Coupang, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Coupang operates an e-commerce business primarily serving Korea, supported by fulfillment, logistics and technology infrastructure. Its reportable segments are Product Commerce and Developing Offerings.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $5.101bn (+10%; +27% constant currency) | $4.645bn | $15.256bn (+14%; +28% constant currency) | $13.330bn |
| Gross profit | $1.234bn | $755m | $3.431bn | $2.146bn |
| Operating income (loss) | $77m | $(315)m | $(195)m | $(1.097)bn |
| Net income (loss) | $91m; 1.8% margin | $(324)m; (7.0)% margin | $(194)m; (1.3)% margin | $(1.138)bn; (8.5)% margin |
| Adjusted EBITDA, non-GAAP | $195m; 3.8% margin | $(207)m; (4.5)% margin | $170m; 1.1% margin | $(463)m; (3.5)% margin |
| Operating cash flow | $58m | $(55)m | $(15)m | $(208)m |
| Free cash flow, non-GAAP | $(222)m | $(245)m | $(708)m | $(712)m |
At September 30, cash and cash equivalents were $2.903bn; restricted cash was $157m current and less than $1m long-term. Total current assets were $4.928bn and current liabilities $4.029bn. Balance-sheet debt comprised $160m short-term borrowings and about $564m current and long-term debt. Operating lease obligations totaled about $1.420bn. Stockholders’ equity was $2.172bn.
Changes and operating trends
- Q3 revenue increased 10% in reported dollars, while constant-currency growth was 27%; the difference reflects unfavorable currency translation. Product Commerce revenue rose 10% reported and 28% constant currency. Developing Offerings revenue fell 6% reported but grew 10% constant currency.
- Active Customers were 17.992m, versus 16.823m a year earlier; revenue per Active Customer was $284, versus $276.
- Cost of sales fell to 75.8% of Q3 revenue from 83.8% a year earlier. Management cited supply-chain optimization and a greater mix of higher-margin categories. Operating, general and administrative expenses rose 8% year over year, while their share of revenue declined to 22.7% from 23.0%.
- Product Commerce adjusted EBITDA improved to $239m in Q3 from a loss of $118m. Developing Offerings narrowed its adjusted EBITDA loss to $44m from $89m.
- For the first nine months, reported net loss improved by $944m year over year. The 2021 comparison included $296m of fulfillment-center fire losses; no such losses were recorded in 2022.
Liquidity, outlook and risks
Cash, cash equivalents and restricted cash were $3.060bn at quarter-end, down from $3.810bn at December 31, 2021. Nine-month investing cash outflow was $718m, including $703m of property and equipment purchases, primarily for fulfillment and logistics infrastructure. The company had $1.0bn available under its revolving credit facility, with no balance outstanding on that facility.
Management believes available liquidity will meet anticipated cash needs for at least 12 months. It expects significant continued investment in newer offerings, new geographies, fulfillment, logistics and technology, and says infrastructure and workforce expenditures are expected to exceed several billion dollars over the next several years. Construction-related capital expenditure commitments were $438m. Total undiscounted contractual commitments were $3.744bn, including purchase obligations, debt payments and operating leases. No specific financial guidance was provided.
- Management cited inflation, higher interest rates, foreign-exchange movements, supply-chain disruptions, logistics and labor costs, consumer confidence and COVID-19-related uncertainty as factors that may affect results.
- A hypothetical 10% adverse currency-rate movement would have reduced reported revenue by approximately $457m for Q3 and $1.4bn for the first nine months; the estimated net-income impact was immaterial.
- Disclosure controls were determined ineffective because of previously reported material weaknesses in IT general controls, segregation of duties, and timely preparation and review of account reconciliations. Management said remediation was in progress and that additional procedures supported the fair presentation of the statements.
- The company reported ordinary-course legal and regulatory matters, including potential employment, worker classification, product, privacy, tax and competition matters. Management did not expect currently pending matters to have a material adverse effect; outcomes remain uncertain.
Important facts for investors to verify
- Whether constant-currency growth translates into sustained reported-dollar growth amid exchange-rate volatility.
- Whether improved Product Commerce margins and profitability persist as sales mix, fulfillment costs and customer demand evolve.
- How investment spending and working-capital movements affect free cash flow and liquidity.
- Progress in remediating the disclosed material weaknesses in internal controls.
- Future borrowing, collateral and contractual commitments, including planned fulfillment-center investment and developing-offering losses.