Farfetch Limited

Good afternoon. My name is James and I will be your conference operator today. At this time, I'd like to welcome everyone to the Farfetch fourth quarter and full year 2020 results conference call. All lines have been placed on mute to prevent any background noise. And after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. 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 fourth quarter and full year 2020 conference call. Joining me today to discuss our results are Jose Neves, our founder, chairman, and chief executive officer, Elliot Jordan, our chief financial officer, and also Stephanie Fair, our chief customer 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-K 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. 2020 was a year in which Farfetch lived its values and successfully advanced our Chapter 2 initiatives, executing on our mission to enable the luxury industry. And we did so through a tremendous display of our robust capabilities, resilient operations, and utmost perseverance from our more than 5,000 Farfetchers. This was particularly significant during the height of the lockdown, when many boutiques and designers could not operate their physical shops and relied on Farfetch as a significant source of revenue, and also as customer demand exponentially moved online throughout 2020. As we look towards 2021 and beyond, We are laser-focused on extending our position to be an operating system and digital enabler for the entire global luxury industry, both online and offline, a nearly $300 billion opportunity. In doing so, we'll build on our progress in 2020, where our teams executed impeccably to grow full-year Group GMV 49% to over $3 billion, further cementing our position as the largest global online destination for luxury fashion. This is on the back of a strong first quarter, as we ended the year with our first $1 billion GMV quarter, attracting our largest cohort of new customers and achieved a crucial profitability milestone with our first quarter of positive adjusted EBITDA. During the quarter, we also announced a transformational partnership with industry giants Alibaba, Richemont and Artemis to go after our shared vision for luxury new retail. by leveraging Farfetch's platform capabilities in combination with their collective expertise in luxury and retail technology. As we enter 2021, we are more determined than ever to execute on our mission to be the global platform for luxury, connecting creators, curators, and consumers, and we are focusing our strategic roadmap across five major themes of our Chapter 2 strategy. The first three are, one, strengthening our luxury partnerships, two, China, three, the luxury new retail or L&R platform, which I will talk to, and the remaining two are, four, the Farfetch brand, and five, unrivaled global customer experience, which Stephanie will address. Starting with our luxury partnerships. What we are continuing to see is a paradigm shift, with brands' attitudes towards digitization moving from nice to have to being the number one priority. And looking across the landscape, Farfetch is uniquely positioned to be their strategic partner. Not only are we the only global luxury platform offering e-concessions, brands' preferred mode of operating with multi-brand channels, but we are continuing to offer revolutionary innovation by advancing L&R, which is what brands need right now. In fact, our top 10 e-concession brand partners increased their participation on the marketplace as they grilled their stock listings by more than 70% in Q4. And our top 100 brand partners have remained lasting partners with 100% retention over the past three years. Our enterprise clients have also expanded their businesses via our platform. as we powered more than 50% growth on average in 2020 in the brand.com e-commerce channels of our more mature fast-edge platform solutions or FPS clients. Those who have been on FPS for at least one year. Turning to China. Over the next five years, mainland China is expected to become the largest luxury market and represent more than $100 billion of luxury spend. Our localized operations in China position as well to attract valuable Chinese customers by enabling them to shop a global supply of luxury fashion from up to 3,500 of the best brands via our app, website and social commerce channels such as WeChat, in their native language, supporting their preferred payment methods, and for our private clients via a local stylist who is attuned to their local zeitgeist. As a result, we are one of only a few Western e-commerce companies who are succeeding in China. This is evidence by the fact that mainland China is our second largest market for the marketplace and has continued to be a growth driver of our global business, having grown GMV faster than the overall marketplace again in 2020. Additionally, in another demonstration of our technological and operational excellence, we are delighted to have soft launch Farfetch on a dedicated storefront in Tmall's luxury pavilion, our PLP, on the 5th of February, ahead of schedule. Our soft launch significantly expands the selection of luxury products on Tmall. Of the 2,400 plus brands we have already made available, more than 90% did not previously have a presence on this channel. As a result, T-MOS consumers are now able to shop the broader selection of luxury fashion online at a time when they are unable to travel to their favorite luxury shopping destinations, and we believe these shoppers will increasingly repatriate their luxury purchases to domestic channels such as the Farfetch app or TLP. We will continue to add more brands to the storefront up until the official launch on the 1st of March, at which time we will begin deploying significant marketing resources to promote our brand with PMO's 779 million consumers. In 2021, we will lean in and invest behind building our audience in the TLP channel, as well as overall fast-edge brand awareness in China across all channels, including apps where most of our business is conducted, as we believe this is the time to invest in brand awareness in the market widely recognized as the key driver of growth for the luxury industry. onto platform and the luxury new retail vision. ClassH is more than a marketplace. From day one, we set out to be a platform for the luxury industry. And over the past 13 years, we have been expanding our platform capabilities to address the needs of our marketplace and branded sites, as well as those of the broader luxury industry. which we envisioned would become increasingly digitized. Our vision also encompasses offline luxury channels. And since 2016, we have been building out our Star of the Future capabilities, which are now part of the overall FPS product suite. We will leverage these technologies in pursuing our L&R strategy to address the needs of luxury businesses, such as Harrods, our largest enterprise client. This time last year, we launched harrods.com on SPS. Since then, our capabilities have been instrumental in enabling the iconic luxury department store to continue serving its global clientele throughout the pandemic. We have also continued to expand our solution set for our enterprise clients. One new, exciting, and we believe unique capability I would like to highlight is SPS's recent launch of e-concessions as a service. This solution enables department stores and detailers to directly plug into brand stock systems and effectively become data places. Our first implementation is now powering Burberry's e-concession on Harrods.com, and the results over the initial couple of months indicate that the feature is delivering a meaningful lift to Burberry's performance on Harrods.com. Our enterprise-raised operating system proposition powers some of the largest and most prestigious luxury brands. from Chanel to Harrods, and is endorsed by Alibaba, Hichemont, and Artemis to deliver digital innovation for the industry via the luxury new retail vision. This squarely positions Farfetch in the category of digital enablers and reinforces my beliefs that Farfetch is the platform that will enable the entire industry to thrive. a unique vision we have to not only go after the online luxury market, but also to address the digital strategies of our enterprise partners' offline channels and the entire nearly $300 billion global luxury industry. Clearly, we are at the start of this journey, but we are tremendously excited about luxury new retail, its relevance today for luxury, and the spectacular reaction we are getting from the luxury industry to our vision. We will continue, therefore, to invest in our technology and also start investing in our B2B brand and pursue enterprise sales efforts with increased organizational focus. While we remain committed to achieving profitability for the full year of 2021, we have also earmarked a portion of our anticipated profitability to fund these growth initiatives. Before passing to Stephanie, I'd like to update you on the important work we are doing around ESG. Our Positively Fast Hatch initiative integrates a multitude of programs throughout the business to further our vision in a sustainable way. In 2020, a year that highlighted more than ever the importance of using our global platform to be an enabler of positive change across the industry, we made significant progress across each of our five positively far-fetched pillars. Since committing in April 2020, we have been carbon offsetting all deliveries and returns. We also significantly increased our offering of sustainable products, our Conscious Edit, which now represents one in 10 products on the marketplace, and more than 5% of 2020 Group GMV. And importantly, made clear our platform is a platform for everyone, through initiatives such as our Black Designer Edit. which helped drive 66% GMV growth for these brands on the marketplace. These are just a few examples of the positive changes we're driving. I would invite you to visit the ESG tab on our investor relations site at 5HInvestors.com to access an infographic we've published with some key highlights from 2020 and learn more about our longer-term aspirations which we outline in our 2030 goals. I'll now let Stephanie walk you through our two other pillars, brand and unrivaled global customer experience. Stephanie.