Coupang focuses on customer experience and operational excellence.
Despite significant growth, Coupang still holds a single-digit share in Korea and Taiwan’s massive retail markets.
Rocket Fresh and FLC services continue to gain momentum, expanding selection and supporting SMEs.
Developing Offerings, including the newly consolidated Farfetch, are exceeding milestones.
Investments in infrastructure and WOW benefits aim to continuously improve customer standards.
Financial Highlights
Q1 revenue increased by 28% year-over-year in constant currency, or 23% excluding Farfetch. Adjustments for FLC accounting changes would have shown even higher growth.
Product commerce active customers grew by 16% year-over-year.
Fresh offering units sold grew by 70% year-over-year.
FLC units sold increased by 130% year-over-year.
Farfetch is expected to approach positive adjusted EBITDA by the end of the calendar year.
Strategic Investments and Growth
Coupang is investing billions in CapEx over the next few years to enhance fulfillment and logistics infrastructure.
Plans to increase goods manufactured in Korea from $13 billion in 2023 to over $16 billion in 2024.
WOW membership benefits are expected to expand, providing over $4 billion in benefits in 2024.
Financial Performance Details
Total net revenues grew 23% year-over-year, or 18% excluding Farfetch.
Product Commerce segment revenues grew 15% year-over-year, or 20% in constant currency.
Developing Offerings segment revenues grew over 330% year-over-year, or 134% excluding Farfetch.
Gross profit reached a record $1.9 billion with a gross margin of 27.1%, excluding Farfetch.
Net income attributable to Coupang stockholders was $5 million for the quarter, with diluted earnings per share of $0.00. Excluding Farfetch, net income would have been $98 million.
Adjusted EBITDA was $281 million for the quarter, with a margin of 3.9%. Excluding Farfetch, adjusted EBITDA was $312 million.
Product Commerce segment delivered $467 million of adjusted EBITDA, a 62% increase year-over-year.
Developing Offerings segment adjusted EBITDA loss was $186 million, with anticipated 2024 losses around $750 million including Farfetch.
Ended the quarter with approximately $5.6 billion in cash, following a $2.4 billion operating cash flow and $1.5 billion free cash flow over the trailing 12 months.
Capital Allocation and Share Repurchases
After the quarter, Coupang repurchased $178 million of Class A common stock, reflecting ongoing evaluations of capital allocation strategies.
Question and Answer
Farfetch Long-Term Strategy
Question
Can you elaborate on the long-term strategy for Farfetch beyond achieving positive adjusted EBITDA on a run-rate basis by year-end?
Answer
The focus is currently on stabilizing Farfetch without compromising customer service and value.
The company will share more details on the midto long-term strategy after reaching the EBITDA milestone.
Taiwan Logistics Strategy and CapEx
Question
Will Taiwan eventually adopt an end-to-end logistics strategy similar to Korea, and what factors might impact the level of CapEx in Taiwan?
Answer
Coupang plans to leverage its experience and infrastructure from Korea to expedite growth and reach profitability faster in Taiwan.
The company will also explore new solutions to differentiate the customer experience and drive shareholder returns in Taiwan.
Developing Offerings Loss Guidance
Question
The Developing Offerings loss guidance was raised from $650 million to $750 million. Is this increase driven solely by Farfetch, and when can we expect the Eats losses in Taiwan to start declining?
Answer
The $100 million increase in guidance is primarily due to Farfetch, with expectations for it to reach breakeven or positive adjusted EBITDA on a run-rate basis by year-end.
All Developing Offerings are on track or exceeding expectations.
The company expects to expand its consolidated EBITDA margin on an annual basis this year while maintaining discipline in investments.
Share Repurchase Strategy
Question
How does the recent share repurchase align with the company’s capital deployment strategy, and are there plans for further buybacks, potentially involving SoftBank?
Answer
The share repurchase demonstrates the company’s commitment to evaluating various capital deployment opportunities, including buybacks, to drive long-term shareholder returns.
Coupang continues to engage with SoftBank, one of its largest investors, while considering multiple options for capital allocation.
Advertising Progress and Plans
Question
Can you provide an update on the progress and effectiveness of the advertising initiatives, and what are the plans for the near to medium term?
Answer
Advertising is a significant area of investment and innovation, growing faster than the overall business but still at a relatively early stage.
The company is focused on developing a comprehensive range of tools and services to enhance the advertising experience for both customers and advertisers.
While there is strong growth and adoption, Coupang acknowledges that it is still early in the journey of advertising development.
2024 Revenue Growth Outlook
Question
Given the consistent acceleration in growth over the past five quarters, can you comment on the 2024 revenue growth outlook, excluding the impact of Farfetch?
Answer
The company emphasizes viewing growth in a longer-term context, driven by years of investments in customer experience, selection, and delivery speed.
Coupang’s growth is not limited to a specific segment but is fueled by increased spending across all customer cohorts, indicating the potential to capture a larger share of the $560 billion commerce opportunity.
Eats Unit Economics with Free Delivery
Question
With the introduction of free delivery for Eats, how do the unit economics compare to the previous 10% discount for WOW members?
Answer
Free delivery has significantly boosted Eats growth, with the largest increase in orders and customers in its history.
Eats remains unit economics positive, excluding one-time merchant acquisition costs, and there is a substantial opportunity for further growth as the majority of WOW members have yet to use Eats.
The company is focused on providing the best experience in restaurant delivery and commerce, breaking trade-offs and driving customer satisfaction.
AI Investments and Use Cases
Question
Can you elaborate on the AI investments, including whether you are building on existing foundational models or training your own, and discuss some use cases that differentiate your offering?
Answer
Coupang is exploring both foundational AI models and developing its own, with machine learning and AI being integral to various aspects of the business, including supply chain management and logistics.
The company sees significant potential for AI, particularly with large language models, in areas such as search, ads, catalog, and operations.
Coupang will continue to test, iterate, and invest in AI applications where the greatest potential for return is identified.
Competition from New China Entrants
Question
What is the company’s perspective on the competition from new Chinese entrants, including potential category overlaps and any responses initiated, such as increased sourcing from Chinese suppliers?
Answer
Commerce has always been a competitive market with numerous players, including constant new entrants, and the recent entry of Chinese commerce companies is part of this ongoing trend.
Coupang acknowledges the need to continually invest and innovate to provide the best customer experience and win purchases in a highly fragmented and comparison-driven market.
The company’s success will be determined by its execution in creating new “moments of WOW” for customers and maintaining a focus on operational excellence.
