Coupang (CPNG) 7 Nov 232023 Q3 Earnings call transcript

Hello. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2023 Third Quarter Earnings Conference Call. [Operator Instructions] Now I'd like to turn the call over to Mike Parker, Vice President of Investor Relations, you may begin your conference.

Thanks, operator. Third Earnings Coupang's Call. to everyone, Quarter Conference XXXX Welcome, call joined our and I'm Anand. be the our today Gaurav Kim; pleased to Bom on by CEO, Founder CFO, and

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

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

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

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

Additional our company's Investor to release, unless are our we disclosures we state of the earnings reconciliations comparable SEC posted be non-GAAP accompanying on Any website. basis included these make including a this webcast in will filings, the on slides regarding which and measures GAAP comments comparative these measures, Relations most measures, otherwise. are year-over-year

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

today. joining everyone, for Thanks, us

Before it over I'd through detail, results. in with third turn to our to Gaurav share from financials X like our you go quarter key to takeaways I

durable excellence. the expanding investment because operational growth to not one unrelenting profitability, focus at an and continue we our years First, customer the expense and experience deliver other, the unparalleled of and of of on both

accelerating. is flywheel our Second,

of selection we than faster any customers and is Active Our both customer rate than year-over-year, expanded QX, advantage a and pandemic selection since across XX% the faster quarter. In third that critical grew last of even level quarter Both of flywheel. XXXX. first component grew revenue active the party. accelerating

on a selection QX, increasing customer multiple that Coupang. was of established double-digit rate that like year-over-year on to categories high market. generally the Rocket leads increasing experienced consumables In the of observed growth even We've spend

rate. than high twice as of the grew Fresh the growth a at as market multiple business and Newer also categories fast like more overall

strong the like and seeing Xx volume to in on been categories first-party is outpacing selection where rest grow. is FLC, of to also Fulfillment fashion overall than by faster We're FLC inventory growing than Logistics business. the or is in Delivery That due Rocket third-party also expanding business. historically Coupang which has the growth, part more slower

we believe ahead We in number customer. significant and still active spend both have customers opportunity of per

offering XX help Our today. million Rocket, wallet market expansion on both share just drive and will the single-digit continued first-party and selection the active We higher of count retail customer FLC, total a customers share a our is of low and share believe indicates spend. of retail our via of total active

membership the our WOW is amplifying members around all ecosystem. increase benefit, of it across When Coupang's their of offerings. can benefits increase Third, engagement engagement their all WOW one

a is in savings Eats WOW program Our example. perfect

program membership where we WOW the savings transaction Eats growth. WOW order XX% Since surge and launched we've has QX, regions in the over in program. members in and than XX% of launched since early seen increased customer doubled has we've more gain the launch, a Eats of participating

vast purchasing roughly ahead. we twice approximately And new at aside investments This merchant onetime unit it Eats year, by our setting the launch XX% only Eats see is be with to membership, acquisition market WOW as Eats QX, positive. end share the opportunity is program. and of costs, in of the of expect growth XX% We nearly segment for permanent such at the for economics a members program the WOW was level

extends Engagement and program of impact on higher drive Eats the WOW But beyond the on retention levels acquisition of helps membership. Eats. member

the in and offerings purchase members. purchase on considerably members observed as and we've the more with Eats categories that significantly don't overall purchase commerce. as WOW spend much members launched WOW frequency Eats. across And product twice spend who members WOW before, they we've noted we've non-WOW program, more regions who than where As higher

company, a or company of trade-offs not WOW at in a customers' is consumer a make broader to or is essence, determined that Coupang that on best customers. a deliver Fundamentally, daily and is, value retail delivery the wow company lives. breaks goods we're to for at the WOW membership the company. its heart mission, Coupang planet

the most first than Taiwan a much did Korea. its XXXX, conviction We're long-term year about our We for and of in first operation October is to Taiwan app Taiwan to of the all the launched And scaled Rocket in market of it its XXXX. strengthen. start. offering app downloaded Finally, in the in year faster in potential off in pace continues be in our on Delivery in to promising has

Our a outside of their growth domestic enterprises, doors and example, reminder and and to merchants in trade-offs opening the we opportunity and Small value potential our suppliers wow It's year, break all X merchants over the Taiwan. also the customers have to had moments of in by helped for chain Korea. for historically for in Taiwan suppliers is In our challenges generating XX,XXX shareholders. have customers, benefit medium reaching we've products just their for opportunities that export value of SMEs for market.

I'll And call now over the to turn Gaurav.

Bom. Thanks,

power greater customers, generating the quarter cash customers. flows, active even our This for clear delivered gross value a the was and again revenue, demonstration Coupang of record We profit also while of flywheel.

growing see now customers, X.X XX% million active to an accelerating and QX X% XX% million so continue growth QX, rate have customers in QX. in far year. in adding our We at in XX.X We this active customers,

XX% revenues in net currency. this quarter Total grew XX% or year-over-year constant

net on FLP began going resulted our forward, in from quarter, in within a changes last implementing FLC changed certain communicated which gross basis. a we to accounting that revenue program contract changes we QX, As

economics FLC The had accounting no on profits. FLC's underlying change impact or gross

the continue the growth treatment almost different the QX, will our adversely next the new While change in the merchants several the quarters to due to contracts quarters. rates affect end of reported accounting by converted all accounting FLC to of revenue for comparative

the XX% constant place QX currency to net prior in points been growth consolidated total the same than an basis in change, would XXX QX growth accounting rate rate. estimated higher revenue our have Using the treatment

Commerce segment basis reported Product constant XX% and grew XX% currency. in on a revenues

making Developing a XX% increasingly are The momentum in exciting our investment on We from currency. Eats evident. revenues segment basis grew of constant initiatives reported Taiwan XX% becoming key Offerings progress in and is to where

retail retail at for the overall this see come and the years-long year-over-year, delivery trend We the multiple market customers broadest increasingly an continued market. of a to With of fastest assortment in experience. estimated our X.X% growing Coupang Korea overall prices, that growing best quarter high

this the gross growing record line over strong by quarter, our profit $X.X the billion, generated of top Fueled growth we year. XX% last business across

points our Our This Developing gross within XX.X%, decreasing in was margin XXX basis investments we Commerce, by improved that growing the offset points driven for margin profit in Offerings third mentioned and quarter. XX primarily by increased was basis year-over-year call nearly Product quarter the last quarter-over-quarter. over

new Commerce this chain improvements basis impacted Within improved such of an Ads. lower The to factors accounting estimated operational offerings gross continue QX XXX XXX points. optimization, the through efficiencies change profit The generate where improvements margin originating margin and our Product segment, by as scaling inventory year-over-year supply profit further basis points quarter we newer short-term FLC like from offset margin gross were by added. selection positively

has As higher growth in party selection with critical optimization. generate we Expanding both margins over we our time have to demonstrated trajectory. margin to and in the our expect and first been third past, durable

We long-term expansion. our selection the growth, expand customer with continue in spend to customer confidence on impact and margin

change. year-over-year, negatively basis points a revenue QX increased in as impacted from percentage of estimated XXX an over expense OG&A FLC points XXX accounting basis the by

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

million a offerings, selection Our EBITDA of Product $XXX a our X.X% of quarter-over-quarter. points and of This decrease offset including driven basis year-over-year XX points with around XXX and in by improvement margin-accretive factors of Commerce short-term approximately margin segment was and operational improvements, expansion. inefficiencies generated by nearly basis optimization, scaling an adjusted

$XXX year-over-year basis over quarter-over-quarter. was $XXX segment increased EBITDA well Offerings investments trailing of for Product down as Developing quarter. consolidated in business months. essentially XXX adjusted quarter driven and margin adjusted the XX points Commerce The this and X.X% million This was as QX of our generated by flat EBITDA nearly Our this million

We in improvement, and operational ads opportunities are significant levels margin still of early front are newer there optimization, in expansion to offerings merchant journey and our and believe us services, higher supply automation. chain drive margin scaling through like of

always not growth on our quarterly expect while continue improvements in opportunities may be to fuller While and margin adjusted EBITDA generating nascent Offerings. investing into dollars basis we consolidated improvements, Developing a in there meaningful

our confident of entitlement our margins in are achieve We over adjusted to XX%. EBITDA ability

increased driven had last nascent will $XXX million was year-over-year. segment Developing into quarter. level increase saw of fourth level adjusted $XXX these for investment lower the losses of was in communicated this We quarter, Our be we loss losses our million we as than This quarter of EBITDA the Developing Offerings Offerings this anticipate an the by quarter. opportunities,

accelerate remain initiatives we managing and across the noted, We momentum line are tenets. flywheel. our are committed Bom value in As confident to to and their our in with entire growing in ecosystem seeing operating investing discipline exciting our and with to early-stage these increasingly ability business compound

record cash of We continue flow. delivering levels

of significantly flow on free factors. that and a TTM the XX-month be generated EBITDA we some levels flow to capital of operating This benefits, quarter, is onetime generated. among adjusted closer trailing on we This trailing flow seasonal higher than the in free cash basis. expect basis Generally, $X.X EBITDA adjusted XX-month due billion $X.X will cash billion cash and working a to other

will remain opportunities to flow long-term to As levels shareholder the to cash we we allocation capital of highest prioritize even value. higher achieve committed we our continue of believe those generation, level generate

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

Sachs. [Operator of Goldman the with comes Instructions] Your question Eric first from Cha line

I have questions. two

main anticipate inventory the the Product the especially margin. you Product be for able sequentially my question. Commerce headwind elaborate this means? coming for accounting? Commerce declined elaborate exactly quarter headwind for from the should this profit to expansion GMV on due some First, fourth new can selection that reasons first And on gross what mentioned decline? is we well? Is margin to think was expansion, adjusting margin, shift the but time, why Would you So in GP inventory I you this as the

a for what is come $XXX on I that. guidance is just comfortable The a year, Developing so that, quite the there numbers, still EBITDA the down. was Simply wondering the question reduction fourth I meet million. think, quarter million? second loss the Are it know you loss cumulative to I mentioned Offerings. of in be adjusted to meeting now, And you bit in the $XXX loss has keeping under looking at will

for thanks Eric, the questions.

nearly Commerce generated billion $X.X EBITDA, increasing basis we've as a Commerce Product points. million in just from quarter. months, $X reminder, the XX Just nearly over Margin also went last XXX in months past Product XX trailing over up margins to bps. went XXX by adjusted EBITDA adjusted billion $XXX

the our adjusted strong. of confident over in long-term remain may But its underlying quarterly room cash are march will continue As see or free margins we've XX% in as for The lot acquisition underlying margins. the margin quarter-to-quarter, such upwards stated onetime are in over of be but merchant snapshot in a and have trends that our of expansion. flows. some strong are margin new might We corresponding continue expenses to past, of guidance margin and investment There EBITDA selection a you drivers profit uneven very time. affect

mentioned make On And remain line, Developing that $XXX we we're more encouraged to We the versus in than in our in are project investments. the to meaningfully encouraged potential initiatives. the momentum significant we'll investments by Developing the future customer the our that underway seeing. million the Offerings QX by that to the as past, seeing, that and discipline Offerings, continue demonstrated Developing more cash And year a continue we're investment economics that we we've potential decline previously. QX. in be in for in total underlying potentially experience economics to little we we to to expect flows remain We confirm differentiated estimate roughly apply investment see we only initiatives. promising efforts continue And significant Offerings and

Stanley Your Yang next the question of line JPMorgan. comes with from

question, I Product your EBITDA margin one Commerce have on dynamic.

your coming below was should Lastly, quarter? with outlook, and top the strategic That Second helpful. Or changes Commerce quarters? What the they explain to substantial Product hit margin third they coming from between line but fourth from a the expectation. margin quarter promotions? the focus direction very be are the major divergent the this any well Commerce competition guidance, on quarter operational X Are in are discount increased EBITDA Product factor? margin was

the questions. for thanks Stanley,

our be change So no was policies. pricing in there clear, pricing or to

new merchant onetime acquisition associated as we've costs. selection with mentioned, We expenses have, and

you For if new example, is FLC margin-accretive costs. acquisition exclude merchant

reinvest case efforts from help we FLC both a before, noted of strong adoption -- to free we've in through example. the discover for trials. As trial, to both consumers merchants have, have investments benefits. seen These to a onetime in adoption, benefits as and free you investments you And in when the point. merchants we've help FLC, also more really for parties example, onetime strong discover are And

more retention which unlocks selection and couldn't investments seeing rate we like access has merchants example, value and Rocket have billions Rocket in We're And customers, on in even more by for in services savings which quarter, accelerating business merchants. FLC of made services, FLC scaled technology the enjoy as considerable adoption of FLC, growth built to believe flywheel. of and overall scales, growth this more turn for we than FLC our dollars for they selection own. and customers Returns, merchants their And and and last strong the gaining the infrastructure merchants more of on Xx of Dawn that capture to expands attracts growth with

a really to and there's a initiatives. long-term But that continue any is seeing lot margins these we snapshot quarterly of of blend of will benefits see,

nature Some selection. are acquisition onetime it merchant by of with affected expenses new that new is in or associated

Morgan Your Seyon from with next question of the comes line Park Stanley.

in clearly to revenues of My bit And positive, losses Eats led guess, Offerings. Bom, Eats case, if mentioned with which is of see Coupang a Developing quarter-on-quarter growth, meaning think, that on a increase seen I you to, lowered meaningful little I We've theoretically, what Coupang Offerings. is increase? provide unit lead Can Developing us basis. on a that maybe you should for the economics then for a in question did breakdown then that

us it it's that maybe on is correct has case or been larger maybe help that just or -- to if can kind of is here, case. If that you reconcile the for narrowing can is that. led actually are me, but losses if side would So Eats is you Taiwan wrong the my losses, the the the be Or Play that logic if great. Eats,

Seyon, thanks all for the questions.

Delivery. has you by confident launched start But been that And still continue profits, Taiwan in our with operational there in in It's Taiwan As expense only not of so Korea. was both each in Taiwan we've have than market, year it first We excellence, you overall faster growth Eats. noted, able not experience Rocket response a Korea. see a lot the the strong seeing to only of as of as Delivery. customer in in as the very demonstrated and should delighted improve in our been Rocket of excellence, we been know, we've momentum are we Taiwan. work year build the customer improve I'll model growth since to want we've our We've far. at us we one we've to kind first customer but also us and experience, other, and do the on. capture see set And you that experience to operational the sights remain

Eats date. savings yielding our to is strong Eats, results program WOW On on

the XX%. Eats we members long regions launched delivery in purchasing ahead. also growth all As QX, we've The of for program. have doubled increased. also just where #X regions And where runway has the we we're of transaction service mentioned, are have in on majority volumes Eats XX% so purchasing the has increased of our a members WOW food number

in don't WOW our the members. Eats members. Higher non-WOW twice Eats Eats membership retention broader members members of Product much offerings. and WOW who we've higher WOW on overall program our and services of purchase WOW acquisition extends We've program. purchase who engagement members Commerce also as increasing WOW to Eats across than where launched of all expands significantly engagement spend this ecosystem, And spend regions customer attrition in as impact the course, observed our reducing

the accretive ecosystem that beneficial to there's seen we've with overall lot Eats. So of things a

even and newer mentioned, as merchant the offering, about less is and onboarded onetime setup new economics we see one and even expanded unit There we But we've positive. we've been that give of unit of and selection that to the acquisition, as stand-alone like more lot But customer value we've Eats been of the committed beyond aspects program onboarding a delighted talked Eats more are customers. response, for Eats about us a us make program WOW -- costs of a continue merchants new confidence is lots of of And savings excited permanent membership. savings Eats benefit of trends the by, the which makes our Eats. potential the to economic the

question comes of the Lee from James Your next line Mizuho. with

questions follow-up making, on speak some learnings last-mile responses of And of investments had have some that lastly, the can in wondering, region? of delivery. you're you the also, some so investment can seeing was you you the you are suppliers, including can several to also, you got far? given if your I talk Taiwan. maybe And elevated speak of I to about competitive customers, also, level And

it's I James, early. think very

response ahead. lot a been the have with customers. gotten We've pleased of from that We work we've

customer experience of of excited we a forward both and those about or can and ahead progress care pillars. in is delighted trade-offs are we the And we resonating make We response are Our can many operational by we to resonate can And customer with been the excellence. improving markets. believe that will we mentioned, lot I there work as service, about break we customers as that the far. But and it, break look we trade-offs in we've started customers. have always meaningful with so

and be continue disciplined As to always, opportunistic. we'll

that control. improving we'll As analysis excellence. in customers have that rigorous In demonstrated attention energy in two we our to we've of And and be will competition, about on. all meaningful a and differentiation our of general, the operational experience fronts meaningful things of course, invest we spend our we that tend experience are create Those only pay believe for past, spend the continue improving in shareholders. but for energy the about our to and customer obsessing opportunities be we we'll both do, we to obsessed return

take our of will Instructions] the now [Operator question Barclays. Shao We with last Jiong line from

in first on question but competition, Korea. is My

do I whether share sort out revenue, you long not are few are KPI of is was you Taiwan some or the are Tmall entered see in or wondering can about any in for cross-border think, of for you aggressive feasibility kind metrics in like Any the the appears or with second very with not ago. know, country decide bit question appreciated. And more unlike you I orders to in will put getting guys As overlap few you a metrics competition to of terms thoughts watching you of what terms the Korea if us study, Chinese is tied that country. product the to of now. the months please so number in getting a of there more months AliExpress the Japan, be back. category these Could here strategic, you guys be not closely are GMV, talk of from either kind a term, overlap? Taiwan. they anything aggressive

for your Jiong, questions. thanks

Korea, in growth, there what revenue customers. to been show and our actually, accelerating. see, continue can you growth has see. in That's And strong we As we active both

quarters, it's consecutive growing Active since at is accelerating. pandemic levels. any than the customers, faster we been point mentioned, as For X

expand indications think metrics is believe We'll strong continue internally the made at we all make to best we've at very what cost. investments we a with see, see unmatched to internal that We it's selection. that the of metrics. strong and efforts reflection experience in So least invest the the to best continue we

make expand exceptional to for the As for investments and we service price bar continue customers. to those experience we've selection, mentioned, customer raise lower

also it's But think. we a reflection,

at reminder of retail single-digit or to Our short is market are. share exceed a early just in growth $XXX X that's just accelerating we growth of a how We're strong years. massive billion just projected

We stage stage of continue given both execution. we And and of given our operational determined retail will share experience overall execution our be to customer of believe the continue be to spend, on excellence. laser-focused success growth, by our our on that

was question second your Taiwan. And around

over billion in the growth. the flow. with can That opportunities demonstrated generally, that we lowest in did the that our -- bps able months, trade-offs margins opportunities, cash growth the how profitability to is comes growth That's to both the we only free at any cost. strategy generated, generate in or free and to make been capture increasing where think customer invest operational lowest cost cash market rapid EBITDA, I that $X we best best in level come we can drawn we we the trade-offs will accelerating flows at mentioned, any these of say We've from break at of to not that customer future. by provide And XXX we're break believe we've And those cost. enter. past build an significant the fundamentally investments initiative, as that experience adjusted at I we've nearly XX experience

achieve more investments. objectives demonstrated the experience that future potential as And customer we've meaningful both these significant earn you Efforts their way a in unflinchingly in investments to the the demonstrate discontinued to and past. potential also cash point achieve to have out, flow free not significant that

initiative this so tenets our quarter, the and markets remain What in tenets, discipline we've different opportunities we pursue and far maintain And confidence but framework will every to continue rigor to after as by the public, iterate test, published shortly same unchanged we'll learn, strengthens and areas. continue seen went framework. will shared reinforces of our we in We'll that Taiwan we operate and we we that these hypothesis. different

conference call. may This There Thank today's you, are further you no now questions. disconnect. concludes and