Coupang, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Amounts are in U.S. dollars unless noted. Coupang operates primarily in Korea, with Product Commerce and Developing Offerings segments.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $5.84B (+16%; +21% constant currency) | $5.04B | $11.64B (+15%; +20% constant currency) | $10.15B |
| Gross profit / margin | $1.52B / 26.1% | $1.15B / 22.9% | $2.94B / 25.3% | $2.20B / 21.6% |
| Operating income (loss) | $147.6M | $(67.1)M | $254.4M | $(272.8)M |
| Net income (loss) | $145.2M; $0.08 per diluted share | $(75.5)M; $(0.04) per share | $236.0M; $0.13 per diluted share | $(284.8)M; $(0.16) per share |
| Adjusted EBITDA (non-GAAP) | $300.2M; 5.1% margin | $66.2M; 1.3% margin | $541.1M; 4.6% margin | $(24.7)M; (0.2)% margin |
| Operating cash flow / free cash flow (non-GAAP) | $819.8M / $449.9M | $(18.3)M / $(195.5)M | $1.32B / $856.6M | $(73.2)M / $(485.1)M |
Q2 active customers rose to 19.7 million from 17.9 million a year earlier; revenue per active customer was $296 versus $282. Product Commerce revenue grew 16% reported (21% constant currency) in Q2, and segment adjusted EBITDA was $407.6M versus $97.8M. Developing Offerings revenue declined 2% reported (increased 2% constant currency); its adjusted EBITDA loss widened to $107.4M from $31.7M.
Financial position and liquidity
At June 30, 2023, cash and cash equivalents were $4.47B and restricted cash was $270.5M. Total cash, cash equivalents and restricted cash were $4.74B, including $3.0B held by foreign subsidiaries that may not be freely transferable to the U.S. Current assets were $6.72B and current liabilities $5.64B. Stockholders’ equity was $2.78B.
Balance-sheet borrowings comprised $232.2M short-term borrowings, $185.8M current long-term debt and $718.7M long-term debt. Operating lease obligations were $1.59B in total. The company reported $1.1B available under revolving facilities and no outstanding borrowings on those facilities. It was in compliance with debt covenants.
For the first half, property and equipment purchases were $471.6M. Cash and restricted cash increased by $1.06B. Accounts payable included $403M of confirmed supplier-finance-program invoices.
Changes, outlook and risks
- Operating improvement: Revenue growth, operational efficiencies, supply-chain optimization and operating leverage supported higher gross margin and the return to GAAP profitability. Cost of sales fell to 73.9% of revenue in Q2 from 77.1%; operating, general and administrative expense fell to 23.6% of revenue from 24.2%.
- Fulfillment and Logistics by Coupang (FLC): New merchant contracts changed a portion of revenue recognition from gross to net beginning in Q2. This is expected to reduce reported revenue prospectively, with no significant corresponding impact on gross profit expected.
- Investment plans: Management expects investment in newer offerings, new geographies and fulfillment, logistics and technology capabilities to continue. It expects future infrastructure and workforce spending to exceed several billion dollars over several years; remaining construction commitments were $160M. The company said liquidity should cover anticipated needs for at least 12 months. No specific earnings or revenue guidance was provided.
- Developing Offerings: Segment losses reflected continued investment in Eats and Taiwan and higher Coupang Play content costs, partly offset by lower Eats delivery costs.
- Contingencies: A securities class action, amended in May 2023 to add securities-fraud allegations, seeks unspecified damages; the company says it intends to defend the case and cannot estimate a possible loss. Korean Fair Trade Commission investigations could result in fines, process changes or other proceedings; potential losses cannot be estimated. Management believes other currently pending legal matters are not expected to have a material adverse effect, but outcomes remain uncertain.
- Other sensitivities: A hypothetical 10% adverse currency-rate change would have reduced reported revenue by approximately $533M for Q2 and $1.0B for the first half, with an immaterial estimated net-income impact. Tax valuation allowances may be released if sufficient sustained positive evidence emerges, potentially reducing tax expense; timing and amount are uncertain.
Most important facts to verify
- Whether revenue growth and margin gains continue after the FLC gross-to-net presentation change; reported revenue comparisons may be affected.
- Cash generation quality, including the contribution of higher accounts payable and supplier-finance balances to operating cash flow.
- Developing Offerings’ losses and planned investment levels, alongside the returns from Eats, Taiwan and Coupang Play.
- Availability and transferability of cash held overseas, committed capital spending, and borrowing needs as expansion proceeds.
- Developments in the securities litigation and KFTC investigations, for which loss estimates are not currently available.
- Foreign-exchange exposure and any future changes in tax valuation allowances.