On August 6, 2024, Coupang Inc (CPNG, Financial) released its 8-K filing for the second quarter ended June 30, 2024. Coupang Inc, an e-commerce company, sells a variety of products including apparel, electronics, and food products. The company operates through two segments: Product Commerce and Developing Offerings, with the majority of revenue generated from the Product Commerce segment.
Revenue and Profitability
Coupang Inc reported net revenues of $7.3 billion for Q2 2024, marking a 25% year-over-year (YoY) increase on a reported basis and a 30% increase on an FX-neutral basis. This figure slightly missed the analyst estimate of $7.375 billion. Excluding the impact of Farfetch, the growth was 18% YoY on a reported basis and 23% YoY on an FX-neutral basis.
Gross profit for the quarter was $2.1 billion, up 41% YoY, with a gross profit margin of 29.3%, an improvement of 310 basis points YoY. Excluding Farfetch, gross profit was $1.9 billion, growing 27% YoY, and gross profit margin was 28.3%.
Net Income and EPS
The company reported a net loss of $105 million, with a net loss attributable to Coupang stockholders of $77 million, a decrease of $222 million from the previous year. This was primarily due to the operating losses incurred at Farfetch and a $121 million administrative fine from the Korea Fair Trade Commission (KFTC). Excluding these factors, net income attributable to Coupang stockholders was approximately $124 million.
Diluted earnings per share (EPS) was negative $0.04, a decline of $0.12 from last year. Excluding the Farfetch loss and the administrative fine, diluted EPS was $0.07, beating the analyst estimate of $0.01.
Segment Performance
The Product Commerce segment reported net revenues of $6.4 billion, up 13% YoY on a reported basis and 18% on an FX-neutral basis. The segment's adjusted EBITDA was $530 million, up $122 million YoY, with a margin of 8.2%, up 110 basis points YoY.
The Developing Offerings segment, which includes International, Coupang Eats, Play, Fintech, and Farfetch, reported net revenues of $892 million, up 472% YoY on a reported basis and 483% on an FX-neutral basis. Excluding Farfetch, the growth was 177% YoY on a reported basis and 188% YoY on an FX-neutral basis. The segment's adjusted EBITDA was negative $200 million, including a negative $31 million impact from the consolidation of Farfetch.
Cash Flow and Liquidity
Operating cash flow for the trailing twelve months was $2.2 billion, an increase of $250 million YoY. Free cash flow was $1.5 billion for the trailing twelve months, an increase of $420 million YoY.
Key Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Total Net Revenues | $7.3 billion | $5.8 billion | 25% |
| Gross Profit | $2.1 billion | $1.5 billion | 41% |
| Net Loss | ($105 million) | $145 million | (172%) |
| Adjusted EBITDA | $330 million | $300 million | 10% |
| Free Cash Flow | $488 million | $450 million | 8% |
Commentary
"This quarter we continued to see deeper levels of engagement from our customers, powered by our relentless focus on providing even greater levels of selection, service, and savings for customers," said Gaurav Anand, CFO of Coupang. "We remain focused on creating moments of WOW for our customers every day, while driving continuous improvement across our operations by leveraging our investments in infrastructure, technology, and automation."
Analysis
Coupang Inc's Q2 2024 earnings report highlights significant revenue growth and improved gross profit margins, driven by strong performance in the Product Commerce segment. However, the net loss and negative EPS, primarily due to the Farfetch acquisition and the KFTC fine, present challenges. The company's ability to generate substantial operating and free cash flow is a positive indicator of its financial health and operational efficiency.
For value investors, the key takeaway is Coupang Inc's robust revenue growth and improved profitability metrics, despite the temporary setbacks from Farfetch and regulatory fines. The company's focus on enhancing customer engagement and operational efficiency positions it well for future growth in the competitive e-commerce landscape.
Explore the complete 8-K earnings release (here) from Coupang Inc for further details.
