Hello, everyone. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2024 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] 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's third quarter 2024 earnings conference call. I'm pleased to be joined on the 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. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During today's call, we may present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures are included in our earnings release, our slides accompanying this webcast, and our SEC filings, which are posted on the company's investor relations website. And now I'll turn the call over to Bom.

Thanks, everyone, for joining us today. Before we review our results for the third quarter in detail, I'd like to start with three key takeaways. First, our strong and consistent growth and expanding margins are the result of years of investment and a relentless drive to break trade-offs, to do the hard things that deliver an ever-improving experience for our customers and operational excellence, not one at the expense of the other. Second, our growth in Product Commerce is fueled primarily by deeper engagement from our existing customer cohorts, driven in large part by selection expansion in both established categories and newer offerings like Fresh and Fulfillment and Logistics by Coupang or FLC. Over the long term, growth from existing cohorts will be supplemented by the converging spend of new, active customer cohorts. Third, our nascent offerings like Eats Taiwan, Play, and Farfetch, along with Ads and FLC, continue to march forward on the positive trajectory that we've seen throughout the year. It's important to note that with each of these offerings, we're still in the very early stages of the journey. And with each step, we become even more encouraged by their potential to create meaningful moments of WOW for customers and deliver attractive returns. Now, a few highlights from our results for the quarter. This quarter, constant currency revenues grew 32% over last year, or 25% excluding Farfetch, which we acquired earlier this year. This marks yet another quarter of at least 20% constant currency growth, which we've been able to do in 14 out of the 15 quarters we've reported since our IPO. And still, we continue to represent just a small percentage of the massive commerce opportunity in the markets we serve. We believe the growth opportunity in the years to come is still largely untapped…

Thanks Bom. In Q3, we continued the trend of strong results that we have delivered throughout this year. Our customers continue to engage with Coupang with expanding momentum which is demonstrated by the results we are reporting this quarter. Sustained growth in revenues, Product Commerce Active customers, gross profit and adjusted EBITDA. Before I go through the numbers for the quarter in detail, I need to highlight a few items to provide more context to the comparative numbers we are reporting. First, I remind you of our Farfetch acquisition completed earlier in Q1 of this year. Where possible, I will provide results with and without Farfetch. And second, The FLC accounting change that began in Q2 of last year no longer impacts our quarterly year-over-year comparative results. As a result, FLC adjustments to quarterly year-over-year revenue growth rates are no longer needed. This quarter, our total net revenues grew 27% year-over-year or 20% excluding the impact of Farfetch. Our constant currency growth adjusting for the effects of changes in foreign currencies was 32% or 25% excluding Farfetch. During Q3, the total retail spend in Korea was relatively flat year-over-year. This compares to our Product Commerce segment which grew revenues at 16% year-over-year or 20% in constant currency. This Product Commerce constant currency revenue growth of 20% is consistent with the growth in our overall Product Commerce volumes. As we continue to be a very small portion of the total commerce spend in Korea, we see a massive runway for growth ahead of us. We continue to see strong growth in the average spend levels of our customers this quarter. Net revenues per Product Commerce Active customers grew 4% year-over-year in Q3 or 8% in constant currency. This was impacted by the short-term dilution from newer active customers that historically have…

[Operator Instructions] The first question comes from Eric Cha from Goldman Sachs.

All right, thank you for the opportunity and congrats on a good result in a tough quarter. I have two questions on Developing Offerings. First one is that the Developing Offerings loss has come down quite a bit this quarter compared to the previous quarter. Could you elaborate on some of the moving pieces and could you provide some color into what fourth quarter trend might be in terms of the loss? And if you could get a hint into the trend next year, that would really help. The second question is on Farfetch specifically. It's nice to see Farfetch has already reached close to break-even this quarter. Can we be expecting some maybe profits into the fourth quarter and for the next year? And what would be the synergy between Coupang and Farfetch? Thank you.

Hi Eric, thanks for your question. On Developing Offerings, it's worth highlighting that due to the nature of our investments there, the timing of expenses with the various components may fluctuate quarter-to-quarter as they have in the past. I don't think there's anything material enough to update on that front and certainly for the fourth quarter. On Farfetch, as Gaurav shared and I shared earlier, we're very happy that the Farfetch team has achieved the end of year goal of near break-even adjusted EBITDA in Q3. We're proud of the speed and especially its scale and the discipline with which the team has executed so far this year. There's still more work to do there and our goal is to finish the job of stabilization through the remainder of the year. Next year, we'll begin to assess other opportunities including synergies with Coupang and we look forward to sharing updates at the appropriate time.

The next question comes from Seyon Park with Morgan Stanley.

Of course, looks like it was up maybe about $180 million.

I'm sorry. I don't think I caught most of that question, Seyon, would you mind repeating the question, please?

Can you hear me right now?

Yes.

Okay. So the question is on the OG&A cost, which saw about $180 million sequentially increase. I know Gaurav had explained that there are seasonal factors in there, as well as spending on technology and automation. I just wanted to get a sense of how much maybe of that is temporary compared to structural. Especially for the technology spend, usually I guess technology spend is accounted for as a modernization on some kind of a capital spend. Is that kind of what has been influencing the higher OG&A? That's my first question. The second question, I'm not sure if it's going to be readily available, but if we were to take FLC and have it on a growth basis, do we have a sense of what the year-on-year growth would have been for the third quarter? Thank you.

Hi, Seyon. On the OG&A, and particularly the technology and automation or technology and infrastructure spend. As Gaurav mentioned earlier, we've always made and we continue to make investments there to build the foundation for future scalability. The higher percentage of revenues that investment in tech and infrastructure accounted for this quarter does not reflect a structural change. It's really a matter of timing. And you may see some unevenness quarter-to-quarter because we just don't manage our business or investment schedule with an eye towards quarterly numbers. So again, it's a timing issue, not a structural one. And we expect to generate leverage as we have in the past on these investments. And we expect OG&A to decline over time as a percentage of revenue. On FLC, we've seen strong momentum throughout this year that's continued in Q3. FLC's growth in unit sellers and overall volumes so far this quarter, sorry, this year, each of them grew over 130% over a year. And I think what we can share is that FLC is still in its early stages and it will continue to be a significant part of our growth for years to come.

The next question is from Stanley Yang with JPMorgan.

Okay, thank you for the opportunity. I have two questions. First question is on the Product Commerce margin side. The margin expansion trajectory has been quite strong and consistent for some years on trailing perspective, although a bit of uneven like this quarter. Moving on to next year, do you expect Product Commerce margin expansion speed to remain similar to 2004 level or accelerate or decelerate? And also among the margin drivers, will FLC be more meaningful margin driver next year? My second question is on the Developing Offering side. You already achieved your guidance of the Farfetch margin. Any color on your margin mix trend during third quarter? Is it a bit of earlier but curious about developing offering loss guidance in 2025? That would be appreciated. Thank you.

Hi, Stanley. As you point out, the Product Commerce margin generated $470 million in adjusted EBITDA, which is an improvement of about 10 basis points year-over-year, but decreased 140 basis points versus Q2. So there's some quarterly fluctuation there. And that's something that's been consistent with our performance in the past. We see these quarterly fluctuations in our business. And this quarter, it included some seasonal impact due to weather-related expenses we often see in Q3 versus Q2. And we've provided long-term margin guidance for adjusted EBITDA, which is over 10%. We continue to see a lot of upside in almost every part of our business. And there are opportunities to leverage technology, including AI and automation, expand margin-accretive offerings, improve processes, among many other things, to both enhance the customer experience and reduce waste. And I think you'll see some quarter-to-quarter unevenness, but we're confident about long-term potential opportunity there. On your second question about Farfetch, on Developing Offerings. I think we'll have more to share on our 2025 guidance or thoughts on 2025 in the upcoming quarter. But so far, we're pleased with the progress we're making on Farfetch. But as I mentioned, the job is still not done. There's still more work to do, and our focus remains on finishing the job of stabilization throughout the remainder of the year.

The next question comes from Jiong Shao with Barclays

Thank you. I have a quick follow-up first and two questions, if I may. I think, Bom, you mentioned earlier, of course, we understand the investments go up and down from quarter-to-quarter. And I was just wondering, because a lot of the investments seems to be in technology, which tend to be amortized, as we know. And I was just wondering, given the sort of more intensive investments in Q3 this quarter, was there anything at one time, or this is just a base? You're going to amortize that going forward, and then you will grow out of that. That margin is expanded again. So just try to get a little bit of extra color there, if I may. Then I have two questions.

All right, look, I think Gaurav can comment more on this. But don’t, we're not capitalizing our tech investments. So I think this amortization, a depreciation question, is a little bit surprising for us. There are no one time. These are part of our continued quarterly investment in technology and infrastructure. You can look at our historical performance on that, and certainly on OG&A but broadly, that we have demonstrated and we continue to expect to generate leverage on it over time. You will see quarter-to-quarter some unevenness because we just don't manage our business to hit quarterly expectations on investments like this. So I think that's some of the unevenness you're seeing. And again, we don't capitalize our tech investments. So this is not an issue of amortization, depreciation reflecting here. And we're not talking about any big one time investments here.

Okay, this is super helpful. Okay, that's great. That's help, expand things. My question is, I was hoping you could talk a little bit about your ad take rate. I know that has been a growth driver, high margin. If you can share some insight there in terms of the range you currently are and where you think you can get to. And my second question is that we have noticed you are doing some sort of a campaign or to sort of get some of the cross border guys to do the fulfill by Coupang offering. Just say, hey, we help deliver our products if you want to cross border. Is that something sort of meaningful or is that just one of many, many things you do day to day? We shouldn't pay too much attention to that.

I think to your second point, there's a number of initiatives. They are initiatives big and small. So I think we're always trying to bring more selection to our customers. We're always trying to increase savings. We're always trying to improve services. And you'll see initiatives across the company on a number of fronts there. On ads, specifically, I think to your first question, it continues to be an important area of investment and innovation for us. And it's going well. As we've said before, it's still a small percentage of our overall transaction volume and lower than the levels we see with our global peers. We're still in the developing stages of building out the full range of innovative tools and services that we believe we need to provide the best experience for both consumers and advertisers.

We will now take our last question from the line of James Lee with Mizuho.

Alright, great. Thanks for taking my questions. Two over here first on Eats. You guys call out improvement of losses this quarter Maybe can you unpack that a little bit, maybe which aspect of business you're seeing increased efficiency and can you also comment on the market share and your progress on expanding the supply for the full delivery business? And secondly on Taiwan. And maybe can you give us an update on the progress you made in that region, kind of your market positioning and your efforts on resolving some of the quality of services issue currently facing the Taiwan e-commerce industry? Thank you.

Hi James. I think the, what we've shared on Developing Offerings improvement Farfetch is the segment for the offering that we have shared that we've improved our losses. Specifically, we've achieved a near break-even, which was our target for end of the year, which I think it's worth noting again, that we're really proud of the Farfetch team for having achieved that, but the job is also not finished. We continue to see a strong response from our customers to the value that we're providing and the service levels that we're providing. Our goal there is to provide customers with more choice, with a service that offers selection, service, and savings. It's still very early and we'll share updates in the future when there are meaningful milestones or developments on that front. Taiwan, I think, as we have mentioned, we are excited about the opportunity there broadly. It's still early. There's momentum in progress. We're fortunate to be able to leverage there, a lot of what we've built in Korea over many years. That's certainly helping us scale, and we believe it'll also help us generate operational efficiencies more quickly than we did in Korea. As always, we'll be very disciplined with any increased levels of spend, investing more only when we are convinced about the returns we can generate, and we look forward to providing more updates there at the appropriate time in the future.

There are no further questions. This concludes today's conference call. Thank you and you may now disconnect.