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Investment and Growth: Coupang's Q2 2023 Results

Source: Coupang

Seatle, USA and Seoul, South Korea - Coupang (NYSE: CPNG) has announced its results for the second quarter of 2023.

Why it matters:

Coupang has always been at the center of controversy in the South Korean tech and retail industries.

In the past, the debate between those who claimed Coupang would fail and those who said Coupang would turn around and become profitable has been somewhat muted by Coupang's net income.

Now, the market is watching to see if Coupang can pursue growth and profitability simultaneously.

The Key Points

1. Financial Results

  • Net revenue: $5.8 billion, up 16% y-o-y and 21% on a constant currency basis. An accounting change in FLC revenue impacted revenue growth, resulting in 300 basis points above the 21% growth rate.
  • Gross profit: $1.5 billion, up 32% over the prior year. The gross margin was 26.1%, a 320 basis point improvement over the preceding year. This includes a 100 basis point positive impact from the change in accounting for FLC revenue.
  • Net income: $145 million, a significant increase of $221 million over the prior year and a margin of 2.5%.
  • Adjusted EBITDA: $300 million, with a margin of 5.1%, a 380 basis point improvement over the prior year.
  • EPS: $0.08, up $0.12 year over year.
  • Cash flow from operations: $2.0 billion, up $2.3 billion year-over-year, with trailing twelve months free cash flow of $1.1 billion.

2. Business Highlights

  • Product Commerce: Net sales of $5.7 billion, up 16% on a reported basis and up 21% on an FX-neutral basis. Adjusted EBITDA of $408 million, up $310 million year-over-year, and Adjusted EBITDA margin of 7.2%, up 520 basis points year-over-year.
  • Developing Offerings: Net sales of $156 million, down 2% on a reported basis and up 2% on a constant currency basis. Adjusted EBITDA was negative $107 million, including International, Coupang Eats, Play, and Fintech.
  • Active customer growth: 10% year-over-year, with 19.7 million active customers.

Key Takeaways:

Profitability and growth: Coupang continues to drive profitability while maintaining high growth. The company's focus on customer experience and operational excellence has been instrumental in this success.

Accelerating trends: Coupang's revenue and active customers grew faster this quarter, with a single-digit market share in a massive retail market expected to reach $550 billion over the next three years.

Milestones: Coupang achieved $2 billion in operating cash flow and more than $1 billion in free cash flow. It is the fourth consecutive quarter of significant GAAP profitability, focusing on long-term guidance of greater than 10% Adj. EBITDA.

Growth Initiatives: Momentum is evident in growth areas, including fashion and beauty categories, third-party sales, advertising, fulfillment, and logistics through Coupang, and developing offerings such as Eats in Taiwan.

Investment Strategy: Coupang will invest approximately $400 million in developing offerings in 2023, including Taiwan, Play, and Eats, while remaining committed to generating meaningful free cash flow.