Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coupang Inc (CPNG, Financial) reported a 30% year-over-year growth in constant currency revenues, or 23% excluding the impact of the Farfetch acquisition.
- Product Commerce Active Customers grew 12% year-over-year, indicating strong customer retention and acquisition.
- Gross profit reached over $2.1 billion, growing over 40% year-over-year with a gross margin of 29.3%.
- The number of sellers joining the Fulfillment and Logistics by Coupang (FLC) grew 25% quarter-over-quarter and over 150% year-over-year.
- Coupang Inc (CPNG) continues to see strong momentum in its Eats segment, with restaurants on Coupang experiencing nearly 30% growth in volumes within three months.
Negative Points
- General and administrative (G&A) expenses as a percentage of revenue increased by 600 basis points year-over-year, primarily due to the inclusion of Farfetch and related restructuring costs.
- Coupang Inc (CPNG) accrued an estimated $121 million administrative fine announced by the Korean Fair Trade Commission.
- The company reported a net loss attributable to Coupang stockholders of $77 million for the quarter.
- Developing offerings segment reported a $200 million loss for the quarter, driven by additional investments and the consolidation of Farfetch.
- Despite strong growth, the company remains in the early stages of its journey in Taiwan, with customer experience and operational excellence not yet at desired levels.
Q & A Highlights
Q: Can you provide more color on the margin drivers in the second quarter for product commerce? What are the major tailwinds and headwinds for your tele-commerce margin trend in 2024?
A: Bom Kim, CEO: The margin expansion in Q2 was driven by continuous improvements in operations and supply chain, scaling of margin-accretive offerings, and greater utilization of automation technology including AI. We expect our profit margin to continue its upward trajectory towards our long-term target of over 10% adjusted EBITDA.
Q: Is the Eats stand-alone margin improving with the economy of scale? Will you prioritize top-line focused market share gain strategy or a balanced strategy between growth and profitability?
A: Bom Kim, CEO: Eats is currently unit economics positive and continues to improve with scale. We focus on providing customers with selection, service, and savings without compromising on any aspect. We aim to break trade-offs between growth and economics to provide the best experience in restaurant delivery and commerce more broadly.
Q: The developing offering loss has increased to $20 million in Q2. Is there a potential for Coupang to exceed the $750 million loss guidance for developing offerings?
A: Gaurav Anand, CFO: We still believe our full-year results will align with the $750 million loss guidance for developing offerings, including Farfetch. The timing of expenses may fluctuate quarter to quarter, but our overall guidance remains unchanged.
Q: Can you explain the drivers for the G&A increase in product commerce and when we might expect some operating leverage?
A: Gaurav Anand, CFO: The increase in G&A expenses was primarily due to the inclusion of Farfetch, restructuring costs, and investments in developing offerings. We are also investing in technology and infrastructure to build a stronger foundation for future scalability. These investments may temporarily decrease margins but will create long-term value.
Q: Can you share more details about the progress and coverage of Coupang's services in Taiwan?
A: Bom Kim, CEO: While it's early to share detailed metrics, we are encouraged by the momentum and progress in Taiwan. We are leveraging our investments and refined processes from Korea to start in a much better place in Taiwan. We are disciplined with our investments and excited about the potential in Taiwan.
Q: Is the long-term target of over 10% adjusted EBITDA margin achievable for the 1P business? Are there new high-margin categories you expect to grow?
A: Bom Kim, CEO: We see significant opportunity to expand our share of the $560 billion commerce market by improving selection, service, and savings across all categories. We believe our long-term target of over 10% adjusted EBITDA margin is achievable.
Q: Can you provide any insights into the impact of the WOW membership fee increase on new member sign-ups and existing member churn?
A: Bom Kim, CEO: We disclose WOW membership numbers annually. Our focus is on creating a massive value surplus for our members through various benefits. We aim to make WOW the best deal on the planet for our customers.
Q: Given your market share gains in food delivery, what competitive responses have you seen? When do you plan to reach parity with your number one peer in restaurant selections?
A: Bom Kim, CEO: We continue to add selection and focus on delivering on all three pillars: selection, service, and savings. There are no plans for M&A we are focused on internal execution in the food delivery space.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
