Earnings Transcript for FTCH - Q4 Fiscal Year 2021

Operator: Good afternoon. My name is Sam and I will be your conference operator today. At this time, I would like to welcome everyone to the Farfetch Fourth Quarter and Full Year 2021 Results Conference Call. [Operator Instructions] 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.

Alice Ryder: Hello and welcome to Farfetch’s fourth quarter and full year 2021 conference call. Joining me today to discuss our results are José Neves, our Founder, Chairman and Chief Executive Officer, Elliot Jordan, our Chief Financial Officer; and Stephanie Phair, 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 section of our Form 20-F filed with the SEC on March 4, 2021 and our Annual Report on Form 20-F for 2021 to be filed with the SEC. 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 José.

José Neves: Thank you, Alice and thank you all for joining us today. I will provide a brief review of 2021 before discussing how we are seeing 2022 and beyond to develop across our platform, marketplaces and brand platform. Over the course of the COVID-19 pandemic, the luxury industry has once again proven its resilience, with most luxury houses reporting 2021 revenues above 2019 levels. During this time, the secular trends of the move from offline to online also accelerated and we believe this shift is permanent. With digital sales mix expected to grow from an estimated 22% in 2021 to 30% by 2025, as the leading global platform for luxury, we see tremendous growth ahead for Farfetch. We exited 2021 with a business almost double the size in GMV as compared to 2019. This is on top of the ambitious targets we have been delivering on as we have exceeded our targeted 30% CAGR in each year since our 2018 IPO and we expect to continue delivering on this targeted CAGR through 2022. I believe this is absolutely remarkable and unrivaled in the luxury industry at our scale. In achieving this strong growth, we also stayed disciplined as we navigated many external headwinds, including digital services taxes and the greater than expected impacts of Brexit, inflationary pressures across our cost base, and IDFA. The full cost of this amount is to tens of millions of dollars in 2021. This focused execution resulted in an expansion of our adjusted EBITDA profitability. And I am delighted to share Farfetch achieved an historical milestone with our first full year of profitability at the adjusted EBITDA level, following a decade of strong growth and reinvestments to build what is today the leading global platform for the luxury fashion industry. But what makes us most proud is the fact that we stood by our global fashion community, supporting our partners right from the start of the pandemic via initiatives such as our hashtag support boutiques campaign and leveraging our platform to enable the continuity of their businesses while their other channels were unavailable. They have reported that Farfetch is a crucial channel, particularly sold throughout the unprecedented crisis, highlighting the very core of our mission to be the connector between curators, creators, and the global community of fashion lovers. We emerge from this pandemic stronger than ever and in Farfetch style, an industry leader with more strategic brand relationships and an unmatched proposition for consumers. Our marketplace business is also healthier than in 2019. Like many luxury groups, we have taken the last 2 years as an opportunity to shift our business increasingly to full-price sales away from Maisons. This has been a deliberate strategy stated clearly by us in 2019 and executed brilliantly as we reported over 30% annual growth even as we transitioned to a slower growth of Maisons products. In Q4, 2021, full-price GMV growth significantly exceeded overall digital platform GMV growth at 33% year-on-year and 118% on a 2-year stack. Markdown, by contrast, grew mid single-digits in Q4 and 2-year full price GMV growth for full year 2021 grew a staggering 5x as fast as markdown GMV. As always, we take a long-term view and operate in alignment with luxury brands and have supported many brand strategies to move to full price only. Of the top 10 brands on our marketplace, 5 now follow a full-price strategy for their e-Concessions and our own BrownsFashion.com has eliminated all markdown sales for over 1 year and is now a 100% full processing nation. In 2022, we expect to continue to deliver market share capturing digital platform GMV growth, while executing on our strategy to continue driving a much larger full price mix towards an even healthier business. With that, I would like to turn our focus to our long-term opportunities across our platform, our Marketplace and our Brand Platform in pursuing our mission to be the global platform for luxury. First, our platform. In 2021, we made significant strides in our platform capabilities, including expanding our e-Concessions as a service module, which Harrods has leveraged to significantly increase the number of SKUs they can offer from Gucci, Burberry, Brunello Cucinelli and Zegna and announcing plans for a JV with Clipper Logistics to build out our fulfillment by Farfetch proposition and offer a dedicated fulfillment solution for the broader luxury industry. And with respect to connected retail where we continue to expand with CHANEL, Thom Browne and BrownsFashion, we further broadened its use case via our boutiques pilot that enables online to offline activations for our boutique partners and signed on to design future retail experiences for Matarazzo and [indiscernible], new luxury retail developments in San Paolo and [indiscernible] respectively. Over the last 6 months, we have also acquired three small, but exciting tech businesses aimed at further cementing us as the platform for the industry, [indiscernible] LUXCLUSIF and [indiscernible]. These bring to bear respective capabilities in marketplace as a service technology, B2B expertise for luxury resale, and virtual creation of higher quality or model images. The significant momentum behind our platform in combination with the fact that the industry has really taken notice of the unique capabilities of the Farfetch platform at a time when large companies are once again opened to significant technology partnerships to bolster their digital capabilities leads me to feel increasingly confident that 2022 will be a transformational year for FPS. I want to spend a moment on the previously disclosed discussions with Richemont. Following our announcement on November 12, 2021, Farfetch remains in discussions with Richemont about the potential expansion of our existing luxury new retail strategic partnerships. We are continuing to discuss a potential deal, which includes the leveraging of Farfetch platform solutions to power Richemont’s Maisons and Yoox Net-a-Porter, YNAP, the participation of Richemont’s Maisons in Farfetch’s marketplace and a minority investment in YNAP by Farfetch. However, there can be no guarantee that we will be able to sign this deal or any of the options under consideration. We will make further announcements if and when required. In parallel, we are also in discussions on several other enterprise-grade FBS deals in our exciting pipeline, watch this space. Turning now to the marketplace, while it is the largest global destination for online luxury fashion within the grand scheme of the $300 billion luxury industry, the marketplace represents less than 2% share of the personal luxury goods market. And we see significant growth potential behind this business. This incredible growth potential is also broad-based geographically as we have a presence and then to be a leader in all major luxury markets in the world. The U.S., our largest market continues to be a huge opportunity and area of focus. In 2021, U.S. performed very well growing above the average of our marketplace driven by our unrivaled luxury range, which is especially appealing to the sophisticated American luxury consumer. In 2021, we also continued to gain customers and grow Mainland China GMV ahead of the marketplace, predominantly through our proprietary app, although we are pleased to share that less than 1 year into our launch on Tmall, our newest channel already represents more than 10% of 2021 GMV in this market. Our strong performance in China and this cost differentiation we offer through our cross-border supply making available brands that are not readily available in China. This is an advantage that we plan to lean into, particularly in 2022 when international travel options out of China are expected to remain limited. Our third leg of our platform strategy is within New Guards, our brand platform. New Guards has a history of exciting collaborations, including creating one of Nike’s most powerful collaborations ever Nike Off-White. They are one of the few teams who have the DNA to bring a crossover of luxury and sports to life. We are tremendously excited about New Guards’ recent addition of Reebok to its portfolio via an agreement with Authentic Brands Group, ABG to become the exclusive partner to create, curate and bring to market luxury collaborations upon their announced acquisition of the brand as well as a operating partner for Reebok across Europe and distributor for all the brands premium lines in over 50 countries, including U.S., Canada and most of Europe. Reebok has an incredible heritage. And we have developed a fantastic rapport with ABG, who have a very strong strategy to reignite this iconic brand. The addition of the Reebok premium exclusive license is also a double-down on our strategy for New Guards to create significant buzz and organic traffic to the Farfetch Marketplace as well as additional business for FPS, which will power the digital sales under these licenses. As we approach the 3-year anniversary of New Guards acquisition, this strategy has been tremendously beneficial to Farfetch as well as the individual brands themselves, with direct-to-consumer sales on Farfetch channels growing from 2% of NGG revenues of acquisition to be by far the largest single channel for these brands to reach consumers globally. On the February 28, New Guards will stage a celebratory Off-White show during Paris Fashion Week, honoring Virgil Abloh’s unique contribution to the history of fashion. I will now hand over to Stephanie to update you on all things, brand and customer. Stephanie?

Stephanie Phair: Thank you, José and hello everyone. It’s great to speak with you all today and give you an update on our progress on the demand side of our marketplace business. Over the past 2 years, we have acquired on average 500,000 new active consumers each quarter. And as we remain focused on retaining these customers, I am pleased to share that in Q4 2021 we continued to see improved retention compared to 2019 levels. Our ACCESS loyalty program provides a framework for us to build a strong relationship with our customers and in 2021, we saw customers upgrading tiers at a higher rate as compared to 2020. And as customers move up the tiers, we see increased average order values, frequency and retention all the way up to our most valuable customers, our private clients. As we aim to continue to improve retention, some of our core initiatives are centered around leveraging our first-party data for a continued focus on personalization, including personalized communications, which have delivered a conversion rate 50% higher than non-personalized messages over the past few quarters. And we are also increasing ACCESS loyalty program engagement during early stages of the consumer lifecycle to drive repurchase rates, which have a high correlation with customer retention. More generally, I would like to spend some time today outlining three main areas of focus for 2022 on the customer front. Firstly, driving a balanced and efficient approach to performance marketing and brand investment; secondly, driving advertising sales via our media solutions business unit; and thirdly, the launch of beauty. Starting with our approach to marketing, we want to be the most loved brand in the industry building an emotional connection with our existing audience and acquiring new customers by playing to our only on Farfetch strengths around choice, global community, our millennial Gen Z customer base, and as a marketplace, our ability to serve multiple points of view and stay on the leading edge of innovation. To do this, we continue to implement a full funnel marketing strategy, combining our performance marketing expertise with mid and upper funnel brand building activities. This strategy has delivered our highest ever brand preference and consideration in Q4 2021. And this is also reflected in the partnerships with brands, who see us as a preferred marketing partner for product launches and exclusives, leveraging our editorial positioning our global reach access to multiple channels in China and our innovation capabilities thus creating a flywheel between our center brands and our customers. Just yesterday, we partnered with Balenciaga to be their exclusive global multi-brand channel for the highly anticipated YEEZY GAP Engineered by Balenciaga collection. We are thrilled to be able to offer this much hyped collab to Farfetch consumers around the world, including in China, where we also launched the collection on Tmall via Farfetch. These partnerships are as important as ever as the digital marketing landscape is changing and we see the importance of balancing paid traffic with organic traffic generating initiatives. On our last call, we discussed these changes in the digital marketing landscape, including challenges related to IDFA and laid out the initiatives we are taking to mitigate these headwinds. And as we had expected, these actions drove a sequential recovery and demand generation to 21% of digital platform services revenue in Q4, an improvement from 23% in Q3 2021. Specifically, we have continued to develop and enhance our digital marketing capabilities, leveraging our 1P data and tech resources to drive efficiencies across multiple channels, broadening our lower funnel channels and increasing our investment in mid-funnel activities. In 2022, we plan to continue this approach to marketing focused on being top of mind across different customer touch points with both paid and non-paid activities. This includes also leveraging our media solutions capabilities and brand partnerships, which in themselves provide valuable marketing moments to the customer. This leads me to the second area of focus for 2022 advertising sales via media solutions. As luxury brands increasingly recognize our 1P data capabilities and the value of our relevant community of luxury fashion shoppers, media solutions continue to gain traction in 2021. Throughout the year, we served campaigns for a diverse mix of over 85 partners, including brands such as Gucci and Prada, which run multi-product campaigns. Through these campaigns, customers are able to engage and interact with their favorite brands, while our partners amplify the reach and success of their collections, with one of our recent campaigns delivering a total reach of over 20 million visitors more than double the monthly traffic estimated for some major Brand.com sites. As an example of how brands leverage our innovation and editorial capabilities, in Q4, we partnered with Netflix and Balmain on the launch of their capsule collection for the release of the movie, The Harder They Fall, which was exclusively launched on the Farfetch Marketplace, Netflix shop and Balmain as direct channels. The campaign included social content featuring 3D visuals woven into the recreation of the movie set pieces, combined with editorial elements highlighting the limited edition Balmain collection. This resulted in a 66% uplift in Balmain product listing page views during the campaign period. Additionally, 88% of campaign clicks were from new to Balmain visitors with an average order value of more than $950, around 50% higher than our marketplace average. This year, we will continue to lean in to our media solutions business, investing in developing our ad tech and programmatic capabilities, which will allow us to further scale our ad inventory, paving the way for media solutions to become a more material part of our business. Finally, on beauty, we remain on track to launch this category on the Farfetch Marketplace in Q2. We will take a unique approach to beauty for both supply partners and customers offering a differentiated experience and a curated offering. As you will have read in the ramp up to this launch, we recently announced the acquisition of Violet Grey, which will bring industry authority as well as a curated selection of products to the marketplace. Violet Grey is a cult favorite beauty destination with elevated content which has built a devoted community who trust and love the brand for its expertise. Our overall strategy for this new category is to partner with beauty brands through an e-concession model, which differentiates us from other multi-brand online channels and aligns well with brands own direct-to-consumer strategies. Combining this with our 1P business by Browns and Violet Grey as well as exclusive supply from New Guards, we will be able to offer a relevant mix of both larger established and indie brands. Our expansion into beauty will also provide brands an opportunity to reach our audience of tens of millions of targeted luxury visitors through co-branding and advertising sales opportunities. And now, I will hand the call over to Elliot to discuss our financial results and outlook.

Elliot Jordan: Thank you, Stephanie and hello to you all. It is good to speak with you today. I’d like to share with you the key points from our Q4 2021 financial performance, a quarter that demonstrates our overall strength, leadership within the industry and our ability to quickly adapt to a changing environment. Before looking at Q4 in detail, I’d like to summarize the 2021 full year position. We achieved profitability at the adjusted EBITDA level across 2021 as a whole, making 2021 a milestone year for Farfetch. We added over $1 billion in GMV to deliver $4.2 billion of group GMV in 2021, achieving 33% growth over 2020 and driving 35% growth in revenue. Our operating expenses, which include G&A and technology expense, increased at 17% compared to 2020, half the rate of growth in revenue, achieving significant scale and leverage and moving the group into full year adjusted EBITDA profitability for the first time. In terms of fourth quarter 2021, we delivered group GMV of $1.3 billion, an increase of 22% year-on-year, adjusted revenue of $571 million, an increase of 23% year-on-year, gross margins of 47%, 95 basis points above the prior year quarter, and adjusted EBITDA profitability of $36 million versus $10 million in Q4 2020. These results reflect strong performance across all three business segments. First, within our digital platform, GMV was $1.1 billion, an increase of 22% year-on-year or 82% compared to 2019 as we continue to make significant share gains within the overall luxury industry. Most importantly, our digital platform powered $891 million of third-party GMV, up 23% year-on-year, which is an acceleration on growth from Q3. This GMV generated $271 million of revenue at a 30.4% take rate, a 160 basis points year-on-year increase, which contributed to the 100 basis points year-on-year increase and third-party gross margin to 67%. GMV from first-party transactions on the platform grew 16% year-on-year to $161 million as we started to refocus first-party original towards a full price offering rather than attracting sales from higher levels of markdown that were in place in Q4 2020. And we delivered growth from Browns in line with the overall marketplace. First-party gross margin decreased to 30% due to stock clearance activity. Performance GMV increased 26% outpacing overall GMV growth reflecting a higher pass-through to consumers of shipping and duties costs. These costs to us reported within our cost of revenue increased 19% year-on-year. The revenue growth – sorry, the higher growth in revenue versus the growth in costs represents the first time in several quarters that we have been able to reduce rather than increase our investment in subsidized or free shipping, improving our recovery on these costs and our platform gross margins. Digital platform order contribution margin increased 580 basis points between Q3 and Q4 to 32.4% for the quarter, reflecting several initiatives taken to improve profitability in the quarter and the years ahead. First, we updated consumer shipping rates and free shipping policies to reflect the cost inflation we have seen over the past year as well as sharing – shipping and packaging cost increases with our sellers. Second, we implemented measures to address recent changes in the digital marketing landscape. As a result, demand generation as a percentage of digital platform services revenue was 21%, a 236 basis point sequential improvement from Q3 ‘21. We continue to benchmark strongly on our lifetime value over customer acquisition cost ratios. And I am pleased to report that the Q2 ‘21 cohort of customers has recovered its initial acquisition spend within the first 6 months. Additionally, we have successfully renegotiated increased commissions to reflect the inflationary environment with circa 65% of our brand e-concession partners and those brands have not only remained on the platform, but also increase their spring summer supply by more than 100% year-on-year. In recognition of the unique value and attractive audience, Farfetch delivers towards their own digital strategies. The financial impact of these increased commissions will be phased in throughout 2022. The Farfetch Marketplace, which accounts for the bulk of GMV on the digital platform, accelerated its year-on-year growth compared to Q3 on the back of our unparalleled third-party stock position and strong growth across a number of our key luxury markets. Brand Platform revenue grew 13% year-on-year to $117 million. This was below expectations due to shipment delays we experienced in December. Palm Angels was the fastest growing brand in terms of delivered wholesale orders in Q4 and now accounts for just under 30% of Brand Platform revenue. Brand Platform gross margin was particularly strong in Q4 at 59%. This reflects a higher mix of Palm Angels revenue and the fact that we no longer recognize royalties on this brand in cost of revenue following our acquisition of 60% of the brand company as well as one-time benefits from cost recovery on current season collections and rebates from manufacturers in relation to shipping delays and production volumes. Our third segment in-store physical retail generated revenue growth of 64% year-on-year to $22 million and gross profit of $14 million at a margin of 63% driven by an expansion of the higher margin New Guards store network. The impressive GMV and revenue growth across the group in Q4 ‘21 was achieved with just 9% year-on-year growth in our operating expense base, which resulted in 410 basis points of operating cost leverage when compared to Q4 2020. When looking back over the last 2 years, we see the investments in our technology and operational platforms have paid off and enabled us to nearly double group GMV, again 68% growth in operating expenses over the same time period. I am happy to report a successful quarter and a successful year, which allows us to now focus on our outlook for 2022. At this point, it’s worth reminding everyone that our mission is to be the platform for the global luxury market. Our long-term financial strategy has been to maximize our share of the $300 billion in sales within this market each year by compounding GMV growth of 30% per annum, strengthening unit economics and expanding our EBITDA margins. The strategy has been in place since our IPO and remains unchanged. Executing on this strategy and delivering steady progress towards this mission over the medium-term is what motivates us and sits how we run our business. Moving forward, we will align our guidance to this strategy, focusing our forward-looking statements on our annual targets rather than our quarterly outlook. We believe conversations with shareholders will be more productive if they are better matched with the way we operate and execute the business. As such, looking at the year ahead, we expect to see continued growth in digital platform GMV of 28% to 32% for continued market share capture. GMV growth will be lower in the first half. In Q1, we are comping against 60% growth from Q1 2021, which was achieved due to a boost from first time adoption of consumers to Farfetch during COVID-19 lockdowns and the incremental trade from Harrods and its first full year as a platform client. Growth from this partner became like-for-like from Q2 2021. GMV growth on the Brand Platform is expected at 20% to 25% in 2022. We expect to see an improvement in unit economics over 2021 levels with digital platform or contribution margin in the range of 33% to 35% driven by higher take rate on the platform and lower costs overall in relation to customer engagement and retention. Brand Platform gross margins are expected at 50% to 52%. We expect 2022 operating costs to continue to grow slower than adjusted revenue achieving further operating cost leverage. This is despite a reinvestment of a proportion of Brand Platform profitability into important brand-building activities, including runway shows and seasonal campaign initiatives, including our hotly anticipated shows in Milan and Paris in the coming weeks. Operating costs are expected to decline from 38% of adjusted revenue in 2021 to 35% to 37% of adjusted revenue in 2022. And therefore, in balancing growth, investment and overall profitability, we expect to see a further increase in adjusted EBITDA margins to 1% to 2% in 2022. I look forward to speaking to you in May to update you on our progress towards these very exciting financial goals. José?

José Neves: Thank you, Elliot. The Q4 numbers clearly show the strong momentum behind our mission to be the global platform for luxury as we enter a post-pandemic environment. During these last 2 years, the luxury industry proved its resilience and we continues to execute on our strategy. As we transition to a new normal in 2022, we are the largest global destination for luxury fashion and are growing faster than the runner-ups capturing market share and profitably so. All of this growth is even more impressive in light of our strategy to favor a full-price strategy and shrink the maximum needs of our business significantly. With 2021 demonstrating our execution of our path to profitability, we now look forward to 2022 and beyond as a period of expected EBITDA margin expansion. All in all, we are looking at 2022 from a position of incredible strength. Farfetch is a secular winner in a multi $100 billion opportunity and we are still just in the early innings of this exciting journey. I want to take this opportunity to thank all Farfetchers for continuing to build this incredible company. And now, the team and I would be happy to take your questions.

Operator: Thank you. [Operator Instructions] We will now take our first question from the line of Lauren Schenk of Morgan Stanley. Lauren, you may proceed.

Lauren Schenk: Great, thanks so much. I guess bigger picture. I think there was a lot of fear heading into the release today that that you would have to walk away from your long-term target of 30% annual GMV growth. It looks like you’re on track to achieve that this year. But could you maybe discuss if there has been any change in how you are thinking about the medium to long-term targets or goals of the business? And then sort of near-term for 2022, is there anyway you can help us think about the contribution assume from beauty, from Tmall, any other new partnerships you may have? Thanks so much.

José Neves: Thank you, Lauren. Look, I think first of all, this is an incredible secular growth opportunity, right. This is a $300 billion industry, very resilient, recovering in 2 years, and are ready back to growth. This is going to be a $500 billion industry in the next few years. It’s still very under-penetrated even after COVID. So we are talking 23% online penetration, much lower than other apparel and other categories. This is going to change and grow to 30% plus by 2025. And we are the leading platform. So, this is a tremendous opportunity for growth for many, many years to come. We always said at our IPO that the target was to grow at 30%. Of course, this needs to be seen in the terms of three occasions through these periods. But I think what is absolutely extraordinary is that we exit 2021 with strong momentum. We have 2021 which was great. Our business is twice the size it was in 2019 in terms of GMV. We ended the year with 33% growth, achieving profitability. And this is whilst we were executing on a transition to a full price strategy that we announced in 2019. To give you an idea just in Q4, full price grew at 33% and full price grew 118% on a 2-year stack, right. So, these are very, very strong growth rates. And we are therefore very, very confident about 2022. You have touched on multiple factors of growth. We have beauty coming, we have what I think is going to be a transformational year for FPS. We have, obviously, the announcement for the Reebok license, which is still in a transition period in 2022, from Adidas to ABG, and NGG. But in 2023, is a multi-hundred million dollar business that we are going to add to the NGG portfolio. We are building obviously, Stephanie talked about media solutions, very, very exciting. We are building multiple, multiple, multiple layers of growth in this business. And that’s not just for 2022, it’s for the medium the long-term, right. So, we are – we will look at our business in years and we are executing on this strategy, which is a strategy of capturing market share. And now with expanding levels of positive EBITDA profitability, so again, we are coming into 2022 from a position of incredible strength.

Operator: Thank you, Lauren. Our next question is from Luca Solca of Bernstein. Luca, please proceed with your question.

Luca Solca: Yes. Thank you very much. And one question about your logistics architecture, the multipoint architecture that Farfetch has been using seems to suffer in an environment where transportation costs are growing. This is because the number of items that you can send in the same box is probably lower than if you were starting from a regional or a central warehouse. I wonder whether this is particularly serious in the case of serving different customers, like the Chinese, for example. What are you doing and what can you do to offset this issue? Thank you.

José Neves: Hi, Luca. It’s a great question and in fact a great opportunity for Farfetch. For me that’s a glass of full question. Our very agile distribution model has served us well and continues to serve us well, allowing us to have between 5x to 10x the SKU count of our competitors without any additional risk for the boutiques and the brands that participate on the platform. It allows us to offer superfast delivery. We have same day delivery in 20 cities to give you an idea, none of our competitors can even match anywhere close that, It allows us to we have just launched recently a pilot, connected retail pilot where we can direct customers to nearby stores. So, this is a tremendous innovation that we bring into this industry. Having said that, you correctly pointed out to efficiencies and cost efficiencies, that’s in fact a huge opportunity for all the contribution. And we are absolutely laser focused on that. And there are essentially two ways to optimize the other contribution for logistics level. The first is developing local supply where in major territories where our customers are, we have been very successful with that. We are now shipping from 50 countries, brands like Prada, for example, to give you an idea has 70 inventory delivery points that were connected to in Brazil, in Tokyo in several cities in U.S., several cities in Europe, and China, etcetera. And this is just an example. So, the other super brands have dozens of inventory delivery points as well. And this obviously means that we are in this case, shipping in a much more cost efficient way. And the other big bet is fulfillment by Farfetch. So, this is – the great news is this is now being used by major super brands. So, the likes of the carrying group, all the brands in the carrying group now, Montclair Prada, Valentino. They are now signing and being fulfilled by our network of warehouses globally. So, this is obviously the starting point. And we are developing that with those brands. Beauty is a new category that will be 100% fulfillment by Farfetch. So 100%, five items in one single box to your point. And obviously, you have seen the partnership with thredUP Cleaver, which is very exciting, allows us to scale without investing our own CapEx, scale very fast, the space available in the multiple locations we are, and also add new locations in a very scalable way. So, expect in the future, greater efficiencies on another contribution line coming from these initiatives. But also us continuing to leverage what is an incredible innovation in this industry and when that is inspiring many other industries, you see these super fast delivery services, they are like, absolutely, incredibly popular with customers. And this is only possible when you have a multipoint to multipoint. That’s the hard thing to do. So, we have cracked the hard thing. And now we have an incredible opportunity in terms of upside and profitability. Thank you.

Operator: Thank you, Luca. Our next question is from Louise Singlehurst of Goldman Sachs. Louise, please proceed.

Louise Singlehurst: Hi, good evening, everyone. Thanks very much for the detail so far. So, if I can ask three questions, if I may. Firstly, to Stephanie, please, Stephanie you gave some really good, it sounds like in terms of the customer loyalty, I just wonder when we are trying to reconcile the net adds versus what you were talking about in terms of gross adds in the period? I think you mentioned around 500,000 a quarter. That implies that the exit rate or the churn rate of customers is going up, if I am not mistaken. I wonder if you can just help us think about what that means going forward? Those churn levels should normalize now that we are analyzing post-COVID? Also, is it possible to give us any metrics around net orders per customer, or what you are seeing in terms of customer loyalty, people migrating from bronze, upwards to the higher tiers in terms of contextualizing the loyalty? And then my second question, if I could ask, Elliot this with regards to the outlook for full year ‘22, you mentioned about the type of comps, you won the digital GMV growth, I think the consensus is around 25%. I presume from the comments, we should definitely be looking at growth, more weighted, and later on in the year given that tough comp. But I wonder if you would make any comments with regards to around that Q1 level in the consensus forecast. And then my final question, if I could ask a question to José, please. With regards to China, we haven’t had that much detail, since the JV has been announced. Can you just tell us where you see the business in specifically for the JV in China, relative to your expectations, and where you hope the business to be at this point in time versus last year? Thank you.

Stephanie Phair: Hi, Louise, and I will start with your question, which overall is on the topic of retention, which as you can imagine, has always been a focus for us. At Farfetch, but particularly, of course, given the very high number of customers we have acquired over the past few years. And we are very happy we are exiting 2021 with a retention rate that is above 2019 through all the efforts we have implemented over the past year. And in fact, if you look at our active customers, we have increased that year-on-year by 22%, which is in line with growth. So, we are really happy with that number, and really entering 2022 with strong momentum and confidence that some of the initiatives we are working on, are working and we will refine those. And so some of those initiatives, you mentioned Access, we really are leveraging our Access program. It’s a wonderful framework through which we can talk to our customers. And it’s a way for us to really think about how we migrate customers up the tiers and we have seen customers migrating faster up the tiers in 2021. We are looking at getting those customers into Access sooner. So, we have really looked closely this year, and we will continue to look at our Lifecycle program. So, really a more robust welcome program and able to speak to them earlier in their interaction with Farfetch and really drive that that repurchase rate, which is a very early indicator of retention. We are also working on personalization, to drive those orders for customer. And we really think about personalization in terms of those product based ones, those alerts around newness, or what you have in your wish list or around particularly effective, when you have already engaged the customer in terms of purchase, they are already making keeping them updated on tracking their parcel. We find that that works very well to get them right back in purchasing again. But we are also thinking about behavioral nudges, around how do we really get customers to buy into a little bit more to move them up the tiers and show them the benefits. So, it’s never one answer. It’s a whole suite of solutions. And we are seeing how those work and have worked for 2021 and into ‘22. And then of course, beauty is something that we have really thought about in the context of retention. Beauty is an amazing opportunity to talk to our customer, to have more frequent interactions with them. Not only, of course, does it bring in a new customer, but it allows us to capture larger share of wallet from our existing customers and really increase their frequency. So, lots happening there. And a big continued focus for Farfetch.

Elliot Jordan: Louise, your question about outlook, I am not going to be drawn on the guidance, except to say, as you touched on, we obviously saw very strong year-on-year growth last year in Q1 60%, in Q2 40%. And then obviously, the second half of the year was 20% to 23% year-on-year growth on the digital platform in terms of GMV. So, all I will say is that, as I said earlier on we are expecting lower year-on-year growth across H1. And the growth rates will obviously build throughout the year as we start to annualize those comps from 2021.

José Neves: Louise, on China, we are really, really happy with the JV and so our partners Alibaba and Richemont. The JV had a target, an internal target, which I am delighted to share, we are beating already. And we always said that we expected this to be a meaningful channel for our business in Mainland China. It’s now about 10% of our GMV for that territory. We are not going to break it out more than this as we never breakout channels. But I think it’s important to celebrate the success in less than 1 year after we launched. We are seeing it as a very incremental channel actually to the Farfetch app in China, a channel that reaches to Tier 2, Tier 3 cities. We are seeing the mix of brands that is customers are buying. It skews towards interesting niche smaller brands, which is very interesting to see. The AOV is although lower than the very high AOVs. Chinese is a country where we have an AOV that’s superior to the $600 that we have globally give or take. Tmall is a bit lower, but it’s clearly a luxury customer that is shopping our Tmall channel. And we are seeing already many fans, many followers. And we are obviously leveraging Tmall’s capabilities in terms of live streaming and brand awareness to create more hype around the Farfetch destination in China. So, all round a tremendous success in the first year and a very happy partnership. And we are looking forward to further innovation. As we have already announced we are working with Alibaba on a retail lab to bring luxury new retail, connected retail through China. Watch the space as you know some really cool interesting concepts that we are working on. And we are very bullish on the whole China opportunity, as I said before. Thank you.

Operator: Thank you, Louise. Our next question comes from the line of Ike Boruchow of Wells Fargo. Ike, please proceed.

Ike Boruchow: Hi. Thank you so much. Just a couple for me, I guess just stick with China 10% of regional sales. It sounds like you are above plan José, that’s great. Is there a target of where longer term you think that, that percentage should reach? I am just kind of curious how big ultimately it could be as a percent of regional sales? And then maybe for Elliot, from a Reebok partnership, can you quantify the revenue stream that, that partnership will add, I can’t think you are getting revenue over Europe and in certain luxury drops in North America? But that seems like that should be a pretty meaningful revenue stream for you and then is that embedded in the 20% to 25% Brand Platform growth or is that not there, because you are not, it’s not currently in the P&L today? Thanks.

José Neves: Hi, Ike. So, on China as I shared with everyone on the call, we are extremely happy with the results from the Tmall start. For us what’s important is not essentially the mix, important for me, I always say I don’t care about mixes, I want every dollar out there in all channels and we are growing very fast our Farfetch China app, our proprietary app, we have 600 boots on the ground. We are the only Western company really localizing the experience. These people – the majority are engineers, online marketers, product and highly specialized e-commerce experts that we have in our China team. So, the China app is going to continue to grow and capture market share as a very unique position we have, I think unique among other Western companies in the luxury space and the Tmall channel, I think what’s great is that it’s incremental, right. I mean, we are seeing, we are reaching customers in Tier 2, Tier 3 cities that otherwise we probably wouldn’t reach with our app. We are seeing traction in categories and brands that are different from the ones we see in the app. So, we see incrementality in both channels. So, the idea is really to develop both to their maximum potential and maybe [Operator Instructions] Yes, so I will touch on the Reebok opportunity. So there is a transition period. So, Reebok and adidas, they are about to complete the acquisition, I think in the coming days. And of course, upon that we have signed this exclusive license for the premium collabs and the premium reissues and an archive for the luxury space globally as well as a car partnership for distribution in Europe for older Reebok lines. So in 2023, post-transition is a multi-hundred million dollar opportunity for NGG and Farfetch, a very high percentage is already online, on direct-to-consumer digital channels. In good Farfetch style, we normally boosted once we take over as we did with NGG, went from 2%, online direct to 20% online directly in less than 3 years. We plan to do the same with Reebok with growth of the digital capabilities through FPS. We are going to bring more direct-to-consumer digital sales to that business. And we have the DNA, because we have launched not just Nike Off-White, which is perhaps the most successful Nike collaboration, but also many others with Ambush and with many other projects under the NGG portfolio. This year, you know, it’s what we have included in the guidance is a fraction of the numbers I am talking about. So, it’s really a transition year where we will be working already on the collections on the product on the plant. So, a lot of work – so that we hit the ground running in the beginning of 2023, but obviously we have still smaller impact this year.

Alice Ryder: Okay, thanks very much, José and thanks everyone for joining us today. We look forward to speaking to you next quarter to discuss [Technical Difficulty]