Q2 2024 Coupang Inc Earnings Call
Krista: 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 Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Hello, everyone. My name is Christa and I will be your conference operator today at this time I would like to welcome everyone to the coupon 2024 second quarter earnings Conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Krista: 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.
Speaker Change: After the Speakers' remarks, there will be a question and answer session.
Speaker Change: I 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 Barker Vice President of Investor Relations you May begin your conference.
Mike Parker: Thanks, operator. Welcome, everyone, to Coupang's second 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.
Mike Barker: Thanks, Operator, welcome everyone to coupons second quarter 2024 earnings conference call.
Speaker Change: I'm pleased to be joining the call today by our founder and CEO, Tom Kim and our CFO Gorgon on.
Mike Parker: The following discussion, including responses to your questions, reflects management's views as of today's 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 include forward-looking statements. Actual results may differ materially. 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.
Speaker Change: The following discussion including responses to your questions reflects management's views as of today's date only.
Speaker Change: We do not undertake any obligation to update or revise this information except as required by law.
Mike Parker: That's just one example of how we strive to provide the best customer experience at the lowest cost and generate growth while expanding profitability, not one at the expense of the other. And we believe our future growth opportunity is massive and largely untapped because we still account for a small percentage of overall retail spend, even of our oldest and best customer cohort. On a side note, while Korean products are just part of the assortment that we offer to customers in Taiwan, we're enabling tens of thousands of Korean companies to get their products to Taiwanese consumers. And our growth has helped triple their total sales volumes this year over last year.
Speaker Change: Certain statements made on today's call include forward looking statements.
Actual results may differ materially.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: And now I'll turn the call over to Bob.
Bob: Thanks, everyone for joining us today before we dive into the results for Q2, two or three takeaways from another strong quarter first our results continued to be driven by years of investment and innovation to provide what we believe is the best retail customer experience on the planet.
Bob: Second our focus on innovation and operational excellence helps us break traditional tradeoffs. So we can provide that superior customer experience at the lowest cost and in turn strengthen growth and profitability.
Speaker Change: One example, we delivered the vast majority of our fresh orders using eco bags that replaced almost all of the delivery related disposable packaging.
Speaker Change: That saves us packaging cost helps the environment and allows us to provide free delivery within hours and do so profitably.
Speaker Change: That's just one example of how we strive to provide the best customer experience at the lowest cost and generate growth while expanding profitability.
Speaker Change: One at the expense of the other.
Speaker Change: Third our.
Speaker Change: Our developing offerings are generating strong growth and exciting momentum for the future.
Speaker Change: Our historical investments in product Commerce were misunderstood at the time, but today helped generate strong growth in cash flows you see each quarter.
Speaker Change: We believe our investments in developing offerings are building. The next set of offerings that will further compound our growth and cash flow generation in the future.
Speaker Change: Now a few numbers to highlight from our second quarter performance.
Speaker Change: This quarter, we grew constant currency revenues, 30% over last year or 23%, excluding farfetch, which we acquired in Q1 of this year.
Speaker Change: And adjusting for the fulfillment and logistics by coupon or SLC accounting change. We began in Q2 of last year. The growth would have been 660 bps higher than the 23% constant currency growth rates excluding farfetch.
Speaker Change: Our product commerce active customers grew 12% year over year. It is important to note, however that while new customers contribute to future growth our growth today and tomorrow is powered primarily by the increasing spend of our existing customers and.
Speaker Change: And we believe our future growth opportunity is massive and largely untapped because we still account for a small percentage of overall retail spend even of our oldest and best customer cohorts.
Speaker Change: That's why all of our customer cohorts continue to increase their spend even our oldest and highest spending cohorts.
Speaker Change: We can't stress enough how smallest share we are of the massive and highly fragmented $560 billion commerce opportunity in the market and how early we are in that journey.
Speaker Change: This quarter, we saw the growth in our marketplace, which includes both third party NFL see significantly outpaced the growth of our overall business for the 13th consecutive quarter, our marketplace sales have grown faster than our first party sales marketplace sellers are not only growing faster than our first party. There also.
Speaker Change: Exponentially faster than the overall Korean retail market.
Speaker Change: Many of these marketplace sellers, who have enjoyed this tremendous growth our SME and that doesn't include sellers, who were once smbs, but are now large businesses. Thanks to the growth. They have enjoyed on coupons. We're proud that we've helped over 9000 Smbs graduate from SME status since 2020.
Speaker Change: We continue to invest in services that power of that marketplace growth and <unk> growth trajectory is worth highlighting in Q2, the number of sellers, joining <unk> grew 25% quarter over quarter and over 150% year over year.
Speaker Change: Now a few words on developing offerings, we continue to be pleased with the progress and momentum we're seeing in each where customer adoption continues on its strong trajectory since we launched art, while free delivery program last quarter.
Speaker Change: And merchants are benefiting from that growth in just three months.
Speaker Change: Restaurants on coupon on average have seen a nearly 30% growth in volumes.
Speaker Change: Taiwan, we're focused on breaking the same tradeoffs for the Taiwanese customer that we did for the Korean customer to win their loyalty and trust our conviction of the potential in Taiwan is as strong as ever.
Speaker Change: On a side note while Korean products are just part of the assortment that we offer to customers in Taiwan, we're enabling tens of thousands of Korean companies to get their products to Taiwanese consumers and our growth has helped triple their total sales volumes this year over last year.
Speaker Change: On Farfetch as we stated last quarter. Our goal is to generate close to positive adjusted EBITDA on a run rate basis by the end of the calendar year, we're executing to plan and it's on track to achieve these goals for the year so far.
Speaker Change: Though we're still in the very early stages of our journey, we're excited about farfetch as progress and potential.
Speaker Change: It's important to highlight that in the markets. We serve we see massive potential that is still largely untapped.
Speaker Change: And our strategy to capture that potential has been unwavering.
Speaker Change: Disciplined investment and operational excellence to deliver customer, while the best selection service and savings for our customers.
<unk>: We believe Tor core that the happiness of our customers is the key to maximizing opportunities in the long term for our suppliers merchants employees and shareholders now I'll turn the call over to <unk> to review our results in greater detail.
Juan: Thanks Juan.
Speaker Change: This quarter, we saw a continuation of the strong momentum across our business that we reported in Q1.
Speaker Change: Q2, we again delivered robust growth in revenue comment.
Thomas: Thomas active customers gross profit.
Thomas: EBITDA.
Thomas: As we go through the numbers I want to remind everyone of our acquisition of <unk> that was completed at the end of January this year.
Speaker Change: Q2 represents the first quarter consolidated <unk>.
Thomas: Full months of phosphate operating result.
Speaker Change: No profits by an unfilled included in the prior year.
Speaker Change: Whenever possible I will provide results for the quarter with and without bucket to highlight the performance of our existing business and the impact from the <unk> acquisition.
Speaker Change: Our total net revenues grew by <unk> <unk> and <unk>.
Speaker Change: Excluding the impact of perfect.
Speaker Change: Adjusting for the effects of changes in foreign currency total net revenue grew put people at 23% excluding <unk>.
Speaker Change: As a reminder, <unk>.
Speaker Change: And to do last year, we made certain changes to accounting changes the accounting from gross to net on a prospective basis.
Speaker Change: Adjusting for the impact of this change the growth would have been 660 bps higher than the 23% constant currency growth rate.
Speaker Change: Perfect.
Speaker Change: Within our vertical Commerce segment revenues grew 13% year over year on 18% in constant currency.
Speaker Change: This growth rate would have been 680 bps higher.
Speaker Change: <unk>.
Speaker Change: Accounting team.
Speaker Change: With a total retail spending Korea growing at just one person who can continues to be a growing value destination.
Speaker Change: Our consumer and the primary source of consistent growth for seller and supplier in Korea.
Speaker Change: Net revenues by product Commerce active customers grew 5% year over year in constant currency.
Speaker Change: Includes the short term dilutive impact of the large number of new vertical commerce active customers we have.
Speaker Change: Added over the last few quarters as well as the impact of the FASB accounting thing.
Speaker Change: The impact of new customers is diluted.
Speaker Change: Those new customers initially.
Speaker Change: Initially, but we have seen the spend levels grew in line with the trajectory of older cohorts overtime.
Speaker Change: It's important to note that.
Speaker Change: The majority of our growth is powered by increasing spend of our existing customers.
Speaker Change: Continue to see the spend levels of all our cohort increase even up all day and higher spending.
Speaker Change: We believe that is still a long runway for growth given that account for a small percentage of the overall detail Ben.
Speaker Change: As we have said previously we believe we have a significant opportunity to grow that small percentage of.
Speaker Change: Overall detailed spend to much higher levels by improving our selection service and savings for customers.
Speaker Change: As Bob noted we continue to be encouraged by the progress we are seeing within our developing offering segment.
Bob: Developing offerings revenue grew over 470 people and deal with your.
Bob: 177% excluding firefight.
Bob: On a constant currency basis, developing all things segment revenue grew over 400 people thing.
Bob: 88% excluding profit.
Bob: Given the evolving mix of the radius offering services in silos within our business. We believe our primary indicator of the underlying growth in our business is gross profit.
Speaker Change: This quarter.
Speaker Change: <unk> delivered a record quarter of broth profit leasing over $2 $1 billion growing over 40% Bureau, with your with a gross margin of 29, 3%.
Speaker Change: Excluding profits, we delivered $1 $9 billion in broth profit, but our growth rate of 27, <unk> and a margin of eight 3%.
Speaker Change: This represents an improvement of 220 basis points year over year accelerating even faster than the growth we saw last quarter.
Speaker Change: Sure Commerce gross profit increased 26% year over year to over $1 9 billion.
Speaker Change: And our record gross profit margin.
Speaker Change: It could be 3%.
Speaker Change: This represents a 310 basis point improvement over last year, and 200 basis points over last quarter.
Speaker Change: The margin improvement this quarter was driven by strong growth rate in categories with higher margin composition, as well as higher efficiencies across operations, including benefit from greater utilization of automation and technology, including AI.
Speaker Change: We also continue to benefit from further optimization in our supply chain.
Speaker Change: Scaling of margin accretive offering.
Speaker Change: We expect these values to continue contributing to further margin expansion over the quarters and years to come.
Speaker Change: Our G&A expense as a percentage of revenue this quarter increased 600 basis points versus last year. This was primarily due to the inclusion of Barclays.
Speaker Change: Related restructuring costs as well as the estimated $121 million administrative fine that'd be accrued as unknowns.
Speaker Change: The ODI Fair Trade Commission.
Speaker Change: We generated $3 million of.
Speaker Change: Income before income taxes, and a $77 million of net loss attributable to coupon stockholders this quarter.
Speaker Change: This resulted in diluted loss per share of <unk>.
Speaker Change: Excluding phosphate and the estimated approved fine net income attributable to coupon stockholders was approximately $124 million for the quarter and diluted earnings per share was <unk> <unk>.
Speaker Change: Our consolidated business reported $330 million of adjusted EBITDA, This quarter, which excludes the onetime costs.
Speaker Change: <unk>.
Speaker Change: The restructuring activities in phosphate as well as a new fine.
Speaker Change: This resulted in an adjusted EBITDA margin of four 5%.
Speaker Change: The trailing 12 months adjusted EBITDA was $1 1 billion with a margin of four 2%.
Speaker Change: Excluding phosphate we recorded $361 million of adjusted EBITDA, This quarter and $1 $2 billion over the trailing 12 months.
Speaker Change: With a trailing 12 month adjusted EBITDA margin of four 6%.
Speaker Change: We remain confident in our ability to continue expanding consolidated margin on an annual basis going forward.
Speaker Change: Vernon Commerce segment delivered $530 million of adjusted EBITDA with a record margin of eight 2%.
Speaker Change: This represents a margin expansion of over 100 basis points, although the loss.
Speaker Change: This is a little bit margin was driven by the expansion in gross profit margin as well as the benefit from further improvement in operational efficiencies.
Speaker Change: Segment, adjusted EBITDA and developing offerings.
Speaker Change: $200 million loss for the quarter relatively flat to the last quarter and increasing $93 million year over year.
Speaker Change: This increase was driven by additional investment in these early stage opportunities.
Speaker Change: Well it could be $1 million impact from the consolidation of Barclays.
Speaker Change: We remain encouraged by the progress we are making in phosphates.
Speaker Change: Team is focused on doing one of the things we do best at coupons driving operational efficiencies through discipline and process improvement we remain convinced of the ability for farfetch to get close to positive adjusted EBITDA run rate by the end of this year.
Speaker Change: Our ending cash balance at the end of Q2 was roughly $5 8 billion, increasing 22% over the last year.
Speaker Change: We generated $2 2 billion in operating cash flow and $1 $5 billion of free cash flow over the trailing 12 months.
Speaker Change: As we guided to last quarter.
Speaker Change: We saw an increase in the effective income tax lead driven by consolidation of pretax losses in phosphates and nondeductible expenses.
Speaker Change: As a reminder, this is just an accounting back seat as the <unk>.
Speaker Change: Correct.
Speaker Change: Cash tax obligation this year to be closer to 20% to 25% excluding profit losses.
Speaker Change: Operator, we are now ready to begin the Q&A.
Speaker Change: Okay.
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.
Speaker Change: If he would like to withdraw your question Press Star and then number five once again please limit your questions to two per person, we'll pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Stanley Yang Your line is open.
Speaker Change: Yes.
Speaker Change: Opportunity to ask two questions.
Stanley Yang: Congratulation on the strong visual on major core metrics line items.
Stanley Yang: First question is about the kind of <unk>.
Speaker Change: Our margin.
Speaker Change: Which so.
Speaker Change: Strong expansion margin expansion in the second quarter can you. Please provide more color on the <unk>.
Speaker Change: Margin drivers in the second quarter.
Speaker Change: So.
Speaker Change: Overall in 2034, what are the major tailwind and headwind.
Speaker Change: Commerce margin trend.
Speaker Change: It's roughly equally FSP increasingly margin accuracies.
Speaker Change: My second question is about the each each side.
Speaker Change: So each market share gain momentum seems to be even stronger in the second quarter.
Speaker Change: It is standalone margin improving with economy of scale. Despite his first question on <unk>.
Speaker Change: So question on the first question the second question.
Speaker Change: Going forward, we do prioritize top line.
Speaker Change: <unk> gross margin of market share gain strategy.
Speaker Change: Going forward, what do you look for more balanced strategy between the growth and profitability.
Speaker Change: Alright. Thanks.
Speaker Change: Thanks for the questions.
Speaker Change: Product commerce.
Speaker Change: As you mentioned Q2 regenerated.
Speaker Change: We recorded significant improvements generating nearly $2 billion of gross profit.
Speaker Change: Margin of 30%, which represents an improvement of over 300 bps year over year. The drivers of that margin expansion continue to be the same that we've seen over the last.
Speaker Change: Several quarters and years.
Speaker Change: These are improvements continuous improvements in our operations and supply chain scaling of margin accretive offerings greater utilization of automation technology, including AI.
Speaker Change: And we still have a lot of opportunity to improve on these variables. That's one reason why we provided the long term guidance of over 10% of adjusted EBITDA.
Mike Parker: As we've pointed out in the past, margins may be uneven quarter to quarter, but we expect our profit margin to continue its march upwards over time towards that target.
Speaker Change: And we've pointed this out in the past margins may be uneven quarter to quarter.
Speaker Change: But we expect our profit margin to continue its march upwards over time towards that target.
Speaker Change: Okay.
Speaker Change: On an EPS.
Speaker Change: As you point out.
Speaker Change: <unk> continued to see strong momentum there.
Speaker Change: Great adoption and increasing frequency from while members who are discovering each because of our unlimited free delivery benefit.
Speaker Change: It is important to note that we're doing that while also continuing to improve our cost structure. That's aided by the benefits of scale focus on operational excellence.
Speaker Change: Each is currently unit economics positive and we see that only continuing to improve as each scales.
Speaker Change: And as is the case with product commerce, we're obsessed with providing customers.
Speaker Change: With selection service and savings not one at the expense of the other will continue to focus on breaking tradeoffs.
Speaker Change: <unk> selection service savings between growth and economics.
Speaker Change: To provide the best experience and restaurant delivery and e-commerce more broadly.
Speaker Change: Suddenly you had one more question in between on the margins.
Speaker Change: So the jump in here.
Speaker Change: As Boyd mentioned.
Speaker Change: You mentioned.
Speaker Change: And we are excited about the progress FMC is making.
Speaker Change: In Q2, the number of pillows, joining FMC grew 25% quarter over quarter and over 150% year over year.
Speaker Change: Overall FMC is accretive from a margin perspective.
Speaker Change: But there are still many areas that need improvement.
Speaker Change: <unk> investments to onboard merchants.
Speaker Change: And we will continue to improve some optimal processes and fix systems there.
Speaker Change: Your next question comes from the line of Eric Chang.
Speaker Change: Your line is open.
Eric Chang: Yes. Thank you. Thank you for the opportunity to ask questions I have two.
Eric Chang: The first question is on developing offering.
Eric Chang: I've noticed the developing operating loss has increased to $20 million in second quarter.
Speaker Change: So just simply extrapolating. This for the year would you say there is a potential for a coupon to go meaningfully go over $750 million loss guidance.
Eric Chang: Sure.
Speaker Change: <unk> offerings.
Eric Chang: And.
Speaker Change: It would be helpful. If you could elaborate a little bit more on the key.
Speaker Change: The moving parts for.
Eric Chang: For the bigger loss compared to the first quarter and.
Eric Chang: My second question is around G&A for a product commerce.
Speaker Change: It seems like gross profit margin increase has been the key driver for the just say EBITDA margin improvement for product Commerce lately, and we don't really have much insight into the cadence of G&A for product commerce going forward. So could you explain on.
Speaker Change: But the drivers are for the G&A increase and.
Speaker Change: When we could expect some operating leverage coming from this slide.
Eric Chang: Yeah.
Speaker Change: Yes, thanks for your questions.
Speaker Change: So on developing offering.
Speaker Change: Last quarter, we updated our full year guidance.
Speaker Change: Adjusted EBITDA losses.
Speaker Change: Roughly $750 million this year, including farfetched.
Speaker Change: So while the timing of these expenses within the video component of developing offerings.
Speaker Change: It may fluctuate quarter to quarter.
Speaker Change: Still believe our full year actual.
Speaker Change: It will be in line with the guidance that we had previously provided.
Mike Parker: On overhead expenses, are expenses as a percentage of revenue this quarter increased versus last year? and its related restructuring costs in technology and infrastructure to build a stronger foundation for future scalability.
Speaker Change: On overhead expenses.
Speaker Change: <unk> expenses as a percentage of revenue this quarter increased versus last year.
Speaker Change: This was primarily due to the inclusion of Farfetch.
Speaker Change: It related.
Speaker Change: Got it.
Speaker Change: The liquidity sits at Ingalls.
Speaker Change: The increase investment in developing offerings as well as estimated $121 million.
Speaker Change: Fine.
Speaker Change: Obviously mentioned.
Speaker Change: Within our core operations.
Speaker Change: Although in this thing.
Speaker Change: And technology and infrastructure to build a stronger foundation for future scalability.
Speaker Change: While these investments may temporarily decreased our operating margins in the near term we will leverage on these costs.
Speaker Change: In the next couple of years, and we believe they will create long term value as they help us better serve customers and support our future growth.
Speaker Change: Uh huh.
Speaker Change: The next question is from Steve.
<unk> Park: <unk> Park from Morgan Stanley Your line is open.
Steve Park: Alright, thank you for the opportunity.
Steve Park: I also have two questions first of all just to follow up on that.
Speaker Change: That I think.
Speaker Change: In this quarter.
Speaker Change: The gross profit margin improvement or product commerce was particularly more impressive.
Steve Park: And so maybe.
Speaker Change: I know that the three.
Mike Parker: The mix of operational inefficiencies and the faster growth of higher margin products is the drivers. Could you maybe share just a little bit more color as to, for this quarter, within those drivers, what was particularly more evident?
Steve Park: The mix of operational efficiencies.
Speaker Change: And the faster growth higher margin products as the drivers.
Speaker Change: Could you maybe share a little bit more color as to.
Speaker Change: So this quarter within.
Speaker Change: Within those drivers.
Speaker Change: What was particularly more evident.
Speaker Change: My second question is with regards to Taiwan, and I'm very cognizant that management.
Speaker Change: Not like to give any forward looking I guess.
Speaker Change: Guidance on Taiwan, but.
Speaker Change: At least looking back can be at least to get a sense as to how far coupon services.
Speaker Change: <unk> have been rolled out in Taiwan, what is available what he is not available.
Speaker Change: What kind of coverage you have next morning delivery is that available in Taiwan into most.
Speaker Change: Didn't can you get some sense on that please thank you.
Speaker Change: Thanks for the questions.
Speaker Change: I think on.
Speaker Change: It's important to highlight that on our margin expansion that we really are.
Speaker Change: Early on these variables on our improvement journey on these variables Theres still a lot of room and so the reason why you continue to see these margin improvements happen over the last few years.
Speaker Change: I'm thinking on a continuous basis now there are fluctuations quarter to quarter.
Speaker Change: The improvement is not always in a straight line, but.
Speaker Change: But we believe we're on a long term trajectory.
Speaker Change: To continue to improve all of these variables over time.
Speaker Change: To achieve or long term guidance of over 10% adjusted EBITDA.
Speaker Change: On Taiwan.
Speaker Change: Yes.
Speaker Change: It is too early to share details, but I can share that we continue to be very encouraged by the momentum and progress we're seeing there.
Speaker Change: Our customer experience selection service savings none of them are quite at the levels that we've now built in Korea yet.
Speaker Change: But we are able to start in a much better place.
Speaker Change: That strong start is important due to the fact that we're able to leverage in Taiwan a lot of what.
Speaker Change: We built in Korea.
Speaker Change: We started in a very different place.
Speaker Change: Our selection processes fulfillment and logistics optimization supply chain management or technology stack all of these things.
Speaker Change: Invested and refined over a decade.
Speaker Change: Fortunate to be able to leverage a lot of that in Taiwan. So while we are early in the journey and the experience is not where we'd like to be yet both on the customer experience on operational.
Speaker Change: Operational excellence.
Speaker Change: We're excited about the momentum and progress we're making.
Speaker Change: And we will continue to be very disciplined with any increased level of spend.
Speaker Change: Investing only when we're convinced about the returns we can generate we're also pleased that we will have to make the same kind of investments in many areas because we're able to leverage the investments we've already made in the crude market.
Speaker Change: Just generally the potential to create meaningful differentiation differentiation and customer experience.
Speaker Change: And meaningful returns for our shareholders. We think is is.
Speaker Change: Extremely high and we're very excited about the opportunity we see in Taiwan.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Joan Chow from Barclays. Your line is open.
Joan Chow: Thank you very much for taking my questions.
Joan Chow: First of all talking about follow up question about the margin.
Speaker Change: I think Bob just talked about.
Bob: Long term target.
Speaker Change: EBITDA margin.
Speaker Change: 10% or more.
Speaker Change: Wondering could you talk about.
Speaker Change: Just for your <unk> business do you think that's also achievable and in that sort of the margin guide.
Speaker Change: The gross margin still might.
Speaker Change: Peers have highlighted this quarter was particularly strong.
Speaker Change: Do you feel.
Speaker Change: There's more room to go the higher margin categories could you talk about what are those categories, either new categories, you're seeing you expect.
Speaker Change: To further growth.
Speaker Change: Those categories.
Speaker Change: Question is about the one membership fee increase I was wondering.
Speaker Change: I know the fee the higher fee kicked in beginning of August a few days ago.
Speaker Change: The existing members.
Speaker Change: The new members I think the higher fee kicked in.
Speaker Change: Two months ago.
Speaker Change: Wondering if you could talk about in terms of the member new members paying off.
Speaker Change: The existing member churn you Fannie.
Speaker Change: Any comments would be appreciated thank you.
Speaker Change: Hi, Joe Thanks for the questions.
Speaker Change: Sure.
Speaker Change: <unk>.
Mike Parker: I see a lot of opportunity. I think both Gaurav and I mentioned earlier that we still represent a very small percentage of overall retail spend.
Speaker Change: See a lot of opportunity.
Speaker Change: I think.
Speaker Change: Both Gaurav and I mentioned earlier that we still represent a very small percentage of overall retail spend.
Speaker Change: Yes.
Speaker Change: There's a lot of expansion.
Speaker Change: Potential that we see in spend in almost every category.
Speaker Change: So.
Speaker Change: Thats, just a general trend that I think.
Speaker Change: We represent a very small percentage of a fragmented a massive $560 billion commerce opportunity.
Speaker Change: That <unk>.
Speaker Change: Spend.
Speaker Change: We will go up as we increase selection across all those categories.
Speaker Change: Improve our service.
Speaker Change: <unk> expense savings.
Speaker Change: For our customers.
Speaker Change: Wow.
Speaker Change: We generally disclose where while membership numbers on an annual basis. So we will share more at year end.
Speaker Change: And our focus continues to be on creating massive surplus for members. Maybe this is a good chance for us to expand a little bit on what value surpluses for our customers there.
Speaker Change: Create value surplus throughout.
Speaker Change: We have 14 different benefits that we built over the years and added to the program.
Speaker Change: As an example, let me just take one of those benefits pre delivery savings.
Speaker Change: And parents with young children, but some of the most time and resource constrained customers in the market for a monthly fee that is equivalent to roughly the cost of true deliveries.
Speaker Change: These customers save on 23 deliveries a month.
Speaker Change: Saving more than 10 times the amount they pay and Thats just from free delivery not including the savings that get on free returns exclusive discounts video streaming and not to mention our safe from skipping trips to the store to better spend with their children.
Speaker Change: Really focused laser focused on increasing these benefits and savings.
Speaker Change: Serve our existing customers and to attract tens of millions of retail shoppers who joined Wow.
Speaker Change: That's where our focus is to continue to strive to make while the best deal on the planet for our customers.
Speaker Change: Yeah.
Speaker Change: As a reminder, I would like to.
Speaker Change: If you would like to ask a question. Please star and 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: The next question comes from the line of James NIE, James Lee with Mizuho.
Operator: Your line is open.
Speaker Change: Your line is open.
James Lee: Great. Thanks for taking my questions two here one on food delivery.
James Lee: Given your market share gains can you maybe talk about some of the competitive responses <unk> seen the market.
James Lee: In terms of restaurants selections in general maybe help us understand what do you plan to reach maybe parity with your number one peer in the market and also in terms of potential.
Speaker Change: Potential M&A I'm, just wondering under what conditions would kind of acquisition makes sense in that space. Thanks.
Speaker Change: Okay.
Speaker Change: Sorry, the second question when you said parity.
James: James could.
James Lee: Could you clarify priority on what dimension.
Unnamed Speaker: in terms of restaurant selection.
Speaker Change: In terms of restaurant selection.
Unnamed Speaker: I see. We are each—generally speaking, we are making—
Speaker Change: I see.
James: Hi.
Speaker Change: We are.
Speaker Change: Each generally speaking we're making.
Speaker Change: We will.
Speaker Change: We're continuing to add selection.
Speaker Change: I would say that in some places our selection is better probably someplace the selection is.
Speaker Change: So.
Speaker Change: There was a improvement to go.
Speaker Change: I think the most important thing is that we continue.
Speaker Change: To focus on all three of those pillars is selection service savings.
Speaker Change: Delivering on all three pillars of that.
Speaker Change: Has been.
Speaker Change: Key to winning long term customer.
Speaker Change: Loyalty to continuing to unlock a lot of growth.
Speaker Change: For the program.
Speaker Change: I think that.
Speaker Change: Generally as is our focus.
Speaker Change: There are no plans for M&A I think we are focused on internal execution in that space.
Speaker Change: Great. Thanks.
Speaker Change: Okay.
Speaker Change: There are no further questions. This concludes today's conference call. Thank you and you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].