Coupang, Inc.

Good afternoon. My name is Ashley 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 the Start key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press the Start key followed by the number 2. 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's fourth quarter 2022 earnings conference call. I'm pleased to be joined on the call today by our founder and CEO, Ram 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 and our SEC filings, which are posted on the company's investor relations website. And now, I'll turn the call over to Baum.

Thanks, everyone, for joining us today. A year ago, we were emerging from a challenging period of COVID-related disruptions. We shared our outlook that 2022 would be an important year to demonstrate our ability to march towards long-term profitability targets while still compounding at a multiple of the overall retail market. We also shared that we would renew our focus on operational improvements, as it was increasingly clear that COVID was winding down. And we would report our results under two segments, product commerce and developing offerings, to provide increased visibility on our continued progress. We ended 2-4 of 2021 with a gross profit margin of around 16%, and an adjusted EBITDA loss of $285 million. A year later, 2022 Q4 concluded with a gross profit margin of 24%, an improvement of over 800 basis points. We recorded over $200 million in adjusted EBITDA for the quarter, an improvement of nearly $500 million year-over-year. Adjusted EBITDA margin was 4%, an increase of over 900 basis points year-over-year. And a net income of $100 million in Q4 represents an improvement of over $500 million versus the prior year. We delivered these results while growing revenues by over 20% year-over-year on an FX neutral basis. The results are the outcome of focused execution and innovation by many teams. with most of the gains coming from operational improvements, such as technology, infrastructure, supply chain optimization, and process improvement, including automation. The results are also a reflection of the underlying strength of our flywheel in product commerce. Active customers in product commerce increased 5% year-over-year, and the spend of every cohort, including our oldest, continued to compound at a fast rate. And our newer cohorts are starting their journey at higher levels of spend and growing faster than earlier cohorts. Over the past year, we also added nearly 2 million more customers as paid WOW members whose spend and frequency are many times higher than that of their non-WOW counterparts. Enduring customer loyalty is driven by breaking the tradeoffs between and delivering on all three levers of commerce, service, price, and selection. much of our significant investment over the years has been devoted to delivering on the hardest two legs building the best experience and the most efficient operations so that we can deliver the best experience at the best price to our customers we've begun to see the power of delivering on the first two levers service and price in our superior cohort behavior and while membership adoption we expect that momentum to continue in 2023 and the years ahead as we'll strive to improve our customer experience every day. Expanding selection is the third lever that will amplify our differentiation in service and price for customers. Consequently, we believe selection will be a critical driver going forward of even higher levels of customer engagement and loyalty, which in turn will unlock more growth and profitability over the long term. Currently, only 20% of active customers have purchased nine or more of the over 20 categories that we offer. These customers purchased more than two and a half times the amount of the average customer. We expect that engagement within and across categories will accelerate with wider selection on Rocket. Our oldest cohorts, while spending nearly twice the amount of our newer ones, are still growing in spend each year as they experience new selection and categories on Rocket. Just a third of active customers in Q4 were customers afresh, where we will also invest in enriching assortment. More than 20 million customers online have yet to join WOW, but the program's value proposition will become harder to resist with every new item added to Rocket. While Rocket's selection has grown to millions of items, it pales in comparison to the much larger number of products that have yet to be included. 1P will target the vast catalog of popular products that are yet to be available on Rocket. Fulfillment and Logistics by Coupon or FLC shares with our sellers the benefits of the billions we've invested in our infrastructure and technology. Over two-thirds of our merchants are SMEs, small and medium enterprises with less than $2.5 million in annual revenues. FLC wields the potential to expand selection exponentially for customers and, in parallel, generate unprecedented growth for our merchants, including SMEs. Early results show that merchants who moved their inventory to FLC saw sales increase by over 65% on average. This helped to drive seller adoption that exceeded our expectations last year, and FLC is already driving a significant share of seller sales and higher growth. In Q4, the combined growth of FLC and Marketplace outpaced that of 1P. We're still in the early days of expanding selection on Rocket. Accordingly, our penetration in the overall retail market remains low in the single digits, but we're excited about the significant opportunity ahead. Now, on profitability. There are numerous efforts across the company to increase efficiency that will allow us to improve profitability and invest in better selection, service, and price for customers. As an example, automation in the form of both software and hardware will yield more savings in the years to come. One target of continuous improvement is our fulfillment network, where we see that our most automated FCs have demonstrated more than twice the efficiency of the rest of the network. We'll continue to increase the efficiency of the network as we drive higher levels of automation. While the rate of improvement will be variable, we remain encouraged by our potential to continuously improve operational excellence and drive meaningful profit growth. We're also excited by the potential we see in each of our developing offerings, where we'll continue to challenge tradeoffs customers take for granted. We'll continue to test and invest in initiatives like Eats, Play, FinTech, and International, among other initiatives. Only initiatives that demonstrate the potential for meaningful cash flows in the future will earn their way to more significant investment, and each of the major initiatives has the potential to generate significant externalities as part of our ecosystem that will produce outsized value for customers and for shareholders alike. We start 2023 even more confident and excited about the opportunities ahead. As always, we'll take the long view. and attack the biggest tradeoffs for customers, make bold decision and discipline investments, and build sustainable long-term value for customers and shareholders, 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 review the financials in more detail.