Coupang, Inc.

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 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Now I'd like to turn the call over to Mr. Michael Steno, Vice President of Investor Relations. Please go ahead.

Thanks, operator. Welcome to Coupon, Inc.' 's quarterly earnings conference call for the third quarter ended September 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 10Q, filed with the SEC on August 16, 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. We continue to extend our lead in the fast-growing Korean e-commerce segment, posting total revenue growth of 48% in the third quarter. That builds on last year's massive growth for a two-year compounded annual growth rate of 70 percent. That growth is underpinned by our expanding customer base and compounding customer cohort behavior. Even against elevated COVID comps, we posted our 15th straight quarter of at least 20 percent year-over-year growth in active customers And spend grew at least 25% year over year for every annual customer cohort, including our oldest cohort from 2010. Our strategy to build compounding customer loyalty and long-term shareholder value is reflected in our core operating tenets. One, we exist to deliver new moments of wow for customers and create a world where they ask, how did we ever live without coupons? Two, we don't start with what looks easy. We embrace the hard work of challenging tradeoffs 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 prioritize growth in long-term cash flows. Five, we are disciplined capital allocators. We start with small investments, then increase investments over time in the opportunities with the best long-term potential. The opportunity in the Korean market remains as attractive as ever. The total retail market in Korea, excluding autos, was up 10% year-over-year in Q3 and boasts a two-year taker of 5%. Bolstered by that broader retail market tailwind, the total e-commerce segment grew 20% year over year in Q3, and e-commerce, excluding travel, has now grown at least 20% for 12 straight quarters. The Korean e-commerce segment is on track to reach annual sales of approximately $200 billion by 2024, and is projected to become the third largest in the world after only the US and China. Even at our scale as the leader in Korean e-commerce, we continue to grow at a multiple of the e-commerce segment. And our growth is broad-based, with all of our offerings growing at least twice as fast as their respective segments. The backbone of our sustained growth is our strong customer retention and engagement. While members whose spend and purchase frequency are significantly higher continue to grow faster than active customers, The number of active customers buying across six or more categories has more than doubled from just two years ago, further evidence of our strengthening flywheel. The result is that the customer spend for our newer cohorts is starting higher and compounding faster. What's more, the 25% or higher growth across every one of our annual customer cohorts did not reflect the full customer demand that we saw in Q3. Korea imposed level four COVID restrictions starting in July, stricter than at any point in the pandemic, contributing to a decline in attendance and hiring at our facilities. The shortage was exacerbated by the loss of one of our largest fulfillment centers to a fire in June and continued operations center closures due to COVID cases. We sacrificed some growth by taking measures such as not accepting orders beyond daily capacity to preserve our delivery promise to customers. In doing so, we maintained average rocket delivery times under 12 hours and delivered nearly 99% of orders in one day. We're investing to expand capacity to keep up with high demand and extend our competitive mode. We increased our fulfillment and logistics infrastructure footprint by over 8 million square feet year-to-date through Q3, and we'll add millions more over the next year. For context, we've now added as much square footage of infrastructure since the beginning of 2020 as we did in every year prior to 2020 combined. This includes a significant expansion for fresh offering, which has been particularly capacity constrained since COVID started and accelerated adoption. We're on track to double our Fresh Performance Center footprint in 2021, and we believe we now have more than double the total infrastructure footprint of our largest online fresh competitors combined. We're cautiously optimistic that attendance and hiring will rebound, much as they did after the government relaxed the previous round of restrictions in early 2021. In addition, our operational teams are focused on enhancing recruiting processes and making technology improvements that we believe will also help scale our workforce with greater efficiency in the future. Amid these strong demand tailwinds, our underlying profit drivers are also improving with scale. Retail product level profit before operational costs has increased in each of the past six quarters. Our highest profit categories are also growing the fastest. We're still far from entitlement on both margin and makes, and we see a long runway for continued improvement. Our monetization efforts are also gaining traction. Advertising revenue nearly tripled year on year in Q3. We're still in the early innings and expect advertising to contribute significantly to margins in the future. Other merchant services are also showing promise. Merchants beta testing, our fulfillment and logistics offering are seeing a significant sales uplift. And we expect fulfillment and logistics by coupon to become another meaningful contributor to profits over time. These improving profit drivers were obscured by short-term disruptions and timing of investments. First, we invested approximately $95 million in incremental labor and operational costs following the increase in COVID-19 cases and heightened restrictions in Korea in Q3. Second, a higher percentage of capacity was underutilized due to the timing of infrastructure investments. For example, as part of our aggressive expansion efforts in fresh, nearly half of our fulfillment centers in fresh recently opened or are still under construction. These centers generate little to no revenue today, but account for a sizable portion of our fresh investments. We believe this capacity will enable us to capitalize on the massive demand for our offerings, drive strong future growth, and improve profitability as we scale. Third, we're also investing in WOW membership benefits, expanding our free shipping services and delivering more orders by same day or dawn delivery. The rapidly growing share of orders by WOW members creates higher costs in the short term. But over time, as this share stabilizes, We expect cost per order to improve as operating leverage against fixed costs will only continue to grow with scale. Meanwhile, the higher loyalty and engagement from these differentiated experiences will further broaden our customer funnel and accelerate our flywheel. We've also seen some productivity decline as we add record levels of capacity and reduce delivery times for an increasing number of orders in the current environment. We have seen similar dips in past periods of heavy investment. As was the case with previous investment cycles, we expect to ramp up our new facilities, drive process improvements, and leverage increasing order density and other economies of scale to improve unit costs over time. Additionally, we have significant opportunities to amplify efficiency gains with continued investment in technology and automation. Our size and scale put us in a unique position to make such investments, and in doing so, further differentiate our offerings for customers while building on our structural cost advantage. We're also excited to continue investing in our most promising new offerings. Demand for fresh has outpaced capacity for much of the past year. As I noted, we're aggressively expanding to capitalize on that opportunity and expect significant operating leverage as we grow into the new capacity. Fresh is following a similar trajectory as Rocket, which gained leverage on investments as it scaled and turned profitable in time. ETH is much earlier on that journey. It's been our fastest scaling major offering, marked by strong customer adoption and retention. The monthly order frequency for our early cohorts where we first launched is now approaching the same level as WOW members. and we're increasingly confident in the long-term profitability. That gives us conviction to continue to invest in the near term to scale east. In closing, we're encouraged by the underlying trends of the business and confident that continuing to execute on our operating principles will lead to significant shareholder value creation in the long run. Now I'll turn the call over to Gaurav to go through the financials.