Q1 2021 Coupang Inc Earnings Call
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Net income.
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Good afternoon, My name is Alexander and I will be your conference operator today.
This time I would like to welcome everyone to the coupon earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time and think that for star followed by the number one on your telephone keypad.
And people would like to withdraw your question. Please please press the pound key.
Now I'd like to turn the call over to Michael <unk>, Vice President of Investor Relations you May begin your conference.
Thanks, Operator, welcome to coupons and quarterly earnings conference call for the first quarter ended March 31, 2021 and <unk>.
We used to be joined on the call today by our founder and CEO, Bob and Kim and our CFO Gaurav and on.
The following discussion including responses to your questions reflects management's views as of todays date, only we do not undertake any obligation to update or revise this information except as required by law.
Certain statements made on today's call are forward looking statements you should not place undue reliance on forward looking statements actual results may differ materially from these forward looking statements.
Please refer to today's earnings release as well as the risks and uncertainties described and our prospectus filed with the SEC on March 11, 2021, and other filings made with the SEC when available for information about factors, which could cause our actual results to differ materially from these forward looking statements.
During today's call, we will present, both GAAP and non-GAAP financial measures additional disclosures regarding these non-GAAP measures, including reconciliations of non-GAAP measures for the most comparable GAAP measures are included in our earnings release, and our filings with the SEC each of which is posted on the company's Investor Relations website.
And at IR Dot about coupon dot com.
I'll remind you that these numbers are unaudited and may be subject to change and with that let me turn the call over to Bob.
Thanks, Michael.
Since this is our first earnings call before we talk to the results I'd like to take a moment here to speak about why we're so excited about the decades long opportunity ahead of us at coupon.
To understand coupon, we begin with our mission to create a world where customers wonder how did I ever lived without coupon.
Our orientation is our most important advantage we work backwards from the customer from a vision of a world where our customers have it all jaw dropping convenience without a convenience tax hit.
And historically online shopping is force customers to choose between amazing service low prices and broad selection.
Delivery within hours isn't amazing if youre selection shrinks to that of a convenience store.
Of course, as you to pay higher fees for prices.
And we aimed to break these tradeoffs, it's only when we deliver all three and harmony Amazing service low prices and broad selection that we deliver a true wow experience for our customers and sustain long term growth for the company.
So rebuilt and end to end integrated E. Commerce system that we believe is setting a new standard for commerce globally.
And we ingrained into our culture, a willingness to be brave to take risks to make bold choices and to learn from our failures.
These values are at the core of our DNA and drive our continuous innovation today, Here's an example.
Few years ago, while almost all rocket orders were one day delivery, we learned that many customers are returning home late at night, and we're only able to use what they had ordered the following day, which meant that our one day delivery wasn't effect a two day experience. So we launched dawn and same day delivery with access to not just convenience store selection, but millions of items.
From computers to baby food customers can order seconds before midnight head off to sleep and wake up to find their items waiting at their doorsteps before seven a M via dawn delivery for.
Free it's like Christmas morning, every day, and how convenient was our service of customers could get every branded cereal and rocket, but still have to drive out to a store for milk. So we launched a nationwide online grocery service offering customers one of the largest selection of fresh goods delivered within hours at low prices as a result.
We have quickly become the leading nationwide online grocer and.
And why Couldnt returns vs effortless, and placing an order online from returns on rocket is simply open the app tap a few times and leave the item out in front of your door for pickup.
No packaging printing of a label are cumbersome scheduling with a carrier required and the moment of our drivers scans the item in front of your door at pickup we initiate the refund.
And returns within 30 days on rocket while are completely free.
We tackled and another convenient tax and e-commerce packaging waste packaging is required to protect the items during shipment, but because we control the entire process and to and we found a way to protect items without boxes today more than 75% of the deliveries we processing ship our boxes and it's simple.
<unk> with no additional cardboard, Eric Cushings or bubble wrap.
And we didn't stop there we asked can we get rid of all disposable packaging, we introduced eco bags for rocket fresh which replaces nearly all disposable packaging with completely reusable bags that are picked up by our delivery network for reuse and <unk>.
Day, our trucks at once left full and returned empty are coming back with returns from customers and eco bags for reuse, we estimate that and.
Q1 alone, we saved over 8000 tons or over 15 million pounds of packaging waste due to innovations like box us delivery and eco bags.
Breaking tradeoffs as hard work, that's why few have done it.
But it's our life's work and we're passionate about it.
And we've invested the last seven years and billions of dollars into countless internal systems algorithms and 25 million square feet of E. Commerce infrastructure today, 70% of the Korean population lives within seven miles of one of our centers.
We also manage the largest fleet of full time drivers and Korea directly employing 15000 delivery drivers, who utilize our proprietary software and custom design trucks.
And proprietary technology is critical to our ability to provide a wide selection delivery experience and free shipping are dynamic orchestration technology for example, predict and assigned the fastest and most efficient path for every order out of hundreds of millions of combinations of inventory processing truck and route.
Options.
Within seconds of and order being placed.
We are a technology company at our core and the homegrown technology that underpins our value proposition is designed to optimize our one of our clients and to and integration.
As a result of our unmatched e-commerce investment and the market and years of scaling and iteration. We remain the only major E Commerce company in Korea that delivers 365 days per year guarantee and one day delivery or faster on millions of items and keeping our promise on nearly 100% of our rocket orders.
Even on peak days before lunar new year, our Korean Thanksgiving.
And it's not just delivery speed, our unique investments and growing scale create operational efficiencies, which we can pass onto our customers and the form of lower prices. According to a recent third party study coupons prices were cheaper on average across all surveyed product categories.
And we estimate that rocket while customers saved over $200 million and shipping fees and the first quarter alone.
And the most exciting part is that we're still early and the journey all of the things that we've built are getting better every year and we plan to build more square footage of infrastructure over the next year than in any year since our inception.
Our plan is to increase our nationwide footprint by over 50% and the coming year.
We have a differentiation that will keep growing over time.
The sides growth and structure of the market is another tailwind Korea is a massive e-commerce opportunity. It's the fifth largest globally and grew at a 20% CAGR over the last five years second only to China and.
And it's the largest e-commerce opportunity not one by Amazon or Alibaba, but there was a broader play here.
Similar to China Korea is leapfrogging the offline retail revolution.
The U S has more than 10 times the offline retail footprint per capita of Korea.
We believe we are at the center of two revolutions not just the transition from offline to online, but also retail revolution that happened first offline and the U S. But is now starting online and Korea.
The market also boasts a highly connected tech savvy consumer base with high mobile usage. We believe these structural characteristics create strong tailwind for e-commerce that will lead to higher online penetration than other markets.
That makes this a broader commerce opportunity.
<unk> total commerce market is expected to exceed $530 billion by 2024, and we were still less than 5% of the total market last year.
And coupon has been rapidly gaining traction.
Growing at a multiple of the overall E Commerce segment over the last few years, even as our scale increased that trend continued in Q1 with year over year revenue growth approximately three times faster than the overall E Korean E Commerce segment.
Our cohort behavior confirms that trend as we showed in our S. One filing our annual cohorts are accelerating and size and spend each year further evidence of the engagement and loyalty that our customer experience creates.
And even our oldest cohorts are still increasing their spend indicating that we're still at the early stages of our growth cycle.
All of the benefits we offer customers are amplified by our rocket while membership fees.
Fueled by access to services like Dawn and same day delivery as well as our streaming video offer and coupon play rocket while members purchase with significantly higher frequency and across more categories than non while members.
Fundamentally couponing is not a consumer goods company.
Our delivery company or even and ecommerce company.
Coupon is added essence accompany that challenges tradeoffs and delivers wow and customers' daily lives.
We started with product e-commerce, but have since launched two new services and fresh and needs I'd like to spend a moment on the early success.
And rockets fresh we all for one of the largest selection of groceries online with the only nationwide Dawn and same day delivery service.
We also offer according to our recent and third party study the lowest fresh prices among competitive services as a result of our value proposition fresh revenue in Q1 was more than two five times the revenue and the same period last year.
<unk> started small and focused on the <unk> region, and so until the middle of 2020.
A little less than a year later, each launched and <unk> Island and is now national.
In Q1 coupon eats was the most downloaded mobile App and Korea, and the service has scaled faster than any in our history.
Despite rapid growth and 2020, our penetration on both categories remained low.
And while it's fresh and each for the first new services, we've launched since product commerce, they won't be the last word.
And we're confident about the runway ahead, and we will continue to invest aggressively and these and more offerings and the future.
Finally, we're excited to be reporting our first quarter results because we think they validate the investments we've made and speak to the continued execution along our strategy.
In Q1, we delivered total revenue growth of 74% year over year, and our quarterly active customers increased 21% to $16 million.
Keep in mind that our strong first quarter growth comes against two headwinds first a comp against a strong quarter last year that experienced large order spikes due to the COVID-19 outbreak, which started in Korea in late January and second.
<unk> operating environment that persists due to the pandemic.
Does that second point, we had 20 complete closures of operational centers due to COVID-19 at various times and Q1 and average of nearly two closures per week.
In spite of those and countless other challenges we upheld our high on time delivery rates.
A testament not only to the capabilities that we've built and our end to end integrated network and technology, but also to the dedication of our teams the lost operational bandwidth and opportunity cost were real but our team's commitment and hard work helped make our workplace safer, while keeping our promise to our customers I couldnt be prouder of our team.
<unk>.
In conclusion, we're excited to be on this journey with our shareholders and we're just getting started.
While our business will continue to evolve we won't change how we operate we will always work backwards from an ambitious goal for the customer we won't hesitate to make difficult decisions and bold investments for the long term.
We'll keep attacking tradeoffs between service selection and price to create a world where customers wonder how did I ever live without coupon.
With that I'll turn the call over to Gaurav.
Thanks, Paul.
And thank you everyone for joining today.
Before going into the quarter, let me begin with the framework, we use to manage our financial profile.
Our primary objective is to delight customers as he believed that building and deepening customer relationships and maximize long term value for all our stakeholders and customers windows $10 and shareholders.
On the financial trend that means we intend to prioritize these investments to drive long term cash flows for.
Short term profit optimization.
These investments will continue to use the same disciplined approach to deploying capital that <unk> always used.
Similar to how we develop all things like finished and seats.
When I see a sizeable market and an opportunity to create a differentiated customer and expedient. He.
And we started small investments to test and then focus on depending on the product and model building.
Confidence and customer behavior and unit economics.
Only then Luis good investments.
While we remain bullish and ambitious and pursuing new opportunities. These start small and our feedback to unbilled read into bigger and investments.
Turning to our fourth quarter results vs.
Delivered strong 74% reported revenue growth and a 63% increase on a constant currency basis.
And that game against challenging comps to last year's fourth quarter revenue benefited from the COVID-19 Lockdowns.
For context, while the accordion and E Commerce segment declined on a continental and quarter leases grew from grew total revenue net and both on quarter over quarter and 9% on a constant currency basis.
Last year February was the first full month, we saw our revenues spike due to COVID-19.
And against that comparison, our constant currency revenue growth and February March and remained in the high 50% range.
There remains uncertainty around how consumers will respond for developments independently.
Do you have any excited as the fundamentals of our business and as strong as that it'll be.
Quarterly active customers, Google and <unk> and dealing with Yang and Q1 to $60 million.
For someone who's been 10 rate remains very high and our superior Experian and continues to attract new customers and.
Revenue per active customer grew 40 pulp us and.
The high and it makes up new customers, who initially spend net and <unk>.
But we are happy to make that free as a customer cohort that fluent lab strong retention and increased spend over time.
In terms of revenue mix, despite the difficult yield OLED and comparison net revenue growth accelerated relative to five quarters, increasing 126% yet Olivia.
<unk> growth is related to revenue from coupon peet's and <unk>.
Rising two newer offerings that have continued to scale for the past year.
Gross profit increased 70% to $733 million and Q1.
Gross margin was about 40 basis points lower than last year due to the revenue mix across our offerings and additional investments.
And we are encouraged that the underlying operating leverage and the business is improving.
And with a new off things like fish and.
We continue to prioritize investments through price growth and based scale.
Also while noted how our teams continued to navigate operational challenges related to COVID-19 safety protocols and shutdowns.
Free cash Gumby, then opportunity cost of building efficiency and Netflix and the near term.
As we move past COVID-19 further scaled new offering and optimize operations and supply chain, we expect to see increasing efficiencies and meaningful gross margin expansion longer term.
Excluding equity compensation, and depreciation and operating general and administrative costs increased to 10 people and 9% of Avenue and Q1.
The increase is mainly from investments and technology to support continued prudent and management and more corporate book now.
The first quarter also includes non recurring cost and they take two and ideal and.
And the result of the higher expense growth.
<unk> EBITDA was $133 million and the first quarter for cash flow, we focus on trailing 12 months numbers, which we believe are better indicators of ongoing business performance.
Trailing 12 month operating cash flow was negative $197 million and.
And the first quarter due to the timing of and Mindy and missing and.
Payable cycles, and Q1 relative to the first quarter of last year.
Last quarter, we made and Lindsay investments, while having a strong growth make last year to offer customers a broader selection.
Meanwhile, Q1, 'twenty, two and the cash flow benefited from commissions and sales from the COVID-19 Lockdown and.
And then free replenishment lagged debate.
But our cash conversion cycle and unchanged and we expect these factors to normalize as the year progresses.
Overall, we are pleased to have added our operating momentum into 2021, and we are confident that the investments we are making and our focus on operational excellence to deliver and exceptional customer experience will continue to pay off.
I'll now turn the call back to the operator to begin the Q&A.
Thank you at this time I would like to remind everyone in order to ask a question. Please press. The star then the number one on your telephone keypad. Please.
Please limit your questions to two per person per.
We'll pause for just a moment to compile the Q&A roster.
We have your first question from <unk>.
And the Yang with JP Morgan Your line is open.
Thank you for your vote.
Our first quarter results.
Two questions.
First question is.
They are a competitive landscape.
Martin and Martin Currie, the pure gross with prayer announced too.
And the low price strategy.
And I can and cant yourselves and the coupon.
And momentum so what's the counter measure.
Your company.
And.
Should we expect any disruptive marketing contribution for the second quarter and onward.
<unk> and <unk>.
Next question.
Wondering about this one for you versus the Dnb.
<unk> sales and during the first quarter.
Can you please add color any dnb strength.
And and.
And in a product category.
Trends in terms of GMB. Thank you.
Hi, Thanks, and thanks for the question I'll take the first part of that and I think maybe to go out and you can tackle the second question.
So I think as we stressed and our opening I think the most important competitive advantage that coupon has is really our orientation. We've made we've always worked backwards from from the customer it's never been appealing to us to be reactive to competitive changes.
We always we believe that enduring long term trust with customers really comes from consistently delivering the best experience at the low price.
Every day to all customers and.
And I think that's an important context, we built.
We've invested billions of dollars.
And through our end to end network and fresh for example, we believe we are the only nationwide dawn delivery and same day delivery. We believe we have the best selection and we believe we have the lowest price because we have structural advantages and efficiencies that we've shared in part with back with our customers. So for example standard.
We have the lowest shipping free shipping threshold and fresh that we know of.
Anywhere in the world at least that we know of which is about $13 minimum or 15000.
<unk>.
That's the kind of everyday low price fast delivery.
Experience that we're delivering consistently at.
At scale.
And it's not an easy thing to do we've built hard things invested.
A lot of a lot of capital to build that unique and 10 network Thats why youre seeing the growth.
That you saw in the first quarter.
In Q1 fresh was two and a half times the size it was.
And Q1 of 2020 and.
And that's not on a small scale.
So even at large scale and youre, starting to still see very high growth.
And that's not because we reacted to any competitive.
That's not because of a countermeasure or have a short term promotion and that's because we built the infrastructure and the technology nationwide to provide the best selection. The best service at the lowest price consistently every day to everyone and we will continue to invest and that its one of them.
Russia is one of our.
New initiatives that we're really excited about we're focused on and we will invest in and the upcoming year.
Stanley on your second question.
One day versus <unk> mix change.
We continue to see strong growth and both <unk> and there is no material change and mix at this time. So we are focused on Bluetooth low this is and continue to drive initiatives and each of them. However over time, we would become agnostic new between our owned inventory and put by the selection.
We continue to optimize for total gross profit dollars.
And and the long term non union.
Nor defense and customer experience inside of value whatever that is.
More profitable from.
From a <unk>.
Thanks, Operator, we can take the next question.
Your next question comes from the line of Shah.
With Goldman Sachs. Your line is open.
Hi.
Thank you for the opportunity just had.
Two questions if I may.
First one is <unk>.
Notice that there seems to be pretty strong growth coming.
Pretty.
Strong sustained growth coming from the active users.
Just wanted to know what is what's the driver behind this.
And the second question is Theres been a couple of I think news out.
Coupon regarding it.
Overseas expansion initiatives.
Just wanted to hear from the management weather.
Weather.
And how focused.
Coupon is on the OSA suspension and if they are.
Is it.
On the e-commerce part or is it for the.
And other sort of initiatives. So just wanted to know that a bit more details around that as well. Thank you bill. Thank you. Thanks for the question Eric.
On the first part on the first question.
We think that the drivers of that active customer growth are the same drivers that you saw.
Drive the high adoption and spend growth.
That we shared and the S. One if you look at our cohort behavior or customer adoption.
Continues to accelerate continues to accelerate and we think it's really a culmination of.
And really validation of and our view of the long term strategy investments we've made.
We really believe no matter what category Youre looking at customers want all three of those pillars service selection and price and we're really excited about is that the primary driver of our growth continues to be organic word of mouth is spreading.
And you saw.
No.
That number that adoption continue to grow the vast majority of online shoppers in Q1 in Korea did not purchase rocket yet right and not purchase rocket and Q1. So we're just so excited to see that penetration go up and we're excited because.
Even if this.
And our new customers.
Have a lot of evidence that once they experience.
Net selection service and price differentiation consistently and they build that trust.
Their spend and loyalty to our services.
Gross.
And accelerates over time, and we really believe that as we add on more offerings like fresh and <unk>.
Net it creates more opportunity and more reasons for customers to two.
And to become loyal to our platform to put place their trust in us.
And so we're seeing all of those and investments really compound.
Our customer adoption and loyalty.
On the second question of overseas expansion I think it's important context I just want to make sure I think some of this will be obvious.
Too many if not for everyone on the call.
That we have a tremendous runway ahead.
We just had.
So early and our journey and our existing market. This is one of the largest and fastest growing markets and the world and Korea.
The fact that our oldest cohorts are still increasing spend at a fast rate and the fact that our most mature categories are still gaining online share growing faster than the online segments just speaks to I think.
And the overall growth being three times that of the E Commerce segment.
And even in a quarter like this quarter that comp for COVID-19 COVID-19 months last year, just I think speaks to how early we are on this journey and how much runway, we have and and the wonderful thing about having such a large and growing opportunity like the one we have in front of us and it gives us.
As us ample opportunity to continue to build more and hone our capabilities.
And when we.
Which means that when we extend those capabilities to new markets, we will have a greater chance of success and we of course.
We will examine and explore opportunities and new markets as they come to us and we will pursue them we will pursue opportunities. If we find an attractive one if we identify attractive one.
Thanks, Eric Operator, we'll take our next question.
Your next question comes from the line of Peter Milliken with Deutsche Bank. Your line is open.
Yes. Good morning, Thanks, Thanks, guys.
Firstly.
And you have any specific plans for what to do with the $3 $5 billion raised from the IPO because it seemed for many to give you and even the chance to.
And youll need and the like.
And secondly.
Logistics is really a great competitive advantage.
Can you explain any recent developments you've had maybe and that.
And fulfillment side.
And whether you think birch and for more than one e-commerce platform to link <unk> fulfillment or whether they would have settled for one.
Doing that thank you.
Hi, Thanks for your question.
I think those two questions for summer.
Related for us at least the answer will be related I think when you look at so.
I think you are well aware that we've invested billions of dollars over the last seven plus years Bill.
Building 25 million square feet of fulfillment and logistics infrastructure, not only that but a unique tech stack, just countless systems and processes and algorithms that we've invested in and we continue to invest and to optimize and and upgrade.
And we're not resting on that lead our goal is not to rest on that lead we have capital that we're going to use to extend that advantage and so in the coming year.
We're going to build more we're going to build more and are coming here than we've ever built in any year and our history.
Just and infrastructure alone set aside the technology investments, just and infrastructure e-commerce infrastructure alone.
We're going to build over 50% of what we've built and our entire history and just the coming year.
So we're really going to continue to push and extend the structural advantages.
And that we're going to build.
That we've built.
And it's not just advantages and customer experience.
<unk> that come out of that scale come out of the processes that we keep iterating on and refining and enhancing with our technology.
And those savings we're going to pass on.
And part to our customers and share with our with our partners and I think when you think about whether it's <unk> I think thats.
I think the way to think of it is who is building the infrastructure, who can build infrastructure that create structural advantages and efficiencies that.
And that can be shared back and if you don't have.
That scale that technology that infrastructure.
Actually not efficiencies, but higher costs.
And I think that's the way, we're we're continuing to build and then advantage and experience and cost the best experience and lowest cost will also continue to invest in and new offerings. As we mentioned, we're going to and we're excited about the progress, we're making and fresh and eat and and they won't be the last investor.
And we.
And they won't be the last new offerings.
We're constantly testing more opportunities and will.
We will increase our investments and as opportunities gained traction.
Thank you operator, thank you very much.
Your next question comes from the line of so Ian Chin with Credit Suisse. Your line is open.
Hi, gentlemen, and thank you for a day opportunity.
Two questions.
Number one on Euro Peters.
How should we think about.
And the hour every day.
And the comparing with all day marketplace I think hernia.
And then also how fast can this call along with the expansion of E Jets delivery services.
Second question on your customer base can you give us day more color like in terms of like the age groups are uncertain and the <unk>.
Area so.
I'd like to think day, where we can see the upside on day from population and Korea, and then our site I would like to note that the percentage of like.
And we will kick off day membership from the Susquehanna.
And also if you can provide any target please.
Can you bucket.
Sorry for that okay, great. Thank you. Thank.
Thank you that's a lot of.
So let me try to tackle.
And hopefully I'll try to cover as much ground as I can so just to give you a sense of the opportunity.
You asked about the age groups and the demographics.
This is how we're seeing we're still underpenetrated and almost every age category. You can think of every demographic. So in Q1 at least according to the sources that we found there were $37 million.
<unk> online and Korea over $37 million and Q1.
We had $16 million, which is of course, a big jump from what we had a year over year and that continues to grow and you know from our cohort.
Data that we share that once they start adopting.
Our.
Services that youll see the spend grow every year.
And accelerate and so we're still very early and we're excited to see us growing and every age group and gender demographic you can think of.
Because we believe that the vast majority of online shoppers should be shopping on couponing and and.
And shopping on rocket at.
At the end of the day and so we still have a lot of.
A lot of runway and a lot of growth that we have a lot of adoption that we have to still target and you mentioned some services were always because we are trying to create more.
Chances and more contact points, so that people can discover our services and people come into our services. There are so many different channels. Some will start low and rockets and will start on EPS. So I will start on market and go to fresh.
We're launching and we of course talked a lot about fresh and needs, but at any given point right. Now we have dozens of services of new experiments that we are testing if not.
100 that we're testing and we're experimenting we're learning we're iterating.
<unk>.
And we will continue to.
To improve enhance and invest more.
And so that we can create more opportunities for us to engage customers and get them started.
On that journey with us.
Yes.
Thank you.
Thank you. Thank you so much.
And our next question comes from the line of James Lee with Mizuho. Your line is open.
And taking my questions. My first question for Rob can you talk about maybe revenue growth expectation for second quarter and FY 'twenty one.
As expected a deceleration and pretty consistent with your prior view and it looks like you guys did a good job on EBITDA can you also talk about your expectations for the same period as well for <unk>.
Bombs, specifically, maybe some follow up question.
Competition, given the potential capital raising by one of your major competitor that being neighbor and also potential increased competition can you talk about maybe the difficulty for someone to replicate your end to end network here and.
And if they decide to increase the competition, maybe replicate your network how do you plan to respond to.
To that.
And competitive pressure here.
Thank you for the question.
And.
<unk> nine mentioned and linear.
Risks and <unk>.
Good day in March and we saw the yodel and unit.
<unk>.
After COVID-19 after.
After COVID-19 hit.
<unk> and 'twenty.
And.
Since that time the comps we have seen is a.
Growth and high fees and constant currency.
We're going to be and hiseq fees and.
And U S dollars.
And.
There is oil and uncertainty going forward.
But.
And thats weighted for VR.
What we have seen so far.
Yes, I think just to.
Touch a little bit on the.
On the profitability side.
Youll continue to see.
In the near term theirs, and theres going to be fluctuations and gross margin because of revenue mix across our different services things that are growing at different rates and also with new investments that we make.
But I think in the long run.
We're.
The momentum you see and our business I think Gaurav, just mentioned that our February and March.
February and March for example, even against fully comps COVID-19 numbers was growing in the high <unk>, we see strong momentum of course, there's uncertainty.
Related to how the year progresses, how it how the COVID-19 pandemic progresses, but there.
There is strong momentum that we've built because we made choices in the past, we invest made investments and the past.
That and maximized or sought to maximize long term cash flow over short term profit and we're fortunate to be and are positioned to do that.
We are still fortunate to be in that position to be stewards of capital for very long term investors for our employees our customers who all.
Turned to US we believe we are building a generational company, we're making investments.
And that are targeting decades long opportunities and we have a chance to build a groundbreaking customer experienced a break tradeoffs.
And we are going to continue to make investments whenever we see attractive opportunities to maximize long term cash flow.
Over short term profit optimization, we will always choose long term cash flows.
And that's our orientation, that's where we'll continue to do.
And similarly in that vein.
And I think what gives us additional confidence to do this.
Is that.
Underlying.
Operating leverage.
That we see and our business is improving.
Especially in our most mature investments and.
And so that gives us a lot of confidence of that again, if we make the right decisions for the customer and for the long term.
They really do.
I think.
We are headed and the wide direction of providing the best experience at the lowest cost.
I think your second question was around competition.
And again it doesn't change our strategy.
It's not as though we're just starting to make investments we've been making investments over the last decade, especially the last seven years.
In this end to end integration.
And our fulfillment logistics infrastructure that now.
Blanket to the market and technology that really is driving.
The scale and efficiency here and we're going to invest we have invested in what we think is unprecedented scale and e-commerce technology and infrastructure and we believe will be unmatched.
And our future investments as well as I mentioned, just the next coming year alone.
Just on the fulfillment logistics infrastructure side not to mention the technology side.
And we're going to build with <unk>.
Plans to build over 50% of what we built over the entire history of our company and the coming years. So.
We are going to.
We're going to be as aggressive if not more.
<unk>.
And as aggressive as we've been and our past.
Thanks, Chimps, operator, we'll take our next question.
We will now take our last question from the line of John <unk> with Citi. Your line is open.
Thank you. Thank you for the percentage patient and the opportunity to ask questions.
My first question is about operating cash flow and.
First quarter operating cash flow came down to negative territory from deposits to C. U R E Gov.
And at first glance it looks like it was related to the increase of inventory level.
Net loss for I would like to understand.
And the reasons.
Or is it for us related to the increase in <unk> mix of grocery or rocket fresh and the second question is for fulfillment service recently couponing has started to profile within the services and a three peat sellers.
To understand how many surveys from <unk> so far.
Or how is the feedback wise and how much the monetization opportunity you are expecting thank you.
Thank you John for the question.
So.
Similarly on our operating cash flow.
And then a mood changes to the fundamentals of our business.
The operating cash flow and negative.
Similarly.
The timing of inventory procurement and accounts payable and these we expect it to normalize.
And in the foreseeable future.
Fundamentals remain strong for.
For both our inventory is down.
So the margin looking on that.
Yes, I think Thats, yes, thats right.
And the fulfillment services question.
I think a way to think of it the way we think about this.
Is that we are building structural advantages and efficiencies, whether it's serving whether it's retail or weather.
And then we can share back with our customers and with our suppliers.
I think as you mentioned fulfillment services with all the things that with any one of our new initiatives, we always start.
And at a small scale to test iterate to learn.
I don't know if you know the background for East for example, we started and just one part of sold coming out and region and.
And we were for through much of last year for middle of last year. It was still primarily focused on just parts.
But coming out and regional sold.
And now its national because we were able to build the capabilities.
And to get confidence that we could provide the best experience again at the lowest cost and Thats. The same way, we think about our.
Our rocket experienced that we weather weather.
It's the suppliers or different parties that we partners that we work with.
What we build for retail should help non retail we are building scale.
Structural advantages and efficiencies.
And that we can share back with our customers with lower prices free shipping free returns and for suppliers.
Enhanced.
Enhanced and hence growth at lower cost so that's the scale and theyre going.
And so many different ways for our suppliers to engage with us and different services that we can create out of that but the.
<unk> of all of that is still the same it's still R. R e-commerce infrastructure and technology and our E Commerce scale.
Our rocket scale that allows us to build structural advantages and efficiencies that will allow us to create the best experience for their customers.
At the lowest cost, which means ultimately the lowest price for.
And hopefully that gives you.
And we're going to have lots of different opportunities different experiments on that foundation that will continue.
Two invest timing.
Thanks, Sean.
And now at sort of Nikola back over to you.
Thank you everyone for joining us today and appreciate the interest.
Operator.
And the call. Thank you. Thank you.
This concludes today's conference call you may now disconnect.
And then.
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