Coupang(CPNG) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements Defines forward-looking statements, outlines associated risks and uncertainties, and clarifies no obligation to update them - Forward-looking statements involve substantial risks and uncertainties and are not predictions of future events[10][12] - The company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the report date, except as required by law[15] - Key areas of forward-looking statements include future operating and financial performance, business and growth strategy, market trends, competition, expansion, investments, acquisitions (including Farfetch), liquidity, supplier relationships, cybersecurity, employee relations, logistics, seasonal trends, internal controls, foreign currency exposure, tax rates, global events, macroeconomic conditions, personnel, regulatory compliance, and legal outcomes[13] PART I. FINANCIAL INFORMATION Presents Coupang's unaudited financial statements, management's discussion, market risk, and controls, highlighting financial performance Item 1. Financial Statements (Unaudited) Provides unaudited consolidated financial statements, including operations, balance sheets, equity, cash flows, and detailed notes Condensed Consolidated Statements of Operations | Metric (in millions, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total net revenues | $8,524 | $7,323 | $16,432 | $14,437 | | Operating income (loss) | $149 | $(25) | $303 | $15 | | Net income (loss) | $31 | $(105) | $145 | $(129) | | Net income (loss) attributable to Coupang stockholders | $32 | $(77) | $139 | $(72) | | Basic EPS | $0.02 | $(0.04) | $0.08 | $(0.04) | | Diluted EPS | $0.02 | $(0.04) | $0.08 | $(0.04) | Condensed Consolidated Statements of Comprehensive Income (Loss) | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $31 | $(105) | $145 | $(129) | | Foreign currency translation adjustments, net of tax | $153 | $(79) | $148 | $(184) | | Total other comprehensive income (loss) | $156 | $(77) | $153 | $(181) | | Comprehensive income (loss) | $187 | $(182) | $298 | $(310) | Condensed Consolidated Balance Sheets | Metric (in millions) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Cash and cash equivalents | $6,796 | $5,879 | | Total current assets | $10,176 | $8,994 | | Total assets | $17,831 | $15,344 | | Total current liabilities | $9,369 | $7,716 | | Total liabilities | $13,146 | $11,167 | | Total equity | $4,685 | $4,102 | Condensed Consolidated Statements of Redeemable Noncontrolling Interests and Equity - Total equity increased from $4,102 million as of December 31, 2024, to $4,685 million as of June 30, 2025[28] - Key drivers of equity changes include net income ($107 million for Q1 2025, $32 million for Q2 2025), positive foreign currency translation adjustments ($153 million for Q2 2025), and equity-based compensation ($113 million for Q2 2025)[28] - The company acquired noncontrolling interest, resulting in a decrease of redeemable noncontrolling interests from $75 million to $0 by June 30, 2025[28] Condensed Consolidated Statements of Cash Flows | Metric (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $145 | $(129) | | Net cash provided by operating activities | $899 | $876 | | Net cash used in investing activities | $(512) | $(295) | | Net cash provided by (used in) financing activities | $108 | $(80) | | Net increase in cash and cash equivalents and restricted cash | $858 | $197 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations for financial statements, covering accounting policies, revenue, segment performance, and the Farfetch acquisition Note 1. Basis of Presentation and Summary of Significant Accounting Policies - Financial statements are prepared under U.S. GAAP and SEC interim reporting rules, requiring management estimates[34][35] - The company acquired Farfetch Holdings plc in January 2024, expanding into the luxury fashion industry[36] - New accounting standards ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures) are effective for fiscal years 2025 and 2027, respectively, and are being evaluated for impact[37][38] Note 2. Net Revenues | Revenue Category (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net retail sales | $6,507 | $5,779 | $12,595 | $11,674 | | Third-party merchant services | $1,755 | $1,374 | $3,317 | $2,421 | | Other revenue | $262 | $170 | $520 | $342 | | Total net revenues | $8,524 | $7,323 | $16,432 | $14,437 | - Revenue recognized from contract liabilities (deferred revenue) was $139 million for the six months ended June 30, 2025, up from $92 million in the prior year[40][41] Note 3. Segment Reporting - Coupang has two reportable segments: Product Commerce (core retail, marketplace, Rocket Fresh) and Developing Offerings (Eats, Play, fintech, Taiwan retail, Farfetch)[42][43][44] | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues: | | | | | | Product Commerce | $7,334 | $6,431 | $14,204 | $12,925 | | Developing Offerings | $1,190 | $892 | $2,228 | $1,512 | | Gross profit: | | | | | | Product Commerce | $2,390 | $1,950 | $4,541 | $3,786 | | Developing Offerings | $171 | $192 | $336 | $285 | | Segment adjusted EBITDA: | | | | | | Product Commerce | $663 | $530 | $1,213 | $997 | | Developing Offerings | $(235) | $(200) | $(403) | $(386) | Note 4. Defined Severance Benefits | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Current service costs | $52 | $39 | $102 | $79 | | Interest cost | $4 | $4 | $8 | $8 | | Amortization of net actuarial loss | $3 | $1 | $5 | $2 | | Net periodic benefit cost | $59 | $45 | $115 | $90 | Note 5. Income Taxes - Decrease in effective tax rate for Q2 and H1 2025 attributed to Farfetch losses (prior year), non-deductible KFTC fine (prior year), and lower U.S. taxes on foreign earnings[54] - The company is assessing the impact of the 'One Big Beautiful Bill Act' (OBBBA), enacted in July 2025, which introduces tax reform provisions effective 2025[55] Note 6. Earnings per Share | Metric (in millions, except per share amounts) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to Coupang stockholders | $32 | $(77) | $139 | $(72) | | Basic EPS | $0.02 | $(0.04) | $0.08 | $(0.04) | | Diluted EPS | $0.02 | $(0.04) | $0.08 | $(0.04) | | Weighted-average shares outstanding (Basic) | 1,817 | 1,789 | 1,812 | 1,791 | | Weighted-average shares outstanding (Diluted) | 1,855 | 1,789 | 1,847 | 1,791 | Note 7. Fair Value Measurement | Financial Asset (in millions) | Classification | Measurement Level | June 30, 2025 | December 31, 2024 | | :---------------------------- | :---------------------- | :---------------- | :------------ | :---------------- | | Money market trust | Cash and cash equivalents | Level 1 | $1,837 | $1,755 | | Money market fund | Cash and cash equivalents | Level 1 | $1,548 | $828 | | Money market trust | Restricted cash | Level 1 | $91 | $83 | Note 8. Supplemental Financial Information | Supplemental Cash Flow (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for operating lease liabilities | $291 | $274 | | Operating lease assets obtained | $368 | $663 | - Confirmed invoices owed to financial institutions under supplier financing arrangements totaled $467 million as of June 30, 2025[63] - Accumulated other comprehensive loss was $(250) million as of June 30, 2025, primarily due to foreign currency translation adjustments[64] - In May 2025, the Board authorized a $1 billion Class A common stock repurchase program, with no repurchases made during the three and six months ended June 30, 2025[65] Note 9. Short-term Borrowings and Long-term Debt - A new five-year revolving credit facility of up to $1.5 billion was established in June 2025, with no outstanding balance as of June 30, 2025[66] - In July 2025, $425 million was borrowed under the new facility to fully redeem the $392 million Farfetch Term Loans[67][68] - The company was in compliance with all financial covenants for its borrowings and debt agreements as of June 30, 2025[69] Note 10. Commitments and Contingencies - Long-term contractual commitments include $668 million in new unrecognized obligations through 2033 for technology services, fulfillment center construction, content, and software licenses[70] - The company faces a putative class action and derivative lawsuits alleging securities fraud and breach of fiduciary duty, with an unestimable potential loss[72] - The KFTC imposed a $121 million administrative fine in Q2 2024 on Coupang Corp. for product ranking disclosure violations, which is under appeal. A criminal investigation is also ongoing with a maximum fine of $200,000[73][74][75][76] Note 11. Business Combinations – Farfetch - Coupang acquired Farfetch in January 2024 for $208 million to expand into luxury retail[79][80] | Purchase Price Allocation (in millions) | Estimated Fair Value | | :------------------------------------ | :------------------- | | Net assets assumed | $147 | | Noncontrolling interests | $(78) | | Goodwill on acquisition | $139 | | Total consideration | $208 | | Acquired Intangible Assets (in millions, except years) | Weighted Average Useful Life | Estimated Fair Value | | :--------------------------------------------------- | :--------------------------- | :------------------- | | Brand trademarks | 5 years | $130 | | Customer relationships | 5 years | $34 | | Supplier relationships | 15 years | $61 | | Developed technology | 3 years | $38 | | Brand licenses | 8 years | $62 | | Total intangible assets | | $325 | - Farfetch contributed $460 million in total net revenues and a net loss of $108 million for the three months ended June 30, 2024[82] - Restructuring actions post-acquisition included terminating a license agreement, saving $264 million in guaranteed minimum royalty payments over eight years[84][92] - Coupang acquired Greenoaks' 19.9% equity interest in the Limited Partnership (formed for the Farfetch acquisition) for $122 million in April 2025, consisting of cash and Class A Common Stock[85][86] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Coupang's financial performance, business overview, key metrics, results, non-GAAP measures, liquidity, and accounting policies Overview - Coupang is a technology and Fortune 150 company offering diverse services (retail, delivery, streaming, fintech) across multiple geographies, including South Korea, Taiwan, and Europe[91] - The company's integrated fulfillment, logistics, and technology network supports 'Rocket Delivery' in Korea, offering free, next-day delivery for millions of products[91] - The January 2024 acquisition of Farfetch expanded Coupang into the global luxury fashion industry, leading to subsequent restructuring actions to reduce headcount and exit leases/licensing agreements[92] - The business is managed and evaluated through two segments: Product Commerce (core Korean retail, marketplace, Rocket Fresh) and Developing Offerings (Eats, Play, fintech, Taiwan retail, Farfetch)[94][95] Key Business Metrics | Metric (in millions, except %) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :----------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Total net revenues | $8,524 | $7,323 | 16 % | $16,432 | $14,437 | 14 % | | Total net revenues, constant currency | $8,705 | N/A | 19 % | $17,314 | N/A | 20 % | | Gross profit | $2,561 | $2,142 | 20 % | $4,877 | $4,071 | 20 % | | Net income (loss) | $31 | $(105) | NM | $145 | $(129) | NM | | Adjusted EBITDA | $428 | $330 | 30 % | $810 | $611 | 33 % | | Product Commerce Adjusted EBITDA | $663 | $530 | 25 % | $1,213 | $997 | 22 % | | Developing Offerings Adjusted EBITDA | $(235) | $(200) | 18 % | $(403) | $(386) | 4 % | | Metric (in millions, except $) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------------- | :------------ | :------------- | :------------ | | Product Commerce Active Customers | 23.9 | 23.4 | 21.7 | | Net revenues per Product Commerce Active Customer | $307 | $294 | $296 | | Net revenues per Product Commerce Active Customer (constant currency) | $315 | $321 | N/A | - Product Commerce Active Customers increased by 10% year-over-year to 23.9 million as of June 30, 2025[99] Results of Operations | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Net retail sales | $6,507 | $5,779 | 13 % | $12,595 | $11,674 | 8 % | | Net other revenue | $2,017 | $1,544 | 31 % | $3,837 | $2,763 | 39 % | | Total net revenues | $8,524 | $7,323 | 16 % | $16,432 | $14,437 | 14 % | | Cost of sales | $5,963 | $5,181 | 15 % | $11,555 | $10,366 | 11 % | | Operating, general and administrative | $2,412 | $2,167 | 11 % | $4,574 | $4,056 | 13 % | | Operating income (loss) | $149 | $(25) | NM | $303 | $15 | NM | - Product Commerce net revenues increased 14% (17% constant currency) for Q2 2025, driven by 10% growth in active customers and 6% constant currency growth in net revenues per active customer[108] - Developing Offerings net revenues increased 33% (33% constant currency) for Q2 2025 due to greater customer engagement in early-stage offerings[109] - Cost of sales as a percentage of revenue decreased from 70.7% to 70.0% for Q2 2025, primarily due to higher-margin revenue categories and operational efficiencies in Product Commerce[111] - Operating, general and administrative expenses as a percentage of revenue decreased from 29.6% to 28.3% for Q2 2025, partly due to the absence of the $121 million KFTC administrative fine from the prior year[113] | Segment Profitability (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Gross profit: | | | | | | | | Product Commerce | $2,390 | $1,950 | 23 % | $4,541 | $3,786 | 20 % | | Developing Offerings | $171 | $192 | (11)% | $336 | $285 | 18 % | | Adjusted EBITDA: | | | | | | | | Product Commerce | $663 | $530 | 25 % | $1,213 | $997 | 22 % | | Developing Offerings | $(235) | $(200) | 18 % | $(403) | $(386) | 4 % | - Product Commerce gross profit and Adjusted EBITDA increased due to higher revenue, increased percentage of higher-margin categories (e.g., FLC), and operational efficiencies[121][122] - Developing Offerings gross profit decreased for Q2 2025 due to revenue growth from offerings with negative gross profit margins, and Adjusted EBITDA loss increased due to continued investments, particularly in Taiwan[123][124] Non-GAAP Financial Measures - Non-GAAP measures (Free Cash Flow, Adjusted EBITDA, Constant Currency Revenue) provide additional useful information for evaluating performance and are used for financial and operational decision-making[125][127] | Metric (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Trailing Twelve Months Ended June 30, 2025 | Trailing Twelve Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | :----------------------------------------- | :----------------------------------------- | | Net cash provided by operating activities | $545 | $664 | $899 | $876 | $1,909 | $2,206 | | Total purchases of property and equipment | $(299) | $(178) | $(538) | $(285) | $(1,132) | $(709) | | Proceeds from sale of property and equipment | $1 | $2 | $2 | $4 | $7 | $16 | | Free cash flow | $247 | $488 | $363 | $595 | $784 | $1,513 | | Metric (in millions, except %) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $31 | $(105) | $145 | $(129) | | Adjusted EBITDA | $428 | $330 | $810 | $611 | | Adjusted EBITDA margin | 5.0 % | 4.5 % | 4.9 % | 4.2 % | | Metric (in millions) | Three Months Ended June 30, 2025 (As Reported) | Three Months Ended June 30, 2025 (Constant Currency Basis) | Three Months Ended June 30, 2024 (As Reported) | Year over Year Growth (Constant Currency Basis) | | :------------------- | :--------------------------------------------- | :--------------------------------------------------------- | :--------------------------------------------- | :---------------------------------------------- | | Total net revenues | $8,524 | $8,705 | $7,323 | 19 % | | Product Commerce | $7,334 | $7,517 | $6,431 | 17 % | | Developing Offerings | $1,190 | $1,188 | $892 | 33 % | Liquidity and Capital Resources - As of June 30, 2025, Coupang had $6.9 billion in cash, cash equivalents, and restricted cash, and $1.5 billion available under its revolving credit facilities[131] - The company plans significant investments in its growth strategy, particularly in the Developing Offerings segment and expansion of fulfillment, logistics, and technology capabilities, with future expenditures expected to exceed several billion dollars[133] - Remaining capital expenditure commitments for fulfillment center construction contracts totaled $374 million as of June 30, 2025[133] - In May 2025, the Board authorized a stock repurchase program for up to $1 billion of Class A common stock, with no repurchases made in Q2 2025[134] | Cash Flow (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :---------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $899 | $876 | $23 | | Net cash used in investing activities | $(512) | $(295) | $(217) | | Net cash provided by (used in) financing activities | $108 | $(80) | $188 | - The increase in operating cash flow was driven by a $274 million increase in net income, offset by working capital fluctuations[136] - Investing cash outflow increased by $217 million, mainly due to a $253 million increase in purchases of property and equipment for fulfillment and logistics infrastructure[137] - Financing cash flow turned positive due to a $677 million increase in debt proceeds, partially offset by $587 million in repayments, and the absence of a $178 million share repurchase from the prior year[138] - The company believes current liquidity and cash flow will meet requirements for at least the next 12 months, but may seek additional financing for future opportunities[139] - A new five-year revolving credit facility of up to $1.5 billion was entered into in June 2025, and $425 million was borrowed in July 2025 to redeem Farfetch Term Loans[143][144][145] Critical Accounting Policies and Estimates - Critical accounting policies and estimates are discussed in the 'Critical Accounting Policies and Estimates' section of the 2024 Form 10-K[146] Item 3. Quantitative and Qualitative Disclosures About Market Risk Coupang is exposed to market risks from interest rates, foreign currency, and credit, with details on variable rate debt and KRW impact - Market risk exposure primarily includes interest rate risk, foreign currency risk, and credit risk[150] - Interest rate risk arises from variable rate debt, with $648 million outstanding on variable interest rate credit facilities as of June 30, 2025[151][152] - Foreign currency risk, predominantly from KRW fluctuations, impacts transactional and translational results; a hypothetical 10% adverse change in exchange rates would reduce total net revenues by approximately $748 million for the three months ended June 30, 2025[153][154][155] - Credit risk is managed by placing cash and cash equivalents with high-credit-quality financial institutions[157] Item 4. Controls and Procedures Coupang's disclosure controls were effective, and Farfetch's material weakness is believed not to result in material misstatement - Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[159][160] - The previously identified material weakness in Farfetch's internal control over financial reporting (related to New Guards business) is now believed not to result in a material misstatement due to ongoing restructuring and divestiture activities[161][162][163] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[164] PART II. OTHER INFORMATION Addresses legal proceedings, risk factors, equity sales, defaults, and other information, concluding with exhibits and signatures Item 1. Legal Proceedings Incorporates legal proceedings details by reference from Note 10, 'Commitments and Contingencies' - Legal proceedings information is incorporated by reference from Note 10, 'Commitments and Contingencies'[168] Item 1A. Risk Factors Investing in Coupang's securities involves high risk, with no material changes since the 2024 Form 10-K filing - Investing in the company's securities involves a high degree of risk[169] - No material changes in the risk factors discussed in the 2024 Form 10-K have occurred[169] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no unregistered sales of equity securities or use of proceeds for the period - No unregistered sales of equity securities or use of proceeds occurred[170] Item 3. Defaults Upon Senior Securities States no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred[170] Item 4. Mine Safety Disclosures Indicates that this item is not applicable to the company - This item is not applicable[171] Item 5. Other Information Reports no director or Section 16 officer adopted or terminated trading arrangements during Q2 2025 - No director or Section 16 officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[172] Item 6. Exhibits Lists comprehensive exhibits filed with the Form 10-Q, including organizational documents, agreements, and certifications - The report includes exhibits such as the Certificate of Incorporation, Amended and Restated Bylaws, Credit Agreement, RSU/PSU Award Notices, Employment/Separation Agreements, and CEO/CFO Certifications[173] Signatures Contains required signatures, confirming the report's due authorization and filing by Coupang, Inc. on August 5, 2025 - The report was duly signed on behalf of Coupang, Inc. by Jonathan Lee, Chief Accounting Officer, on August 5, 2025[175][176]