Coupang (CPNG) 8 Aug 232023 Q2 Earnings call transcript

Hello, my name is Crissa and I'll be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2023 Second Quarter Earnings 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. [Operator Instructions] Thank you.

turn Investor over Relations. to Vice Mike like of President I'd the to call Parker, Now,

You begin may your conference.

the to Thanks, second operator. Kim; joined and pleased Gaurav CEO, quarter Coupang's by on be XXXX earnings our Founder Welcome, conference call. Bom everyone, and call today to Anand. our CFO, I'm

by including to your date required questions, discussion, do not update We except only. revise law. undertake management's information, views following The obligation reflects responses to any or this today's as of as

made statements materially. statements. call Actual results forward-looking Certain on include today's may differ

financial Additional is and that information the recent and about could factors filings filings. on our in potentially SEC, release impact press report our our most XX-K annual results today's including with included Form in subsequent

GAAP both and present may non-GAAP measures. we call, today's financial During

including our these release non-GAAP are filings, to included Additional measures most measures, and these earnings posted in the comparable Investor our disclosures webcast SEC regarding reconciliations this of Relations GAAP website. are Company's which on accompanying measures, slides the

now, And call Bom. to over turn I'll the

today. joining everyone, for Thanks, us

Before over our a detail, take to our goes to takeaways. in results frame key like results moment I’d QX greater under financial five Gaurav

of our growth, an continue profitability other, we expanding the on both and the focus years and unrelenting of expense excellence. sustained one Experience First, because of Operational deliver unparalleled at and high to not investment Customer the

quarter. and customers year-over-year highlighting to at last increased X% this active revenue to of a this both accelerated accelerating, growth the in that worth year is of quarter. QX QX pace flywheel It’s our Active XX% Second, in X% from faster Customers

categories are and oldest continue the purchasing even on of all number increase to our Additionally, their customer Coupang. cohorts, spend they of our

and trends value that selection. in how limited underscore retail prices defined is proposition All market is by our high these of we believe a differentiated

It’s three a billion share early expected the are of this we next reach we are how just single-digit $XXX to They to reflection in just overstate retail hard today stage early massive of years. our on growth, have of a market journey. also

this milestone $X delivering operating twelve of cash $X Third, months billion over free and quarter, cash trailing the in billion we significant reached of flow. another flow

We QX. net quarter consecutive GAAP million in also income fourth of profitability, with of $XXX delivered our significant

In addition, EBITDA adjusted as converged cash flow has free our with promised.

confident We’re adjusted our guidance will more deliver that XX% ever of long-term than we on than EBITDA. higher

Fourth, we our initiatives. are powerful momentum seeing growth in

Beauty. Rocket like rate, categories a decade our than less as significantly newer Fashion only retailer categories into and years our growing We’re and a Beauty and a business. are newer Accordingly, and than are fast a of on old categories like at growing few still all Fashion overall faster

And high party isn’t first to limited offering. our growth

Logistics of in and including as advertising our category, overall services emerging and virtually business. and retail Fulfillment at or market. than growing as FLC, are our Beauty, Coupang, the Third-party growing more every a like are sales Fashion merchant multiple twice And by fast

we’re and also and progress quarters metric. every developing unit improving several Finally, In and we almost customer Eats positive achieving spent in Taiwan. in in offerings, particularly seeing economics Eats, experience potential exciting

on the members WOW on in seen already benefit, increase In in of XX% a back and form for our average up in an margin reinvested We've of spend total increase to Eats XX% in we've WOW unlimited where contribution regions XX% members our launched positive WOW Eats. a Eats discount we've the orders. participating member

Eats who those points spend membership. on been gain our is has Eats segment Moreover, of WOW in XXX e-commerce, have value higher in by Customers regions. delighted purchase share generating ecosystem. basis and higher significantly over This retention drive helped across we've the

the is our light of of lion's of of made a Eats we WOW on as growth And WOW whole. the our In members for the order flywheel feature place this yet an strategy, with Eats, business share a of permanent to unlimited believe accelerate ahead Eats has still of the potential success majority us. discount membership we've the program. to our

Taiwan another far is investment that is expectations. exceeding thus our

always enabled play this out customers We're around Korea delight we've commerce in We have the world. that experience could transformational in believed the seeing Taiwan.

Coupang was Delivery, months launch. the In has in in first the downloaded app than QX, faster And scaled most we since Taiwan. Korea launched did in its months post XX Delivery Rocket in Taiwan XX Rocket

others Our that We've attractive meet exited our investments didn't most deferred and bar thresholds new that initiatives internal opportunities. rank is high. for our below countless

Taiwan is bar. far, leaping So over that

of invest we a will view this Taiwan progress, that In in year. at higher level

only the validate continue remain investing convictions. we'll capital allocators, if As to underlying our metrics disciplined more always,

of Play Taiwan, XXXX. Our be investment in will Eats, $XXX including updated estimate and in around Developing million Offerings,

to We expect every generating investment the And at we to remain generally cash Developing flow remain free case, Offerings in at level. meaningful levels. in these our consolidated committed

on and excited opportunities with we're continue capital customer and allocate operational summary, and the before In and we We'll market discipline. massive the with about focus to execute we've momentum experience rigor built us. excellence, unwavering have

that, With turn over to the Gaurav. I'll call

Thanks, Bom.

strong customers, Our flows, efficiencies business. profit, We another throughout our innovation and as and record cash teams driving delivered revenue, hit remained our we operations. disciplined execution across quarter and of focused on

total revenue reported Our currency. a a quarter, which in XX% constant was segment, by XX% growth and currency. Commerce growth growing saw basis our of net also on year-over-year accelerated reported constant and XX% This basis XX% Product this revenues on driven in

again small expanded And XP or quarter, this driven enterprises, faster offering, SME's. than and by medium in our growth FLC, XP, including

net gross certain last we accounting QX to has implemented quarter, for which basis. changes changes that in noted As from FLC revenue, in we resulted a starting contract changed a

treatment accounting higher growth overall That multiple the bps XX% the Using growth is a would which XXX market, year-over-year. at last of than estimated QX grew an growth the have in been rate. rate retail X.X% quarter, our same as

gross year-over-year customers strength added growth our We year. active the in profit. can XX.X customer million increasing business be to seen Active of to last in The million continues XX% X.X accelerate over QX. underlying our

profit, over quarter. last $X.X generated and we a representing gross quarter X% growth This billion the in year-over-year record XX%

XX.X%, This was accounting by margin improvement bps bps year-over-year. profit previously FLC gross was XXX a impacted margin mentioned. positively XXX Our change the

though margin meaningful improvement driving in further we expect the see future, efforts will expansion not continue We every quarter. may our

expect change fully year, this QX FLC accounting to contracts. be transition reporting our the by will new merchants this as of reflected We in fully

on growth has as FLC’s or change see meaningful no we this indicator forward. going dollars our As profits, more gross impact a underlying business profit economics continue of to the gross of

prices. Coupang vast for unmatched increasingly Customers our come delivery and speed, to low selection,

across XP day no next experience FLC delivery products market. in Our the millions and comparison Rocket has of

driven and We continue to general our by operational fixed efficiencies in further spend, generate and administrative both cost improvements leverage.

as decreased investments targeted Year-over-year, revenue to even of growth make XX bps we QX continued percentage a as expense OG&A into opportunities. in

of we income delivered quarter effective $XXX per expense, This $X.XX. share $XX of earnings XX%. of million record rate tax net XX%, includes an of a with This tax and year-to-date and rate income of tax million

generated in bps record adjusted a QX, generated in the X.X%. $XXX consolidated and adjusted in million over quarter-over-quarter, $XXX bps EBITDA of billion with months. trailing EBITDA XXX We This for adjusted represents a nearly XXX EBITDA year-over-year also margin improvement twelve

million of of is and core with bps Our year-over-year in Commerce XXX $XXX improvement nearly Product a segment margin adjusted quarter-over-quarter. XXX EBITDA bps an X.X%. This QX, in generated

of supply XX%, significant and Ads. ability our over of drive to newer optimization, increasingly confident to scaling in offerings front of still are expansion chain opportunities EBITDA in achieve operational further us entitlement with efficiencies, We like through margins adjusted our margin

gains consistent to quarter. expect don’t However, we be the each

The year-over-year loss quarter, to Offerings adjusted million EBITDA Developing for this increased $XXX a segment our million $XX increase.

confident As the more and Play. these about we progress across Eats, we offerings especially are our increasingly Bom are developing Taiwan, and pleased noted, with making we are opportunities,

to be We now expect Offerings our around Developing for XXXX. $XXX adjusted in million EBITDA losses

We entire to are value flywheel. offerings, to momentum seeing by their across and the are compound ecosystem encouraged our in accelerate and the we these ability

and to continue disciplined operating abide will our remain by We tenets.

always long-term deliver view highest capital the We prioritize and take to allocation our shareholder expect of value. the levels long to

our building We years. have demonstrated over Korea the in this retail offering discipline in

another this adjusted guided. We and quarter cash basis. free converged generating a billion milestone our trailing $X flow cash in has $X.X XX-month free with flow And EBITDA, operating flow significant had as we in have on now cash billion hit

thus working we are management continue. disciplined while flow nascent invest has also as cash CapEx sustainable to International. have this continuing profitability, and generating the we and And is spend. We believe driven been far into capital in progress overall free Eats and well in made improvements by expansion TAM-building It like will as opportunities

the proud of which our every are today, customers we more proud focused we day. we are our even are way the results relentlessly on wowing While reporting teams in of are

a break for Coupang? trade-offs excited and did creating where how to customers live without working I customers are ever wonder, world to continue We

now Operator, to we the are Q&A. begin ready

of from [Operator first Yang line Instructions] question Stanley comes Your of JP Morgan. the

open. is line Your

questions. have two I

proportion normal driving GMP faster growth? would business of to the is FLC your growing First go you on FLC, of you Which please expect the the XX% product. and than Can mentioned are categories guide out year? total faster you how throughout FLC that FLC

My I'd target second the the and guidance of to guidance? if from much at are recent aggressive the this question $X expect provide your expansion? out developing offering in key like from Taiwan marketing would also And is million, international the of Coupang's consumers long-term takeaways appreciate point you do how for What Taiwan? loss some we, value know you position

both by just consumers as All is rapidly, fast FLC, to the as out. twice That's as you It's our business. scaling and merchants. we're than everyone on providing more benefits FLC point driven to growing is overall remind

and like on on FLC selection in meaningful Returns. to or small of rocket benefit dollars turbocharging of Delivery network business and that's from able couldn't enables to Consumers, to enterprises for whom of Rocket infrastructure course, of to available their own. merchants access getting more and have also more particularly made are leverage delivery grow and find and Rocket investment their technology many by we've our they the services being medium been Dawn businesses, billions SMEs, that their built

high in greater on and ahead. Rocket a we're the seeing market that historically play the growth with noting with still total majority represents It's just More FLC, small sold, in of the fraction on FLC. FLC vast of selection we worth that lies growth we've believe total despite has selection a units out growth, mentioned, driven the percentage that of and

expand all fragmented about is Fashion and that your Beauty. Beauty. across especially in like about categories to categories, like dramatically categories, categories are potential tail FLCs for categories, in the FLC customers question To and emerging and on including driving Fashion highly all especially long FLC, excited selection We're growth

period Taiwan, mentioned, over faster growing second time is of the same did than Rocket. question Your Korea Taiwan. on we post the launch as

experience Our value with playing in transformational Korea. the always customer proposition is out the far built we so Korea in We've same believed other would Taiwan. is That markets. customers as resonate that in

getting pleased that positively SMEs many way. market, our Taiwanese the selection. already we products Korea. in started to providing expanded from the leveraging that access assortment. have our in in we're to also customers service built to XX% things just we've of learned While the Taiwan customers responded of which We're and Over millions from We're Korean access Korean Korean comes by of

we'll test, learn, a intelligent strategy Taiwan, this operations and Our keep and and iterate customer the improve is executing to manner. our discipline market. experience in and continue in to in We'll investing rapidly

While time to what work of note still is I we front, to in this lot early we we're want see, on sharing when encouraged that look more journey, the forward very do, and by to we it's right. our have a

of comes the line Eric next Goldman question from Cha of Sachs. Your

is open. line Your

me. for questions Two

mentioned the I also growing you think is revenue. that growth to compared than along faster ad FLC, twofolds with

isn't, environment Our quarter. Korea that market understanding is to that due in great ad second pressure wasn't macro in

do think So, coupon much Coupang where ads against still think and GMV what you is think penetration runway ad and driving this of the do are how you you has? growth performance terms in for do

And questions the like ask is second question some to follow-up Taiwan. I'd around

disciplined. So that you you'll mentioned be

of what not out to anymore? you So would Taiwan in So you've think pursue done Japan. I Japan? you prompt maybe As pulled

expecting CapEx what would pursue where should also What this, the be you Taiwan? but of some sort Stanley would I situation Taiwan towards specifically we be cycle beyond not of asked And, think year. anymore? So this

growth That engagement. On selection, and has advertising, customer be future. engagement we We've to seen to merchants growth more the led suppliers and selection, turn, advertise. customer ad led more has increase to in in to opportunities of and historically, more more key in expect drivers

from than we've you out business, our and point potential. fast still more business we're our as far as As very overall growing is as advertising full but twice our mentioned,

future. profit We're of the to front. before past of share mentioned has believe the to operational in We margin growth, of make improvements on continues as contribute outside higher progress, very strides, optimistic ads gains margin that to make bulk and year. that this expansion we pleased the a the But potential it and

on year, Taiwan, going to investment excuse disciplined On levels the this second point we're me. how be beyond on about strategy our

worth I offerings about the our developing whole. and back taking look think across a our level bit in of the investment little on developing investments it's accelerates compounds strategy perhaps value describing step that a a at pool offerings flywheel. a as entire and We as ecosystem and investments

we'll meet within We'll investments every allocate our provide or in At pointed turn, as reduce you results. do that exit the and dollars assess promising that thresholds. when past most to high pool at investments, we have done allocate they don't times the out and as

With maximize long-term our objective investments, these shareholder to is value.

we and presentation by which that again tenants, first strategy earnings achieve of earnings quarter. operating in our published continue post remain abide we we'll disciplined We our our calls this IPO, operating our laid those out one to tenants, in which in shared to

for $XXX million. XXXX investment As noted, our we've is guidance in developing offerings

We to at we're free scenario and at the the level. in flow these expect at of generating every our at level it's offerings cash developing still this that free we meaningful level significant levels, And consolidated consolidated noting in flow investment generate that quarter, remain was investment level. but to our cash expect worth

from comes John question the from Yu Next line of Citi.

Your line is open.

I questions. have two

FLC regarding of Firstly, mentioned quarter. in I skills the second please commerce the comparison the about but and to I'm understand share advertising Q&A, could gross color each division, you earlier contribution revenue you quarter? part in product that the about heard more rate trying gross some the in of the

offering CapEx option. few in asking players delivery And specifically question advantage potential next this also it competition in could would day local the for would helpful in the regarding Taiwan? what if share Taiwan, estimates already Coupang's be And as be Taiwanese Taiwan I'm context focus are you years. competitive of one key

Taiwan? landscape So how would in the competitive Thanks. you describe

question. thanks John, Hi, for the

digit think overall I just active we have commerce, product total the single shoppers the our note customers that is Active half about opportunity. a market only retail it available. on important are to in share of

active Our this millions have accelerating Tens join customer yet quarter. growth of of to wow. is again customers

accelerating and continue is unmatched at XP also of our applies that technology active operational of customer the FLC, to at to a growth grow because and the investments our excellence third-party enabled made to and deliver customer multiple market, We our and or that infrastructure we've growing and us overall market. multiple a are have unparalleled experience even offerings

as still in after tiny projected to We're market. grow multiple continue scenario, that share that at of market any next we'll a a confident is years. quarter, the just retail to demonstrated quarter reach of And a the billion we're three we've in $XXX

too discuss terrific. our built is to here to For But Korea. customer transformational has designs of Taiwan, can we been all customer that fulfilled in of see it but same haven't we the early build you and and plans kind the that, response experience specifics,

encouraged of of execution to track time have a Again, things to see. when we lot and more it's look sharing by and have record And discipline things forward we the right. we but is a we many early, improve investment. We're

in question revenues. to the revenue John, contribution on had impacts XXX to and by first gives indication your of net bps. FLC call, QX That revenue of highlighted of of kind our magnitude that change you FLC of we contribution about net revenue

Seyon of Park from comes Your question next Morgan Stanley.

open. is line Your

I have questions. two

increase, to product color it I can look you if profit that pure at Whether with us little If of what business drove better XP seeing margins question. That's first a from or of as to $XXX FLC you million the growth contribution my commerce, or increase? more the a wondering, coming advertisement? it we're coming from whether the bit whether contribution large up and from part was sequentially. provide about some that from increased is the ramp

to a The at about to you given And predicting AI AI we going that or the guess your seeing and second talk Whether forward? strategy year. AI this coupon of to or big question on demand the some adopt, in is, and any of generative I more like. I a topic I'm products that curious, vibes using become where regions has led that AI, of changes just AI. of the lot to your been has has such plans AI more just each have whether this know

Thanks Seyon.

On or of improve gross years the profit, supply technology consistent gross infrastructure, among drivers. drivers the The improvement leverage with in been investment margin shared improvement that of what or new we've margin continuous services We've others. chain driving optimization, and of before.

immediately our of margin every very our fruit expect confident keep bear to continue XX% for remain higher to long-term about don't confident quarter. to optimistic lowering improvements here make EBITDA. ability will to customers we and prices time we and Again, significant But or and every than achieve adjusted expand evenly initiative opportunity long-term that operational us margins. enable guidance we'll over And our

you're currently continue to right customer the AI related business facet powerful that take and AI teams ads, On with search a operations every few. advantage of virtually to deployed service, tools held, evaluating invest strategy of we'll that consistent has advances across a rocket efficiencies enhance We're just name management, customer that we've to the we've technology drive from our chain AI. to been AI, supply the opportunities and recent in experience. It's to always and in to

from Your Lee next James of Mizuho. question is

Your line open. is

here. questions Two

to some talk on rely can little you color fixed existing speak about costs. variable think to on a could about get maybe that drivers bit? asset your cost, with delivery? solely the and I maybe your to more as selling in to the talk you you opposed leverage discount more progress past e-commerce in want Maybe some members the provide cross on update? food First, we Can you also

selections past accelerating in talk the You guys right? is that'll progress, able of guys talked And drive of is I was question categories frictions had progress to more selections, adoption which categories forward? wondering improve of the be you hoping you're have and one to second Thanks. more which making to you're for your about membership. the more And expanding to membership about, going not about

a an increase have membership, seen first in We in board. XX% synergies across Eats, WOW participating each. WOW total We've few the on members the members we earlier. those in on seen WOW mentioned of our topic XX% total in increase call On each seen spent

seen up. retention also commerce engagement members' customers among each. WOW In higher go engage We've addition, the on we've seen product WOW who on

of lots scenes also, behind We have the course, synergies. opportunities of pursue to

side, excited across the On be, I deal continue ecosystem. think whole our multiple efficiency again, to customers. we're and this, wow the will of all stress want we these really on of this that to best that on drive offerings fronts, pursue operational gains make of goal And service our we're able our there value compound the is to a to synergies to planet is goal of I but in for make

to each to but on surplus drive as the create growth With the made purchase on not their each, to a yet only potential supercharge members on for majority commerce value even and this WOW. WOW more have of on members our benefit product engagement

across is and segment every strategy, On customer to There selection, our selection, categories. we're and seeing, category, our spend. emerging of every many mission are expansion drive

years years Rocket. Fashion like our Beauty, just a old of under a on than emerging with We less our many just, XX and and are belt, categories retailer few we're is

have all low proposition, categories our excited we're categories, penetration along value across and in our we our customers. early expand all again, to journey just, for It across all and are categories we customer especially selection penetration. emerging how highlights low particularly but there So are segments with

line Jiong our will the of last take Barclays. We from Shao question of now

line Your open. is

my question a My add follow-up me congrats first Let as is on FLC. well.

number a quarter the a of part? about for elaborate think of ago X% Could I about about about Is you even to XP on faster? very capacity awesome. you the also you be rate? because limiting And sort adoption percentage was talked a the, merchant any If the share have? sort of bit the the factor, can share, grow units. you you you the FLC can prevent of Any issue could talk FLC that'd that color of units

around question second is, ease. again, clarification My a

your the using Eats WOW percentage saying talked about of about penetration I Could among is now? Eats again, ease that using members rough you of You talk wild you members? rate currently a now heard EOV. them What's XX% profitable. are

you heard indeed a so unit I just want confirm the that's to positive. economics think Thank I is I much. case?

Hi, questions. the for Jiong. Thanks

I rural see, you think fast. it's can fast than as more FLC, business. We scaling twice it scaling is very shared for as that

So course think of are blockers there don't there's always I there. or any improvement

at continue processes, There to technology, As improvement. our service, on to new work continuous the with any aspects experiences. teams on merchant build the consumer side, improve right side, right the are are we to um, have the the and right hard

a that's So continue do. to we that work continuing

adoption that think very positive FLC can units But sold, we as you tiny we you're I share And been again total on total has this in FLC the can shared, quarter front. and think on has still right, we've shared, selection of a see, front it both fraction merchant and last a the small market. the consumer the percentage of represents quarter, I

benefit that opportunities be of merchants Dawn FLC and especially more also very and rocket and Rocket the small expensive to or of service access And to this medium to Delivery of to grow, Services are that for excited and And would many, selection growth small for excited SMEs SMEs we're there many Rocket customers enterprises and it provides. to we're on bring we the to like expand whom including deliveries more level believe merchants, our returns. them help recreate

we to over share believe each and can in membership but whole unit did contribution those we we profits this last product each. is have reinvest focus only a on make economics commerce the across membership taken ecosystem to generating purchase majority WOW Eats yet not benefit positive. Eats. positive in each, the quarters the the We've here WOW of that also on in members think form make On to ROI, few WOW that engagement of I And

started I look and still It we'll forward still are of across lots to early that, is you in still in just both with in we FLC to So getting make of work improvements and greater make to is Eats, we progress. There updating do, think board to detail continue the the our journey. lots and future.

today's concludes call. This conference

may You now disconnect.