Q1 2024 Coupang Inc Earnings Call
[music].
Hello, everyone. My name is Christie and I will be your conference operator today at this time I would like to welcome everyone to the coupon 2024 first quarter earnings Conference call.
Operator: Hello, everyone. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2024 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Operator: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number five on your telephone keypad. If you would like to withdraw your question, press star and the number five once again. Now, I'd like to turn the call over to Mike Parker, Vice President of Investor Relations. You may begin your conference.
Operator: If you would like to ask a question. During this time simply press star followed by the number five on your telephone keypad. If you like to withdraw your question Press Star and the number five once again now I'd like to turn the call over to Mike Berger Vice President of Investor Relations you May begin your conference.
Michael Parker: Thanks, operator.
Michael Parker: Operator, welcome everyone to Coupang's first quarter 2024 earnings conference call. I'm pleased to be joined on the call today by our founder and CEO, Bom Kim, and our CFO, Gaurav Anand.
Michael Parker: Everyone to coupons first quarter 2024 earnings conference call I.
Michael Parker: I am pleased to be joining the call today by our founder and CEO, Bob Kim and our CFO, who are going on.
Michael Parker: The following discussion, including responses to your questions, reflects management's views as of today 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 include forward-looking statements, and actual results may differ materially.
Michael Parker: The following discussion including responses to your questions reflects management's views as of today's date only.
Michael Parker: We do not undertake any obligation to update or revise this information except as required by law.
Michael Parker: Certain statements made on today's call include forward looking statements actual results may differ materially additional information.
Michael Parker: Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During today's call, we may present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures, are included in our earnings release, our slides accompanying this webcast, and our SEC filings, which are posted on the company's investor relations website. Now, I'll turn the call over to Bom.
Michael Parker: Information about factors that could potentially impact our financial results.
Bom: Quoted in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.
Bom: During today's call, we may present, both GAAP and non-GAAP financial measures additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures are included in our earnings release, our slides accompanying this webcast and our SEC filings, which are posted on the company's investor relations.
Bom: Web site.
Michael Parker: And now I will turn the call over to Bob.
Bom: Thanks, everyone for joining us today before we dive in here are five takeaways from a strong start to 2024 first we continue to deliver results because we focus on what matters most customer experience and operational excellence second we're still single digit share of a massive retail <unk>.
Bom Suk Kim: Thank you everyone for joining us today. Before we dive in, here are five takeaways from Strong Start to 2024. First, we continue to deliver results because we focus on what matters most customer experience and operational efficiency. Second, we're still a single-digit share of a massive retail opportunity in Korea and an even smaller share of Taiwan. Third, newer services like Rocket Fresh and Fulfillment and Logistics by Coupang, or FLC, are gaining momentum. Offerings like these enable us to expand selection on Rocket exponentially for customers and provide critical support to suppliers, particularly small and medium enterprises or SMEs, by giving them access to our Rocket infrastructure and network.
Bom Suk Kim: <unk> Korea, and an even smaller share of Taiwan's third newer services like rocket fresh and fulfillment and logistics by coupon or F. L. C are gaining momentum offerings like these enable us to expand selection on walk it exponentially for customers and provide critical support supplier.
Bom Suk Kim: Particularly small and medium enterprises rash that needs by giving them access to our market infrastructure.
Bom Suk Kim: Yeah.
Bom Suk Kim: Fourth, our developing offerings are making significant strides, meeting our milestones, and in many cases, performing ahead of plan. Finally, we continue to invest in infrastructure and wow benefits to raise the bar again and again for what customers should expect as their standard, and we will be relentless in our pursuit of new moments of wow for customers across selection, price, and service. Now, some numbers to highlight our performance at the start of the year.
Bom Suk Kim: Fourth our developing offerings are making significant strides meeting our milestones and in many cases performing ahead of plan.
Bom Suk Kim: Finally, we continue to invest in infrastructure and while benefits to raise the bar again and again for what customers should expect as their standard experience will be relentless in our pursuit of new moments of Wow, where customers across selection price and service.
Bom Suk Kim: Now some numbers to highlight our performance at the start of the year.
Bom Suk Kim: In Q1, our revenues increased 28% year-over-year in constant currency, or 23% excluding far-fetch, which we began consolidating at the end of January. And adjusting for the FLC accounting change we made beginning in Q2 of last year, these Q1 revenue growth rates would have been over 10 percentage points higher. That robust growth was primarily driven by the increase in spend of all of our existing customer cohorts, even our oldest. Our product commerce active customers also grew 16% year over year. Newer customers naturally spend less, but their spend levels have followed the same trajectory as older customers over time.
Bom Suk Kim: In Q1, our revenues increased 28% year over year in constant currency or 23%, excluding farfetch, which we began consolidating at the end of January and adjusting for the <unk> accounting change we made beginning in Q2 of last year.
Bom Suk Kim: These Q1 revenue growth rates would have been over 10 percentage points higher.
Bom Suk Kim: That robust growth was primarily driven by the increase in spend all of our existing customer cohorts, even our oldest.
Bom Suk Kim: Our product commerce active customers also grew 16% year over year newer customers naturally spend less but their spend levels have followed the same trajectory of older customers over time.
Bom Suk Kim: While new active customers were not the primary driver of this past quarter's revenue growth, the rising number of new active customers should contribute more to growth for the business in the years ahead. The growth of our fresh offering was also notable this past quarter, growing 70% year-over-year in units. Customers are attracted to what we believe is the widest assortment of fresh goods in the market, low prices, high quality, and a free shipping threshold of just $11.
Bom Suk Kim: While new active customers were not the primary driver of this past quarters revenue growth the rising number of new active customers should contribute more to growth for the business in the years ahead.
Bom Suk Kim: The growth of our fresh offering was also notable this past quarter growing 70% year over year and units sold customers are attracted to what we believe is the widest assortment of fresh goods in the market low prices high quality and a free shipping threshold of just $11.
Bom Suk Kim: This is the best free shipping program for online groceries that we know of in the world. And to top it off, we guarantee that your order placed by midnight will be at your door before 7 a.m. in the morning.
Bom Suk Kim: This is the best free shipping program for online grocery that we know of in the world.
Bom Suk Kim: And to top it all.
Bom Suk Kim: We guarantee that your order placed by midnight will be in front of your door before seven a M. In the morning.
Bom Suk Kim: We're also proud that Fresh provided critical support to farmers and fishers by increasing the inventory we purchased directly from them, while also delivering significant savings in both time and money to customers. We continue to see impressive growth in FLC, which recorded a 130% increase in units sold year over year. As a result, the assortment available to customers with the convenience of overnight, same-day, or next-day delivery is expanding with each passing day.
Bom Suk Kim: We're also proud that fresh provided critical support to farmers and fishers by increasing the inventory we purchased directly from them. While also delivering significant savings in both time and money to customers.
Bom Suk Kim: We continue to see impressive growth in F. L C, which recorded a 130% increase in units sold year over year.
Bom Suk Kim: As a result, the assortment available to customers with the convenience of overnight same day or next day delivery is expanding with each passing day.
Bom Suk Kim: And SLC is providing critical support to thousands of merchants were able to grow faster by selling their products with rocket service levels without investing in prohibitively expensive infrastructure and technology.
Bom Suk Kim: And FLC is providing critical support to thousands of merchants who are able to grow faster by selling their products with rocket service levels without investing in prohibitively expensive infrastructure and technology. FLC sellers, over 80% of whom are SMEs, have seen their sales on average more than double within 90 days of converting to FLC. And on developing offerings, we've been pleased with our execution and progress. We've consolidated Farfetch into our developing offerings this quarter.
Bom Suk Kim: L C sellers over 80% of whom are Smes have seen their sales on average more than double within 90 days of converting to F. L. C.
Bom Suk Kim: And on developing offerings, we've been pleased with our execution and progress we've consolidated farfetch into our developing offerings. Starting this quarter. Our journey at Farfetch is just beginning and the team is focused on generating close to positive adjusted EBITDA on a run rate basis by the end of the calendar year.
Bom Suk Kim: Our journey at Farfetch is just beginning, and the team is focused on generating close to positive adjusted EBITDA on a run rate basis by the end of the calendar year. On EATS, customer adoption is accelerating. In the month of March, when EATS launched its free delivery program, EATS recorded the largest year over year growth. We continue to make progress in Taiwan, where we're working to break meaningful trade-offs for customers. We're also providing access to a wide Korean selection and helping over 21,000 Korean suppliers export their products to the Taiwanese market over the last year.
Bom Suk Kim: On each customer adoption is accelerating in the month of March when each launched its free delivery program. Each recorded the largest year over year increase in customers and orders in its history.
Bom Suk Kim: We continue to make progress in Taiwan, where we're working to break meaningful tradeoffs for customers.
Bom Suk Kim: We're also providing access to wide Korean selection, helping over 21000 Korean suppliers export their products to the Taiwan market over the last year. It's early days in Taiwan, but we are as excited as ever about its potential.
Bom Suk Kim: It's early days in Taiwan, but we're as excited as ever about its potential. While we're further along in Korea, it's important to note that we're still just a single-digit share of a massive and highly fragmented $560 billion commerce opportunity. New Chinese commerce entrants remind us that barriers to entry are low, and consumers can switch shopping options faster in retail than in almost any other industry, within seconds and with a swipe of the finger.
Bom Suk Kim: While we're further along in Korea, it's important to note that we're still just single digit share of a massive and highly fragmented 560 billion dollar commerce opportunity.
Bom Suk Kim: China Commerce entrants reminders that barriers to entry are low and consumers can switch shopping options faster in retail than in almost any other industry within seconds and with the swipe of the finger.
Bom Suk Kim: Customers cast a new vote with every purchase they make and will not hesitate to spend their money at another venue they deem to be better. We have to win their vote each and every time by offering them the best selection, price, and service.
Bom Suk Kim: Customers cast a new vote with every purchase they make and will not hesitate to spend their money at another venue they deemed to be better we have to win their vote. Each and every time by offering them. The best selection price and service and we strive relentlessly to make that value proposition better.
Bom Suk Kim: And we strive relentlessly to make that value proposition better every day. To that end, we plan to continue investing billions of dollars in CapEx over the next several years to strengthen our fulfillment and logistics infrastructure. We aim to increase the speed of delivery across the market and make free delivery available to even the most remote corners of Korea, including secluded islands and mountain settlements that currently do not have access to our fastest delivery options.
Bom Suk Kim: Everyday.
Bom Suk Kim: To that end, we plan to continue investing billions of dollars in capex over the next several years to strengthen our fulfillment and logistics infrastructure. We aim to increase the speed of delivery across the market and make free delivery available to even the most remote corners of Korea, including secluded Islands and mountain settlements that current.
Bom Suk Kim: We do not have access to our fastest delivery options.
Bom Suk Kim: That investment in infrastructure will help Korean manufacturers and SMEs get even better service levels for their products on-line. We're also deepening our commitment to Korean manufacturing. We plan to increase the amount of goods that we purchase and sell that are manufactured in Korea from $13 billion in 2023 to over $16 billion in 2024. Last year, we provided over $3 billion in WoW membership benefits, including free delivery and return services and WoW-exclusive discounts.
Bom Suk Kim: That investment in infrastructure will help Korean manufacturers and Smbs getting even better service levels for their products on rocket.
Bom Suk Kim: We're also deepening our commitment to Korean manufacturing, we plan to increase the amount of goods that we purchase and sell that are manufactured in Korea from $13 billion in 2023 to over $16 billion in 2024.
Bom Suk Kim: Last year, we provided over $3 billion, and while membership benefits, including free delivery and return services and Wow exclusive discounts. This year, we expect to expand those membership benefits, even further providing over $4 billion in wild related benefits for our customers in 2024.
Bom Suk Kim: This year, we expect to expand those membership benefits even further, providing over $4 billion in WoW-related benefits for customers in 2024. This includes free access to exciting sporting events we've created, like the MLB season opening games we hosted between the Dodgers and Padres in Korea in March, as well as the world-class European football matches we bring live to fans in Korea each summer. We also recently began providing unlimited free delivery for Eats4Wow members across Korea to eliminate one of the biggest recurring costs for consumers in food delivery.
Bom Suk Kim: This includes free access to exciting sporting events, we've created like the MLB season opening games, we hosted between the Dodgers and Padre in Korea in March as well as the World class European football matches, we bring alive to fans in Korea each summer.
Bom Suk Kim: We also recently began providing unlimited free delivery on each for while members across Korea to eliminate one of the biggest recurring costs for consumers and food delivery.
Bom Suk Kim: 2024 will be an important year to strengthen our experience for customers and to expand programs that provide vital support to our manufacturing and SME partners. We remain as energized as ever to transform the lives of every customer and stakeholder we touch, to create a world where everyone wonders, "How did I ever live without Coupang?" Now, I'll turn the call over to Gaurav to review our results in more detail.
Bom Suk Kim: <unk> 2024 will be an important year to strengthen our experience for customers and to expand programs that provide vital support to our manufacturing and SME partners.
Gaurav: We remain as energized as ever to transform the lives of every customer and stakeholder, we touch to create a world where everyone wonders how did I ever live without coupon.
Bom Suk Kim: Now I'll turn the call over to Gaurav to review our results in more detail.
Gaurav: Thanks, Bob.
Gaurav Anand: Q1 was a strong start to the year as we saw sustained momentum continue across our business. We again delivered durable growth in customers, revenue, and profit, driven by our focus on providing even greater value to our customers. Before I go through the numbers in detail, I want to remind everyone that the acquisition of Parfetch was completed earlier this year at the end of January. As a result, two months of Farfetch financials are now included in a quarterly consolidated result and in a developing offerings segment with no adjustments made to any period prior to the date of acquisition.
Gaurav: Q1 was a strong start to the year.
Gaurav Anand: As these are sustained momentum continue across our business we.
Gaurav Anand: We again delivered beautiful both in customers revenue and profit.
Gaurav Anand: Driven by our focus on providing even greater value while customer.
Gaurav Anand: Before I go through the numbers in detail I want to remind everyone that the acquisition of <unk> was completed earlier this year at the end of January.
Gaurav Anand: As a result, two months of audit finance yields are now.
Gaurav Anand: And our quarterly consolidated results and in our developing offering segment with no adjustments made to any period prior to the date of acquisition.
Gaurav Anand: In Q1, our total net revenues look when the peoples and deal with year or 18%, excluding the impact of package.
Gaurav Anand: In Q1, our total net revenues grew 23% year-over-year, or 18%, excluding the impact of part-time. On a constant currency basis, total net revenues grew 28% or 23% excluding far-fetched returns. Adjusted for the FLC accounting change, the growth would have been 10 percentage points higher than the 23% constant currency growth rate excluding part-time. The adjustment is a result of the change in FLC revenue accounting last year from gross to net. Product commerce segment revenues grew 15% year over year in Q1 on a reported basis, or 20% in constant currency.
Gaurav Anand: On a constant currency basis total net revenues grew 28% or 20% excluding farfetch.
Gaurav Anand: While the FASB accounting change the growth would have been 10 percentage points higher than liquidity peoples and constant currency growth rate excluding pockets.
Gaurav Anand: The adjustment is a result of the change in the business revenue accounting last year from <unk>.
Gaurav Anand: Verdict Commerce segment revenue grew 15% year over year in Q1 on a reported basis or 20% in constant currency.
Gaurav Anand: Adjusted for the FLC accounting change, the growth rates would have been over 10 percentage points higher. Our growth rate continues to compound at high multiples of the growth rate of total retail spend in Korea, which grew at 2% this quarter.
Gaurav Anand: This simple the SLC accounting change the growth rate would have been over 10 percentage points higher.
Gaurav Anand: Our growth rate continues to compound at high multiples of the growth rate of the quarterly there's been in Korea.
Gaurav Anand: To close in this quarter.
Gaurav Anand: We all observed increasing spend but all of our cohorts, even our oldest along with a 16% year over year increase.
Gaurav Anand: We observed increasing spend by all of our cohorts, even our oldest, along with a 16% year over year increase in product commerce active customers, as we added 2.9 million active customers over the last year. This demonstrates the tremendous value that customers have come to expect from Coupang, as we continue to make significant investments to provide the broader selection, the fastest, most reliable delivery at the lowest price. Product commerce segment revenues per active customers grew 3% year-over-year in constant currency.
Gaurav Anand: <unk> almost active customers as we added $2 9 million active customers over the last year.
Gaurav Anand: This demonstrates the tremendous value that the most.
Gaurav Anand: <unk> come to expect from <unk>.
Gaurav Anand: As we continue to make significant investments to provide the broadest selection the fastest most reliable delivery at the lowest prices.
Gaurav Anand: Vernon Commerce segment revenues that active customers grew people's <unk> in constant currency.
Gaurav Anand: This includes the short-term dilutive impact of the large number of new product commerce active customers we have added over the last few quarters, as well as the impact of the FSC accounting change. We believe a large amount of future growth will continue to come from the spend of newer customers converging to the much higher spends of the older customer cohort.
Gaurav Anand: This includes the short term dilutive impact of large number of Newburgh, almost active customers. We have added over the last few quarters as well as the impact of FSC accounting change.
Gaurav Anand: We believe a large amount of user growth will continue to come from the spend of newer customers the emerging to the much higher spend of the older customer cohorts.
Gaurav Anand: We continue to see exciting momentum building in our developing offerings segment, where segment revenues grew over 330% year over year, or 134% excluding part-time. On a constant currency basis, developing offerings segment revenues grew over 340%, or 143% excluding part-time. Q1 produced a record $1.9 billion in gross profit, with a gross margin of 27.1%, excluding Farfetch. We delivered $1.8 billion in gross profit with a margin of 26.5%, a margin improvement of 200 basis points year over year and 90 basis points quarter over quarter.
Gaurav Anand: We continue to see exciting momentum building in our developing all things segment, where segment revenues grew over 330% the other way the <unk> hundred and <unk> excluding farfetched.
Gaurav Anand: On a constant currency basis developing offerings segment revenues grew over 340 person or 143% excluding pockets.
Gaurav Anand: You went produced a record $1 9 billion and gross profit with a gross margin of 27, 1%.
Gaurav Anand: Excluding farfetch redelivered, one $8 billion in gross profit with a Mazda ocwen be six type of thing.
Gaurav Anand: Margin improvement of 200 basis points, the other would be up.
Gaurav Anand: And 90 basis points quarter over quarter.
Gaurav Anand: <unk> Commerce lost profit increase would be 1% deal with year and gross profit margin increased 100 basis points quarter over quarter.
Gaurav Anand: Product Commerce gross profit increased 31% year over year, and gross profit margin increased 100 basis points quarter over quarter to 28.3%. Our margin improvement continues to be driven by investments in process, technology, and automation, as well as further optimization in our supply chain and the scaling of margin-attritive offerings, including ads and affiliate services. OG&A expense as a percentage of revenue increased 390 basis points this quarter versus last year.
Gaurav Anand: The eight people thing.
Gaurav Anand: Our margin improvement continues to be driven by investment in process technology and automation as well as further optimization in our supply chain and the scaling of margin accretive offering including an LLC.
Gaurav Anand: <unk> expense as a percentage of revenue increased 390 basis points this quarter, what did last year.
Gaurav Anand: This change was primarily due to the inclusion of Farfetch, whose expenses also included $58 million of one-time costs this quarter relating to the acquisition and subsequent restructuring activities. We generated $59 million of income before income taxes and $5 million in net income attributable to Coupang stockholders this quarter. This resulted in diluted earnings per share of 0 cents.
Gaurav Anand: This gain was primarily due to the inclusion of phosphates, whose expenses also include $58 million of one time cost this quarter relating to the acquisition and subsequent.
Gaurav Anand: Restructuring activities.
Gaurav Anand: We generated $59 million of income before income taxes, and $5 million and net income attributable to coupon stockholders this quarter.
Gaurav Anand: This resulted in diluted earnings per share of Zillow savings.
Gaurav Anand: Excluding Farfetch, net income attributable to Coupang's stockholders was $98 million for the quarter, and diluted earnings per share would have been $0.05. Our consolidated operations generated $281 million of adjusted EBITDA this quarter. This does not include the one-time costs relating to the acquisition and subsequent restructuring activities, in part.
Gaurav Anand: Excluding farfetch net income attributable to <unk> stockholders was $98 million for the quarter and diluted earnings per share would have been <unk>.
Gaurav Anand: Our consolidated operation generated $281 million of adjusted EBITDA This quarter.
Gaurav Anand: Does not include the one time costs relating to the acquisition and subsequently sector activities and Farfetch.
Gaurav Anand: The Q1 adjusted EBITDA margin was three 9%, which was favorably impacted 30 basis points from the accounting change in FNC.
Gaurav Anand: The Q1 adjusted EBITDA margin was 3.9%, which was favorably impacted by 30 basis points from the accounting change in FLCS. Adjusted EBITDA over the trailing 12 months was $1.1 billion, with a margin of 4.3% this quarter, representing a 100 basis points improvement year over year. Excluding Farfetch, we recorded $312 million of adjusted EBITDA this quarter and $1.1 billion over the trailing 12 months. This resulted in a trailing 12-month adjusted EBITDA margin of 4.5%, a 110 basis point improvement year-over-year.
Gaurav Anand: Adjusted EBITDA over the trailing 12 months was $1 $1 billion with a margin of four 3% this quarter, representing a 100 basis point improvement yoga with yield.
Gaurav Anand: Excluding parfaits, we recorded $312 million of adjusted EBITDA, This quarter and $1 $1 billion over the trailing 12 months.
Gaurav Anand: This resulted in a trailing 12 month adjusted EBITDA margin of $4 five person.
Gaurav Anand: And then basis point improvement year over year.
Gaurav Anand: We believe we are still far from realizing the full margin potential of our business and are confident in our ability to continue expanding consolidated margins on an annual basis this year. The product commerce segment delivered $467 million of adjusted EBITDA, an increase of 62% year-over-year and a margin of 7.2%. This represents a margin expansion of 210 basis points over the last year and includes the 60 basis points benefit from the FLC accounting chain. The growth in margin continues to be driven by further operational efficiencies, improvements from supply chain optimization, and contribution from the growth of our higher margin categories and offerings.
Gaurav Anand: We believe we are still far from realizing the full margin potential of our business and are confident in our ability to continue expanding consolidated margins on an annual basis. This year.
Gaurav Anand: Direct commerce segment delivered $467 million of adjusted EBITDA, an increase of 62% year over year and a margin of seven 2%.
Gaurav Anand: This represents a margin expansion of 210 basis points over the last year and includes a 60 basis point benefit.
Gaurav Anand: The FASB accounting change.
Gaurav Anand: The growth in margin continues to be driven by further operational efficiencies improvements from our pricing optimization and contribution from the growth of our higher margin categories and offerings.
Gaurav Anand: Our developing offerings segment's adjusted EBITDA loss was $186 million, increasing $139 million year-over-year. This was driven by our increased level of investment in these early stage opportunities as well as a $31 million impact from the consolidation of our. Last quarter, we provided guidance that we anticipate incurring adjusted EBITDA losses in developing offerings of approximately $650 million in 2024, excluding part-time. With the addition of Farfetch to developing offerings, we now estimate that the 2024 adjusted EBITDA losses for developing offerings will be around $750 million.
Gaurav Anand: Our developing offerings segment adjusted EBITDA loss was <unk> hundred $86 million, increasing $139 million the other one a year.
Gaurav Anand: This was driven by our increased level of investment in the early stage opportunities as well as.
Gaurav Anand: The $1 million impact from the consolidation of Farfetch.
Gaurav Anand: Last quarter, we provided guidance that we anticipate and getting adjusted EBITDA losses in developing offerings of approximately $650 million in 2024, excluding perfect.
Gaurav Anand: With the addition of Farfetch in developing offerings, we now estimate that the consequent report adjusted EBITDA losses are developing operating will be around 10% in <unk>.
Gaurav Anand: $3 million.
Gaurav Anand: We also anticipate that.
Gaurav Anand: We also anticipate that Parfetch will reach close to a positive adjusted EBITDA run rate by the end of the calendar year. We ended the first quarter with roughly $5.6 billion in cash, increasing 35% over last year. This was a result of generating 2.4 billion dollars in operating cash flow and 1.5 billion dollars of free cash flow over the trailing 12 months. This quarter, we saw an increase in effective income tax rates driven by the consolidation of free tax losses, in part.
Gaurav Anand: Our basement close to positive adjusted EBITDA run rate by the end of the calendar year.
Gaurav Anand: We ended the first quarter was roughly $5 6 billion in cash increasing colby pipe with them over the last year.
Gaurav Anand: This was a result of delivering $2 4 billion in operating cash flow and $1 5 billion of pick a slow order trailing 12 months.
Gaurav Anand: This quarter, we saw an increase in effective income tax rate driven by consolidation of tax losses and buffet.
Gaurav Anand: With the inclusion of our Fed, we now anticipate we'll experience a temporarily high book tax rate between 95% to 100% in 2024. This is just an accounting tax rate, as we expect our cash tax obligations to be closer to 20 to 25 percent, excluding far-fetched losses. Over the long term, we expect to normalize to an effective tax rate closer to roughly 27%. Shortly after quarter-end, we repurchased $178 million of Class A common stock from one of our early-stage investors. We are continually evaluating our capital allocation strategy, assessing various opportunities, including shared eco-chases, to generate long-term shareholder value. We are now ready to begin the Q&A.
Gaurav Anand: With the inclusion of Opex. We now anticipate will experience has been pleasantly high book tax rate between 19, 5% to 100% in granite only four.
Gaurav Anand: This is just an accounting tax rate as we expect our cash tax obligations to be closer to 20% to 25% excluding profit losses.
Gaurav Anand: Over the long term, we expect a normalized effective tax rate closer to roughly 27%.
Gaurav Anand: Shortly after quarter end, we repurchased $178 million of class a common stock from one of our early stage in this stuff.
Gaurav Anand: We are continually evaluating our capital allocation strategy assessing various opportunities, including share repurchases will generate long term shareholder value.
Speaker Change: Operator, we're now ready to begin the Q&A.
Gaurav Anand: Okay.
Operator: At this time, I would like to remind everyone that in order to ask a question, press star and then the number five on your telephone keypad. If you would like to withdraw your question, press star and the number five once again.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number five on your telephone keypad.
Operator: He would like to withdraw your question press Star and the number five once again.
Operator: Please limit your questions two per person.
Operator: Please limit your questions to two per person. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Eric Cha, your line.
Speaker Change: We'll pause for just a moment to compile the Q&A roster.
Operator: Our first question comes from the line of Eric Chang.
Minuh Cha: Your line is open.
Minuh Cha: Thank you for the opportunity. First off, I just wanted to say the guidance on FAR-FETCH is much appreciated. It should be very helpful for the investment community. On that note, my first question is, could you maybe elaborate on the long-term strategy for FAR-FETCH? We understand that the initial step is to take a positive on a run-made basis by year-end, but we just wanted to see if we could get more details on your long-term strategy and what sort of opportunities you see with the platform.
Minuh Cha: Thank you for the opportunity first off just wanted to say the guidance on Farfetch as much appreciate it should be very helpful for the investment community.
Minuh Cha: On that note. My first question is could you maybe elaborate on the long term strategy on Farfetch.
Minuh Cha: We understand that the initial step is to take your positive adjusted EBITDA on a run rate basis by year end.
Minuh Cha: But just wanted to see if we can get more details on your long term strategy and what sort of opportunities you see.
Bom Suk Kim: The second question is about Taiwan. Will Taiwan eventually mimic the end-to-end logistics strategy it has done in Korea, as this would be the key differentiating factor? And are there any Taiwan-specific factors that impact or dictate the level of CAPEX if Coupang does decide to build out its own logistics network there? Thank you.
Minuh Cha: With the platform.
Bom Suk Kim: Second question is around Taiwan.
Bom Suk Kim: Taiwan eventually mimic be end to end logistics strategy and is done in Korea.
Bom Suk Kim: This would be the key differentiating factor.
Bom Suk Kim: And are there any one specific factors that impacts our dictate the level of Capex if coupon.
Bom Suk Kim: Does decide to build out the selling and logistic network there.
Bom Suk Kim: You.
Bom Suk Kim: Thanks for your questions. On Farfetch, we're very early in our journey. We just completed our acquisition at the end of January, and our ruthless priority at this moment is to stabilize Farfetch without compromising our level of service and value to customers. As we've mentioned, we've begun executing on that plan, and we anticipate that Farfetch will achieve close to positive adjusted EBITDA on a run rate basis by the end of this calendar year.
Speaker Change: Alright, thanks for your questions.
Bom Suk Kim: On Farfetch, we're very early in our journey.
Bom Suk Kim: We just completed our acquisition at the end of January.
Bom Suk Kim: Our ruthless prioritization at this moment is to stabilize farfetch without compromising our level of service and value to customers.
Bom Suk Kim: As we've mentioned.
Bom Suk Kim: Begun executing to that plan.
Bom Suk Kim: And we anticipate that Farfetch will achieve close to positive adjusted EBITDA on a run rate basis by the end of this calendar year.
Bom Suk Kim: It's a bit early to be discussing our mid or long-term strategy, but we look forward to sharing more after we reach that important milestone. In Taiwan, as with any new context, there are important similarities and some meaningful differences. I can say we're fortunate to be able to leverage a lot of what we've built in Korea over many years, everything from our selection, learnings from years of building processes and optimizing fulfillment logistics, supply chain optimization, and the advanced technology we've built and refined over a decade.
Bom Suk Kim: It's a bit early to be discussing or mid or long term strategy, but we look forward to sharing more after we reach that important milestone.
Bom Suk Kim: On Taiwan as with any new context, there are important similarities in some meaningful differences.
Bom Suk Kim: I can say, we are fortunate to be able to leverage a lot of what we built in Korea over many years, so everything from our selection learnings from years of building processes and optimizing fulfillment logistics.
Bom Suk Kim: Supply chain optimization, the advanced technology, we built and refined over a decade. They are all helping us to scale faster in Taiwan, and we expect they will also help us reach profitability there faster than.
Bom Suk Kim: They're all helping us to scale faster in Taiwan, and we expect they will also help us reach profitability there faster than we did in Korea. While we're excited about applying what we've learned, we'll seek out new solutions when appropriate to create meaningful differentiation in the customer experience and also to seek out meaningful returns for our shareholders.
Bom Suk Kim: And then we did in Korea.
Bom Suk Kim: Yes.
Bom Suk Kim: While we're excited about applying what we've learned we're also rule.
Bom Suk Kim: We will seek out new solutions when appropriate.
Bom Suk Kim: To create meaningful differentiation of customer experience.
Bom Suk Kim: And also to seek out meaningful returns for our shareholders.
Bom Suk Kim: Your next question comes from the line of Stanley Yang.
Operator: Your next question comes from the line of Stanley Yang. Your line is open.
Stanley Yang: Your line is open.
Operator: Yeah.
Stanley Yang: But the question. My question is about the developing operating loss guidance you raised the guidance.
Stanley Yang: My question is about the developing offering loss guidance. You raised the guidance from $650 million to $750 million. So is this an incremental $100 million increase driven by POPFEDS only or any other factors included? The other question is when it comes to your existing developing business segment, the adjusted EBITDA loss seems to be stabilizing at the current level. When do you expect the loss from the East and Taiwan to start declining?
Stanley Yang: 50 million.
Stanley Yang: Two 750 million U S dollar.
Stanley Yang: So if this incremental $1 million increase driven by Opex only or any other factors included.
Stanley Yang: My other question is actually when it comes to your existing developing business segments, the adjusted EBITDA loss to be.
Stanley Yang: Stabilizing at current level.
Stanley Yang: When do you expect the loss from the east in Taiwan to start declining.
Speaker Change: Thanks, Andy for your question.
Stanley Yang: The increased guidance that we have for one.
Gaurav Anand: The increase in guidance that we have provided is primarily from pretty much Farfetch. So we expect Farfetch massive restructuring changes there. And as Bo mentioned earlier, we are very ruthlessly prioritized to hit EBITDA positive there. So, all of the developing offerings are on track, you know, and are above expectations. So, we are good there. Yeah, a lot on Stanley that.
Gaurav Anand: <unk> is primarily from.
Gaurav Anand: Perfect.
Gaurav Anand: Perfect.
Speaker Change: Do you want.
Gaurav Anand: Add on about $100 million.
Gaurav Anand: EBITDA losses for the year.
Gaurav Anand: By end of the year, we expect it to hit a run rate of.
Gaurav Anand: Our breakeven or positive.
Gaurav Anand: We integrated farfetch into into coupons.
Gaurav Anand: On the end of Jan.
Gaurav Anand: We have made some.
Gaurav Anand: Massive restructuring changes there.
Gaurav Anand: And as Bob mentioned earlier, we are very lucky prioritized.
Gaurav Anand: Okay.
Gaurav Anand: So all of the all of the dumping offerings are on track.
Gaurav Anand: Yeah.
Gaurav Anand: Or above expectations.
Speaker Change: Yeah good.
Bom Suk Kim: I'll add, Stanley, that as we've shared, our development offerings are making positive strides. They're meeting our milestones, and in many cases, they are performing ahead of plan. And it's important to note that even with these investments, we expect to continue expanding our consolidated EBITDA margin on an annual basis this year. We will continue to be disciplined with our investments. Our goal and our objective will always be to maximize long-term free cash flow for our shareholders, and we'll continue to operate with discipline and within the operating tenets that we share with you every quarter.
Gaurav Anand: Yes.
Gaurav Anand: On a family that as we've shared our developer offerings are making positive strides. They are meeting our milestones. Many cases performing ahead of plan.
Bom Suk Kim: It is important to note that even with these investments we expect to continue expanding our consolidated EBITDA margin on an annual basis. This year.
Bom Suk Kim: And we will continue to be.
Bom Suk Kim: Be disciplined with our investments our goal and our objective will always be to maximize long term free cash flow for our shareholders and we will continue to operate.
Bom Suk Kim: With discipline and within the operating tenant that we've shared with you every quarter.
Bom Suk Kim: Okay.
Bom Suk Kim: Your next question comes from the line of Sam Park. Your line is open.
Operator: Your next question comes from the line of Seyon Park. Your line is open. Hi, thank you for the opportunity.
Seyon Park: Alright, thank you for the opportunity.
Seyon Park: Hi, thank you for the opportunity. I have two questions. The first is on the share repurchase that the company conducted recently. I think it has come as a bit of a positive surprise, and I'm just kind of wondering how you think about Chairman Baiback's future. The selldowns we've seen from SoftBank have, you know, obviously been a bit of a hurdle for investors. So the fact that you are starting to do repurchases comes clearly, I think, as a welcome sign.
Seyon Park: I have two questions. The first is on the share repurchase that accompany conducted recently.
Speaker Change: Got it.
Seyon Park: I think it has come as a bit of a positive surprise and I'm just kind of wondering how you're thinking about share.
Seyon Park: Share buybacks going forward.
Seyon Park: The sell downs from Softbank have.
Seyon Park: Obviously been a bit of a hurdle for investors so the.
Seyon Park: The fact that you are starting to do repurchases come clearly I think as a welcome sign.
Seyon Park: Should will you be conducting these kind of repurchases from or is it possible to do so from Softbank.
Seyon Park: Will you be conducting these kind of repurchases from, or is it possible to do so from, SoftBank directly, or would it really be more in the form of an open kind of repurchase? I think the first question that I wanted to ask. The second question is about advertising. I know this has been an initiative that the company has been pushing for, I think, the last year and a half or so.
Seyon Park: Softbank directly or would it really be more in the form of an open.
Seyon Park: The repurchase.
Seyon Park: I think the first question that I wanted to ask.
Seyon Park: The second question is on advertising I know this has been an initiative that the company has been pushing for I think the last year and a half or so and then just one.
Seyon Park: Wanted to get maybe quality.
Seyon Park: And I just wanted to get some maybe qualitative comments as to how far that progress has been, whether it's still early innings, what kind of response that you've been seeing from your merchants, and what the time is maybe for the near to medium term. Thank you.
Seyon Park: Comment as to how far that progress has been whether it's still early inning, what kind of response that you've been seeing from.
Seyon Park: <unk>.
Seyon Park: And what the panel maybe for the near to medium term would be greatly appreciated. Thank you.
Seyon Park: Yes.
Speaker Change: Thanks for your question.
Gaurav Anand: As you noted, in April, we repurchased and cancelled about $178 million of our Class A common stock from one of our early stage investors. Our strategy for capital deployment remains the same. We continuously assess various opportunities, including, you know, share repurchases, to generate what and how we can drive long-term returns for the shareholders. As for SoftBank, they have been a good partner, and we continue to, you know, and they are one of our largest investors, and we continue interacting with them. But at a higher level, we are evaluating multiple opportunities at the same time and would make decisions on what's best for our long-term shareholders in the advertising.
Seyon Park: As we noted in April, we repurchased and canceled about $278 million of our class a common stock.
Gaurav Anand: One of our early stage in this dose.
Gaurav Anand: Our strategy for capital deployment remains the same.
Gaurav Anand: We can do easily assess various opportunities including share repurchases.
Gaurav Anand: The generic what to what.
Gaurav Anand: How we can drive long term returns for the shareholders.
Gaurav Anand: As for Softbank, there have been a good partner.
Gaurav Anand: And do you know of.
Gaurav Anand: And they are one of our largest investors and we continue interacting with them.
Gaurav Anand: But.
Gaurav Anand: The high level, the odd evaluating multiple opportunities at the same time.
Gaurav Anand: Make this theme.
Gaurav Anand: What's what's best for our long term shareholders.
Gaurav Anand: On the advertising front I think.
Gaurav Anand: On the advertising front, I think... As you mentioned, it's an important area of investment and innovation for us, and it continues to grow significantly faster than our overall business. It's still a very small percentage of our overall transaction volume and lower than the levels we see at our global peers. We're still in the early stages of developing the full range of tools and services to provide the best experience on that front for both customers and advertisers. You know, again, we see strong growth, adoption, and significant potential, but we're still early in that journey.
Gaurav Anand: As you mentioned.
Gaurav Anand: It's an important area of.
Gaurav Anand: Sure.
Gaurav Anand: Investment and innovation for us.
Gaurav Anand: It continues to grow significantly faster than our overall business.
Gaurav Anand: It's still a very small percentage of our overall transaction volume and lower than the levels, we see at our global peers.
Gaurav Anand: We're in the.
Gaurav Anand: Still in the early stages of developing the full range of tools and services to provide the best experience on that front for both customers and advertisers.
Gaurav Anand: Again, we see.
Gaurav Anand: Strong growth adoption.
Gaurav Anand: Significant potential, but we're still early in that journey.
Gaurav Anand: The next question comes from the line of Young Shannon Your line is open.
Operator: Your next question comes from the line of Jiong Shao. Your line is open.
Jiong Shao: Thank you very much for taking my questions.
Jiong Shao: Thank you very much for taking my questions. Congratulations on the very strong results. Despite it's a bit messy with the far-fetched consolidation.
Jiong Shao: Congrats on the very strong results.
Jiong Shao: Despite it's a bit messy with farfetch consolidation two questions from me.
Bom Suk Kim: Two questions from me. You talked about growth last time for 2024 to be sort of consistent with last year's growth. And I think Q1 growth, if you adjust for the FLC with constant currency growth rate, I think you continue to accelerate a higher growth rate than the quarter before. I think this is the 5th consecutive quarter of acceleration.
Bom Suk Kim: You talked about the growth last time for 2024 to be sort of consistent with.
Bom Suk Kim: Last year's growth.
Bom Suk Kim: And I think Q1 growth if you like.
Bom Suk Kim: Just for the F C.
Bom Suk Kim: Constant currency growth rate I think you continue to accelerate.
Bom Suk Kim: A higher growth rate than the quarter before I think this is a.
Bom Suk Kim: Fifth quarter consecutively I think for the saturation.
Bom Suk Kim: With this kind of growth et cetera, waiting any comments about 2024.
Bom Suk Kim: With this kind of growth accelerating, any comments about your 2024 revenue growth outlook, excluding far-fetched, obviously. The second question is about the ETH. I think you talked about the very strong growth for ETH, especially after you sort of launched a free delivery with a bundled order for the WIRE members. Previously, you talked about ETH's contribution margin, with a 10% discount for the Y members. Now you don't need to do 10% a discount, but it's kind of free delivery.
Bom Suk Kim: Some of the revenue growth.
Bom Suk Kim: Oh look excluding Farfetch obviously.
Bom Suk Kim: The second question is on the E.
Bom Suk Kim: You talked about the.
Bom Suk Kim: Very strong growth for east, especially after you.
Bom Suk Kim: Sort of launched a free delivery.
Bom Suk Kim: With a bundled in order for the wall members.
Bom Suk Kim: Previously you talked about the ECS contribution margin I think it's a breakeven to positive.
Bom Suk Kim: With a 10% discount for the one members now.
Bom Suk Kim: You don't need to do 10% discount, but it's kind of a free delivery. So you have plus or minus could you talk about compared to the previous 10% discount but pay for delivery version.
Bom Suk Kim: So you have plus and minus. Could you talk about, compared to the previous 10% discount but pay for delivery version, what the unit economics looks like now for the sort of free delivery side of the ETH segment? Thank you.
Bom Suk Kim: Whats the unit economics looks like now for the for the sort of free delivery.
Bom Suk Kim: Side of the east.
Bom Suk Kim: Segment. Thank you.
Speaker Change: Thank you John for the question.
Bom Suk Kim: Thank you, Jiong, for the question. You know, I think it's important to see our growth in a longer-term context. We certainly look at it that way rather than looking at it in a short window. The growth you see each quarter, and the acceleration you see is not necessarily a reflection of any leverage we've pulled within the past few months. It's driven by and represents customers' adoption of years of investment in the best experience at the lowest price across the broadest assortment.
Bom Suk Kim: I think it's important to see our growth in the longer term context, we certainly look at it that way rather than looking at it in a short window. The growth you see each quarter. The acceleration you see is not necessarily a reflection of.
Bom Suk Kim: Any levers we've pulled.
Bom Suk Kim: Within the past few months.
Bom Suk Kim: It's driven by and represents.
Bom Suk Kim: Customer adoption of.
Bom Suk Kim: Years of investment and the best experience at the lowest price across the broadest assortment and we continue to.
Bom Suk Kim: And, you know, we continue to make such investments, especially around selection, where we're focused on adding more assortment that customers want and increasing delivery speed for Rocket. One example of that selection, by the way, is the private label offerings that we've Bom.
Bom Suk Kim: Such investments, especially around selection.
Bom Suk Kim: Where we're focused on adding more assortment that customers want.
Bom Suk Kim: Increasing delivery speed for.
Bom Suk Kim: For rocket. One example of that selection by the way is the private label offerings that we've.
Bom Suk Kim: We've.
Bom Suk Kim: We're providing for customers, you know, private label offerings are a small fraction of our overall sales but have been very popular with our customers and our suppliers, particularly SMEs. And SMEs supply nearly 90% of our private label units sold. And in addition to saving customers money by directly offering lower priced items, private label also helps lower prices more broadly for customers by helping SMEs compete with larger manufacturers.
Bom Suk Kim: We are providing for customers private label offerings or a small fraction of our overall sales, but have been very popular with our customers and our suppliers, particularly smbs.
Bom Suk Kim: And SME supply nearly 90% of our.
Bom Suk Kim: <unk> or private label units sold.
Bom Suk Kim: And in addition to saving customers money by directly offering lower priced items private label also helps lower prices more broadly for customers by helping smbs compete with larger manufacturers.
Bom Suk Kim: We're excited that our private label offerings continue to help customers save money increased competition to lower prices provide critical support and growth to SME manufacturers and suppliers in the market initiatives like that.
Bom Suk Kim: We're excited that our private label offerings continue to help customers save money, increase competition to lower prices, and provide critical support and growth to SME manufacturers and suppliers in the market. Initiatives like that have really broadened our selection and deepened the value that we provide for customers. And I think another reason that you see our stronger growth persist in the larger context is that we're still in the single digit share of a massive and highly fragmented $560 billion commerce opportunity.
Bom Suk Kim: Really broadened or selection and deepen the value that we provide for our customers.
Bom Suk Kim: And I think another reason that you see or stronger growth persist.
Bom Suk Kim: In the larger context, we're still in the single digit share.
Bom Suk Kim: Of a massive and highly fragmented 560 billion commerce opportunity.
Bom Suk Kim: And you'll see that our growth is not driven by one segment. It's really driven by a broad spend increase across all of our cohorts, even our oldest, which we believe reflects the appetite that customers have to buy even more on Coupang if we can provide better selection at low prices and fast delivery. Our strategy and the drivers of our growth remain consistent with what we've been focused on and have been investing in for the past decade.
Bom Suk Kim: And Youll see that our growth is not driven by one segment.
Bom Suk Kim: <unk>.
Bom Suk Kim: It's really driven by broad.
Bom Suk Kim: Spend increase across all of our cohort four.
Bom Suk Kim: Even our oldest.
Bom Suk Kim: Which we believe reflects the appetite that customers have to buy even more on coupons.
Bom Suk Kim: We can provide better selection at low prices and fast delivery of our strategy and the drivers of our growth remained consistent with what we've been focused on and have been investing in for over the past decade.
Bom Suk Kim: I think to your second question on EATS, as we pointed out, free delivery has really unlocked a lot of growth for EATS. We saw the single largest increase in orders and customers in the history of Eats. And Eats continues to be unit economics positive, excluding one-time merchant acquisition costs. And the majority of W.O.W.
Bom Suk Kim: I think to your second question on on eats.
Bom Suk Kim: As we pointed out free delivery has.
Bom Suk Kim: Really unlocked a lot of growth.
Bom Suk Kim: 440.
Bom Suk Kim: We felt the single largest increase in orders and.
Bom Suk Kim: And customers in the history of it it continues to be unit economics positive, excluding onetime merchant acquisition costs.
Bom Suk Kim: And the majority of what members are still not on an <unk>. So we have a.
Bom Suk Kim: Huge opportunity ahead of us.
Speaker Change: We're proud of that.
Bom Suk Kim: Members are still not on each other, so we have a huge opportunity ahead of us, and we're proud that we've ushered in this era of zero delivery costs, even for restaurant orders. You know, we began by offering zero delivery costs in general merchandise, then in cold chain fresh deliveries. And now we've extended that even to restaurant orders, and we're just delighted by the response our customers have shown us to date. And we'll continue to focus on breaking tradeoffs and providing the best experience in restaurant delivery and commerce more broadly.
Bom Suk Kim: We've also heard in this era of zero delivery costs, even for restaurant orders.
Bom Suk Kim: We began by offering.
Bom Suk Kim: Zero delivery cost in general merchandise than in.
Bom Suk Kim: Cold chain fresh deliveries and now we've extended that even to restaurant orders and we're just delighted by the by the response of our customers have have shown us to date and we will continue to focus on breaking tradeoffs and providing the best experience.
Bom Suk Kim: In restaurant delivery and commerce more broadly.
Speaker Change: I would like to remind everyone in order to ask a question Press Star then the number five on your telephone keypad.
Operator: I would like to remind everyone that in order to ask a question, press star then the number five on your telephone keypad. Our last question comes from the line of James Lee. Your line is open.
Operator: Our last question comes from the line of James Lee Your line is open.
James Lee: Great. Thanks for taking my questions. There are two over here.
James Lee: Great. Thanks for taking my questions two over here.
Bom Suk Kim: First, can you guys talk about your AI investments? You know, are you building applications on your existing foundational models, or are you training on your own? And can you also talk about maybe some of the use cases that differentiate your offering? And secondly, I think Bom had mentioned the new China entrance, and I'm just curious about what you're seeing here. Which category are you seeing the most overlap? And also, any responses you guys initiated? For example, maybe sourcing more from Chinese suppliers.
Bom Suk Kim: First can you guys talk about your AI investments are you building applications on your existing foundational models or are you training on your own and can you also talk about maybe some of the use cases that differentiate your offering and secondly, I think Bob you had mentioned about new China.
Bom Suk Kim: Trends and just curious about what you're seeing here.
Bom Suk Kim: Which category are you seeing the most overlap and also any responses that you guys initiated for example, maybe sourcing more from Chinese suppliers. Thanks.
Speaker Change: Hi, James.
Bom Suk Kim: Thanks.
Bom Suk Kim: Thanks for your questions first one airline we are exploring.
Bom Suk Kim: Hmm.
Bom Suk Kim: Both fronts as you mentioned foundational model as well as our own.
Bom Suk Kim: Hi James. Thanks for your questions. First on AI, we are exploring both foundational models as well as our own. Machine learning and AI continue to be a core part of our strategy. We've deployed them in many facets of our business, from supply chain management to same-day logistics. We're also seeing tremendous potential with large language models in a number of areas, from search and ads to catalog and operations, among others. There is exciting potential for AI that we see.
Bom Suk Kim: Machine learning and AI.
Bom Suk Kim: Continues to be have been a core part of our strategy, but we've deployed them in many facets of our business.
Bom Suk Kim: Supply chain management to same day logistics, we're also seeing tremendous potential with large language models in a number of areas from search and ads to catalog and operations among others.
Bom Suk Kim: There's exciting potential for AI.
Bom Suk Kim: We see.
Bom Suk Kim: And we see opportunities for it to contribute even more significantly to our business, but but like any investment we make we will test and iterate.
Bom Suk Kim: And we see opportunities for it to contribute even more significantly to our business, but like any investment we make, we'll test and iterate and then invest further only in the cases where we see the greatest potential for return. On the competition that you mentioned, retail has, commerce in general, been a very competitive market. It's always been that way since we started.
Bom Suk Kim: And then invest further only in the cases, where we see the greatest potential for return.
Bom Suk Kim: On competition that you mentioned that retail has been commerce in general has been a very competitive market.
Bom Suk Kim: We've always had many competitors, and a constant stream of new entrants, and the Chinese commerce players that you mentioned are some of the latest to enter the market. Again, I want to note that we still have just a single-digit share of a huge $560 billion commerce opportunity. It remains fragmented.
Bom Suk Kim: It's always been that way since we started.
Bom Suk Kim: We've always had many competitors constant stream of new entrants in the Chinese commerce players or that.
Bom Suk Kim: You mentioned or some of the latest to enter the market.
Bom Suk Kim: Again, I want to note that.
Bom Suk Kim: Still have just single digit share.
Bom Suk Kim: Huge $560 billion commerce opportunity. It remains fragmented customers are constantly shopping around to find the best selection price and service.
Bom Suk Kim: Customers are constantly shopping around to find the best selection, price, and service. And customers can compare and purchase at multiple retailers with a swipe of a finger. So we have to continue to invest and innovate to provide the best experience to win their purchase every single time. We have to win customers by creating new moments of wow. That's what mattered in the past, and that's what will continue to matter in this competitive market. And we believe that our success will be determined primarily by our execution on that front, on improving the customer experience and operational excellence.
Bom Suk Kim: And customers can compare when purchased at multiple retailers with a swipe of a finger. So we have to continue to invest and innovate.
Bom Suk Kim: To provide the best experience to win their purchase.
Bom Suk Kim: Single time.
Bom Suk Kim: We have to win customers by creating new moments of Wow, that's what's mattered in the past that's what we'll continue to matter in this competitive market and we believe there are successful will be determined primarily by buyer execution on that front on improving customer experience and operational excellence.
Operator: There are no further questions. This concludes today's conference call. Thank you, and you may now disconnect.
Speaker Change: There are no further questions. This concludes today's conference call. Thank you and you may now disconnect.
Operator: [music].