Good afternoon. My name is Josh and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Now, I’d like to turn the call over to Mike Parker, Vice President of Investor Relations. You may begin your conference.

Thanks, operator. Welcome, everyone to Coupang, Inc.’s quarterly earnings conference call for the first quarter ended March 31, 2022. I am pleased to be joined on our call today by our Founder and CEO, Bom Kim; and our CFO, Gaurav Anand. 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 as required by law. Certain statements made on today’s call include forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially. Please refer to today’s earnings release as well as the risks and uncertainties described in our most recent annual report on Form 10-K filed with the SEC on March 3, 2022 and then other filings made with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements. During today’s call, we will present both GAAP and non-GAAP financial measures. As a reminder, these numbers are unaudited and may be subject to change. Additional disclosures regarding these non-GAAP measures, including reconciliations of non-GAAP measures to the most comparable GAAP measures, are included in our earnings release and our SEC filings, which are posted on the company’s Investor Relations website at ir.aboutcoupang.com. And now, I will turn the call over to Bom.

Thanks, everyone for joining us today. Let me begin with a few highlights from our first quarter operating results. On a consolidated basis, Q1 constant currency revenues grew 3% quarter-over-quarter and 32% year-over-year. Our Q1 growth rate continues to be multiples of the e-commerce segment and we are confident that we will continue to grow significantly faster than the segment for years to come. Our active customers grew to over 18 million, an increase of 13% year-over-year and our unmatched customer experience is driving even deeper engagement. All of our cohorts, even our oldest, are still compounding at a fast rate. And our oldest active customers are spending on Coupang over 60% of their total estimated online spend today. We are excited about our significant growth potential in what is projected to be the third largest e-commerce opportunity in the world, exceeding $290 billion by 2025. In the first quarter, we also recorded the highest gross profit and gross margin in the history of the company, generating over $1 billion in gross profit and exceeding 20% in gross margin. That represents a 42% improvement in gross profit year-over-year and an over 450 basis point improvement in margin quarter-over-quarter, driven largely by initiatives around process improvement, automation and supply chain optimization. As a result, our consolidated adjusted EBITDA recorded an improvement of $194 million from Q4 of 2021. As we previewed in our last earnings call, we begin reporting our operating results this quarter in two segments: one, product commerce, which represents our core e-commerce and fresh offerings; and two, developing offerings, which represents our more nascent initiatives like Eats, video, FinTech and international expansion. First, on product commerce, we have provided guidance in our last call that product commerce would be adjusted EBITDA profitable in late 2022. We are pleased…

Thanks, Bom. Our demand was strong, even as conditions surrounding COVID started to normalize. In the first quarter, we grew 32% year-over-year in constant currency, which with foreign currency impact is 22% year-over-year on a reported basis. We are currently at an annualized run-rate of over $20 billion in revenue. Our unparalleled customer offerings continue to attract new customers and drive strong customer retention. Net revenue per customer increased 8% year-over-year on a reported basis and 16% on a constant currency basis as more customers continue to be more engaged across all categories and offerings. Q1 gross profit increased to a record high of over $1 billion, a 42% increase year-over-year. This represents the best performance in the company’s history. This helped drive the improvement in adjusted EBITDA losses to $91 million and a minus 1.8% EBITDA margin for the quarter. These results have come in part to our focus on driving efficiencies throughout operations. As an example, this includes enhanced utilization of machine learning to better estimate delivery times and create more efficient route assignments as well as increased investments in automation, including robotics, within our fulfillment network. As we look forward to the remainder of 2022, we expect to continue our momentum in driving meaningful profit improvements. We guided in our last earnings call that we expect an adjusted EBITDA loss in 2022 of no more than $400 million. In light of the trends in the business, including our first quarter performance, we are confident in our ability to exceed that adjusted EBITDA target this year. We believe our Product Commerce profitability will continue to improve. However, the cadence and sequencing of our efforts will result in potentially disproportionate benefit quarter-to-quarter. As Bom mentioned, we will maintain a disciplined investment approach with our Developing Offerings like Eats, video,…

[Operator Instructions] Your first question comes from the line of Eric Cha with Goldman Sachs. Your line is open.

Hi, thank you for the opportunity. I have two questions to ask. Firstly, on gross profit margin and EBITDA trend. First quarter, obviously, very strong. How do you anticipate the upcoming quarter’s trend for the two this year? You briefly, I think, mentioned on the drivers, but more detailed elaboration would be helpful. Second, I realize that you’ve not changed your guidance. Can you confirm this for us, please? And if so, any chance during the year whether there could be change in guidance? Or maybe put it in a different way, any changes in your investment plans into video, fin-tech and international? And if I may add, can you also share this quarter’s COVID impact as well? Thank you.

Sure. Thanks, Eric. So we had a strong first quarter. And in light of this first quarter performance and the current trends, Eric, we are very confident in our ability to exceed this adjusted EBITDA target that we gave this year. The Product Commerce profitability, we will continue to improve through the year, though the benefits that you see quarter-over-quarter may be disproportionate. And versus our plan in the developing services, we don’t intend to increase investments versus the plan. So overall, we are confident in our ability to exceed the adjusted EBITDA that we gave.

On the improvement side, most of the 450 bps improvement came from continuous improvement programs. As I mentioned, that were launched before this year around process and technology, around supply chain optimization among other drivers. And some of these efforts, as I’ve mentioned in the past, were happening in the backdrop. They were obscured by short-term disruptions or timing of investments. And some of these accelerated this past quarter as more resources were directed towards them that had previously been dedicated to dealing with pandemic-related challenges. These – as Gaurav just mentioned, we expect Product Commerce segment to remain profitable. We’re in to continue to show improvement over time. Of course, the impact won’t be equal every quarter. But we do expect to see benefits continue to come from greater economies of scale, improved operational excellence from these projects that I mentioned a growth of higher-margin categories and services. These are the same drivers that drove the record improvement, our highest gross margin in the company’s history this past quarter. And they are the same drivers that give us confidence in our ability to achieve 7% to 10% or higher adjusted EBITDA margins in the long run. And I think on COVID, I don’t have the exact number. There is some COVID costs still, of course, that in Q1, but those are decreasing over time.

Thank you.

Your next question comes from the line of James Lee with Mizuho. Your line is open.

Great. Thanks for taking my questions. I have two here. With COVID cases start to come down, can you guys talk about any changes in consumer behavior? Are you seeing any sort of shift to offline shopping or even to like services industry like travel similar to what we see in the U.S.? And if so, which category are you seeing most impact? Which category do you think is more resilient? And second question is for Gaurav. I noticed quite a bit of outperformance in COGS. Revenue is kind of flattish quarter-over-quarter, but COGS came down quite a bit. Can you parse that out for us for both the core product and developing business? Thanks.

On the COVID impact. I mean, there is, of course, a lot of variables at work here related to the reopening around COVID. We’re seeing internally a lot of evidence that the consumer behavior changes and the engagement level increases in COVID. We’re not temporary, but for the long-term. And we’re at a stage right now where our growth across all categories is still at a – still relatively strong compared to broader conditions. Our demand, for example, in Q1 was strong even as conditions around COVID started to normalize. The product e-commerce segment in Korea, for example, the broader segment in constant currency was down, was negative quarter-over-quarter. We were up. Year-over-year, the product e-commerce segment was up only 8% in the broader e-commerce segment in Korea, 8% up year-over-year. Our Product Commerce growth rate was nearly 4x of that at 30%. So there continues to be lots of unpredictable variables related to the opening in the short-term. But the long-term trajectory is very clear to us that in any scenario, we will continue to grow significantly faster e-commerce segment and continue to gain share across all of our categories. We’re on pace to gain significant share. In an e-commerce market segment, that’s expected to approach nearly $300 billion in sales by 2025 and become the third largest e-commerce opportunity in the world after only the U.S. and China. Gaurav, do you want to take the second question? Yes.

Yes. James, on the second question, we did give out the split between Product Commerce, margin improvement and Developing Services margin improvement. And as Bom highlighted earlier, the overall margin improvement was 450 bps. On the Product Commerce side, most of it came from operational excellence, supply chain improvements, process improvements that we had seeded earlier in the quarter. On Developing Services, the improvements came in – a large part of it came in from Eats while we continue to build on the other initiatives that we have. I hope that answers your question.

Okay. Great, thank you.

[Operator Instructions] Your next question comes from the line of Peter Milliken with Deutsche Bank. Your line is open.

Yes. Good morning, everybody. My question is your share price is down close to three quarters since the IPO. Look, that’s happened to a lot of companies in that period of time. But does that change what invested the demand of you in terms of your mandates, right? Initially, with the land grab, get dominant and then build the adjacencies. Are they – do you feel like they are still completely on side with that? Or is there more of a balance that they are after to also focus on getting to breakeven more quickly perhaps than you would like to target right now? Thanks.

James, I didn’t hear that question as clearly. I don’t know if it was just on my end. But I think your question was around has our mandate, has our strategy changed, given the changes in the stock market environment. Sorry. Was it Peter, sorry, Peter. Peter, was that the question probably?

Yes, that’s the question.

Yes. One of the things we wanted to point out, we have laid out our five operating tenants about a year ago, well before any changes in the market. And we laid out exactly what we were – we’re focused on investing for the long-term, creating customer wow, really breaking trade-offs and also operational excellence. We have a culture – I mean it’s really core in our DNA, operational excellence. We want to create the best customer experience with the least – with the highest efficiency. And I think we laid out the disciplined way in which we were going to allocate capital, the rigorous way in which we were going to test and iterate and improve operational excellence. And as we mentioned, a lot of these program that you’re seeing, you’re seeing the fruits of a lot of these more evidently in Q1, but they were happening – they were first – yes, they were being produced by programs that started – many of them well before Q1. Some were bearing fruit that was being obscured by a lot of short-term disruptions, lots of pandemic-related disruptions that we had shared earlier. So for us, our culture, our strategy remains consistent. We’re disciplined. We’re rigorous, and we’re also unafraid to take on hard challenges to create customer WOW and operating leverage. So we hope to show that and continue to show that and continue to demonstrate our progress on both fronts in the quarters ahead.

That’s very clear. Thank you. And just a quick follow-up on that. So, on the core and the sort of developing businesses I can see that you’re still moving ahead in the same way. On the more massive businesses like say the media side, is that still the case as well or do you feel like there is a higher bid that you need to before you start putting more resources into something like that?

Yes. We have always had a – we have outlined in our operating tenants how we test and invest. And it’s early in the international, fintech play. I think those are the services you mentioned. It was a little – I couldn’t quite make it out.

Yes, something like that. Yes.

Yes. Again, we have a capped budget. We test within that. We get proof of concept. We nail it before we scale it. And that continues to be our operating framework in many of these areas. Look, in cases like fintech, it’s an evergreen opportunity for us. It continues to – these are areas with a vast potential. But as our ecosystem builds – as our ecosystem grows, that opportunity continues to grow. And so we are patient, and we are patient and we will continue to – in a very disciplined way, test, iterate and learn.

Got it. Thanks. Thank you.

Your next question comes from the line of Stanley Yang with JPMorgan. Your line is open.

Hi. Thanks for taking my question. I have two questions. Can you share about the second quarter operation momentum in terms of the top line growth and the Q-o-Q margin trend? And what will be the additional drivers of the margin improvement going into the second quarter or second half? Do you expect the temporary setback of the GP margin in case of full reopening in second half? And my next question is about the labor supply issue. So, tight labor supply has been one of the key constraint of your margin side. Do you see any reserve of this supply issue in the first quarter? And going forward, this will be additional room of the growth, and – or do you expect any structural headwinds on this regard? And what are the major initiatives to drive labor cost savings or labor efficiency increases? That’s two – those are my two questions.

Yes. Stanley, so I think on upcoming quarter, there were lots of – on growth, there are lots of unpredictable variables in the short-term, as we mentioned. But what’s clear in Q1, what we continue to see is that we are and we will continue to grow significantly faster in the e-commerce segment. That part is – that trajectory is becoming clearer and clearer to us every day. And in fact, as we mentioned, we grew – our share of growth grew every quarter of last year. That was even higher in Q1. So, I think while we can’t speak and predict with precision in the near-term, I think we are very confident in the long-term that in any scenario, we will continue to gain significant share and continue to grow significantly faster than the market for – in the e-commerce segment for years to come. You mentioned drivers for margin improvement. As we mentioned, there were process improvements, technology and automation improvements. There was supply chain optimization. There were also continued scaling of various services. What’s exciting for us is that as we get bigger, it’s becoming – we are seeing more benefits coming from economies of scale, from – more scale increases our ability to invest either in software and hardware automation and efficiency projects. Also our – some of our biggest opportunities for growth are in higher-margin categories and services. So, for us, growth in the future should be higher margin. And that’s what looks, it’s really exciting about the growth in margin in the future. I think going forward, the impact or the improvement – the scale of improvement won’t be as dramatic every quarter. But we do expect to show steady improvement over time. And as Gaurav mentioned, you will continue to see product commerce remain profitable, show improvement. You will see developing offerings also continue to make improvements quarter-over-quarter. You mentioned labor supply, we are not seeing any structural constraint in labors capacity. Of course, there was – there are always challenges related to – we had record capacity in Q1 so far. And we have been – our investments in process improvements and technology improvements, among other things have really helped us manage – there are, of course, variables we don’t control. We mentioned in our earlier statement that we did see some headwinds from inflation and supply chain disruption, but we were able to offset a lot of that because of the improvements we are making on the drivers that we control. And that’s what continues to be the anchor of our optimism going forward is that we are very confident in our ability to drive the inputs that we control. And we believe that they will continue to drive our ability to achieve the 7% to 10% or higher in adjusted EBITDA margins over the long-term.

[Operator Instructions] There are no further questions. This does conclude today’s conference call. Thank you for joining. You may now disconnect.