Q3 2024 Earnings Summary
- Farfetch, a recent Coupang acquisition, achieved near breakeven adjusted EBITDA in Q3 ahead of the end-of-year goal, demonstrating strong execution and potential for profitability in developing offerings.
- FLC (Fulfillment and Logistics by Coupang) showed significant growth, with units, sellers, and overall volumes each increasing over 130% year-over-year, indicating substantial future growth potential.
- Expansion into Taiwan is progressing well, leveraging Coupang's experience from Korea to scale operations efficiently and achieve operational efficiencies more rapidly.
- The company's Operating, General & Administrative (OG&A) expenses have increased significantly due to higher investments in technology and infrastructure, which are expensed rather than capitalized. This has led to higher operating costs and unevenness in margins quarter-over-quarter, raising concerns about cost management and future profitability.
- The Developing Offerings segment, including Eats and Taiwan expansion, remains in the early stages with limited progress disclosed. The company has not provided clear guidance on loss trends or profitability for these segments, indicating potential risks and uncertainties in achieving returns from these investments.
- The advertising business remains a small portion of overall transaction volume and is underdeveloped compared to global peers. This suggests that the company may not be fully leveraging this high-margin revenue opportunity to enhance profitability.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Product Commerce Margin | Q3 2024 | no prior guidance | Adjusted EBITDA margin over 10% | no prior guidance |
Developing Offerings | Q3 2024 | no prior guidance | Near breakeven profitability for Farfetch | no prior guidance |
Fulfillment and Logistics by Coupang (FLC) | Q3 2024 | no prior guidance | Units/sellers/volumes growing over 130% year-over-year | no prior guidance |
Technology & Infrastructure Investment | Q3 2024 | no prior guidance | Ongoing investments with expected leverage over time | no prior guidance |
Operational Efficiency | Q3 2024 | no prior guidance | Focus on driving operational efficiency, e.g., AI/automation | no prior guidance |
Developing Offerings Revenue Growth | Q3 2024 | no prior guidance | Grew nearly 350% year-over-year; excluding Farfetch, over 145% | no prior guidance |
Long-term Adjusted EBITDA Margin | FY 2024 | Over 10% | no current guidance | no current guidance |
Developing Offerings (Adjusted EBITDA loss) | FY 2024 | Approximately $750 million | no current guidance | no current guidance |
Farfetch | FY 2024 | Target close to positive adjusted EBITDA on a run-rate basis | no current guidance | no current guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Taiwan expansion | Expressed continued optimism about market potential and faster scale-up by leveraging Korean expertise. Emphasized disciplined investment and direct partnerships with brands to drive selection. | Highlighted momentum and operational efficiencies, applying lessons from Korea to build infrastructure in Taiwan and partnering with more brands. Maintained a disciplined investment approach. | Recurring topic; sentiment remains positive with a focus on efficient scaling and discipline. |
Farfetch integration | Completed acquisition with one-time restructuring charges expected; aiming for near-breakeven profitability by end of year. Contributed to revenue growth but also to losses in Developing Offerings segment. | Achieved near breakeven adjusted EBITDA, impacting the effective tax rate and part of an improved Developing Offerings performance. Management sees room for future synergies. | Recurring topic; sentiment has improved as Farfetch approaches breakeven, viewed as a potential strategic and financial contributor. |
FLC (Fulfillment & Logistics) | Showed strong growth in units and seller adoption, described as margin-accretive and outpacing the overall business. Viewed as an early-stage driver of future growth. | Maintained triple-digit YOY growth in units, sellers, and volumes. Expected to be a significant margin driver over time and expand selection for customers. | Recurring topic; sentiment remains positive with expectations of long-term margin contribution and expanded selection. |
Eats | Experienced substantial growth and customer adoption through free delivery programs; remains unit economics–positive. Noted as an important part of Developing Offerings. | Continues to receive a strong customer response, contributing to improved Developing Offerings losses. Still early in its life cycle, with emphasis on service levels and value. | Recurring topic; sentiment stays positive as Eats drives user engagement and improves segment profitability. |
Advertising | Described as fast-growing but still a small part of overall GMV; higher-margin potential and early in development. | Emphasized as an important investment area, still lower than global peers, with plans to build out a full range of solutions. | Recurring topic (except Q2 mention); sentiment remains optimistic about long-term potential. |
Chinese cross-border e-commerce competition | Acknowledged competitive market with large Chinese platforms; emphasized barriers to entry are low and importance of unique customer experience. | No mention | No longer mentioned; previously noted as a strategic consideration to maintain competitive differentiation. |
Cost structure, margins, and profitability | Noted growing margins and improving profitability in Product Commerce, though Developing Offerings and Farfetch drove higher losses. Focus on operational efficiencies, supply chain optimization, and margin-accretive offerings. | Product Commerce margins remained solid, slight quarter-over-quarter fluctuation due to tech investments. Developing Offerings losses improved with Farfetch near breakeven. | Consistently mentioned; sentiment is positive on long-term margin expansion, with short-term fluctuations from investments. |
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Farfetch Near Breakeven
Q: Can we expect profits from Farfetch in Q4 and next year?
A: Farfetch achieved its end-of-year goal of near breakeven adjusted EBITDA in Q3. While we're proud of the team's speed and discipline, there's still work to do, and our goal is to finish stabilization through the remainder of the year. Next year, we'll assess opportunities, including synergies with Coupang. -
Developing Offerings Loss Reduction
Q: Why has Developing Offerings loss decreased this quarter, and what are future trends?
A: The decrease in Developing Offerings loss is due to fluctuating timing of expenses among various components. There's nothing material enough to update for Q4, and expenses may fluctuate quarter-to-quarter due to the nature of our investments. -
Product Commerce Margin Outlook
Q: Will Product Commerce margin expansion continue next year as before?
A: Product Commerce generated $470 million in adjusted EBITDA, improving 10 basis points year-over-year but decreasing 140 basis points versus Q2, reflecting quarterly fluctuations. Seasonal impacts like weather-related expenses affected margins this quarter. We maintain long-term adjusted EBITDA margin guidance of over 10% and see upside potential across the business, leveraging technology and automation to enhance customer experience and reduce waste. -
OG&A Expense Increase
Q: Is the higher OG&A cost temporary or structural, especially for technology spend?
A: The increase in OG&A, particularly technology and infrastructure investments, is due to timing, not a structural change. Expenses may fluctuate quarterly as we don't manage investments to hit quarterly numbers. We expect OG&A to decline over time as a percentage of revenue and to generate leverage on these investments as in the past. -
FLC Growth Impact
Q: What's the year-on-year growth of FLC, and its future significance?
A: FLC showed strong momentum, with units, sellers, and overall volumes growing over 130% year-over-year this year. Though still in early stages, FLC will continue to be a significant part of our growth for years to come. -
Advertising Revenue Potential
Q: Can you provide insight into your ad take rate and future expectations?
A: Advertising is an important area of investment and innovation, progressing well. Currently, it's a small percentage of our transaction volume, lower than global peers. We're developing a full range of innovative tools and services to enhance experiences for consumers and advertisers. -
Eats Business Efficiency
Q: Where are you seeing increased efficiency in Eats, and how is market share expanding?
A: We see a strong customer response to the value and service levels in Eats. Our goal is to provide more choice with selection, service, and savings. It's still early, and we'll share updates when there are meaningful developments. -
Taiwan Market Progress
Q: Can you update us on Taiwan operations and addressing service quality issues?
A: We're excited about the opportunity in Taiwan and are making progress. Leveraging our experience in Korea helps us scale and generate operational efficiencies more quickly. We'll invest disciplinedly, ensuring returns justify increased spend, and will provide updates at the appropriate time. -
Cross-border Fulfillment Initiative
Q: Is the cross-border Fulfilled by Coupang offering significant?
A: We have numerous initiatives to enhance customer selection, savings, and services. This is one of many efforts, and while we continue to innovate, we'll share more as appropriate.