Business Combinations - Farfetch

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Business Combinations – Farfetch

Farfetch Acquisition

On January 30, 2024 we completed the acquisition of Farfetch. We believe the acquisition will allow us to expand into luxury retail. We have accounted for this acquisition as a business combination. Total purchase consideration consisted of amounts previously funded to Farfetch under a loan prior to acquisition (the “Bridge Loan”) and required partial repayment of the Farfetch Term Loans at the close of the transaction.


(in millions)	Estimated Fair Value
Farfetch Term Loan repayment	$	58
Bridge Loan contribution	150
Total purchase consideration	$	208

Purchase Price Allocation

We have estimated the preliminary fair value of assets acquired and liabilities assumed based on information currently available and will continue to adjust those estimates as additional information becomes available during the measurement period. The measurement period will end no later than one year from the acquisition date.

The following table summarizes the preliminary allocation of purchase consideration and the fair value of the assets acquired and liabilities assumed as of the acquisition date:


(in millions)	Estimated Fair Value
Assets acquired
Cash and cash equivalents	$	126
Accounts receivable, net	288
Inventories	310
Prepaids and other current assets	224
Property and equipment, net	95
Intangible assets	325
Operating lease right-of-use assets	209
Other non-current assets	227
Liabilities assumed
Accounts payable	(505)
Other current liabilities	(169)
Long-term debt	(557)
Operating lease obligations	(214)
Other non-current liabilities	(177)
Net assets assumed	182
Noncontrolling interests	(78)
Goodwill on acquisition	104
Total consideration	$	208

The excess of purchase consideration over the fair value of net identifiable assets acquired and liabilities assumed was recorded as goodwill which is not deductible for tax purposes. Goodwill represents the future economic benefits we expect to achieve as a result of the acquisition, including the workforce of the acquired business as well as future operational and logistical cost efficiencies expected to be achieved. During the three months ended September 30, 2024, certain insignificant measurement period adjustments were made to the initial allocation, and the preliminary amount of goodwill was increased by $22 million. Goodwill was recorded in our Developing Offerings segment.

The identifiable intangible assets acquired were as follows:


(in millions, except years)	Weighted Average Useful Life	Estimated Fair Value
Brand trademarks	5 years	$	130
Customer relationships	5 years	34
Supplier relationships	15 years	61
Developed technology	3 years	38
Brand licenses	8 years	62
Total intangible assets		$	325

The results of Farfetch included in our consolidated statement of operations since the closing of the acquisition were as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
(in millions)	2024
Total net revenues	$	439	$	1,187






Net loss	$	(44)	$	(274)

Acquisition-related costs were recorded as operating expenses for the three months ended September 30, 2024 and were not material.

Supplemental Pro Forma Information (Unaudited)

The following financial information presents our results as if the acquisition of Farfetch had occurred on January 1, 2023:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2024		2023		2024		2023
Pro Forma Information
Total net revenues	$	7,866	$	6,791	$	22,490	$	19,558
Net income (loss)	$	61	$	103	$	(167)	$	158

These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are illustrative only and are not the results that would have been achieved had the acquisition actually occurred on January 1, 2023, nor are they indicative of future results. The pro forma results include adjustments related to the business combination, including amortization of acquired intangibles, stock-based compensation, lease expense, and income taxes.