Coupang, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Highlights: Consolidated revenues were $9.3 billion, growing 18% on a reported basis and 20% on a constant currency basis. Gross profit margin expanded to 29.4% (up over 50 basis points vs last year). Adjusted EBITDA margin was 4.5% (up 10 basis points vs last year). Product Commerce drove significant margin expansion. Taiwan's momentum continued to accelerate with revenue growth and progress in first-party assortment and last mile logistics.
• Operational Focus: Aggressively deploying automation technologies in logistics and fulfillment. Rolling out reusable eco-bags beyond Fresh. Continuing to invest in Taiwan with expansion of selection and build-out of last mile logistics. Focus on breaking trade-offs for customers and driving operational excellence.

Segment Performance

• Product Commerce: Net revenues were $8 billion, increasing 16% year-over-year or 18% in constant currency. Gross profit was $2.6 billion, up 24% year-over-year or 26% in constant currency, with a gross profit margin of 32.1% (expanding over 210 basis points vs last year). Segment adjusted EBITDA was $705 million, up 50% over last year, representing a margin of 8.8% (an increase of over 200 basis points year-over-year).
• Developing Offerings: Net revenue was $1.3 billion, increasing 32% over last year or 31% in constant currency. Gross profit for the quarter was $156 million, a decrease of 22% over last year. Segment adjusted EBITDA for Developing Offerings was a loss of $292 million. Full-year guidance for Developing Offerings' adjusted EBITDA losses was revised to the higher end of $900 million to $950 million due to continued momentum in Taiwan.

Guidance

• Consolidated net revenue growth is expected to be roughly 20% in constant currency YOY, in line with full-year guidance.
• Full-year Developing Offerings' adjusted EBITDA losses are revised to the higher end of $900 million to $950 million due to continued momentum in Taiwan.
• Full-year effective tax rate is expected to be temporarily elevated at 60% to 65%, with the long-term expectation to normalize to closer to 25%.

Risks

• Competition in the Fresh segment could impact growth.
• Seasonal weather-related impacts in Product Commerce and further investments in Developing Offerings led to quarter-over-quarter margin decreases.
• Investment levels in Developing Offerings may continue to impact margins in the short term.

Question and Answer

Q: Given the launch of Naver, Kurly partnership recently, I was wondering if Coupang saw any impact on its Fresh GMV or any other metrics for that matter impacting the momentum.

A: On Fresh, the strong trajectory has continued, with growth well above the overall business. Focus remains on continuous innovation to enhance the customer experience and make Fresh more affordable.

Q: In reverse, should we be expecting some sort of a headwind in the fourth quarter due to this year's Chuseok timing? And could you give us some idea how substantial that could be?

A: The timing of Chuseok fell between third and fourth quarter, which had some impact on compatibility. However, underlying demand trends remain solid, and full-year growth is expected to be in line with guidance.

Q: Can you please provide a bit of color, what is the current rough estimate of your e-commerce share in Taiwan and how rapidly growing?

A: It's very early in Taiwan, but momentum is accelerating. Similar to Korea's early stages, focused on building the best customer experience with progress in first-party assortment and last mile logistics build-out.

Q: What are Coupang's plans on the AI side? Whether Coupang also has plans to purchase GPUs or build data centers that are either for Coupang's internal usage or it could be for -- to provide services to customers as well?

A: Focus is on building internal AI computing infrastructure to support operations and improve performance. There are small efforts to test making parts of the technology available externally, but disciplined in resource allocation.

Q: I was just wondering that the strong expansion in EBITDA margins in Q3 was sort of an indication of the start of that kind of tapering off process for technology investments?

A: Product Commerce margins are around 9% and expanding. Tech investment pace has been slowing down; OG&A expense was 27.6% of total net revenue, up only 10 bps over last year and down nearly 70 bps over last quarter. Still investing in tech for future growth but at a slower pace.

Q: I have two. The first one I'll ask on Taiwan. I think you guys launched the WOW membership earlier this year with a 90-day no-cost promotion, right? Can you talk about what you have done so far? And how the retention after the 90 days, if any of them already hit the deadline already, given the fact that you now have outplayed the game with your last mile logistics?

A: WOW membership early response has been encouraging, similar to early stages in Korea. Focus on improving service levels and adding benefits, with customer response looking promising.

Q: How big is that one-off sponsorship spending for the APEC Summit 2025? And what have you guys have learned so far?

A: APEC sponsorship is not a major business lever. Focus is on partnering and building relationships for future investment opportunities more than a direct business impact.