Coupang 2022 Earnings Recap
We are going to periodically share updates on companies we have covered in the past here. These will sometimes show up as Twitter threads first, but we want readers to be able to easily access the archive of earnings recaps. The start here tab allows for easy navigation. We may occasionally refine or expand our analysis based on feedback.
This week, we’re covering Coupang. Previously, we’ve covered RH and Constellation Software.
Coupang 2022 Earnings Recap
CPNG 0.00 was -10% in the weeks after reporting 4Q22. This unprofitable “growth” company grew revenues just +5% y/y. And active customers growth slowed to just +1%. It looks bad… well, until you actually look…
FX has been a significant headwind. With the Won weakening against USD, US dollar reported revenues look bad, but in constant currency revenue growth is +1,600bps higher y/y. Product commerce growth of +11% y/y in GAAP is +26% y/y FX adjusted.
But even without adjusting for FX, the two year revenue CAGR is 31%.
Recall the distinction between 1P and 3P. For every $1 of 3P revenue, there is roughly $10 dollars of GMV behind it. Whereas 3P services generated just $790mn in 2020, today it’s +130% to ~$1.9bn.
See Kim’s commentary below: 3P revenues are growing faster than 20%.
Why will FLC continue to grow?
“Merchants who moved their inventory to FLC increase sales by 65%”.
They are just starting to unlock 3P. (FLC is fulfillment like Amazon’s FBA.)
We previously estimated GMV 1P/3P mix at 55/45, but it is likely now closer to 50/50.
That means their GMV is at roughly ~$36bn, an amount that was impacted to the tune of ~$5bn from FX headwinds.
Most importantly, profitability has materially improved. Gross profit margins are up to 24% in 4Q23 from 16% last year.
Cash from operations were $565mn for 2022, a ~$1bn y/y improvement. Stripping out the “Developing Offerings” segment, Product Commerce reached a 5% EBITDA margin. And they raised their long-term guidance to 10%+ EBITDA margins from 7-10%.
Although, this is a capital intensive business with over $800mn capex last year alone. That is also their competitive moat that allows them to stock and deliver millions of items to consumers in a single day.
The active customer growth of +1% y/y might seem concerning until you realize their 18mn active customers is compared to a TAM that has a total of ~21mn households.
Importantly, Wow Members is +2mn y/y to 11mn.
And spend across every cohort continues to increase.
Bom Kim notes that only 20% of customers are purchasing items across more than 9 of the 20 categories they offer. These “multi-category” customers also spend 2.5x more than the average customer.
This isn’t a customer growth story anymore, but wallet penetration mission.
In the past, we’ve estimated the 2030 ecommerce TAM at $300bn. What % market share do you think the leader in “service, price, and selection” will garner?
In trying to estimate owner earnings, being 1P/3P agnostic, it seems anywhere from 3-8 cents in EBIT per $1 of GMV is a fair range of potential earnings. If you are optimistic on FLC and advertising, pick the high end. And this doesn’t include “Developing Offerings”.
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