organic engagement. You've heard me say before that Farfetch is a bigger company than it is a brand. While we've managed to build the leading global luxury fashion platform without meaningful branding investments, luxury is an industry of brands, and we see significant opportunity ahead in building awareness of Farfetch. With the industry in a critical phase of online transition, now is the right time. In September, we launched a new upper funnel marketing campaign, marking a key milestone in our chapter 2 growth strategy. The campaign, taglines open doors to a world of fashion is focused on building brand love and an emotional connection to Farfetch by communicating what makes Farfetch 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, print, social and online channels, as well as our first foray into addressable TV. In conjunction with this, we also launched a new brand identity for Farfetch and refreshed the look and feel of all external and internal facing touch points, including the marketplace. Not only are we seeing positive reactions from consumers who are saying that the new clean, modern and luxurious look and feel allows them to focus more on their shopping journey, but Luxury Brands have also remarked on the elevated image of our marketplace following our rebranding. We're very pleased with the initial feedback and will amplify our campaign over the coming months to continue driving our unique brand positioning. In addition to driving online adoption by consumers, Farfetch is also powering the digital transformation for luxury brands and retailers. The accelerating demand we have seen across the Farfetch marketplace is driving heightened interest from brands and retailers who have taken note of luxury consumers' increased adoption of online channels. And Farfetch consumers are particularly attractive to brands and retailers. They represent 1 of the largest global audiences of luxury shoppers. And about twothree of our consumers are millennials or Generation Z, a higher proportion than the overall luxury industry, which offers our brand and retail partners, increased exposure to the customer segments had to fuel the future growth of the luxury industry. Additionally, our focus on delivering full price sales has made Farfetch a particularly attractive channel for new and existing partners, many of whom see the 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 Farfetch's multi brand e concession model. Our record Q3 digital platform GMV reflects an increased mix of products sold at full price and products 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-nineteen infections, our plan is to continue executing on the strategy with respect to less promotions. This stance has strengthened our ties with our existing e concession brands and attracted some of the most desirable brands to the Farfetch marketplace. We are thrilled to welcome Moncler, a top 10 brand on the marketplace and have also recently signed Dolce and Gabbana, Ralph Lauren and our first brand from the Swatch Group, Radul at New Econ Fashions, in addition to integrating additional supply points 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 1300 third party sellers now participating on the Farfetch marketplace, including more than 5 50 branded concessions and over 7 50 retailers. The strong results for both consumers and brands 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 Richemont to build on Farfetch's existing platform capabilities to realize the luxury new retail vision, which is an extension of Farfetch's long held strategy to be the global platform for the luxury industry. I'm excited by the prospects of leveraging the leading edge expertise Alivado possesses in the areas of omni channel and installed technologies to accelerate into digitization of luxury by offering a suite of products powered by Farfetch, which will encompass both online and in store technologies in both multi brand and mono brand environments. In doing so, Luxury New Retail will enable leading luxury brands with one single partner and integration to achieve a global omnichannel presence via mono brand destinations, connected retail stores, WeChat and the 2 leading online luxury fashion destinations, Farfetch Marketplace and Tmall's Luxury Pavilion. I'm also thrilled to be partnering with Alibaba to form the Luxury New Retail Steering Group and that we will be joined by Richemont's Chairman, Johan Rupert and Artemis Chairman, Francois Ribehanot. Additionally, the formation of our China JV and our launch of a Farfetch star on Tmaller Schweitzervillain, which we are expecting for mid-twenty 21, will boost our exposure to include the 757,000,000 consumers across the Alibaba Group. These initiatives will be underpinned by $1,150,000,000 of total investments by our strategic partners into Farfetch, providing additional capital, which further strengthens Farfetch's 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 to Elias for a financial review. Thank you, Jose, and hello, everyone. Farfetch continues to operate from a position of strength, both operationally, as Jose has been outlining, and from a financial perspective. Across the group, in Q3, GMV grew 62% year on year to $798,000,000 Adjusted revenue increased 69% year on year to $387,000,000 Adjusted EBITDA, our measure of underlying operating profitability, improved $26,000,000 compared to Q3 2019 to minus $10,000,000 taking our adjusted EBITDA margin to minus 2.7%. And finally, our cash position closed the quarter at $757,000,000 with a further working capital benefit offset by a $42,000,000 tax payment 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 in 2021. I'd like to share some specific insights about the Q3 performance from our 3 business segments. 1st, our digital platform. This platform delivered GMV of $674,000,000 representing 60% year on year growth on reported 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. FPS growth also accelerated with strong results across all our FPS clients. The addition of harrods.comandoffwhite.com earlier in the year as well as 3 new branded websites for the New Guards Group in the quarter. These new first party original site as well as high demand on the marketplace have driven first party GMV growth of 116% year on year to 17% of platform GMV. GMV growth from 3rd party sellers also accelerated to 50% year over year at 83% of platform GMV and we achieved a sequentially higher take rate of 30.4%. As a result, digital platform services revenue grew ahead of GMV at 68% year on year to $263,000,000 Margins on the digital platform improved significantly in Q3 with order contribution nearly doubling year on year to $97,000,000 and order contribution margin increasing to 37% compared to 31% a year ago and 35% in Q2 2020. There were 4 key drivers of the 5 60 basis point year on year improvement to digital platform order contribution margin. 1st, 280 basis points improvement from reduced funding of customer promotions year on year 100 basis points 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 party gross margins versus the 3rd party business. A negative 260 basis points impact from charges associated with the introduction of digital services tax that we are currently absorbing and an increase of 4.40 basis points through an improvement in demand generation costs year on year. This significant improvement in terms of demand generation saw the cost drop down to 6 0.9% of digital platform GMV, its lowest level in the last 2 years and was primarily due to increased efficiency in our bidding engine, improved efforts to drive reengagement from existing customers through low cost channels such as our app and a less competitive digital advertising environment. This has resulted in remarkable results in the marketplace. New customers continue to drive a stronger mix of GMV than in previous years, and we added 400,000 new customers in Q3, following the 500,000 new customers acquired in Q2. This is whilst achieving lower customer acquisition costs year on year. Overall traffic grew at approximately 50% year on year on a lower cost per visit and higher conversion rate. App installs grew more than 70% year on year with app now driving over 50% of GMV with higher engagement than desktop users. Our app and mobile web represented more than 75% of transactions within the quarter. A higher full price mix year on year contributed to the highest quarterly average order value year to date of $5.74 Although this was still down year on year by 1% as we continue to see more units sold in lower price point categories. This work means we are achieving very strong economics from our customer cohorts. The Q1 2020 cohort, now 6 months old, has recovered its CAC and is now fully paid back. The 3 month LTV of the Q2 cohort is higher than the past 7 quarters of cohorts. This LTV combined with a lower customer acquisition cost and promo spend means the cohort generated our highest 3 month LTV over 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 our connected wholesale business, which generated $112,000,000 of GMV and $59,000,000 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 49%, in line with our expectations. Finally, our in store segment saw a slight year on year increase in GMV to $11,000,000 with the addition of new flagship stores for Off White and Stadium Goods. Turning to our cost base, where we have continued to drive strong operating leverage and efficiencies year on year. Our G and A costs and the operating costs of our technology platform totaled 45% of adjusted revenue in Q3 2020 compared to 51% in Q3 2019. We have delivered substantial leverage from our technology platform, our services platform and from our corporate functions. This has allowed us to invest into the refresh of the Farfetch brand and our employees, both in terms of their well-being as we help them to continue to navigate the challenges coming from the pandemic and ensuring we've accrued the all employee annual performance based bonus in line with full year expectations. Q3 depreciation and amortization was $54,000,000 and our share based payment expense was $82,000,000 reflecting the change in provision for employment related taxes on the back of the higher Farfetch share price at the end of September 2020. Turning now to our outlook for the Q4. The business is extremely well placed to continue to execute on its strategic and financial goals. The strong momentum means we now expect that Farfetch will achieve its 1st quarter of profitability as a public company at the adjusted EBITDA level in the coming quarter. Whilst we expect we will achieve this extremely important milestone ahead 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 target for the full year of 2021. Whilst the paradigm shift to online continues in the quarter ahead, we remain committed to supporting the industry to manage any negative impacts from excessive promotional activity, and we'll 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 GMV growth to be between an estimated 40% to 45% over Q4 last year. We believe this will deliver digital platform order contribution margin of 35% to 37%, a significant improvement year over year. This result means we now expect digital platform GMV of over $2,700,000,000 for the full year of 2020, approximately 40% growth year on year, which is in line with 2019 and ahead of our initial expectations. The brand platform is anticipated to deliver Q4 GMV of $85,000,000 to $90,000,000 which will result in brand platform GMV of $371,000,000 to $376,000,000 for the full year, taking our group GMV in 2020 to an estimated $3,000,000,000 These results will deliver favorable working capital movements within the quarter, increasing our underlying cash balance to an estimated $800,000,000 by year end. This balance will be further increased by the proceeds of the $600,000,000 in total of new convertible notes to be issued to Alibaba and Richemont and $50,000,000 in new shares to be issued to Artemis, which were announced last week. The $500,000,000 investment related to the China joint venture is expected to complete in 2021. We therefore look to start 2021 with strong momentum, more than 5,000 committed Farfetches and a level of reserves that will ensure we can continue to support the global Elliot. Our Tier 3 results added an incredible momentum behind our business as we've leveraged our platform to drive online adoption by luxury consumers worldwide. As a result, we've attracted in Q2 and Q3 a combined 900,000 new customers, and our data shows these cohorts are even stickier than cohorts acquired before COVID-nineteen. Moreover, our survey of these customers revealed almost half of them plan to continue to do more of their shopping online. On top of this, 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 unique e concession model. And we're seeing similar strength across our Farfetch 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 Q4. 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 Farfetch platform drive the digital transformation of the luxury industry and the prospects of further leveraging our platform through the partnership with Alibaba and Richemont. As I said, I believe strongly that we have already entered a new paradigm for luxury, not only a paradigm shift in consumer behavior, but also a paradigm shift in brand 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 to an estimated 30% penetration in 2025. And we are not only benefiting from this secular trend, but actively leading it by enabling the industry to embrace our vision of luxury new retail, all of which, I believe, 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. Our first question comes from Douglas Hynes with JPMorgan. Your line is open. Great. Thanks for taking the questions. I have 2. First, Jose, just 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, Elliot, if you could provide a little bit more color on the 4Q guide just for digital GMV, the 40% to 45% growth relative to the 60% in 3Q. Is that all about kind of managing the growth with profit or are there other factors we should be thinking about in 4Q? Thanks. Thanks, Doug. Yes, I think it's very clear that brands are accelerating and fast tracking their digital strategies. We have 550 brands on the Farfetch platform, as you can fashion. So we already have, if I'm not mistaken, all the brands from the Kering Group, our most of them. We have LVMH with several brands. Fendi, for example, Fendi is a new addition in Q2, where we are an exclusive multi brand platform for them. And this last quarter, we ended signing more brands. We signed Moncler, which is the top 10 brands. We signed Ralph Lauren. We signed Dolce and Gabbana and others. So I think we are strengthening the ties with the brands we already have. We're adding brands from other groups. Of course, the announcement we've done last week opens the door to conversations with Richemont. Richemont was a gap in our brand portfolio. We have so many things we can offer the Maisons that's on the Richemont Group from Marketplace, FPS, Media Solutions, Curiosity China, Star of the Future that we're excited about continuing conversations. But all in all, we're strengthening in a very, very salient way the fantastic relationships we already have with most of the industry and signing new econstrations. So absolutely, it gives a paradigm shift for brand adoption and brand adoption of the Farfetch unique econcession model in particular. And Kai, just on our Q4 expectations. So we're focusing on the longer term here as we always have been really in terms of managing growth. And 40% to 45% is market beating in our belief in terms of how we see the quarter pan out for online growth. It's also ahead of Q1 and 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 expectations. So I think we are continuing to focus on good solid levels of growth, particularly setting ourselves up for next year and the year after that in terms of sustainable growth rates. What I will point out in terms of how we build that out, the stock value that we have on the platform today is the highest it's ever been at over $3,000,000,000 worth of product available through the 3rd party and obviously our 1st party business, predominantly obviously third party. And that's coming through from a step up actually from brand partners. We're seeing, again, continued growth in terms of stock and trade as well. The last quarter, further shift of GMV towards brand partners, and we're expecting that to continue. And the key thing is, as Jose and I have been saying pull back again year on year on promotional spend, just as we did in pull back again year on year on promotional spend just as we did in Q3. And I think that means, as I say, setting ourselves up for longer term sustained growth. But I think because we are doing that, we have to watch the promotional environment. I think we have to watch consumer sentiment, the continued impacts of the pandemic. I think winter will be a slightly different season in terms of what customers will do in terms of spend during the pandemic, whereas with the summer, people were still at least going out to grab fresh air and things like that. We were seeing purchases coming through. So I think we have to watch what this category will do. And I think there will also be, as we've seen, a bit of category mix impact as well. So we're 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 supporting all players on the platform. Our next question is from Stephen Ju with Credit Suisse. Hi, Jia, Fei. So congratulations on the quarter as well as your new partnership in China. And so this is the 2nd time we are thinking about the opportunity in China. So as you think about what happened before and what 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? And Elliot, thanks for the LTV cap disclosure for the most recent cohorts. Stepping back a bit, I think the market found it very difficult to believe a little over a year ago when you acquired NGG that it will serve as a differentiated content driven customer acquisition vehicle. But it seems like the high in demand nature of the brand there is indeed helping to bring customers in. So any way to quantify the the demand acquisition costs there? Thank you. Thanks, Stephen. I think we obviously consider China a very, very strategic market. As we updated in several learning calls in the last few quarters, the JV Star was taking more time to ramp up than what we expected. It wasn't performing to the level that both companies expected, and we both tried to optimize it. And we started looking at data as well. So as we acquired Stadium Goods, we also acquired a Tmall store. Stadium Goods had a Tmall channel. So we could see the same SKU exactly the same SKU on Tmall and the same SKU on the JD Star via Farfetch, obviously, because Stadium Goods assortment is also on Farfetch. And we could see the difference, and it was quite a magnitude of difference. We also have data from our brands and we have data from the market. So it became evident to us that whilst both companies are fantastic e commerce companies and incredible platforms And with full respect to JB and the team and we've worked incredibly have on both sides to really maximize the channel, it wasn't really yielding. And we saw the data, what the data was clearly showing us, both in our own direct experience and also what the brands are sharing with us. So that makes us very, very confident that the Tmall platform, Luxury Pavilion in particular, we're also going to open a storefront in T Lux SoHo, which is a new section of the sites they have launched and also Tmall Global for certain brands. They not only have 757,000,000 customers, so considerably more than JD, they have the intent. They have the female customer. They have fashion as one of the core categories, as we know, the core category, HDs, electronics. So clearly, we believe the intent is there. And also, there is an incredible alignment of visions. When I met Daniel and he was talking about new retail and how Chekma in 2016 envisioned really the conversion for physical and digital retail, I checked that it was the same year 2016 where we, at the Farfetch OS, outlined augmented retail, which was our own name for that same strategy. We now combine the two names, a bit of luxury new retail powered by Farfetch, and it's a global initiative. So we immediately saw we have an opportunity here, not just for China, but an opportunity globally to really leverage Alibaba's best in class really. There's no other company in the world that has it to the magnitude and the extent they're turning to really deliver this vision. So absolutely fantastic alignment in the global strategy and how we see the world. The data shows the intent and the client base is a much better fit for us, quite frankly. And we also structured the deal in a way that I think aligns incentives. As you know, we are going to launch a joint venture where Alibaba and Richemont will own 25%. They can build up if certain milestones are hit to 49%. So that, I think, aligns insurance operationally on the ground in a very, very strong way. So we're very, very confident. And of course, this will take time. We expect to conclude the JV structuring in the first half of twenty twenty one and then very relatively quickly after that launch the Alibaba storefronts, the Timo storefronts, shall I say. And I think obviously, it will have full impact in 2022 as we then start to optimize the channel, etcetera. But we're very excited not just about the China opportunity per se, but also about the global opportunity that we have in hand. And Steve, just on LTVCAC and NGG, the first party original, there's absolutely no doubt in my mind that having the brands from the New Guards Group on the marketplace is driving down the engagement has absolutely rocketed up our list of brands. Has absolutely rocketed up our list of brands over the last couple of months and is growing very, very rapidly within the Farfetch marketplace. I look at baskets that include an NGG brand and other brands, And the growth of those baskets year on year is in triple digits. So we're seeing this halo effect coming through by having original content on the platform and customers buying into the other brands. It's also allowing us to speak with real conviction around our editorial and the proposition to customers through the app, through our e mail campaign, through the online editorial, and that is continuing to drive strong engagement with customers. When I look at the LTV of cat, and again, what I said earlier on around the Q2 cohort, that 500,000 customer cohort that we acquired 3 months ago now. If I go all the way back to 2017, there were only 2 quarters in that history, Q1 'seventeen and Q3 'seventeen, that have had a higher 3 month LTV over cap than this quarter just gone. So all through last year, all through 2018, we've been we're now ahead of that in terms of this Q2 cohort's LTV over CAC. So it's a phenomenally powerful cohort. And it's not only the lower demand generation that Gareth and our team have been doing in terms of using data to really focusing on customers that are going to buy, reduce wastage in terms of bidding and retreating from markets that we don't want to, but visibility to shift away from paid search into lower cost channels, social media, the e mail and push notifications. But it's also on the promo side. So promo reducing significantly year on year has helped push up the lifetime value of this cohort as well. So everything is working perfectly for us to be able to engage with customers. And the good news is that means paid 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 engagement as well on the back of all this work that we're doing to engage with customers. And of course, the relaunch of the Farfetch brand has also been instrumental in this. I think it's really resonated with our customer base, and we're able to drive customers in a more organic way. Final point, and then I will pass to the next question. Referrals, GTV from referrals was up over 100% year on year. So our customers are also telling their friends and recommending via that referral feature to shop on Farfetch, and that's driving great engagement as well. So I think everything suits us up well for next year. Our next question is from Floyd Walmsley with Deutsche Bank. Thanks. I have two questions if I can. First, just on the new platform solutions websites launched in 2020 that contributed to GMV. Can you just give us a sense for how much that contributed to growth and kind of what the pipeline looks like for platform solutions? And then secondly, just as we think about Farfetch joining Luxury Pavilion, do you think that may that combined with just the pandemic may hasten luxury brands to develop their own presence more on the platform since you're kind of effectively bringing them on there? And how do you think that there will be an interplay between your store and Luxury Pavilion versus like others having a presence there? How do you think about it? How should we think about it? Lloyd, hi. I'll take the first question and then FBS and I'll let Jose take the question on China. So I'm not going to break it out unfortunately, so it's going to be a short answer to your question around the impact from the brands on the growth rates. But the pipeline is looking good. The rest of this year is more focusing on further brands from the New Guards Group collection. But then we've got a very strong pipeline of 3rd party brands to launch starting in Q1 next year. But once we are closer to that, I'll give you a better update then. Sure. I'll take the luxury Brazilian question. We think it's very complementary. So you have essentially 2 types of brands, let's say, brands that already have a storefront on the Luxury Pavilion or plan to open 1 And brands that, due to their scale, it's not easy to open a company in China or even if you don't want to open a company to find a TP, produce specific inventory. Let's not forget that every product is in the Leshu Pavilion is in China, has crossed the border and is in the dedicated stock pool just for that channel. And that is done by a third party called TPs, TIMO partners. That's the model. This model is very high cost in terms of OpEx, but very high risk as well because obviously, you have that stock linked to that channel. So what we do, and I think that's an incredible breakthrough for the industry, is bring the global offer from 3,500 brands that are on the Farfetch platform, 550 of them with e concessions to bring that global inventory to the Luxury Pavilion. What does that mean? It means that if you rebrand with the Star front on Blasch Pavilion and you have, let's say, 100 SKUs, by the way, you will find that typically that's the number of SKUs that even the large brands have. So they don't have thousands of SKUs like they have on the Farfetch marketplace. So if you're one of those brands, you suddenly capture a much larger share of voice in that channel by being on Farfetch on the luxury pavilion as opposed to not doing that. And then you have very exciting medium brand, medium sized brands, small brands, even brands that are 100,000,000, 150,000,000, 200,000,000 brands would find it relatively difficult to set up e commerce operations in China and even to sell in the marketplace. So for those, it's a unique opportunity. It's one single integration, and your inventory is available all around the world, including in China, our Farfetch app, and now including in the Luxury Pavilion and of course, Piluxovo, Timo Global in the future as well. So we think it's an incredible proposition, and this is what got us excited and what got Alibaba and the brands excited. And of course, this announcement comes with the endorsement of Richemont, comes with an increased shareholding from Akheniz, which share this vision and also share the leisure in new retail global vision, which we feel very, very positive about. Our next question is from Louise Singhalerz with Goldman Sachs. Your line is open. Hi, good evening, Jody and Elie. Thanks for taking my questions. You guys are absolutely delighted. It's great to see the path to EBITDA turning positive well in Q4. Just touching on the question which we've been asked already. I wondered if you could just elaborate a bit more on that balance. Elliot, you alluded to this in terms of obviously managing growth and the profitability of the platform. But obviously, I think you'd be very much forgiven for spending a bit more to drive even more for the Q4 given the pace of the growth. But I suppose the question is that you've only got 2,700,000 customers today. Is there a turning point that's happening for the platform in terms of customer engagement beyond the actual active user numbers? I feel like in the brand awareness of Farfetch, because I think the €2,700,000 across 3 regions, it's still quite a low number. And then secondly, related to that, I wondered if you would help us think about the regional growth. I know that's not explicit in terms of the detail, but if you could give us a rank, particularly interested in the China number following details from last week. Then lastly, I wondered if you could just talk about, J. J, obviously, the benefit of getting some of the brands now direct. Obviously, Moncler has been Moncler product has been available on platform for some time, but the benefit of having the direct relationship and what that means in terms of inventory and driving traffic? Thank you. Louise, good speaking to you and very good questions as always. Thank you for that. I think Q4, with the momentum that we've got behind us and the amazing work that the team has been doing to deliver scale and leverage. If you think about our technology platform this quarter, 8% of adjusted revenue, that's driving significant scale and leverage year on year. We're able to get to profitability on 40% to 45% growth next quarter. If it was higher growth, I would see that flow through to potentially more profitability rather than us sort of cutting back on growth rates to try and get to profitability. It's not about that at all really. It's about balancing what we think is the right growth for the platform and our suppliers on the platform over this quarter, which I think will be more promotionally heavy, not by us, but by the market. And would we want to spend on promotions just to attract customers that were wanting to buy a new promotion to deliver a faster growth rate? Probably not because the history of the customers that initially buy with us on promotion shows that they they're not the strongest cohorts in terms of lifetime value over the long run. And we've been down the path before where we kept spending on promotion because we wanted to make sure we didn't miss a single customer that was visiting us. Well, that didn't work out in terms of great LTV. What does work out is the digital marketing team focusing on a customer group that is going to be with us for the longer term, and we've seen that over the last couple of quarters. Lower promotions means higher LTV in the short term and we believe over the longer term. So although I do agree with you, 2,700,000 active consumers in this market is a number that leaves us with significant opportunity from here on in. Is it right to pull the promo handle in the next 13 weeks or now the next sort of 6 to 8 weeks just to acquire them now when they're going to be promo customers? I don't think so. I think it's better to embed everything we're doing in terms of engagement and the brand work to build a client base that's really strong over the coming quarters. And as I said earlier on, a sustainable level of growth, which 40% to 45% is pretty good in my view in terms of 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 of our regions accelerate growth. So from Q2 into Q3, all three regions stepped up in terms of year on year growth rate. Actually, the Americas stepped up more than any other market or any other region, And that was coming through again by the focus from the team into Mexico. The U. S. Was particularly strong in terms of year on year growth, Q3 versus Q2. You remember last time we spoke, I said the U. S. Had sort of woken up towards the back of Q2 and was driving growth in the early parts of Q3, that delivered a fantastic acceleration. And as I say, all other markets accelerated. China in a very good place, particularly Mainland China. We are still seeing challenges in Hong Kong in terms of growth, but Mainland China is doing well. And then lastly, Middle East, very strong year on year. U. K, very strong year on year. So I think we've got a broader base of customers from across all three regions. And Louise, I'll take the question on Montclair and what changes. I think, first of all, Moncler is one of our top ten brands even just with the wholesale channel. So it's very, very exciting to see this brand. It's one of the very few brands in our top 20 brands that was not direct. I think we have maybe another one. So that's an excellent record from our commercial team. And I think what is open, well, first of all, as you know, brands have and Moncler has outlined their digital strategy and has been clear also on how they want to divest from wholesale and double down on direct to consumer. And this is an example of exactly that. So they're doubling down on direct to consumer channels with their e concession on Farfetch. So that means the direct presence of brands on the platform becomes more and more important as the brands divest from wholesale. Important to note that all our competitors are wholesale businesses, right? So Farfetch is the only global online luxury destination at scale that operates in the concession model. The number 2, number 3, number 4, number 10 player is essentially a wholesale account for this brand, which means what we expect to see is our competitors with less and less access to supply. And obviously, we continue to be able to grow in-depth with these brands since they are prioritizing our channel. But that's not the end of it. I think the most exciting bit is we start to develop a different quality of partnership, right? So when we what we see when we find these brands is we start to do exclusives, which starts to be the partner of choice for new products, for new launches. They start to see the incredible power of the platform in terms of reaching the millennial customer globally. We have I can point you to some a a global event with Balenciaga, including the 1st trunk show in China, physical trunk show in China with Balenciaga and our VIP customer base. All of these things are very exciting, and they only come, obviously, when you have direct relationships with the brands in the shape of e confessions. And what if they start then prioritizing us over other multi brand online channels, not just because they have doubled the margin, let's say, let's put it in double certainly double the revenue and give or take double the margin, But also it's a direct to consumer relationship. They get much more granularity in terms of the data. They've had full control of pricing and merchandising. So there's many advantages beyond the depth of stock, but obviously, depth of stock as we continue this growth of this 60% pace in Q3, 40% to 45% in Q4, it's essential that we have like a bottomless access to inventory in the years to come, 2, 3, 4, 5 years, despite extrapolated these numbers. Having these concessions is really important for us. We have time for one more question. The final question comes from Eric Sheridan with UBS. I'd love to ask a 2 parter directed at each of you. With the capitalization you're going to have at the end of this year and then raising the capital you're doing on the back of the transaction with Alibaba, how should we think and maybe for you Jose strategically and Elliot for you sort of financially as part of some of the investments you want to make broadly about deploying that capital, how should investors think about what sort of the priorities are for deploying that capital against your growth objectives and driving equity returns? Thanks so much. Alex, you want to take the question? You're the treasury man. Yes, absolutely. Sorry, I was just on mute, that classic answer to any question over the last 6 months. Yes, I think, Eric, as you pointed out, we're extremely well capitalized, dollars 757,000,000 at the end of the quarter, and that should get up to $800,000,000 by the end of the year due to working capital. And the transaction last week wasn't about boosting balance sheet. It wasn't about raising money. It was about making sure we've got meaningful alignment between ourselves and the strategic partners. And the cash is the output of that focus really. I do think the investment means we've got very aligned interest in China and the global business, and we look forward to working with both partners. The cash, as it stands at the moment, has got no specific purpose other than continuing to invest behind the great results we're seeing on the platform as we help the whole industry navigate the shift online. We won't be doing anything other than focusing on our strategy of evolving the business to support the growth online. We're 12% market share now, moving to 30% in the next 5 years. Farfetch is going to lead the way with that. And the funds that we have will be used to ensure we're 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 our eye off the ball of continuing to drive growth, focus 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'll be putting it straight into good investment on the bank in the bank. I think that's probably it, unfortunately. Time is up. We look forward to speaking to you again in 3 months' time. And Alice and Diana are available, of course, as always, if you have any more questions for 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 and you may now disconnect.