Coupang, Inc.

Good afternoon. My name is Alexander, 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 speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Thank you. Now I'd like to turn the call over to Michael Sano, Vice President of Investor Relations. You may begin your conference.

Thanks, Operator. Welcome to Coupon, Inc.' 's quarterly earnings conference call for the first quarter ended March 31st, 2021. I'm pleased to be joined on the call today by our founder and CEO, Ban 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 are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements. Please refer to today's earnings release as well as the risks and uncertainties described in our prospectus filed with the SEC on March 11, 2021, and in other filings made with the SEC when available 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, 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 filings with the SEC, each of which is posted on the company's investor relations website at ir.aboutcoupon.com. I will remind you that these numbers are unaudited and may be subject to change. And with that, let me turn the call over to Baum. Thanks, Michael.

Since this is our first earnings call, before we talk to the results, I'd like to take a moment here to speak about why we're so excited about the decades-long opportunity ahead of us at Coupang. To understand Coupang, we begin with our mission to create a world where customers wonder, how did I ever live without Coupang? Our orientation is our most important advantage. We work backwards from the customer, from a vision of a world where our customers have it all, jaw-dropping convenience without a convenience tax. Historically, online shopping has forced customers to choose between amazing service, low prices, and broad selection. Delivery within hours isn't amazing if your selection shrinks to that of a convenience store, or if it forces you to pay higher fees or prices. We aim to break these trade-offs. It's only when we deliver all three in harmony, amazing service, low prices, and broad selection, that we deliver a true wow experience for our customers and sustain long-term growth for the company. So we built an end-to-end integrated e-commerce system that we believe is setting a new standard for commerce globally. And we ingrained into our culture a willingness to be brave, to take risks, to make bold choices, and to learn from our failures. These values are at the core of our DNA and drive our continuous innovation today. Here's an example. A few years ago, while almost all Rocket orders were one-day delivery, we learned that many customers were returning home late at night and were only able to use what they had ordered the following day, which meant that our one-day delivery was, in effect, a two-day experience. So we launched Dawn and Sand Day delivery with access to not just convenience store selection, but millions of items from computers to baby food. Customers can order seconds before midnight, head off to sleep, and wake up to find their items waiting at their doorstep before 7 a.m. via dawn delivery for free. It's like Christmas morning every day. And how convenient was our service if customers could get every brand of cereal on Rockets but still have to drive out to a store for milk? So we launched a nationwide online grocery service offering customers one of the largest selection of fresh goods delivered within hours at low prices. As a result, we've quickly become the leading nationwide online grocer. And why couldn't returns be as effortless as placing an order online? For returns on Rocket, you simply open the app, tap a few times, and leave the item out in front of your door for pickup. No packaging, printing of a label, or cumbersome scheduling with a carrier required. And the moment our driver scans the item in front of your door at pickup, we initiate the refund. and returns within 30 days on RocketWow are completely free. We tackled another convenience tax in e-commerce, packaging waste. Packaging is required to protect the items during shipment, but because we controlled the entire process end-to-end, we found a way to protect items without boxes. Today, more than 75% of the deliveries we process and ship are boxless, in a simple sleeve with no additional cardboard, air cushions, or bubble wrap. And we didn't stop there. We asked, can we get rid of all disposable packaging? We introduced eco bags for Rocket Fresh, which replaces nearly all disposable packaging with completely reusable bags that are picked up by our delivery network for reuse. Today, our trucks that once left full and returned empty are coming back with returns from customers and eco bags for reuse. We estimate that in Q1 alone, we saved over 8,000 tons or over 15 million pounds of packaging waste due to innovations like boxless delivery and eco bags. Breaking tradeoffs is hard work. That's why few have done it. But it's our life's work, and we're passionate about it. We've invested the last seven years and billions of dollars into countless internal systems, algorithms, and 25 million square feet of e-commerce infrastructure. Today, 70% of the Korean population lives within seven miles of one of our centers. We also manage the largest fleet of full-time drivers in Korea, directly employing 15,000 delivery drivers who utilize our proprietary software and custom-designed trucks. And proprietary technology is critical to our ability to provide a wide selection, delivery experience, and free shipping. Our dynamic orchestration technology, for example, predicts and assigns the fastest and most efficient path for every order out of hundreds of millions of combinations of inventory, processing, truck, and route options within seconds of an order being placed. We are a technology company at our core, and the homegrown technology that underpins our value proposition is designed to optimize our one-of-a-kind end-to-end integration. As a result of our unmatched e-commerce investment in the market and years of scaling and iteration, we remain the only major e-commerce company in Korea that delivers 365 days per year, guaranteeing one-day delivery or faster on millions of items and keeping our promise on nearly 100% of our rocket orders, even on peak days before Lunar New Year or Korean Thanksgiving. And it's not just delivery speed. Our unique investments and growing scale create operational efficiencies, which we can pass on to our customers in the form of lower prices. According to a recent third-party study, coupons prices were cheaper on average across all surveyed product categories. And we estimate that RocketWOW customers saved over $200 million in shipping fees in the first quarter alone. The most exciting part is that we're still early in the journey. All of the things that we've built are getting better every year, and we plan to build more square footage of infrastructure over the next year than in any year since our inception. Our plan is to increase our nationwide footprint by over 50% in the coming year. We have a differentiation that will keep growing over time. The size, growth, and structure of the market is another tailwind. Korea is a massive e-commerce opportunity. It's the fifth largest globally and grew at a 20% CAGR over the last five years, second only to China. And it's the largest e-commerce opportunity not won by Amazon or Alibaba. But there is a broader play here. Similar to China, Korea is leapfrogging the offline retail revolution. The U.S. has more than 10 times the offline retail footprint per capita of Korea. We believe we're at the center of two revolutions, not just the transition from offline to online, but also a retail revolution that happened first offline in the U.S., but is now starting online in Korea. The market also boasts a highly connected, tech-savvy consumer base with high mobile usage. We believe these structural characteristics create strong tailwinds for e-commerce that will lead to higher online penetration than other markets. that makes this a broader commerce opportunity korea's total commerce market is expected to exceed 530 billion dollars by 2024 and we were still less than five percent of the total market last year and coupon has been rapidly gaining traction growing at a multiple of the overall e-commerce segment over the last few years even as our scale increased That trend continued in Q1, with year-over-year revenue growth approximately three times faster than the overall Korean e-commerce segment. Our cohort behavior confirms that trend. As we showed in our S-1 filing, our annual cohorts are accelerating in size and spend each year, further evidence of the engagement and loyalty that our customer experience creates. And even our oldest cohorts are still increasing their spend, indicating that we're still at the early stages of our growth cycle. All the benefits we offer customers are amplified by our Rocket WOW membership. Fueled by access to services like Dawn and Same Day Delivery, as well as our streaming video offering Coupon Play, Rocket WOW members purchase with significantly higher frequency and across more categories than non-WOW members. Fundamentally, Coupon is not a consumer goods company or a delivery company or even an e-commerce company. Coupang is, at its essence, a company that challenges trade-offs and delivers wow in customers' daily lives. We started with product e-commerce, but have since launched two new services and fresh needs. I'd like to spend a moment on their early success. In Rocket Fresh, we offer one of the largest selection of groceries online with the only nationwide dawn and same-day delivery service. We also offer, according to a recent third-party study, the lowest fresh prices among competitive services. As a result of our value proposition, fresh revenue in Q1 was more than two and a half times the revenue in the same period last year. Coupang Eats started small and focused on the Gangnam region in Seoul until the middle of 2020. A little less than a year later, Eats launched in Jeju Island and is now national. In Q1, Coupang Eats was the most downloaded mobile app in Korea, and the service has scaled faster than any in our history. Despite rapid growth in 2020, our penetration in both categories remain low. And while Fresh and Eats were the first new services we've launched since product commerce, they won't be the last. We're confident about the runway ahead, and we'll continue to invest aggressively in these and more offerings in the future. Finally, We're excited to be reporting our first quarter results because we think they validate the investments we've made and speak to the continued execution along our strategy. In Q1, we delivered total revenue growth of 74% year over year, and our quarterly active customers increased 21% to 16 million. Keep in mind that our strong first quarter growth comes against two headwinds. First, a comp against a strong quarter last year that experienced large order spikes due to the COVID-19 outbreak, which started in Korea in late January. And second, a challenging operating environment that persists due to the pandemic. To that second point, we had 20 complete closures of operational centers due to COVID at various times in Q1, an average of nearly two closures per week. In spite of those and countless other challenges, we upheld our high on-time delivery rates. It's a testament not only to the capabilities that we've built in our end-to-end integrated network and technology, but also to the dedication of our teams. The lost operational bandwidth and opportunity costs were real, but our team's commitment and hard work helped make our workplace safer while keeping our promise to our customers. I couldn't be prouder of our teams. In conclusion, we're excited to be on this journey with our shareholders, and we're just getting started. While our business will continue to evolve, we won't change how we operate. We'll always work backwards from an ambitious goal for the customer. We won't hesitate to make difficult decisions and bold investments for the long term. We'll keep attacking tradeoffs between service, selection, and price to create a world where customers wonder, how did I ever live without Kupak? With that, I'll turn the call over to Gaurav.