Q2 2024 Earnings Summary
- Coupang's product commerce gross profit margin reached 30% in Q2 2024, an improvement of over 300 basis points year-over-year, driven by continuous improvements in operations, supply chain, scaling of margin-accretive offerings, and greater utilization of automation technology including AI. The company believes there is significant room for further margin expansion towards its long-term adjusted EBITDA target of over 10%.
- Coupang's Eats business is experiencing strong momentum with increasing adoption and frequency from WOW members, and is already unit economics positive. Benefits of scale and a focus on operational excellence are expected to further improve profitability, making Eats a promising growth driver.
- Coupang is experiencing strong momentum and progress in Taiwan, leveraging its investments and experience in Korea to quickly scale and create meaningful differentiation in customer experience. The company is excited about the significant growth opportunities in new markets without having to make the same level of investments, indicating potential for substantial shareholder returns.
- Despite progress in the Eats business, Coupang has not yet reached parity in restaurant selection with its number one peer in the market, admitting that "selection still has areas of improvement to go" and that they are "continuing just to add selection," which may affect competitiveness and market share gains.
- The developing offerings segment reported a $200 million loss in Q2, increasing $93 million year-over-year, driven by additional investments and a $31 million impact from the consolidation of Farfetch. This raises concerns about the potential to exceed the $750 million loss guidance for developing offerings for the full year, which could "temporarily decrease our operating margins in the near term."
- While Fulfillment and Logistics by Coupang (FLC) is margin accretive, the company acknowledges that "there are still many areas that need improvement" and they are "making investments to onboard merchants" and to "continue to improve our suboptimal processes and tech systems," indicating that further investments are needed which may impact short-term profitability.
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Product Commerce Margin Expansion
Q: Can you explain the drivers behind strong margin expansion in product commerce?
A: In Q2, we generated nearly $2 billion of gross profit margin at 30%, improving by over 300 basis points year-over-year. This was driven by continuous improvements in operations and supply chain, scaling of margin-accretive offerings, and greater use of automation technology, including AI. We believe there's still significant room for improvement and expect profit margins to continue rising toward our long-term guidance of over 10% adjusted EBITDA. -
Long-Term EBITDA Margin Target
Q: Is the over 10% adjusted EBITDA margin target achievable, including for 1P business?
A: We are on a long-term trajectory to improve all variables to achieve our guidance of over 10% adjusted EBITDA. We see significant opportunity as we represent a small percentage of a fragmented $560 billion commerce market. By increasing selection across categories, improving service, and expanding savings, we expect spend to grow and margins to improve. -
Taiwan Expansion
Q: How far has Coupang's service rolled out in Taiwan?
A: It's early, but we're encouraged by the momentum and progress in Taiwan. While our customer experience, selection, service, and savings aren't yet at Korea's level, we're leveraging our decade of investments in Korea, including selection processes, fulfillment logistics, supply chain management, and technology stack. We're excited about the potential to create meaningful differentiation and returns for shareholders in Taiwan. -
WOW Membership Fee Impact
Q: Any impact from the WOW membership fee increase on sign-ups or churn?
A: We disclose WOW membership numbers annually and will share more at year-end. Our focus is on creating massive value surplus for members through 14 different benefits. For example, for a monthly fee equivalent to the cost of two deliveries, customers save on 23 free deliveries a month, saving more than 10 times what they pay. We're focused on increasing these benefits to serve existing customers and attract tens of millions of shoppers who haven't joined WOW yet. -
Eats Business Profitability and Strategy
Q: Is Eats improving margins with scale, and what's the growth strategy?
A: We've seen strong momentum in Eats, with great adoption and increasing frequency from WOW members who enjoy unlimited free delivery. Eats is currently unit economics positive, and we expect continued improvement as it scales. We're focused on providing customers with selection, service, and savings—not one at the expense of another—to deliver the best experience in restaurant delivery and commerce. -
Developing Offerings Loss Guidance
Q: Could losses in developing offerings exceed the $750 million guidance?
A: We updated our full-year guidance of adjusted EBITDA losses of roughly $750 million this year for developing offerings. While expenses may fluctuate quarter-to-quarter, we believe our full-year results will align with the guidance provided. -
G&A Expenses and Operating Leverage
Q: When can we expect operating leverage from G&A expenses in product commerce?
A: Expenses as a percentage of revenue increased due to inclusion of Farfetch and restructuring costs, increased investments in developing offerings, and an estimated $121 million adjusted EBITDA impact previously mentioned. We're investing in technology and infrastructure to build a stronger foundation for future scalability. While these investments may temporarily decrease operating margins, we expect to leverage these costs over the next couple of years, creating long-term value. -
Restaurant Selection Parity
Q: When do you plan to reach parity in restaurant selection with your #1 peer?
A: We're continuously adding selection; in some areas, our selection is better, while others need improvement. Our focus is on delivering selection, service, and savings, which is key to winning long-term customer loyalty and unlocking growth. -
Potential M&A Plans
Q: Under what conditions would an acquisition make sense in this space?
A: We have no plans for M&A; we're focused on executing in our current operations.