Coupang, Inc.

Good afternoon. My name is Ashley, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Coupang 2023 First 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. 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, please press star two. 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 Coupon's first quarter 2023 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 FCC, 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, 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 Baum.

Thanks, everyone, for joining us today. Before we dive in, here are five key takeaways from a strong start to 2023. First, We continue to deliver results because we focus on what matters most, customer experience and operational excellence. Second, we continued our trend of growing at a high multiple of the overall retail market and taking a significant portion of its growth. Third, we're reigniting active customer growth. Fourth, we continue to drive margin improvements and generated meaningful free cash flow in Q1, a significant milestone. Finally, we're rolling out a new benefit to our WOW members that will drive additional savings for our Eats customers and make WOW even harder to resist. Before Gaurav goes over our financial results in more detail, I wanted to frame them in the context of our continued opportunity and long-term strategy. As I mentioned, we continue to grow at a high multiple of the overall retail market, and year after year, that trend has continued to accelerate. One reason for that sustained growth is the structure of Korea's retail market, which differs dramatically from that of markets like the US. According to one study, Korean consumers had access to less than 10% of the offline retail space per capita enjoyed by their US counterparts. We continue to defy the broader slowdown in the retail market because we offer customers something very different to the limited assortment and high prices they see in offline retail. And there's immense potential to amplify that value and growth by increasing selection on Rocket delivery. When we started Rocket in 2014, our selection consisted primarily of consumables. As late as 2018, non-consumables accounted for just a third of total units sold. Expanding the selection in non-consumables categories accelerated their growth, and today, they account for the majority of units and revenue on Rocket. Both groups continue to grow at a high multiple of the overall retail market, and we're still far from offering the full selection of popular brands and products across all Rocket categories. As we expand both our first-party and third-party selection on Rocket, now enabled by Fulfillment and Logistics by Coupon, or FLC, we expect that trend to continue for years to come. Despite our rapid growth, our penetration in all categories, including consumables, remains low. We're still at a single-digit market share of a massive retail market projected to approach $550 billion in the next three years. It's hard to overemphasize how staggering the opportunity is before us and how early we are on this journey. We're also confident that we can expand margins to our target of 10% or higher adjusted EBITDA, thanks to the long runway we see for operational improvements. The majority of the nearly 600 bps improvement in profit margin this quarter came from operational improvements in product commerce, not benefits from advertising, EATS, or WOW membership. It was also not driven by one-time cost-cutting measures like layoffs. And more importantly, we achieved these profit improvements without sacrificing the customer experience. In other words, without raising prices to increase margins, rolling back benefits, or compromising service levels. To illustrate, while some online grocery services rolled back free shipping programs and increased free shipping thresholds to as high as $150 to reduce losses, we achieved profitable economics in our fresh offering while sticking to our low prices and free shipping offer for all orders above just $11. This is the best free shipping program for online grocery that we know of in the world. We did this by streamlining operations and reducing waste, all while expanding selection and delivering nearly all fresh orders via dawn and same-day delivery. Another example of our operational improvements is our effort to increase recovery rates on returned items, which led to a 30% year-over-year decrease in loss per unit sold. Such efforts to minimize waste enable us to improve margins amidst inflationary headwinds and offer market-leading benefits like 30-day free returns on all Rocket Orders for our WOW members. And this quarter, we fulfilled our commitment to deliver positive free cash flow for the entire business. Our sustained focus on operational excellence allowed us to achieve this milestone even as we continue to invest hundreds of millions of dollars in CapEx and hundreds of millions more in developing offerings over the past year. Because we take the long view, we don't expect every initiative to bear fruit immediately or evenly every quarter. Instead, we trust in our ability to drive significant operational improvements over time, enabling us to continue lowering prices for customers and expanding margins for the business for many years to come. That, along with the opportunity to scale other margin-agreed offerings and automation, gives us confidence that we have a lot of upside in margin expansion. On developing offerings, we believe our actions reflect both the enterprising and disciplined aspects of our strategy. 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. It's the same proven, disciplined approach we used to build our earlier offerings. In our international initiatives, we shuttered our operations in Japan, where we weren't producing the returns we'd hoped for. In contrast, we like what we've been seeing in Taiwan. which is showing the same signs of transformative potential that we saw in Korea when we launched rocket delivery. While it's still early and we'll remain disciplined capital allocators, investing more only if the underlying metrics validate our convictions, we're excited about the potential we're seeing. Another such area is our EATS offerings. We promised last year that we would focus on streamlining efforts that would improve profitability and explore synergies with other offerings. The structural changes we made over the past years have enabled Eats to become self-funding, and we've built a foundation that positions it to scale with higher efficiencies. In April, we began rolling out a 5% to 10% discount on all orders for WOW members on Eats. the latest major benefit added to our membership program. We've observed that customers who purchase Eats, much like Fresh, have higher levels of spend and engagement on general merchandise offerings. And WOW members who purchase Eats spend over twice as much as WOW members who don't. We believe this benefit will generate savings for customers, growth for merchants, higher engagement for Rocket, and increased membership in our WOW program. This benefit has the potential to be another major catalyst that compounds value across our e-commerce and membership offerings and accelerates our entire flywheel. In summary, we're excited about all that's in motion in 2023. In keeping with our operating tenets that we're sharing again in our presentation this quarter, we'll bring our operational rigor to all of our initiatives, investing more capital over time only in opportunities that have the best long-term cash flow potential. There's a lot to be excited about what's happening here at Coupang, and we look forward to updating you on our progress in the upcoming quarters. And now, I'll turn the call over to Gaurav.