Q1 2025 Coupang Inc Earnings Call
James Lee, Jiong Shao, Bom Kim, Gaurav Anand, Michael
Krista: Hello everyone, my name is Krista and I'll be your conference operator today. At this time I would like to welcome everyone to the Coupang 2025 First Quarter Earnings Conference call.
Krista: All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. If you would like to ask a question during this time simply press star, qualify the number 5 on your telephone keypad. If you would like to withdraw your question press star and the number 5 once again.
Krista: Now I'd like to turn the call over to Mike Parker by President of Investor Relations. You may begin your conference.
James Lee, Jiong Shao, Bom Kim
Speaker Change: Thanks operator. Welcome everyone to Coupang's first quarter, 2025 earnings conference call. I'm pleased to be joined in the call today by our founder and CEO , Bom Kim, and our CFO , Gaurav Anand.
Krista: 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 is required by law.
Krista: Certain statements made on today's call include four looking statements. Actual results made different materially.
Krista: 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 10K and subsequent filings.
And now, I'll turn the call over to Bom.
Bom Kim: Thanks everyone for joining us today. Let me begin with a few highlights. We began the year with a strong start in Q1 with consolidated revenue growing 11% or 21% on a constant currency basis.
Bom Kim: We also delivered strong expansion in margins with gross profit margin growing 217 basis points to 29.3% and adjusted EBITDA margins improving nearly 90 basis points to 4.8%.
Bom Kim: Over the trailing 12 months, we generated $1.5 billion in adjusted EBITDA and over $1 billion in free cash flow.
Speaker Change: James Lee, Jiong Shao, Bom Kim
Bom Kim: Or a consistent trend of delivering both strong growth and margin expansion is the result of years of investment and a determination to deliver the best customer experience at the lowest cost.
Bom Kim: That's most evident in our product commerce segment, where our focus on expanding selection, lowering prices, and raising the bar on delivery experience has powered sustained growth at high multiples of the overall Korean retail market.
Bom Kim: In beauty, for example, this quarter we've onboarded esteemed brands such as Kiel's, Dolce and Gabana and Joe Malone, joining existing brands like Estee Lauder and Lancome to the delight of our our Luxe customers.
Bom Kim: This is an addition to other popular brands that we've welcomed across many other categories, including Swarovski, Converse, Wedgwood, Royal Copenhagen and Nespresso.
Bom Kim: This selection expansion is driving strong engagement from our customers, where we saw the number of customers purchasing in nine or more categories grow over 25% this quarter.
Bom Kim: Our teams continue to expand the reach of our signature rocket delivery service, providing more customers with access to even more selection with same-day dawn or next-day delivery.
Bom Kim: That creates a virtuous cycle, as we invest in delivering more selection faster and with greater reliability, customers reward us with a greater share of their retail spend, which in turn attracts even more selection.
Bom Kim: Fulfillment and Logistics by Coupang, or FLC, strengthens that virtuous cycle for marketplace sellers.
Bom Kim: Improving the delivery experience for marketplace products and accelerating seller growth. This quarter we saw strong momentum in FLC with sellers, selection, and overall volumes all growing at multiples of our overall business.
Bom Kim: While we still have much to do to optimize this offering, it has quickly become a tremendous growth engine for sellers who want to tap into the speed, convenience, and efficiencies
Bom Kim: by handling storage, packing, shipping, and even returns for our third-party merchants, FLC dramatically lowers the barriers to success for tens of thousands of small businesses.
Behind the scenes, we're constantly refining our operations.
Bom Kim: Our investments in technology, innovation, automation, and robotics are generating substantial benefits across our business. For example, this quarter we saw benefits from advances in our automated picking, packing, and sorting systems, and machine learning utilization that deploys inventory with more precise prediction of demand.
This, coupled with our focus on operational excellence.
Bom Kim: enables us to continually improve the customer experience while also lowering the cost of service.
Bom Kim: Today, product commerce has become a thriving enterprise delivering consistent growth alongside expanding margins.
Bom Kim: But that didn't happen overnight. It's the result of years of strategic investments and disciplined execution, even at times when progress wasn't immediately visible.
Bom Kim: Likewise, the investments we're making in developing offerings are building the foundation for even greater growth and profitability in the future.
Bom Kim: One of these exciting opportunities is Taiwan. We see enormous potential to deliver the same jaw-dropping wow experiences that have resonated so strongly with consumers in Korea.
Bom Kim: We're making significant progress in expanding our selection and forging direct relationships with suppliers, including global brands like Coke, Pepsi, PNG, and Unichar, as well as many of the local brands so important to Taiwanese customers.
Bom Kim: This helped or drive an expansion and selection of nearly 500% this quarter.
Bom Kim: and customers in Taiwan are responding. They're coming back more frequently and spending more each time they visit.
Bom Kim: We also launched our Wild Membership Program this quarter in Taiwan. This program offers members tremendous value and savings, which, similar to our Wild Membership Program in Korea, drives higher levels of spend from Wild Members.
Bom Kim: We're excited about the investments we're making in Taiwan, our continued investment in the market reflects our rising confidence in what we're seeing on the ground, and we trust our shareholders will share that excitement.
Bom Kim: As we continue to allocate capital with the same level of discipline that is defined or success in the early years, we believe these investments will follow the same trajectory as product commerce, creating significant shareholder value over the medium and long term.
Bom Kim: For four-fetch, we're positioning the business towards next phase of expansion.
Bom Kim: At its heart, Forfetch is about bringing the world best assortment and experience in luxury to customers wherever they live around the world.
Bom Kim: We made significant progress over the past few quarters, streamlining both the operations and customer offerings that align with this strategy, and these changes are already yielding encouraging results.
Bom Kim: Eats is another area where this quarter we continued to sustain the momentum that we saw throughout 2024. Our vision for Eats is simple, to wow customers with the best customer experience in food delivery, but providing them with the broadest selection, rate value and the fastest and most reliable delivery.
Bom Kim: As always, we continue to execute across these initiatives in line with our core operating principles.
Customer Obsession, Operational Excellence, and Disciplined Investment.
Bom Kim: We recognize the tremendous potential before us and we're eager to continue delivering results for our customers and shareholders. And now, I'll turn the call over to our CFO , Gaurav Anand, who will walk you through the financial results of the quarter in more detail.
Speaker Change: Thanks, Bom. We saw a strong start to the year in Q1 continuing the momentum we ended last year with in terms of durable growth in both revenues and profitability.
Speaker Change: On impact of macro, we have not experienced a meaningful impact on our business from recent
Speaker Change: However, we recognize that no economy is immune to the current global conditions and we will continue to monitor closely changes in the macro environment.
Speaker Change: Coming back, we grew total net revenues this quarter by 11% year over year or 21% in
Speaker Change: I should highlight that Korean one weekend or year over year versus the US dollar again in Q1, creating even more of the variance between reported revenue results in US dollars and over 10% currency.
Speaker Change: As a result, we believe it's important to review our growth on a constant currency basis.
Speaker Change: A growth in Korea continues to be driven by even deeper levels of spend across our customer cohorts. All of the cohorts, even our oldest, are increasing their spend at consistently high levels.
Speaker Change: We believe we are still far from realizing the full spend potential of each of our customer cohorts as evidenced by our small share of the total retail spend in Korea.
Speaker Change: R, Product Commerce, Segment, Groose, Revenue, 6% year over year, or 16% in Concent Currency. On a quarter over quarter basis, Revenue, 0, 4% in Concent Currency.
Speaker Change: Product Commerce Active Customers Group 9% year over year, which combined with the strong growth in average spend levels, where constant currency revenues per active customer all grew 6% year over year.
Speaker Change: Developing offering segment, revenues, grew 67% year over year in Q1 or 78% in constant currency.
Speaker Change: This growth continues to be driven by the strong customer engagement we see in both each
Speaker Change: This quarter we generated $2.3 billion in consolidated gross profit growing 20% year over year or 31% in the constant currency with a gross profit margin of 29.3%
Speaker Change: For product commerce, we delivered gross profit of $2.2 billion with a gross profit margin of 31.3%
Speaker Change: This represents a margin improvement of over 300 basis points versus last year and nearly 30 basis points increase over last quarter, excluding the benefits of the Fc fire insurance
Speaker Change: Grog's profit dollars grew 17% year over year this quarter or 28% in constant currency.
Speaker Change: As Bom previously noted across product commerce, we are seeing benefits from our investments in process improvement, automation and innovation, as well as continued improvements who are supply chain and growth in our margin of creative categories and offerings.
Speaker Change: We still see tremendous opportunity from these drivers and expect them to contribute to even further annual margin expansions in the quarters and years to come.
Speaker Change: OGNA expense as a percentage of revenue was 27.3% this quarter, representing an increase of nearly 80 basis points over last year.
Speaker Change: This increase is primarily due to recent increased levels of spend on our technology and infrastructure as we continue to focus on building a stronger foundation for future scalability.
Speaker Change: We are encouraged by the tangible benefits we are beginning to see across our business from these investments and we expect OGNA expenses will decline as a percentage of revenue in the near to medium term.
Speaker Change: This quarter we generated $144 million of operating income growing $14 million over year or nearly
Speaker Change: We also reported $107 million of net income, attributable to Coupang stockholders. This resulted
Speaker Change: The Q1-adjacent EBITDA margin was 4.8%, an increase of nearly 90 basis points, despite are increased investments into developing offerings.
Speaker Change: As we have shared previously, the initiatives driving margin improvement across our business are not focused on producing linear margin expansion from quarter to quarter.
Speaker Change: But we expect to consistently expand margins on an annual basis, as we continue progressing towards our expected long term margins of greater than 10%.
Speaker Change: This eventual margin entitlement is best demonstrated in our product commerce segment, which delivered $550 million of adjusted EBITDA this quarter with a margin of 8%.
Speaker Change: This represents a margin expansion of over 80 basis points year over year and just under 20 basis points water over quarter.
Speaker Change: For developing offerings, we saw Cuban adjusted a bit the losses of $168 million, reflecting an increased level of investment consistent with the 2025 guidance we provided last quarter.
Speaker Change: We continue to expect adjusted EBITDA losses for developing offerings for the full year to
Speaker Change: On the trailing 12-month basis, we generated $2 billion in operating cash flow and $1 billion of free cash flow.
Speaker Change: This represents a decrease in free cash flow of $150 million versus last year, which is driven primarily by certain non-recurring working capital benefits that we previously communicated it, what is the prior period?
Speaker Change: This quarter, we reported an effective in-contact rate of 47% driven by the losses in our early stage operations in Taiwan, as well as certain non-directible expenses.
Speaker Change: As a reminder, this is just an accounting tax rate as we expect a cash tax obligation
Speaker Change: We anticipate will continue to experience a temporarily high effective tax rate between 50 to 55% for the full year.
Speaker Change: We are also announcing today that our Board of Directors has approved a $1 billion share repurchase program as part of our broader capital allocation strategy.
Speaker Change: We view share repurchases as one of the many tools at our disposal, allowing us to act opportunistically when we believe we can take advantage of existing market conditions to generate meaningful returns for the shareholders.
Speaker Change: This is our debut repurchase program at scale, and it's important for us to have flexibility to take advantage of opportunities as they arise.
Speaker Change: We will be thoughtful and disciplined as it relates to the pace of our buybacks, which we'll consider in the context of our overall capital allocation priorities.
Speaker Change: We remain committed to generating the highest levels of long-term shareholder value.
Operator, we are now ready to begin the Q&A.
Speaker Change: At this time, I would like to remind everyone in order to ask a question to the number 5 on your telephone T-pad. If you would like to withdraw your question, press star and the number 5 once again. Please limit your questions to two per person. We'll pause for just a moment to compile the Q&A roster.
The first question is from Eric Cha.
with Goldman Sachs. Your line is now open.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Thank you for the opportunity to ask questions. I have two.
Speaker Change: First one is, I meant to ask the impact on macro and tariff on your business, but I heard Gaurav addressing this in the prepared comments saying there's a limited impact.
Speaker Change: But still wanted to ask whether you are seeing any change in user behavior at all and if you are, whether there is a kind of measure around this.
Um, um,
Speaker Change: Second question is on the stock repurchase plan you have announced today. Can you share what the motive is and what the thinking is behind the plan around the timing and the size of the program. And if you could also share some details on the broader capital of the strategy. And if you could share some details about the strategy.
That'd be great. Thank you.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: or the impact of macro and customer behavior. As we've guided to last quarter, we expect our...
Speaker Change: and we'll continue to monitor changes in the macroeconomic environment closely and we'll update you in the future if we see any significant change in our outlook.
Speaker Change: Yeah, thanks, Eric. Some of the shared repurchase plan aboard recently approved a billion dollar program.
Speaker Change: So, this plan will basically enable us to act opportunistically when we believe we can take advantage.
Speaker Change: Eric of the Excessing Market Conditions to generate meaningful returns, you know, for the shareholders. There is no fixed term for the three purchase program and regarding the pace of buybacks, we will be opportunistic and disciplined, maintaining focus to generate the highest level of returns.
Speaker Change: Sir, Eric, it's important to note that this share repurchase program is just one part of our broader capital allocation strategy.
Speaker Change: and our overall strategy for capital deployment remains the same. We are continually assessing various opportunities including share repurchases and investment into our existing business which generate what we expect to be the greatest levels of shareholder, long term shareholder value.
Speaker Change: James Lee, Jiong Shao, Bom Kim,
Stan Liang: Our next question comes from Stanley Yang, from JP Morgan. Your line is now open.
I have two questions. The first question is regarding your...
Stan Liang: 20% revenue growth guidance this year. Is this revenue growth target is comfortable to achieve
Stan Liang: the current macro and competitive environment. In particular, I would appreciate your any additional color on the product covers revenue growth value, especially your wild product between first 1p and FSC.
and my second question is regarding the development of film loss.
Stan Liang: which increased quite significantly QOQ. Can you share any color on respective margin trends in each and Taiwan in the first quarter?
Stan Liang: In particular, your eats market share is narrowing the gap with the bamin, which was highly profitable last year. So any reason of the Coupang eats continue to lose making operation despite market
Stanley. Thanks for your question. I think it's...
Stan Liang: As we've made it noted, we don't see a change to our outlook for 20% growth at a consolidated level this year. I think we should note that we don't think our inventory model is
Stan Liang: very susceptible to recently announced tariffs on goods flowing into the U.S.
and we haven't yet observed any significant impact.
Stan Liang: on our overall business and consumer behavior yet, we'll continue to monitor it closely. And you mentioned FLC, we continue to see strong momentum in...
Stan Liang: in programs like FLC. The trends we've shared over the past few quarters and FLC have only continued.
Stan Liang: FLC is growing at a high multiple of our overall business.
Stan Liang: and we're seeing strong rates of adoption from merchants who are continuing to recognize the benefits of leveraging the operational capabilities of FLC to serve customers better and in turn help their businesses thrive. We're we're
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Investing in enhancements to our service.
including improvements in selection of convenience for customers.
and better tools and support for FLC merchants.
Stan Liang: which in turn drives higher levels of engagement and lead to even greater growth opportunities for our merchants and suppliers. We expect FLC will be a significant driver of growth in the quarters and years to come.
you mentioned each and as well. You know, there are each.
Stan Liang: It's his performance continues to be very strong. We see them, they continue to sustain the same momentum in both growth and margin that we saw throughout 2024.
Stan Liang: Customers have been enthusiastic in their response to our service there, which we believe is providing the broadest selection, rate prices and the fastest and most reliable delivery in the market and possibly anywhere in the world.
Stan Liang: and as each continues to scale, we'll see all of that positive momentum, bear fruit both in the top and bottom line. You know, each has a lot of room to grow, especially outside of soul where we have lower penetration.
Stan Liang: and we expect that each will continue its march towards its full potential in both scale and profitability over time.
Stan Liang: I would like to remind everyone in order to ask a question, press stars and the number 5 on your telephone keypad.
Speaker Change: Our next question comes from Seyon Park. From Morgan Stanley , your line is open.
Sayon Park: Hi, thank you for the opportunity. I also have two questions. One is follow up on the
Sayon Park: Is there a timeline for this 1 billion repurchase to me?
Understand it as kind of a one-year.
Sayon Park: Commitment and maybe some thought that whether that one billion would be fully exercised or that depends on market circumstances.
That's my first question.
The second question is just regarding Taiwan, you know, Ed.
Speaker Change: And we kind of look at some of the third party data on active users and there doesn't yet seem to be any material change in terms of users.
Speaker Change: and just wanted to get a little bit more color after this increase in selection and the launch of the Wild Membership.
Speaker Change: Um, you know, how that's being deceived right now by consumers or whether we should be expecting more change in the coming quarters. Thank you.
Speaker Change: Thanks, Seyon, for your question. On the share repotches program, as we announced and as I mentioned earlier, there's no fixed term to this repotches program.
Speaker Change: This plan basically will enable us to act opportunistically when we believe we can take advantage of the existing market conditions.
Speaker Change: and the pace of the buybacks, again, will be opportunistic and disciplined, you know, maintaining focus on generating the highest levels of return.
Hope to see you soon.
[inaudible]
Speaker Change: Well, on Taiwan, I think we can share that we're seeing strong growth there, both year over year and quarter over quarter.
and local brands.
Quarters have responded with higher levels of engagement.
and Span.
Speaker Change: which is also attracting more suppliers who want to work with us and that in turn increases selection for customers. We expect that virtuous cycle to continue and we're increasingly optimistic about the investments we're making there because of what we're seeing on the ground.
Speaker Change: Or we believe our investments in Taiwan will follow the same trajectory as investments that we made in the past in Korea.
Speaker Change: creating significant shareholder value over the medium and long term. And we're committed to continue to allocate capital with the same level of discipline that has defined our success for many years.
Speaker Change: Now, as with any new offering we launch, there will always be a learning curve as we...
Speaker Change: So a lot of these initiatives will bear more fruit in the coming months.
Fortress and years. [inaudible]
I get it.
Speaker Change: We will now take our last question from the line of Jiong Shao from Barclays. Your line is open.
Jiang Xiao: Thank you very much for taking my questions. Since I'm the last, maybe I can squeeze it, have a question after my first two questions.
Jiang Xiao: The first question is back to FLC. You talked about the growth for FLC, I think customers are revenue being far above the old wall growth rate. I was hoping if you can to...
Share a little bit more about, for example,
your customer penetration there or merchant penetration there.
Jiang Xiao: and the fact that FSA is growing much faster than overall growth rate that I mean your 3P, G&V, is growing much faster than 1P. So any color you can share will be very helpful to us. Second question.
is about
Uh...
sort of leverage, or you talked about it.
Speaker Change: You are in the middle of the technology investment cycle a couple of quarters ago I recall.
Jiang Xiao: as you go through these critical investments, necessary investments for longer-term growth.
There's a kind of a second academy to it.
Jiang Xiao: I'm using a classic kind of baseball analogy, so which in and are we in for the current term?
Jiang Xiao: Investment Cycle. And my half question is back to macro. I know you have highlighted a couple of times that the U.S. tariffs really shouldn't have much of impact on your core business.
which is all in Korea, but on the flip side.
Jiang Xiao: Given that there's a lot of reports around the Chinese exporters are having issues in the US for obvious reasons, so they're looking aggressively for other markets to expand. I see any behavior changes from a couple of Chinese competitors in Korea for the cross-border self. Thank you.
Jiang Xiao: Hi, Jiong. Yeah, thanks. Thanks for your question. Questions? I think I think.
Jiang Xiao: on, you know, Road for FLC. I think you asked about our trend there.
and a growth of our mountain place.
Jiang Xiao: versus Oral Business and versus 1P. I think we can share there as I mentioned that FLC is growing at a high multiples of Oral Business.
Jiang Xiao: and our marketplace as a result is growing much faster than our 1P today. We see good moments. It's still very early. I think both it is it is we've got lots of room and we're certainly far below the penetration levels that we've seen.
of peers in other markets.
Jiang Xiao: On the macro, our focus has always been on the competitor.
Jiang Xiao: as opposed to what any one competitor may be doing or you know what phase or or or in the cycle that we're at. I think I've mentioned before that we're still a small fraction of the overall market retail markets that we serve.
Jiang Xiao: and our growth continues to be powered by the input that we believe are primarily under our control, providing the best experience with the best selection and the highest value for customers.
Jiang Xiao: and really going back to that point about our retail market, you know, they're both massive.
Jiang Xiao: and you know, the retail markets broadly have always been and continues to be a very competitive space with room for many winners.
Jiang Xiao: They're massive and growing. I think we've noted in the past and in Korea alone, we expect that we come up to be well over $500 billion dollars.
Jiang Xiao: and we still have a lot of room for growth ahead, you know, occupying just a small fraction of the overall retail markets in both Korean Taiwan.
Jiang Xiao: There have been always historically a constant stream of new entrants both offline and online.
Jiang Xiao: and to stay competitive in such a dynamic environment with low barriers to entry, we have to continue innovating to create new moments of wow that are set or customer experience apart.
We believe success in the market will be determined primarily.
Jiang Xiao: by our ability to provide customers with the best selection, best service, most savings, and that's always going to be our focus and our priority.
Yeah, and on your question on the text pen.
Jiang Xiao: As we noted in over the last few quarters, we are investing in tech and infrastructure to build the stronger foundation, you know, for scalability.
Jiang Xiao: The higher percentage of revenues that investment in tech and infrastructure accounted is
Jiang Xiao: and it, you know, it does not reflect the structural change in our operating costs.
Jiang Xiao: and we expect these OGNA expenses will decline as a percentage of revenue in the near-to-medium term. I think that's the guidance we are giving.
James Lee, Jiong Shao,
Thank you very much.
James Lee, Jiong Shao,
Jiang Xiao: This concludes today's conference call. Thank you and you may now disconnect.
[music]
James Lee, Jiong Shao, Bom Kim, Gaurav Anand, Michael Parker, Minuh Cha
James Lee, Jiong Shao, Bom Kim, Gaurav Anand