Coupang, Inc.

Good afternoon. My name's Maddie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Coupon 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'd like to ask a question during this time, simply press star followed by the number one on your cell phone keypad. If you would like to withdraw your question, press the pound key. Thank you. Now I'd like to turn the call over to Michael Ceno, Vice President of Investor Relations. You may begin your conference, sir.

Thanks, Operator. Welcome to Coupon, Inc.' 's quarterly earnings conference call for the second quarter ended June 30th, 2021. 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 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 most recent quarterly report on Form 10-Q, filed with the SEC on May 13, 2021, and in 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. 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 filing, each of which is posted on the company's investor relations website at ir.aboutcoupon.com. And I'll remind you that these numbers are unaudited and may be subject to change. Let me now turn the call over to Bob.

Thanks, Michael, and thank you to everyone for joining us today. Our unrelenting focus on wowing customers resulted in our 15th consecutive quarter of over 50% constant currency revenue growth. Our revenue has more than tripled in just the past two years, now reaching $18 billion on an annualized run rate basis. Total reported revenues increased to robust 71% in Q2, even as we operate with industry-leading scale. We believe we're the largest e-commerce player growing at a multiple of one of the biggest and fastest growing e-commerce opportunities in the world. Our top of the funnel continued to expand with not only strong active customer growth, but revenue per active customer increasing 36% against strong COVID-fueled comps last year. Balancing that growth is an improving profitability profile. Direct investments in just two of our new initiatives, Rocket Fresh, our fresh grocery offering, and Coupang Eats, our food delivery offering, accounted for $120 million of the $122 million adjusted EBITDA loss. That highlights the profitability of our mature offerings. And as we will describe in more detail, our confidence around the future cash flows of Fresh and Eats has never been stronger. Their rapidly improving economics with increasing scale confirm that they are on a similar trajectory as our earlier offerings. We see these results as a validation of the operating tenets of our company. One, we exist to deliver new moments of wow for customers. As we create these moments, we will continue to unlock a better world for every customer, merchant, and employee we touch, leading all to wonder, how did we ever live without coupon? Two, we don't start with what looks easy. We work backwards from imagining jaw-dropping customer experiences, and we embrace the hard work required to challenge trade-offs that customers take for granted. Three, We will employ technology, process innovation, and economies of scale to create amazing customer experiences and drive operating leverage and significant cash flows over time. Four, we always prioritize growth in long-term cash flows. When we find opportunities, we reinvest cash flows from established offerings to generate greater cash flows in the future. And five, we are disciplined capital allocators. We start with small investments, then test and iterate rigorously. We invest more capital over time in opportunities that have the best long-term cash flow potential. As we are still early in our journey as a public company, we thought it would be helpful to spend time on three foundational topics today before discussing the quarter. First, the flywheel that we're building and how it is accelerating across all our offerings. Second, Our disciplined investment approach and how our latest projects are following the trajectory of our earlier successes. And third, how our model is setting the global standard and creating unparalleled benefits for local economies, small businesses, and employees. First, on how our flywheel is perpetuating growth across all our offerings. Korea is a massive commerce market opportunity. poised to exceed $530 billion by 2024. We believe Coupang is already the largest e-commerce player in Korea, and we're growing meaningfully faster than the rest of the e-commerce segment. And importantly, we see our size and momentum as an indication that we're becoming the default destination for customers to begin and end their journey entirely on our services. This is due to the shared flywheel of our offerings. Every new moment of wow broadens the top of the funnel that in turn drives growth to other offerings. We believe that a key measure of success is how quickly that top of the funnel, with a number of e-commerce journeys that begin at Coupang, is growing. A platform with a stalling top of the funnel can still have a fast-growing offering, but only at the cost of another product line's growth. But a booming top of the funnel is typically a rising tide that lifts all boats. For Coupang, all of our offerings are growing quickly. As one offering grows, we see customer frequency drive growth in other offerings. New products create more reason for customers to start their journey on Coupang. And that expansion of the top of the funnel drives growth in existing products as well. Let's take a moment to walk through how our own inventory retail offering, or 1P, helps drive the broader flywheel that accelerates the growth of our third-party marketplace, or 3P. Despite 1P being a harder problem to solve, we chose to invest in 1P before 3P because we believe 1P leadership is the foundation for providing the best overall experience, including the best 3P offering in the market. By breaking the trade-offs across price, service, and selection, our superior 1P offering attracts more and more customers to make Coupang their default shopping destination. This increased traffic feeds into more sales for 3P. which attracts more three-piece sellers who further expand the selection on coupons. That increases selection and convenience for customers, which in turn attracts even more customers and higher frequency, broadening the top of the funnel for both offerings. That increases selection and convenience for customers, which in turn attracts even more customers and higher frequency, broadening the top of the funnel for both offerings. But to jumpstart the flywheel, we first invested in 1P, and we're now seeing the fruits of that decision. Total 3P sales have grown at more than double the rate of the Korean e-commerce segment over the past two years. And that trend continued in Q2. And some of the strongest proof that our 1P flywheel drives the 3P flywheel is that our largest 3P offerings are in the exact categories and use cases where we have our largest 1P offerings. Consumables, where we focused on building our rocket services first, became our largest 1P category. The sales of 3P consumables followed suit, increasing at an approximately 80% CAGR from 2018 to 2020 to become our largest 3P category. We are seeing the same story play out in consumer electronics. 3P and CE grew at a CAGR of over 60% from 2018 to 2020 on the back of a strong 1P flywheel, even though the category involves very different product types, price points, and purchase frequencies from consumables. We ended Q2 with annualized run rate transaction volume of over $2 billion in soft lines. a category we began investing in later, which includes apparel, shoes, and accessories. Aided by triple-digit growth in 1P softlines, 3P in softlines is growing meaningfully faster than the broader online segment, and its metrics appear similar to what we saw in consumables 3P several years ago. We believe we're on pace to become the largest softline destination online in time. The 1P flywheel that we've spent over seven years building is not only hard to replicate, it serves as a foundation for the flywheel of other offerings. We are consistently seeing significant 3P growth follow 1P hypergrowth in the categories we focused on first. And the underlying metrics for our nascent 3P categories indicate that they are on track to repeat the success of the earlier categories. And as our 3P offering continues to accelerate, it puts us in prime position to unlock additional opportunities in areas like merchant services and fintech that will further perpetuate the virtuous cycle of growth across our entire business. It's why one offering's growth doesn't come at the cost of another's at coupons. Our offerings are growing fast and fueling one another, and each additional moment of wow broadens the top of the funnel shared by all. And our growth is not reflective of our full top-of-the-funnel customer demand, which exceeds our capacity in many areas. This is most apparent with our fresh offerings, where we continue to see remarkable growth. Fresh grocery revenue more than doubled year-over-year in Q2, less than three years after its launch it is the leading nationwide online grocer with annualized run rate revenue well above two billion dollars meanwhile each revenue nearly crippled over just the past two quarters as we continue to expand and invest in the service both offerings are growing faster than we expected and continuing to scale at this rate requires large investments For context, total adjusted EBITDA in Q2 was negative $122 million, of which direct investments in fresh and EECS alone accounted for $120 million. And while the accelerated growth of fresh and EECS drove higher losses in the period, the contribution margin for both are improving with scale, and we're even more confident that these offerings are on track to reach profitability. In fresh, contribution margin improved by nearly 1,000 basis points over the last year. The underlying metrics give us high confidence that fresh will replicate the positive cash flow dynamics of our more mature investments. Eats is earlier in the journey than fresh, but following a similar trend line. While revenue nearly tripled over just the past two quarters, the loss per order has decreased every quarter since the beginning of 2020, And in Q2, it was down over 50% year over year. Fresh grocery and food delivery are significant opportunities with large addressable markets and low online penetration. And the trends we're seeing give us even more conviction that we can be a leading player and drive healthy long-term ROI and cash flows for fresh and eat. We plan to lean in and continue to invest aggressively to scale these offerings and to create even better experiences for our customers. In addition to Fresh and Eats, we're investing in capacity across the business. And in total, we continue to make progress on our plan to add more than 13 million square feet to our market-leading 25 million square feet of e-commerce fulfillment and logistics infrastructure, as we announced last quarter. These investments continue to strengthen our moat, providing the foundation to support growth, drive economies of scale, and raise the bar even higher on service levels for customers. Everything we do at Coupang revolves around wowing our customers, and creating new moments of wow is hard to do. Building truly differentiated offerings requires bold and unconventional thinking, as well as investment of time and capital. But we employ a disciplined investment approach. We start with small bets, then test rigorously and invest more capital over time, but only into the opportunities we feel strongest about. We're making sizable investments in fresh meats, for example, because we believe they are just earlier on the same trajectory as our mature offerings, which are profitable. And true to our DNA, we're continuously seeding new initiatives to develop the next vectors of growth. We're excited to highlight in this category opportunities like merchant services, international expansion, and fintech. There are many other early-stage initiatives in the portfolio, and I expect that we will not continue all of them. Only the investments whose underlying metrics show strong potential for meaningful cash flows in the future will earn their way to more significant investment. The initial capital for these projects is small, and the real capital investment comes over time as we overcome hurdles and become more confident about future cash flows. It's the same proven, disciplined approach we used to build our earlier projects. In the same way that we increased investments in Fresh and Eats as our early offerings matured and became self-funding, as Fresh and Eats mature and become self-funding, the most promising among these new initiatives will become the next major investment focus. Our investments to continuously strengthen the virtuous cycle across our business are driving significant growth for our merchants and vendors. And small and mid-sized businesses, or SMEs, are among the biggest beneficiaries. As we continue to strengthen our 3P offering and drive strong growth, SMEs have benefited exceptionally. SMEs in our marketplace grew sales over 87% year-over-year in Q2 with the aid of our investments in products and services that help merchants better reach and serve customers. This is a remarkable feat, considering that total offline sales for SMEs declined 7% year over year in Korea during the same period. Our investments are also driving robust job creation throughout Korea, including regions outside Seoul and other major metropolitan areas. We were the number one private job creator in Korea last year, and we expect that that will be the case this year as well. And about 80% of the jobs we create are located outside of Seoul, consistent with our commitment to advance long-term economic development throughout the country. We're also continuing to make Kupang the best workplace. We offer all of our drivers full-time employment, and we're the only major logistics company in Korea to directly employ 100% of our full-time drivers. Our drivers have an industry-best five-day workweek, insurance and benefits from day one, and a minimum of 15 paid days off per year. That stands in sharp contrast to the rest of the market logistics industry that hires a vast majority of their drivers as third-party contractors with six-day workweeks, no insurance or benefits, and no paid time off. We were the first company in Korea to make our frontline employees stockholders at scale, providing over 39,000 frontline workers with restricted stock awards at our IPO. We're also making meaningful investments to help employees improve their health and increase health awareness. Offering direct employment has far-reaching implications. For example, companies are required to report work-related injuries of employed drivers, but not work-related injuries of contracted drivers, most of whom are responsible for their own health, as well as their own insurance, vehicles, and accidents. By directly employing our drivers, we're also taking responsibility for their health and safety, and we're committed to being a global leader in this area. For example, since the beginning of 2020, we've added over 600 safety employees and invested over $200 million in worker safety initiatives. While our approach comes with additional costs and responsibilities, we gladly take it on because we believe this is the right thing to do. We want to continue leading not only in offering an exponentially better customer experience, but also in setting the global standard in safety, working conditions and benefits for frontline employees. In closing, we have terrific momentum across the business. Our unique position in the market enables us to harness this momentum to continue driving value for customers, merchants and employees, among others, in our growing ecosystem. As always, we will continue to attack the biggest trade-offs for customers, making bold decisions and disciplined investments and building sustainable long-term value while striving to create a world where everyone wonders, how did I ever live without Coupa? Now I'll turn the call over to Gaurav to go through the financials in more detail.