Earnings Call: Q2 2020

Aug 13, 2020

Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Farfetch Second 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 Q2 20 20 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 at farfetchinvestors.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 our results for Q2 2020. Group GMV grew 48 percent to $721,000,000 driven by digital platform GMV acceleration to a record $651,000,000 up 34% or 39% on a constant currency basis as well as the addition of brand platform GMV following the acquisition of new gas in Q3 2019. Last quarter, I outlined 6 key differentiating advantages, which position Farfetch to emerge from the COVID-nineteen situation even stronger. And our outstanding Q2 results clearly demonstrate that they're playing out as the industry undergoes what I believe is a major acceleration of the sustained online adoption we have been anticipating since we found in Farfetch 13 years ago. First, our business model has proven to be truly resilient as we have continued to be able to serve our brands, retailers and consumers since the onset of the pandemic with no material disruption, while also prioritizing the health and well-being of our employees, partners and customers. 2nd, our market leading digital platform has enabled us to leverage our reach across our 190 markets and capitalize on our stronger share of voice by investing in regions where our programmatic marketing algorithms detected demand by consumers who were shifting their shopping online. As a result, we delivered a record level of transactions during the quarter as we acquired our largest ever cohort of over 500,000 new customers and more than doubled year over year app installs. This is particularly valuable as our mobile app customers have historically attributed higher LTVs. Additionally, with access now up to 2,000,000 members, we now have 80% of our active consumers enrolled in our loyalty program. This presents significant opportunity for us to fuel our future growth by driving engagement and sustained repurchase through loyalty initiatives for our expanded consumer base. 3rd, our expertise and localized operations in China and other key markets allow us to offer luxury consumers the best of both worlds by enabling them to shop a global supply of luxury fashion from 3,500 of the best brands via an app and website in their native language supporting their preferred payment methods and for our private clients via a local stylist who is attuned to their local type guys. As a result, we have seen our markets across EMEA, including major European countries and the Middle East as well as markets in APAC and the Americas, such as mainland China and Mexico, outpace our overall marketplace growth as tourism shopping demand is being repatriated in light of continuing restrictions and concerns around international travel. Additionally, in the U. S, which grew slower than the overall marketplace in Q2, we saw encouraging signs of demand picking up as growth began to accelerate at the end of the quarter. 4th, our unique e concession model is helping even more brands, boutiques and department stores navigate this unprecedented situation. In fact, in Q2, our top 20 direct branded partners together saw a doubling of their direct to consumer or e concession sales on the Farfetch marketplace as compared to Q2 2019. And we continued to maintain 100% retention of our top 100 brands and our top 100 retailers. With a significant shift of consumer demand to online since the onset of COVID-nineteen, brands and retailers focus on digital channels has intensified in Q2, and we have expanded our partnerships to nearly 1300 third party sellers now participating on the Farfetch marketplace, including more than 500 brands and over 7 50 retailers. We're also looking forward to bringing selections from renowned French department store, Granta, among others signed recently onto the Farfetch marketplace. In addition to seeing strong interest from new partners, existing sellers have leaned in to the marketplace proposition, resulting in our highest average SKU count and that's of inventory in Q2 and Marcellus offering each skew, which further increases our geodiversity, a key advantage in our ability to continue operating throughout COVID-nineteen related closures. Another benefit from the stronger relationships we have developed with brands has been a ramping up of opportunities for us to partner on exclusive collabs, which offer a way to showcase their brands and also drive further differentiation of the Farfetch marketplace with consumers. Recently, our consumers have had exclusive access to exciting collections from Gucci's 1st Circuit collection, Burberry's thermal monogram capsule and Manny's Homeware Collection. We also established an ongoing exclusive relationship to be the sole multi brand online channel for Rihanna's label, Fenty, which marks our 6 LVMH direct brand relationship across the Farfetch Group. And we are continuing to explore opportunities to strategically partner with mega brands seeking to increase their direct to consumer distribution via a multi brand e concession. A 5th differentiating advantage lies in Farfetch platform solution or FPS, the enterprise solution side of our business. We're pleased to see that FPS is firing on all cylinders across both our longest standing as well as our new partners as we enable their continued operations even as their stores remain closed. GMV for FPS clients with a 1 year or longer tenure grew faster than the Farfetch marketplace, reflecting a broad based shift to online across the industry, including by brand loyal consumers. Additionally, our launch of Harrods replatformed e commerce business in February also drove significant GMV growth for FPS and contributed to the acceleration of digital platform GMV in Q2, our first full quarter reflecting this partnership. We are pleased to have delivered stronger than expected growth for the iconic department store and to have enabled them to continue serving their global consumer base while their Knightsbridge location was closed for most of Q2. Finally, our augmented retail initiatives, which we have been developing through our exclusive technology partnership with Chanel over the past few years, are expected to be even more critical for brick and mortar luxury as leading brands seek to optimize sales per square foot in a lower traffic post COVID-nineteen environment. We look forward to unveiling the next generation of our solutions to help physical retailers enable an enjoyable and personalized new normal shopping experience. We plan to launch our revolutionary Star of the Future experience in our own drum flagship boutique towards the end of this year, which will be an exciting ongoing demonstration of the capabilities we have been developing. Turning now to Nougat, which just celebrated its 1 year anniversary as part of the Farfetch family. Since last August, the Farfetch and nougaz teams have been working closely to advance the 3 key tenets of our collective brand platform vision and strategy, and we've been thrilled with the execution to date. 1st, towards our initiative to increase the mix of high margin direct to consumer revenue across new gas brand portfolio, we have fully integrated the brands into our fulfillment by Farfetch facility to enable sales by Farfetch marketplace. And FPS has begun replatforming their 9 brand.com sites to enable their mono brand channels. Additionally, we have taken proactive actions to reduce or eliminate product allocations to non strategic online wholesale products in our efforts to prioritize long term brand value over short term revenues. These efforts have significantly increased the mix of online direct to consumer revenue from 2% at the time of the acquisition to 19% in Q2. And we see opportunity to continue to increase this mix by further leveraging Newpad's unique merchandising approach in combination with the digital capabilities of the Farfetch platform. We have also seen new gas brands bring cultural relevance to the Farfetch brand and deliver a strong marketplace. In Q2, the number of baskets with both a new gas item and an item from another brand doubled year over year. And when the most recent Off White Edge Darden collab sale dropped last month, it sold out within the first hour and generated 800,000,000 kits during that time with no marketing spend. Finally, we have made progress in continuing to expand existing brands and building new brands of the future to drive long term growth. We're pleased to see Palm Angels has now moved into the top 20 brands on the Farfetch marketplace based on GMV. And Ambush, a Q1 addition to the brand portfolio, has already gained recognition as the next generation brand and cultural pioneer by List and Haislobiety. I'd also like to take a moment to address the important developments behind the global call to action to fight for racial equality. I believe Black Lives Matter and that Farfetch has a responsibility to help eradicate systemic racism in society starting from within. Over the course of the past months, we have had open conversations with our bank employee network and across our business. And what we can clear is that we have a lot to learn and a lot to do to support and champion our Black colleagues. Farfetch is a company of action, not just sentiment. Beyond donating money to important causes on this front, some examples of the actions we have already taken include implementing training and career development programs, establishing a global diversity and inclusion team to drive our efforts across the business amplifying the black fashion community across our platform and becoming an inaugural member of the Black In Fashion Council, an organization focused on advancing black representation at every level, including the sweet sweep of the fashion and beauty industry. We remain committed to driving change and results at all levels of our business. This includes our Board of Directors, where we have also improved representation. Additionally, we have created a new ESG Committee of the Board, which will be dedicated to overseeing our efforts around sustainability, social responsibility and governance as well as our diversity and inclusion initiatives. We are just at the beginning, but we are committed to continuing to listen and learn and to work towards creating positive change for the future. I would also like to take a moment to outline the above evolution we've announced today. These changes reflect the planning the Board and the nominating Corporate Governance Committee have undertaken in anticipation of the natural evolution we expected following our IPO with a view of ensuring continued strong governance and support of Farfetch to our next chapter of growth. I am delighted that Stephanie Hawken, Diane Irving, Victor Luis and Guillain Tanes have agreed to join the Farfetch Board of Directors, as each brings valuable perspective and complementary skill set across key areas, including technology, fashion and finance. I am excited to work with the new directors and the entire Farfetch Board as we continue to solidify our position as the global platform for the luxury industry and maximize shareholder value. At the same time, I'd like to thank the departing directors for their many contributions to the company over the past several years. Each has played a significant role in Partfetch's success in Chapter 1, and I am grateful for their leadership. Finally, I'd like to say a special thank you to my Co Chair, Nathalie Masnay. Nathalie brought incredible wisdom and team insights to the Board over the past 3.5 years and played an invaluable role in Farfetch's growth and transformation, particularly in relation to our focus on putting the customer at the heart of everything we do. Natalie and the other departing directors leave us with our very warmest wishes and thanks. And now I'd like to turn the call over to Elliot for the financial review. Thank you, Jose, and hello, everyone. As Jose has been describing, the Farfetch platform has excelled over the last quarter, and I'm pleased to share the financial results of the group, which reflect this very strong performance and position moving forward. Across the group, GMV grew 48% year on year to $721,000,000 Adjusted revenue increased 70% year on year to $308,000,000 Adjusted EBITDA, our measure of underlying profitability, improved $12,000,000 or 33% compared to Q2 2019 to minus $25,000,000 taking our EBITDA margin to minus 8%. And our cash position closed the quarter at just over $800,000,000 boosted by the $390,000,000 of net proceeds from the issue of convertible debt we executed in April, but also reflecting a significantly reduced underlying cash burn of just $12,000,000 across the quarter. It's also worth highlighting that our combined tech, general and admin costs were held flat between Q1 and Q2 of 2020, whilst the group added $110,000,000 of GMV between the two quarters. These results show we are making excellent progress in driving growth on the platform, expanding unit economics and delivering operating cost leverage. Our goal of achieving adjusted EBITDA profitability across 2021 is another step closer. I'd like to share some specific insights about the Q2 performance from our 3 business segments. First, our digital platform, which enables global third party transactions across our multi brand marketplaces, branded e commerce solutions via our Farfetch platform solutions offering and the sale of first party products from the buying teams at Browns and 1st party original products created by NewGuards. This platform delivered GMV of $651,000,000 representing 34% year on year growth based on reported results and 39% versus last year on a constant currency basis. This growth was underpinned by the highest number of new customers gained in a single quarter on the marketplace with over 500,000 people shopping with Farfetch for the very first time. This drove the share of GMV from new customers to levels we have not seen since 2017 and was achieved despite the cost of acquiring these customers on a per customer basis being down 30% year on year. The digital platform GMV also included a full quarter of trade from our client Harrods as well as strong growth in our direct to consumer proposition for our own brands developed by New Guards across the marketplace and via branded websites powered by our digital platform. Finally, we saw strong support for our Supportboutiques campaign at the start of the quarter and growth of our full price offering across May June. Overall, 86 percent of GMV is from 3rd party sellers on the platform at a take rate of 29.9%, consistent with Q1 and 14% of GMV is from sales of product on a first party basis, which continues to grow stronger than the overall platform driven by growth of the first party original business coming from the New Guards brand. As a result, digital platform services revenue grew slightly ahead of GMV at 35% year on year to $238,000,000 Looking specifically at the Farfetch marketplace. As I said before, we had over 500,000 new customers within the quarter, with our research telling us that the vast majority of these new customers are shopping more online as a response to the pandemic. Overall traffic grew more than 60% year on year and app and stores more than doubled year on year. Our average order value decreased 18% year on year to $4.93 due to the higher mix of first time orders, which tend to have lower average order values. The COVID-nineteen related mix effect towards lower price point categories and currency headwinds. Our full price mix increased year on year despite the markdown levels we've seen externally across the industry and we significantly reduced our level of promotional overlays to the trading calendar with fewer discounting events and fewer free shipping campaigns during this Q2 versus last year. The digital platform also significantly improved profitability in Q2 with growth in order contribution of 68% year on year and order contribution margin stepping up to 35% compared to 28% a year ago and 32% in Q1 of 2020. There were 3 key drivers of the higher margin. First, the growing mix of higher margin services, in particular, the momentum of Farfetch platform solutions, which comes with a lower cost of revenues and higher order contribution as a result. 2nd, reduced funding of customer promotions within our marketplace. Our spend on promotion as a percentage of GMV was back at Q2 2018 levels, reversing the step up in spending we saw this time last year. And finally, improving 1st party margins at 30% versus sub-ten percent in Q2 2019 as we delivered a better full price mix versus last year as well as the growth of first party original products, which have higher product margins. These factors were partially offset by a slightly higher cost of shipping as a percentage of GMV due to the lower average order values across the marketplace. In terms of demand generation, this increased slightly year on year to 7.3 percent of platform GMV, primarily due to the skew towards first time orders across the marketplace because new customers have lower conversion rates and a higher paid mix versus repeat customers. This means the demand generation cost for our first time orders runs higher than the cost for repeat orders. All in all, we are in a very good place with lower absolute per customer acquisition spend and positive early repeat purchase behavior from the new customer cohort. A final word on promotions and how they impact on platform gross margin. We deduct promotional spend from fulfillment revenue. Where this means fulfillment revenue does not cover the pass through of fulfillment costs, the additional costs are included within digital platform services cost of revenue. In Q2, the lower promotional spend resulted in fulfillment revenue growth of 99% year on year, well above order growth, meaning we started to recover more fulfillment costs versus last year, which delivers a positive impact to gross margins. Turning now to our brands platform, representing our connected wholesale business, which generated $66,000,000 of GMV. Whilst this represents a like for like decline in wholesale revenue of 20% year on year, when we combine this with the direct to consumer trade on the digital platform, the new Guards business declined by just 6% overall. This is in a period where other luxury fashion businesses were down 40% to 50%. The synergies that come from owning a studio of brands that develop culturally relevant collections and can reach a global customer base through the digital platform has delivered a strong direct to consumer proposition. The brand platform itself delivered $28,000,000 of gross profit for a 42% gross margin. Finally, our in store segment saw a slight year on year decline in GMV to $4,000,000 due to COVID-nineteen related store closures during the quarter. Turning to our cost base, where we have delivered strong operating leverage and efficiencies year on year. The operating cost of our technology platform and G and A totaled 45% of adjusted revenue compared to 49% in Q2 2019. This reflects our continued focus on scaling our costs with the growth of the business as well as deferring and delaying any incremental spend not deemed essential. Q2 depreciation and amortization was $52,000,000 in line with Q1 2020, and our share based payment expense was $62,000,000 an increase of $35,000,000 from Q1, primarily due to new award grants and our higher share price being reflected in the provision for employment related taxes. This increase in share based payments means our operating loss moved from $108,000,000 in Q1 2020 to $140,000,000 in Q2. Turning now to our outlook for the 3rd quarter. It is clear momentum accelerated across Q2, which has continued into the 1st 6 weeks of Q3. We have entered the quarter with 2,500,000 active consumers. New customer growth remains strong. Average order value has already recovered from the levels of a year on year decline we saw in Q2 and is now likely to be down mid single digits in Q3. And new season product is in hot demand. We therefore expect to see Q3 year on year digital platform GMV growth accelerate from that that was achieved in Q2 with growth in Q3 between 40% to 45% as compared to a year ago. We also expect our digital platform order contribution margin to remain between 32% to 35% in Q3. Within the brand platform, with strong demand for New Guard's brand, shipments of fall winter product are ramping back up, and we now expect to achieve GMV of $90,000,000 to $95,000,000 across Q3. Finally, we expect an adjusted EBITDA loss of $20,000,000 to $25,000,000 as we continue to progress towards our target of achieving positive adjusted EBITDA for the full year 2021. COVID-nineteen could still impact on these results, and as always, we keep a watchful eye on the competitive position across the industry. With that being said, the momentum of the business reflects the amazing work from our team supporting the global Farfetch community, which we will be pleased to continue to serve with our platform proposition in the coming quarters. I'll now turn the call back to Jose. Thanks, Elliot. The past few months have prompted paradigm shifts in many aspects of our lives, including the way we shop. This is particularly true within luxury, which is a very resilient industry, but one that has been underpenetrated relative to overall e commerce, in part due to its heavy reliance on tourism shopping. While luxury shoppers demand for luxury fashion is expected to remain, luxury consumers around the globe are clearly shifting online in response to travel restrictions as well as safety concerns in general. And Farfetch is meeting their continued demand with an unrivaled range of luxury fashion and a unique end to end global shopping experience. As a result, I believe we are undergoing a major acceleration of the sustained online adoption we envisioned as a secular trend shaping the industry. With little visibility on when and to what extent international travel and food traffic to luxury retailers will resume, brands and retailers are fast tracking their digital transformations to affect the unprecedented declines in their traditional retail and wholesale businesses. And Farfetch's global platform, which has been tailor built for luxury, is uniquely positioned to capture this opportunity to enable and connect the curators, creators and consumers of the luxury industry. Thank you, and we'd now be delighted to take your questions. Your first question comes from the line of Oliver Chen from Cowen. Your line is open. Hi, thank you. Regarding the AOV recovering to down mid single, what's been driving that improvement? And how do you see AOVs manifesting as we go forward and as you introduce new clients to the platform? And Jose, I would just love your latest thoughts on physical and physical footprint and luxury goods as you own Browns and you're working with Chanel. What do you think happens there post crisis? Thank you. Hey, Oliver. Good speaking to you. Elliot here on the AOV question. So we've seen a couple of things coming through there. The first is actually the mix effect is starting to reverse a little bit. So the new season collection that's on the platform now from the brand e concessions and from our boutiques, as I said earlier, is in very, very strong demand. And clearly, as we head into the fallwinter campaign comes at the higher AOV. And it seems as though customers are now buying back into similar sorts of categories as they were buying last year as opposed to the last kind of couple of quarters that have been dialing back towards more casual clothing. So that's a positive early indication. We're also seeing the new customers continue to buy strong towards the top end of the AOV, which is helping that boost back up as well. So very good recovery on the product mix and the customer mix there. To your question about as we move forward, I think the AOV will still continue to be down year on year over the next few quarters as the new customer mix continues to hold back on expanding the AOVs. As I said earlier on, new customers tend to buy smaller baskets. So I think we'll still be in the negative position, but not to the 18% we saw in Q2 as it's more mid single digits as we move forward now is what we're seeing. Oliver, sorry, I was going to answer the second part of the question, if that's okay. Please go ahead. Thank you. Hi, Oliver. Yes, so on the Star of the Future technology, I really believe the online and offline worlds are ultimately going to converge. We've been pioneers in that vision 4 years ago for the luxury industry, in particular. Around a couple of years ago, we did an exclusive partnership with Chanel, a cherished shareholder and innovation partner. We launched 1 year ago in their number one flagship store in Rue Cambon in Paris. The adoption has been absolutely exceptional, both from consumers using the Chanel Rue Cambon app and Shop Floor staff using our Shop Floor app, plus all the connected experiences and connected products and devices that we have installed. That is extremely exciting. And we in the onset of the COVID-nineteen crisis, we've gathered our teams, and we worked very, very in a very, very intense way in terms of adapting the product and evolving the product to the COVID-nineteen world. And I'm very excited to looking forward to the launch of the 2nd generation of this product. We will unveil it as we relocate Browns in Mayfair to a new location. This also marks the 50th anniversary of Browns as a company. So we'll be delighted to take this iconic boutique into the 21st century in a revolutionary way. And this will be a great lab and a great ongoing demonstration for our new partners. The Chanel exclusivity will come to will lapse towards the end of the year. And I think this is a huge opportunity for Farfetch as we accelerate conversations with luxury brands, but also the partner stores that are really prioritizing this type of solutions. And I think we have an absolutely pioneering solution that is ahead of the curve for this industry. So I'm very excited on that front as well. And your next question comes from the line of Louise Singlehurst from Goldman Sachs. Your line is open. Hi, good evening, Jose, Elliot. Thank you so much for the color. So far, I wonder if you can just talk to us a little bit about the promotional environment. So obviously, we've seen some very good expansion in the gross margin. But also where we were a year ago and 18 months ago, we're seeing so much competitive pressure from the likes of Neta Porto matches and other platforms. Can you just talk a little bit about the competitive environment of what you're seeing? Obviously, you're getting much better dialogue direct with the brands, onboarding more department stores. But just in terms of that competitive landscape and where you're kind of differentiating, obviously, we can see some very strong kind of app download data and the user number stats coming through. But if you could just talk about peers, that'd be really helpful. Yes. Thanks, Louise. Great talking to you. I think 1 year ago, we were very clear in what was going to be our strategy in terms of staying competitive and rooting and keeping an eye on the competition also on the promotional front. That strategy has been carried out in the last four quarters, and I'm very, very happy with the results. We have had less promotions than 1 year ago and actually reversed the level of promotions from 2 years ago. So we're back to 2018 levels. And this is in spite of, as you would expect, widespread promotional activity in the face of COVID-nineteen buildup of inventory. So I think we're focusing on cultural relevance. The NGG acquisition is also playing out in driving organic traffic. We are elevating the quality of our relationships with brands. We mentioned the Gucci exclusive and the Burberry 1 and the LVMH Gifenti as exciting examples, but there are many others I could mention. I think the e concession, which is a unique feature of the Farfetch platform and as you would expect, luxury brands primarily sell only full price on the Farfetch platform. The top 20 e concessions have doubled in GMV year on year. So as you can see, lots of strength on the full price part of our business, which full price as a mix has actually accelerated this quarter. And so we're delivering on what we said, what went with the strategy 1 year ago. We're doing that in a very, very strong way. And you can expect it to continue to be our stance going forward. And your next question comes from the line of Marvin Fong from BTIG. Your line is open. Good afternoon. Thank you very much for taking my questions. Congratulations on the great quarter. So I would just great numbers on the new customer acquisition. It also seems perhaps that you were doing a better job of retaining your existing customers. So I just thought perhaps you could comment on the retention trends you're seeing among your existing customer base. Do you see any signs of stress because it actually feel like retention improved? Thank you. Hi, Marvin. Thank you, Pat. Oh, go, Jose. Well, hi, Alex. I was going to say that actually, the retention of customers has actually been strong. So the sort of statistics we follow around repeat purchase on a 1 month, 3 month basis indicates that even more recent cohort customers are staying with us. It really feels like there's been a sort of significant behavioral shift in customers' mindsets around shopping online and the frequency of online shopping seems to be quite sticky. What we are seeing or what we had been seeing across Q1 and Q2, as we've previously talked about, is that was with a different product mix versus previous customer cohorts, which means that the existing customers sort of dropped back at the same time as the new customer mix was increasing in terms of GMV. But the good news is the customers are still there and they're still shopping, and that's setting us up for a great platform for future growth. The team in the demand generation aspect of the marketplace has done a fantastic job focusing the customers on app downloads. You've seen the app download number up over 100% year on year. The repeat repurchase activity from the demand generation team through social media and other retargeting has proven to be very positive in terms of that retention that we've just been talking about. And importantly, the cost per repeat order in terms of media spend is down year on year. The customer acquisition cost is down 30% year on year. The cost per visit is down year on year in terms of the data we're using to drive a better targeting. But we're keeping our foot on the gas in terms of demand generation spend, still 7.3% of GMV, as a focus on that new customer growth and retention. So we're really setting ourselves up to benefit from this growth of online shoppers. And your next question comes from the line of Eric Sheridan from UBS. Your line is open. Thanks so much for taking the question. Hope all is well and safe for everyone on the Farfetch team. Maybe going back to the announcement you made a couple of quarters ago and the implementation around Harrigs, how should we think about that as a harbinger potentially more deals like that as you think over the medium to long term? And how should we think about it as a contributor to growth going forward, not only in 2020, but maybe even beyond? Thanks so much. Hi, Eric. We're very excited about FPS, our enterprise side of the business. We really think we've proven we've created the premier global platform for luxury. FTS inherits all the marketplace capabilities. And so I think Harrah's, as you point out, is a great case study. So from day 1, out of the box, they were able to service their Chinese customer, their Middle Eastern customer, their Russian customer. These are geographies that, as you know, are very important for that iconic plasma star. And there's a number of other very powerful capabilities such as, for example, the ability for department stars. This is something that we're looking forward to do with Harrods to launch e concessions within their environment, among other very exciting global capabilities. So we really see this enterprise solution delivering strong results. The existing tenants on this platform is around 20 luxury brands. 3 of them are OMH, as you know. They are growing very fast, faster than the packaged marketplace, so a number above 34%, which we think it's a demonstration of the strength of this enterprise offering. And yes, absolutely, new enterprise customers, we are with open conversations, as you would expect, with other department stores, other brands, which I think will benefit greatly from this platform part of our business. So we this clearly demonstrates that we are an e commerce enabler. We're a platform that enables not just Farfetch as a marketplace, but also the plasma stores and brands' own websites and apps. And I think that is very, very powerful as it is a solution that is absolutely tailored for luxury and the solution that is global out of the box, which I think is a unique proposition on this front. So we think watch the space. I think we are definitely going to continue to have good news coming from that front. Thank you. Your next question comes from the line of Jason Helfstein from Oppenheimer. Your line is open. Thanks. Two questions. So can you clearly, there was a benefit, I think, broadly in marketing spend in 2Q as you were able to benefit from less expensive media costs, lower CPMs, etcetera. And so maybe talk about how much that benefited or contribution margin and then kind of what you were seeing in the Q3 as far as media because I do think pricing has come back up. And then secondly, it really seems that you have really helped brands get through COVID. We're not done, but make the best of it. Just maybe talk about what you think the benefit to you from both the relationship and the business with the brands coming out of COVID? Thank you. Jason, I'll take the first question on the cost to serve. You're absolutely right. We are benefiting from lower costs. I think some of that is external in terms of competitors and how aggressive they're being on search terms versus historical levels. So we've obviously stepped back. So we've been able to benefit there. But also, we've done some fantastic work internally around rationalizing and reviewing how we spend and where we put our media dollars and the better ROI and the better cost to serve that comes from some of that activity, particularly around retargeting social media and also the search engine marketing spend that we've been investing in. So that's allowed us to really reduce, as I said before, the cost per repeat order and the CAC. And that's coming from the data advantage that we have as a marketplace with substantially more visitors year on year with significantly higher number of customers interacting with us. And with a step up in terms of our product range, we've been really able to mine the data to decide where we'll be investing in our media spend and where we don't see the return. But what that's actually mean for order contribution is we've reinvested that in the new customer acquisition. And clearly, where there's customers looking to shift online, we sort those customers out and we've leaned into that with additional spend. So, the order contribution benefit year on year isn't actually down to our demand generation spend. It was broadly 20% of our platform services revenue this year and 20% last year. Where the benefit has come from in terms of the order contribution step up from 28% last year to 35% this year is on the promotional spend that Jose was touching on before. We, as Jose said, are now spending as a percentage of GMV at 2018 levels, so we reversed the step up we saw last year. Actually, our cash promo spend is down 26% year on year. So we're spending less on promo than this time last year even with the step up in GMV growth. And that's because we had no X30 event of our markdowns. We had no X events of full price. We had half as many free shipping days. And as a result, the GMV with a promotion actually half year on year. So with a full price mix and really pulling back on promotions to support the industry is coming through as planned. And what that means is we've been able to step up the gross margin both of the 1P business but also the 3P business, where all of that promotional spend from us has been pulled back. And that's why you've seen the gross margins of the platform move from 48% last year to 55%. And then within that, you can see we've included for the first time a split of that between 1P and 3P. The 1P business has moved from sub-ten percent gross margin to 30% gross margin, a combination of better full price mix and less promotions on external brands and of course, the stronger product margins that come through from the first party original business out of New Guards Group. So really sort of all the plans to expand the gross margin as we've talked about before, the higher first party original, improved margins on 1P, reducing reliance on promotions and of course, saving on demand generation, which we have, of course, reinvested this time and allowed us to reinvest, all helping drive the order contribution up. And also, that's given us the confidence to be at 32% to 35% order contribution in Q3. I won't go into demand generation spend and what we're seeing in terms of media spend for Q3 just yet. We've still got 6 weeks of the courses to go, and I think all things can change. So I'll update you on that when we next speak. And yes, Jason, on your second part of the question regarding brands and helping brands navigate COVID and I think listen, I think what we're witnessing is a real paradigm shift. And I think this paradigm shift is happening from the demand side and is happening from the supply side as well. I think clearly, luxury consumers are moving to online increasingly. And there's also what is very specific to the luxury industry, a huge repatriation of luxury spend. So if you take China, for example, in 2019, Bain estimates the Chinese bought $70,000,000,000 while traveling. So they are 35% of the industry, and a significant percentage of that was done while traveling. So now they're not traveling, which opens an incredible opportunity to service them online. And several brands have reported strong demand in China. We believe that's a market that was already an incredible opportunity. We will have an additional opportunity now. That also applies to other countries around the world, the Middle East, Latin America. We've seen very strong growth above the marketplace from those regions. And I think what's happening is that, that paradigm shift in terms of the consumer means that there's a paradigm shift in terms of the brands as well and department stores as they absolutely have to fast track their online and their e commerce strategy. And here is where Farfetch comes in. I think we are clearly the platform of choice for this global multi 100000000 industry. We are very focused in being a great partner for boutiques, brands and departments throughout this crisis and for the future. And clearly, we can assist them globally, not just in their domestic markets, but crucially, in the largest luxury goods markets in the world, where we have a real competitive advantage. And you see that in the numbers. We are witnessing an absolute acceleration throughout Q2 and into Q3, and that's a result of this paradigm shift and this long standing sustained dynamic in the industry. And your last question comes from the line of Doug Anmuth from JPMorgan. Your line is open. Okay. Thanks for taking the question. Elliot, I know you talked about acceleration through 2Q and then into the 3rd quarter. Just hoping you could give a little bit more detail around this momentum, kind of what you're seeing July into August and little bit more on what gives you the confidence on growth accelerating into that 40% to 45% range in 3Q? Thanks. Hey, Doug. Yeah, we certainly saw quite rapid acceleration towards the back of the of the quarter. Even over the last 10 days, trades have stepped up again, and that has continued through into Q3. And quite pleasing, we've seen it actually come out of the U. S. Market in terms of demand. So we've talked in the past that China saw a bounce back first at the back of Q1 and Q1. Within in Q2, the start saw UK and Europe start to pick up, they've both been particularly strong throughout Q2 as has the Middle East and Latin America. But the U. S. Really was quite sluggish until quite recently where we've seen this spike jump back up. That, therefore, added to where we're seeing the other major markets like China growing ahead of the platform, U. K. And Europe and Russia are growing ahead of the platform. And now the U. S. Starting to boost up as well means we're more confident about demand over the quarter. We're also seeing that the as we said before, the customer retention is there, the customer interaction is strong. We're seeing new customers continue to really drive trade. So, the level of trade we talked about across Q3 in terms of share of GMV continues into the 1st 6 weeks of Q3 with 2017 levels of GMV from new customers. And the supply of product that's coming onto the marketplace continues to be strong. Although slightly delayed a few weeks as we've been talking about in terms of uploads versus prior years. But as it's been coming on stream, very, very strong quantities, very, very strong range. And then lastly, across FPS and the clients on our platform outside the marketplace, we have seen continued strong growth across the vast majority of those clients in terms of adoption of online by their customers as well. So this is really driving sustained growth. Clearly, 6 weeks in to be able to step us up to 40% to 45% shows that we have seen strong growth across July ahead of where the platform was for Q2. And we've got 500,000 fabulous new customers across Q2 that we are showing the benefits of staying with the platform and rolling them straight into Access. We've now got 2,000,000 customers in Access, and we are looking after those customers to push them up from bronze to silver to gold through frequency of shop. So we're really seeing the data tell us that the customers are here to stay. They're telling us through research that they're shopping online because of the pandemic. They intend to shop more online because of the pandemic. And I'm really starting to, I believe, develop ingrained behavior around buying luxury online, which means it's sustained for the future. That's why I'm confident that we can be in 40% plus, 40% to 45% for Q3. And there are no further questions. I'll turn it back to our presenters for some closing remarks. Terrific. Thank you, Rob. Well, thank you all for joining us. We look forward to speaking to you next quarter to discuss our Q3 results. Have a good night. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.