Coupang CI. Photo courtesy of Coupang
Coupang Inc., the U.S. parent company of Coupang, recorded an operating loss of nearly 1.2 trillion won in the first half of this year alone. The loss, the largest since its listing, is attributed to factors including a data breach and the related fine. Separately, Coupang received a tax assessment notice from the National Tax Service (NTS) worth around 300 billion won, and estimated losses related to the recent Incheon fire at around 350 billion won, signaling the possibility of additional cost burdens.
According to Coupang Inc.’s second-quarter consolidated earnings report filed with the U.S. Securities and Exchange Commission (SEC) on the 4th, second-quarter revenue was 13.3007 trillion won (based on an average quarterly won-dollar exchange rate of 1,501.89 won), up 4% from a year earlier. Excluding exchange rate fluctuations, growth was 10% on a constant-currency basis.
However, the operating loss came to about 835 billion won, swinging to a loss from a year earlier. This marked the second consecutive quarter of losses, following an operating loss of 354.5 billion won in the first quarter. Combining the first- and second-quarter operating losses amounts to about 1.1895 trillion won. The second-quarter net loss also came to about 856 billion won, reversing from a net profit of about 43.5 billion won in the same period a year earlier.
In particular, on a second-quarter basis, this is the largest quarterly operating loss and net loss recorded by Coupang Inc. in the five years since its 2021 listing. This is equivalent to the combined operating profit Coupang Inc. earned over the past two years.
The large deficit was heavily influenced by factors including the fine related to the data breach. The Personal Information Protection Commission (PIPC) imposed about 624.6 billion won in fines and penalties on Coupang in June over the data breach, and Coupang Inc. reflected this in its second-quarter results. Coupang filed an administrative lawsuit contesting the disposition, but regardless of the outcome, the fine is reflected as an accounting expense first.
Even excluding this, however, the second-quarter operating loss reached about 219.2 billion won. This is because profitability in Coupang’s core product commerce segment declined, in contrast to its top-line growth. Coupang explained that the business impact from the data breach still remains.
Product commerce, which includes Rocket Delivery, Rocket Fresh, Rocket Growth and Marketplace, posted second-quarter revenue of 11.1515 trillion won, up 8% from a year earlier on a constant-currency basis. However, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came to 573.7 billion won, down 42% from a year earlier. Revenue from developing offerings segments, including Taiwan Rocket Delivery, Farfetch and Coupang Eats, was 2.1492 trillion won, up 20% from a year earlier. The adjusted EBITDA loss was about 328.9 billion won, narrowing 7% from a year earlier.
Customer metrics recovered to pre-data-breach levels. Second-quarter product commerce active customers numbered 24.7 million, up 3% from 23.9 million a year earlier. Compared with 23.9 million in the first quarter, the figure also increased by 800,000.
Cash-generating capacity weakened. Cumulative operating cash flow over the trailing 12 months was about 2.1402 trillion won, down 726.9 billion won from a year earlier. Free cash flow over the same period was about 157.7 billion won, down 1.0198 trillion won.
Separately, in its earnings report, Coupang Inc. disclosed that the National Tax Service (NTS) had sent a tax audit result notice to its Korean subsidiary Coupang Fulfillment Services (CFS) for the 2021 through 2025 tax years. According to the document, the notice from the NTS amounts to about $208 million (about 300 billion won), including penalty taxes and interest. Coupang said it plans to pursue an appeal procedure and that its provisions are at a sufficient level.
Regarding losses related to the recent fire at the Seoknam-dong logistics center in Incheon, the company said the figure “is estimated at $246 million (about 350 billion won), including inventory, asset value and payments related to seller inventory.”
Meanwhile, Coupang Inc. continued its shareholder returns. In the second quarter, it repurchased 23.2 million shares of Class A common stock for a total of $459 million. At the time of its first-quarter earnings announcement, Coupang Inc. had approved a share buyback program of up to $1 billion as part of its capital allocation strategy.