Coupang (CPNG) 27 Feb 242023 Q4 Earnings call transcript

Hello, everyone. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2023 Fourth 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. Fourth Earnings Coupang's Call. to everyone, Quarter Conference XXXX Welcome, following call joined our and I'm today's to date Anand. The as be management's the questions, our including today reflects your Gaurav only. Kim; pleased to of Bom on by views responses CEO, Founder CFO, discussion, and revise We do or not as except obligation any information undertake required update to this by law. today's call include statements. on forward-looking made statements Certain differ may results materially. Actual

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

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

slides including most SEC our this which disclosures over these are I'll webcast are our measures filings, Additional company's the call posted the now these to our measures in website. And reconciliations Bob. comparable non-GAAP Investor accompanying GAAP turn to Relations the measures, and included regarding on release, of earnings

long-term oldest without in over our growth of rate QX, a grew growth which growing growth annual would year-over-year revenues revenues growth and is free QX capped growth value. In cohorts. year-over-year. flow, everyone, QX, we of accounting been for of We customers of higher us ultimately, customer on fourth record for basis today. quarter. that X% In with change serves customers. FLC every constant QX our the spend at QX, shareholder accelerating our our accelerated XX%, XX% have The active in our year active every of service, as even our began In Thanks, XX%. long-term currency selection, price over profitability, grew of across XX% XXXX, joining points revenue rate the In for basis, our and both basis moments free creating cash for cash a believe growth, And than business. flows active year wow, XXX the in profits expanding apples-to-apples the year-over-year XXXX and form quarter foundation the customers cohort and customers we QX, made

generated established flow thanks net exceeds in also adjusted of most profitability to our and offering record X.X%, all We QX. and the We by free now share of whose our while for Product the largest X% even this EBITDA around only did year, income Commerce, over expanding count our of X% cash XXXX year became cash for Offerings. the has $XXX in of years of free billion, generation our at our in X share remained investment since public our million each dilution flow company, after including IPO. And a Developing we $X.X totaled growing the

made durable new Our to bold to are experience producing that flows saw before deliver we have over of $X.X customers. cash cash cash bets Sizable opportunities bets we because attractive and overnight beginning balance are and were even of us in and the years competency for began they to stands this at meaningful not business. required They investment, our company, break a streams initiatives. These few free wow patience billion. a persistence created Since quarters. trade-offs today flow on or foundational free

or our For unique open orchestrate inventory, example, a network. fulfillment managed centers, Rocket an We new to never logistics nationwide delivery on purchased had was X-day Delivery competency. entirely fleet assembled bespoke and integrated build technology

technology, that have Dawn processes, knowledge. ability and competency, of initiatives like we the our and new our we have able incremental Delivery. Today, impact and the With scale scaled were the success initiatives new we've expanded the benefit leveraging success from we to initiatives, to seed scale now add competency of incremental this vast

at own their XX%. Small or build expanding the the access to and about capital. such of We reduce which high. who Customers In Rocket. do merchants SMEs, FLC of each We in retail meaningful to stage number doubled by not historical or share we high our and we small scale confirming base technology not Fulfillment of we're investment. and strong conviction billions their exit to can initiative reach opportunities FLC businesses dollars investing investments investment more. A remains shelves and we of invest network we've on with responded deliver enterprising medium these delighted our they we evidence XX% thresholds, in signals, them account lack and enthusiastically don't and customers volumes on and to for have physical for year-over-year, capital selection meet and make high number in technology. of FLC our when promise. enterprises, our QX, participating our in incredibly investment merchant One Rocket have incremental of bar returns or made Our see for our help Coupang when only over delight to look If that jumped showing to is continue grow FLC, investments businesses. And and traditional Logistics significant in infrastructure investments. shy to remarkable are progress infrastructure for already today. We're access

learnings quarters we've a time advanced over than launching the potential and what growth It's of Since many in an Another to among Rocket. incredible compound have exceeds doubling assets over leverage scale In experienced a is of geography and Taiwan, the Korea and and the its that about is that launch We're of October Taiwan. able over processes years. developed the more period to we last of that customers on with adoption revenues retail we're trade-offs at wow XXXX, same Rocket an after incremental opportunity the and other pace alone. technology impact in market. growth, continued customers challenge X to rate, excited attractive investment proving Taiwan's in

enable that cohort faster from did than already Taiwan our incremental expect our we of investments behavior. We Korea. Many to strong in to in profitability reach us benefit customer

seen potential our and economics onetime across customers. month, expand positive those offerings, new we've And have of volumes engagement investments ability see new we program savings merchant Our seen cohorts our promotions a seen our positive offerings. further order to great categories of engagement expect is of Eats's the of along in continuously new unit the QX, products acquisition equally underlying and is strong launched the with we spending spend scale expand With such as new generation across all customers. we've adoption we Every and in drive and future. What Eats exciting membership as retention example. early double. is we've our their externalities expire, Since levels the in wow we Coupang. customer to cash the

engagement other engagement higher seen for lead higher helps Product to categories, Just we've on as Eats purchasing in in one category in Commerce. engagement

in see all creating this also and our Play on We most unprecedented was scratch broadcasting in XXXX in service. not Play live video engagement in Android just Korea. pattern and app iOS by It's but both sporting downloaded categories events XXXX. also from streaming customers with the delighted Korea

of live in Some sporting by unique years Korea exclusively Play. past been matches most the and streamed created streamed the have events sports over X

season season This play available to Korea games For first franchises Neymar, Korea. And with will played City, millions in MLB Manchester see Padres will the the members. the have regular last, Korea Tottenham tickets Son Farfetch. ever broadcast be open and and a This time PSG like were which in the our been X live in Dodgers in Seoul spring, Spurs. to Haaland, games international exclusively with for that about note able mark first will and ever regular time and

be conversation will how fully GMV today. Even We're financial full and a Coupang confident make While the we're our we service we were already seeking strategic a potential for if Farfetch while the a for that a commitment, the with no Coupang. executing experience rare not on beyond billion with a this remain is to that such additional that paths $X a priority. the prove highly across we'll many fashion, an buy investments worthwhile $XXX around potential excited of a investments, prudent transformed we to too realized, decision. a this making in for see We plan came be in investment. on early self-funding It's biggest capital about focused business sector-leading long-term to we investment acquisition, shareholders. And also we're announced hope that providing conversation opportunity luxury years, to Farfetch few about having customer into turned for while million value

of We Each are have remains by and and a very priority. and small them capturing Korea those share of Taiwan. opportunities retail markets the greatest our in prospect massive, far

wowing wonder how As always, customers ever we create live world did remain relentless to they to where I without focus the a Coupang. committed on our

the I'll to over turn Gaurav financials in detail. the Now to call review more

Thanks, Bom.

year-over-year XX% we customer quarter years. a growth This in engagement even record seen acceleration highest in the growth quarter, greater saw we growth rate of the The XX in customer rate in every accelerated active X culminating with XXXX, QX. past That's million with active customers. have an

since up We also the that our provides now XX% for broadening recognition members. last membership value members, of the have WOW tremendous year, XX million WOW reflecting

successive revenues comp to rate important against our the at oldest net still higher a of XX% every reported. is currency points in prices grew above of constant for XXX than at with oldest rate massive experience. year-over-year cohorts or rate, XX% been grow Adjusting currency. is impact cohort FLC XX% couple for growth $X.X our over would our growth grew that and to highlight billion the constant quarter will It grew continue continue us quarters accounting best-in-class rate, adjustment adversely that in Even faster change, reported annual earlier. The our change previous new even is currency continue the each from we next demonstrating our to the this treatment. It customers WOW will constant for they of quarters there for increasingly that have an XXXX. to the as highlighted opportunity best accounting spend affect total of XX% accounting Adjusted with to revenue basis revenue Our have revenues year-over-year. the delivery FLC that growth accounting selection

few customer. customers lower average X% with year-over-year, dilutive net levels all successive number naturally per are impact The than XX% even the constant We of on short-term a whose will driven active cohorts to much while and large cohorts. customer grew a active the last active spend growth cohorts new the per of and levels also penetration the increasing a addition, on and of much being categories has starting cohorts quarters XX% higher basis faster. products currency. reported by each many per spend growing we of growing spend This adoption In at offerings. added growth is the large across over deeper new revenues levels spend customers new Product over cohort spend come from have continue We levels active Higher continue mature spend and in believe climb. In segment, the saw currency is spend XX% our of our in a constant are spend offerings. newer annual our of converging customer, Commerce annual revenues our of higher increase to oldest and amount to

Our quarter. at X% in of Korea a of grew commerce multiples spend Korea as of are Product Commerce XXXX. compound of Coupang total the journey our projected at continues high rate very in growth believe early in total stages the retail represents very growth the growth billion which small $XXX rate Korea fraction in to this spend by We we of currently

Eats growth with about we a Along in generating revenue year-over-year reported XXX portfolio Offerings As year-over-year and XXX% Taiwan. We a This gross other grew this XXX% XX signals, increasing on margin nascent a basis the are year-over-year. basis from profit, we Developing excited billion increase also we delivered a gross and segment Bom in record in basis constant quarter-over-quarter. this vast noted, potential improving initiatives, Its represents points are profit are $X.X currency. demonstrates XX% and of points of XX.X%, in momentum especially seeing of an

in across and efficiency We improvements of logistics including network higher are greater utilization technology, through our automation driving our and AI. operations

chain from We offerings, our optimization the also ads. and continue to benefit scaling in including further margin-accretive supply of

ahead points by expansion percentage as of we us increased each investment from points were basis and expense delivering change. due year. revenue Developing the to a in impact versus quarter accounting quarter, to partially continue negative was of basis initiatives. OG&A XXX significant Offerings investment FLC expansion this an last to This selection this runway the margin these increased see offset change in of While these XXX continued estimated tailwinds

largely the $X.XX, of net related This net by would income nonrecurring per taxes adjustment impacted for income historical release recorded in assets of from million diluted tax had $XXX billion Removing a valuation reserves, operating tax-related of This $X.XX. we impact diluted an benefit allowances share including been $XXX adjustments. diluted a EPS adjustment, quarter, deferred generated in EPS. $X.XX changes impact of losses. of $X tax tax the for This reserve our on quarter. We earnings certain and net $XXX of quarter million onetime resulted of to the the in million have the adjustment from

adjusted For the for year-over-year, our million $XXX X.X%, consolidated EBITDA margin from EBITDA QX year. benefit includes adjusted XX-basis-point full operations, the change. XX-basis-point this a The improvement quarter, of $X.X we billion reported a and FLC representing accounting was which

due of Offerings Commerce basis the Product margin our an our change. The this we growth than Developing This accounting was the $X.X our improvement segment, cash, a year quarter-over-quarter. We and cash the operational full of full decreasing some was in from Our an and flow capital but This margin EBITDA was the nearly higher across well benefit which adjusted factors. also the basis delivered points XX% producing in years $XX billion $XX result cash the believe $X.X X.X% XX% the XX by of other billion segment of operations of of the seasonal previous in technology $X.X $XXX the among XXX and we includes resulted adjusted million the improvement year-over-year in flow expanded last quarter the billion this This $XXX onetime FLC as excellence. in over we million over potential as that million loss benefits over early EBITDA, still increasing year EBITDA from margin million, driven year free year. ended roughly to is improvements $X.X significantly last in are more operating year. of working and of point than in harvesting business. In in stages year. with for the efficiencies many billion investments And are infrastructure, realizing a of margin adjusted gross profit expansion

generated. that expect As cash previously on levels have EBITDA flow to communicated, closer we a the will free TTM basis we over adjusted time, be of

outlook few Now comments a for on our XXXX.

strong we in forward investment anticipate to be to While over rate rate Developing going losses in seen do $XXX losses already approximately we related anticipate we Farfetch. adjusted past XXXX, more incremental average we EBITDA investment consistent with of Bom are our million growth we not XXXX beyond expect to with the exiting have incurring to excluding Farfetch growth growth, the in it Offerings profitability. as our communicated And noted, get year,

rate an expect recorded obligation tax excluding to an as the to million high to expect effective rate continue basis, We closer annual experience growing adjusted EBITDA This XX% anticipate is to margins adjustment we temporarily XX% this we XX%. on Farfetch. Due will a be reserve just XX% tax effective we $XXX quarter, to in tax between tax to accounting our cash XXXX. we

whose an over this extremely is our Over results enjoyed teams work normalize year. I the of responsible have to we expect closer past and effective XX%. Bom for to term, tax the mid- to to are long proud we years rate many

our potential for and to committed on Q&A. operational execute confident are to passion the we ready are deliver excellence customer to ahead. Operator, will the now remain begin experience a vast We with teams

[Operator from the of first Yang Instructions] Your comes Stanley with question line JPMorgan.

on guidance. fourth With questions. Congratulations XXXX have quarter. for good regard I two result to

Commerce strategy question First Product your and outlook. the about margin is

degree. in onboarding think, and XXXX, share user off a market the and the on margin of new light line at paid of in strong gains, the selection which focused increase the but expense merchant have the and You I to top

your deal? And bit or Eats Farfetch declining? appreciate plan Offerings in to provide you question $XXX when kick margin increasing segment loss Taiwan, And inclusive if Moving million. soften sequentially would I of Product expect of do If video. guidance a breakdown Developing XXXX? My color in expect this you selection start growth stabilizing each you the strategy? terms and Is second more Developing this to of on to you the loss the Offerings out of and of is do Commerce maintain to do about such XXXX, so,

focusing our Stanley, including some we've but greater utilization thank and for margins improvements selection expansion, the selection strategy merchant do network our questions. you in automation, our logistics same. We technology, the expanding AI. growth through impact that been your for acquisition, we On from of and on levers see increase are to remain

while billion margins During adjusted XXXX, we generated by X.X%. EBITDA, $X.X adjusted increasing in nearly bps. Product XXX Commerce XXX bps margin improved to EBITDA

infrastructure, underlying over As that our operations. profit we operational efficiency these time, our annual there's stated upwards a does will the driving years continue anticipate for in be may Even The a improvements majority the an the and investments Farfetch. seeing expanding strong, we're in its increase basis, the across past, drivers Offerings, with continue our come excellence, we Farfetch. lot that of not of these And of see the margin investments, on EBITDA expanding on improvements in uneven from in million investment expect Developing be basis, still march but are you quarter-to-quarter, $XXX we're technology Farfetch years to excluding these expansion. On We should consolidated include and margins excluding and margins margin Taiwan. room of XXXX. in

each are we're significant rigor and meaningfully both only initiatives the can at and the investments. operate earning break line potential best to experience, provide on way customer shared the tenants more which where we focus trade-offs their and evaluating continue We we've stage, customer in with past. deciding efforts and differentiated future flows, cash with significant opportunities the We'll lowest in to achieve cost. At experience demonstrate to these

objectives. these We to have that that do discontinue -- will continue potential past don't demonstrate in investments achieve and the to not

see also positive be We won't more. are signals, about shy investing where we signs And seeing in we positive Taiwan.

value. continue long-term and As be to opportunistic shareholder to disciplined we'll maximize always,

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

two. have I

is and Farfetch bit to buybacks. share Farfetch. your a First early, the acquire you And know factor but general capital appeared that to attractive allocation, what too it's share would I you capital including on you can was be what said allocation. principle biggest regarding also,

to seems market, importantly, competition. your any when see look you interest attrition? a impact on any And competition among the your more user related And There's this see rise size Chinese it related behavior, heightened on do core in you also, competition? is you in at platforms. Second e-commerce basket do the cohorts impact in cross-border on to

and the for drive in hasn't if things, it's by know And be captured we create possibly dollars meaningful players question. could marketplace, innovation we a a were customer thanks focus been we experience. one we differently, Eric, We much operations, any way and e-commerce Luxury valuable, of on around segment, large very market and that we to is know those yet. better equity how value. business more saw billions run at if of that could thought know

looking was existing our looking saw We're moving too situation. not it's we quickly opportunity also were do strategy. not for a We very us for that a weren't deal. to opportunistic strategic Farfetch more the conversation in-depth you -- to afforded a potential very business. But have we at a Coupang remind that price. our a This to beyond just value attractive buy is early I today. M&A

much share small our over growing remains organically, time. strategy in Our our share larger markets existing very into

We in much have for bet. our so markets existing Coupang opportunity

competition. second strategy Our around growth. On your remains organic question core

constant the entrants, point and support to offline to a selection, with that winners. Retail players Customers competitive Chinese going enough retail market new lot many improving competitors out in $XXX from our to And best traditional China, primarily or best us. retailers finger just seek still down and success of or dynamic by opportunity over the experience It's border a of ranging important the the walk slipway. and domestic is been, large billion both they front stream the a continues many international. has we to are always to believe be just and customer execution is across and single-digit the have of market, a share large highly a projected determined best whether from continue operational and X-minute price service. have And We on street excellence. the of our to alternatives, massive

our behavior. Again, that still mentioned have as That's find we result we laser-focused time we experience of spend levels and capture single-digit of in are excellence point over -- of cohorts have share have joining our operational So every we've large constantly our And last of higher our retail out spend WOW customers Where, new large a one every is newer day. number about. We well of more earn cohort see added moments oldest increasing energy customer cohort new for opportunity. I'll at loyalty to as spend massive growing also mix customers market past. quarters. share of large what to future customers and even remain I efforts our our new the the that their fight large of for our a earlier, over obsessing our XX%, we on active and opportunity. faster one amount just to a than cohorts. we'll That portends all the in of few customers And a of new growth. of

course, and to will over frame. As the of levels of that also much spend a converts the be, to newer spend of climb. time older longer cohorts the cohorts But of continue levels spend higher

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

overhang an much execution, job we from some done company Bom, on perspective, I I sell-down think coming and I don't yourself, was don't and the executing. think, quarter, follow kind look tremendous there's think of a a have the terms wanted in kind at this as that's I like. last I from the -- kind up on. [ guess X doubt of ] just you maybe hinted obviously, with SoftBank years. that very of I of each guess, an over, question to the of I equity about has think But

thinking if maybe how to a your thinking share free address the the with the that company Maybe potential immediate, market. of the to some about be that way shared helpful in cash a continues I So of now just maybe some on position you're flow, you're come not of understanding kind a equities. you maybe over in think, the a longer respect very would to supply, to thoughts how about tender is to kind term, address the buyback much share or comfortable supply much can more

Yes, Seyon, take that. I'll

last the before we even solution working to our years, Over and and we'll so. to all with IPO, optimal been everyone, continue for an find for do shareholders, closely have investors

that's say a at investment think all I the this we growth this. I company that on point, we will have are excited think believe to of looking about But profitability care opportunities with that take improving, said, our good, itself. we all

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

on your And comes sense million. you to lean that on investment, visualize should that at when wondering have even kind on I you to of, more Taiwan on end delivery. signals fulfillment execution including investment give any you give in. And just learnings can the give two market was should year, in EBITDA secondly, adjust I curious, like it to ground confidence you guidance, that of here. get guys on of $XXX selection, color a can help saw of center the or local tactically? And we your to losses Taiwan continue guys if you here we maybe us what relating sense a can this

your thanks It's for question. in still James, early Taiwan.

seeing are We momentum there. strong

than seen And double. last was October growth the and revenues Korea. been has XXXX, in Rocket and customers active far just in of in mentioned, so X there we quarters I it launched alone, faster we've As

worth our supply we've also they all help in chain many technology iteration. expect faster. and optimization, years a logistics, knowledge also scaling building that learning reach so But we're And profitability Taiwan. with every Everything also learnings, and fulfillment the built decade selection, us over in that's are It's from from there will we've Korea. noting over leveraging we built what from we to that optimizing much our that contributing faster processes

assess conversations, think a shareholders. a but excited continue it stage, progress the investments very in at only to that's but our and when too the it's a experience and I deeper conversation, seeing our we're meaningful generate there. Yes, of returns for ground and that have analysis, have in time, will making right every by on -- think we're early opportunities at the still I meaningful differentiation we to believe the we'll promise our rigorous of we're and the customer lot will be invest

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

the on well. have questions Congrats results. strong two very I as

I Korea on able just sorry, I guys about -- First about lot ask tell I to Farfetch have you you us ready would it. be mentioned are said, mistaken, Farfetch, think think I'm a I not remarks, again. said be Taiwan, What the just and are to in I because these understand talk you about to the But would speaking, if is your countries. was to not for to is goal today's then is going how you have about how -- Farfetch sort wondering, of I accounting-wise, And in from in it only book you clearly mean, do you Korea where other over the there? And broadly other And big expenses self-funded. Coupang Farfetch? later countries prepared on, business. and revenues what in you might you what therein do

what the has for the to business the business, per last said, is I the right? or or accelerating few been next going quarter FLC the version growth accelerating And QX, but not for the in see you your will X last like acceleration end very of QX. save you growth FLC your since in question QX, still by FLC, changed to spend was for the to all acceleration? of capital you to growth behind contracts revise that helpful. quarters, any the delta, you then see drivers the kind the accelerating You're be kind quarters about outlook of second really your are se? My newer the going for for just the that accounting. wondering X When

the FLC question Let me address first.

this represents price in adoption over -- this reflection the growth our wasn't recent quarter we the investment quarter years even our best it the is It a pulled providing at past into really lowest this of past quarters. of First, quarter customer levers or experience assortment. across or specifically any many broadest

market, We And in stage speaking, in that me, is reflection the think of only is initiatives investments We who early, the -- a our our retail tens reflection early excuse and our ahead. are broadly of $XXX are of growth and WOW one excited opportunity. a we also to market. We're is is, have yet our Farfetch believe at we're made not the of at of that a customer development but we're our single-digit billion millions about of it that growth just the in we see response. are that of an massive we investing and -- join we've FLC. potential there still membership, growing stage shoppers still a the it's selection, the share And very

that take me let one. Farfetch, On

the But restructuring come we'll and back. charge probably into we finalized for the into it a weeks in But classification, it split next ago, out. take just consolidating on QX on segment getting will financials strokes, We to come the On will that So we more in be months. a deal couple we'll our few details. broad of call. we a and onetime are

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