In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” The standard requires additional disclosures about an entity’s segments, primarily about significant segment expenses that are reported to the Chief Operating Decision Maker. Early adoption is allowed under the standard. We will apply the guidance starting with our consolidated financial statements included in the Annual Report on Form 10-K for the year ending December 31, 2024.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures.” The standard requires disclosure of specific categories of an entities income tax expenses and income taxes paid among other disclosures. Early adoption is allowed under the standard. We are evaluating the effect of adopting the ASU on our disclosures, which is effective beginning with the fiscal year ending December 31, 2025.
2. Net Revenues
Details of total net revenues were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Net retail sales
$
6,140
$
5,315
$
17,814
$
15,660
Third-party merchant services
1,499
709
3,920
1,732
Other revenue
227
160
569
430
Total net revenues
$
7,866
$
6,184
$
22,303
$
17,822
This level of revenue disaggregation takes into consideration how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Net retail sales are recognized from owned inventory product sales to consumers. Third-
party merchant services represent commissions, advertising, and delivery fees earned from merchants and restaurants that sell their products through our online businesses. Other revenue includes revenue earned from our Rocket WOW membership program and various other offerings.
私たちは、韓国の小売市場を主にその他の国際市場にもサービスを提供する小売ビジネスを所有および運営しています。最高執行責任者（“CODM”）は当社の最高経営責任者です。 two 操作および報告セグメントには、商品コマースと開発提供があります。これらのセグメントは、CODMがビジネスを管理し、リソースを割り当て、運用上の決定を行い、運用業績を評価する方法に基づいています。
Our segment operating performance measure is segment adjusted EBITDA. Segment adjusted EBITDA is defined as income (loss) before income taxes for a period before depreciation and amortization, equity-based compensation expense, interest expense, interest income, and other income (expense), net. Segment adjusted EBITDA also excludes impairments and other items that we do not believe are reflective of our ongoing operations.
We generally allocate operating expenses to the respective segments based on usage. The CODM does not evaluate segments using asset information and, accordingly, we do not report asset information by segment.
Results of operations for the reportable segments and reconciliation to income before income taxes is as follows:
The following table provides the components of net periodic benefit costs and the portion of these costs charged to expense:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Current service costs
$
43
$
36
$
123
$
104
Interest cost
3
3
11
10
Amortization of:
Prior service credit
1
1
2
2
Net actuarial loss
1
1
2
1
Net periodic benefit cost
$
48
$
41
$
138
$
117
5. Income Taxes
Our tax provision from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment. No income tax benefit was accrued for jurisdictions where we anticipate incurring a loss during the full fiscal year as the related deferred tax assets were fully offset by a valuation allowance. Our resulting effective tax rate differs from the applicable statutory rate, primarily due to tax credits, the inclusion of the global intangible low-taxed income (GILTI) provisions, the valuation allowance against deferred tax assets in loss making jurisdictions, and other permanent differences.
The increase in our effective tax rate for the three and nine months ended September 30, 2024 is primarily due to the loss before income taxes incurred by Farfetch, with no offsetting tax benefit, and the prospective impact of releasing the valuation allowance on our Korean deferred tax assets in the fourth quarter of 2023. Specific to the nine months ended September 30, 2024, our effective tax rate also increased due to the impact of the non-deductible KFTC administrative fine (the “administrative fine”) discussed in “Note 10 - Commitments and Contingencies”.
6. Earnings per Share
Basic earnings per share is computed by dividing net (loss) income attributable to Coupang stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net (loss) income attributable to Coupang stockholders by the weighted-average number of shares of common stock and potentially dilutive common stock outstanding during the period.
We have two classes of common stock outstanding, Class A common stock and Class B common stock (collectively “common stock”), with equal rights to dividends and income. Earnings per share attributable to Coupang stockholders are therefore the same for Class A and Class B common stock, both on an individual and combined basis.
We have agreements with third-party financial institutions to facilitate participating vendors’ and suppliers’ ability to settle payment obligations from us to designated third-party financial institutions. Participating vendors and suppliers may, at their sole discretion, settle obligations prior to their scheduled due dates at a discounted price to the participating financial institutions. The invoices that have been confirmed as valid under the program require payment, in full, based on the original standard invoice terms. Confirmed invoices owed to financial institutions under these programs are included within accounts payable and were $465 million and $459 million as of September 30, 2024 and December 31, 2023, respectively. Coupang or the financial institutions may terminate the agreement upon giving notice.
Accumulated Other Comprehensive (Loss) Income
Accumulated other comprehensive loss includes all changes in equity during a period that have yet to be recognized in income. The major components are foreign currency translation adjustments and actuarial gains (losses) on our defined severance benefits. As of September 30, 2024 and December 31, 2023, the ending balance in accumulated other comprehensive (loss) income related to foreign currency translation adjustments was $6 million and $44 million, respectively, and the amount related to actuarial losses on defined severance benefits was $(56) million and $(60) million, respectively.
Share Repurchase
In April 2024, we repurchased 10 million shares of our Class A common stock for $178 million in a private transaction.
9. Short-term Borrowings and Long-term Debt
Revolving Credit Facility
In January 2024, our senior unsecured credit facility (the “Revolving Credit Facility”) was amended to extend the maturity date to February 2026 and to bring the aggregate principal amount to $875 million. The Revolving Credit Facility continues to provide us the right to request incremental commitments up to $1.25 billion, subject to customary conditions.
The Revolving Credit Facility contains customary affirmative and negative covenants, including certain financial covenants. The Revolving Credit Facility is guaranteed on a senior unsecured basis by all our material restricted subsidiaries, subject to customary exceptions.
Taiwan Revolving Credit Facility
In September 2024, a Taiwan subsidiary entered into a new five-year senior unsecured credit facility (the “Taiwan Revolving Credit Facility”) providing for revolving loans in an aggregate principal amount of up to $207 million. The Taiwan Revolving Credit Facility permits the borrower to obtain incremental commitments up to $307 million, subject to customary conditions. Borrowings under the Taiwan Revolving Credit Facility bear interest at a rate per annum equal to the Taipei Interbank Offered Rate (TAIBOR) plus 1.25%.
The Taiwan Revolving Credit Facility contains customary affirmative and negative covenants, including certain financial covenants. As of September 30, 2024, there was no balance outstanding on the Taiwan Revolving Credit Facility.
Farfetch Term Loan
As part of the Farfetch Acquisition, our subsidiary assumed the then outstanding syndicated Term Loans (“Farfetch Term Loans”) under Farfetch’s existing Credit Agreement with certain banks and financial institutions of $575 million, inclusive of fees incurred and less $58 million we repurchased upon acquisition. Repayment of the Farfetch Term Loans is due in quarterly installments, of 0.25% of the original principal balance, payable on the last business day of each fiscal quarter. The Farfetch Term Loans mature in October 2027, and early payment is permitted. The Term Loans bear interest at a rate equal to SOFR plus 6.25% per annum. As of September 30, 2024, $571 million was outstanding.
The Farfetch Term Loans contain customary affirmative covenants as well as customary negative covenants, including, but not limited to, restrictions on certain entities within Farfetch’s ability to incur additional debt, make investments, make distributions, dispose of assets, or enter into certain types of related party transactions. The loans are secured against specified assets of the Farfetch group and guaranteed by certain subsidiaries of Farfetch.
Our debt is recorded at amortized cost. The fair value is estimated using Level 2 inputs based on our current interest rate for similar types of borrowing arrangements. The carrying amount of debt approximates its fair value as of September 30, 2024 and December 31, 2023 due primarily to the interest rates approximating market interest rates.
We were in compliance with the covenants for each of our borrowings and debt agreements as of September 30, 2024.
10. Commitments and Contingencies
Commitments
Unconditional purchase obligations include legally binding contracts with terms in excess of one year that are not reflected on the consolidated balance sheets. These contractual commitments primarily relate to technology related service contracts, fulfillment center construction contracts and software licenses. For contracts with variable terms, we do not estimate the total obligation beyond any minimum pricing as of the reporting date.
New Guards Group
As a result of efforts to restructure unfavorable economic terms within licensing arrangements involving New Guards Group Holdings S.p.A. and certain of its subsidiaries (collectively “NGGH”), a subsidiary acquired in the Farfetch Acquisition, and Authentic Brands Group LLC (the “licensor”), NGGH received a termination notice from the licensor in October 2024. The license agreement granted NGGH distribution rights for Reebok-branded footwear and apparel ranges within certain countries in the European region and provided for minimum guaranteed royalties to be paid by NGGH over the remaining eight years of the agreement, with no cancellation rights. NGGH’s minimum guarantee liability was recorded at fair value at acquisition and had a carrying value of $136 million as of September 30, 2024. Licensor has alleged as an effect of the notice all unpaid minimum guarantees and other related breach payments totaling $312 million became payable by NGGH to the licensor, and all rights in and to the licensed property reverted to the licensor. Coupang has not guaranteed payments under the license agreement, and the liability is limited to NGGH. The brand license intangible asset acquired was recorded at fair value at acquisition and had a carrying value of $44 million as of September 30, 2024.
Legal Matters
From time to time, we may become party to litigation incidents and other legal proceedings, including regulatory proceedings, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes with respect to these matters and determines loss contingency assessments on a gross basis after assessing the probability of incurrence of a loss and whether a loss is reasonably estimable. In addition, we consider other relevant factors that could impact our ability to reasonably estimate a loss. A determination of the amount of reserves required, if any, for these contingencies is made after analyzing each matter. Our reserves may change in the future due to new developments or changes in strategy in handling these matters. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of currently pending legal matters will not have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
On August 26, 2022, a putative class action was filed on behalf of all purchasers of Coupang Class A common stock pursuant and/or traceable to Coupang’s registration statement issued in connection with our initial public offering. Choi v. Coupang, Inc. et al was brought against Coupang, Inc., and certain of its former and current directors, current officers, and certain underwriters of the offering. The action was filed in the United States District Court for the Southern District of New York alleging inaccurate and misleading or omitted statements of material fact in Coupang's Registration Statement in violation of Sections 11, 12, and 15 of the Securities Act of 1933. The action was amended on May 22, 2023, and added allegations of securities fraud under Sections 10 and 20 of the Securities Exchange Act of 1934. The action seeks unspecified compensatory damages, attorneys’ fees, and reasonable costs and expenses. Between August and December 2023, three separate stockholders’ derivative actions were filed in the United States District Court for the Southern District of New York against certain of Coupang’s former and current directors and current officers. Coupang was named as a nominal defendant in the actions. These derivative actions purport to assert claims on behalf of Coupang and make substantially similar factual allegations to Choi v. Coupang, Inc. et al, bringing claims for, among other things, breach of fiduciary duty, unjust enrichment, and violations of securities laws. The actions seek compensatory damages, governance reforms, and other relief. We believe all the aforementioned actions are without merit and intend to vigorously defend against the aforementioned actions. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time. Accordingly, we can provide no assurance as to the scope and outcome of this matter and no assurance as to whether our business, financial position, results of operations or cash flows will not be materially adversely affected.
Korea Fair Trade Commission Investigations
In June 2021, the Korea Fair Trade Commission (the “KFTC”) initiated an investigation into a potential violation of the Monopoly Regulation and Fair Trade Act, including alleged preferential treatments of private labelled products provided by our subsidiary, Coupang Private Label Brands. In June 2024, the KFTC publicly announced that as a result of their investigation, they determined that our product search rankings violated Korean law; a regulatory finding subject to judicial review, and that they would impose an administrative fine on us and that they intended to direct us to take certain related corrective actions. Payments of fines to the KFTC are not stayed during an appeal process and as a result, we accrued the administrative fine in the second quarter of 2024, resulting in a charge, included within operating, general and administrative expenses, of approximately $121 million. The Company will pay the administrative fine in six installments over two years and made the first payment in October 2024 and will make the last payment in June 2026.
In August 2024, we received the KFTC’s formal written decision, and in September 2024, we appealed such decision. That appeal is pending, and the first hearing of the administrative litigation action will be held on November 21, 2024. We also filed a preliminary injunction with the Seoul High Court to stay the fine and corrective orders during the pendency of the appeal. In October 2024, the Seoul High Court granted our request for suspension of the KFTC’s corrective orders, but dismissed the request for a stay of the KFTC’s administrative fine. The KFTC subsequently appealed the Seoul High Court’s decision to grant a suspension of the corrective orders.
The KFTC is also investigating us on other matters related to the alleged violations of certain KFTC regulations. We are diligently cooperating with these investigations, and actively defending our practices as appropriate.
Under Korean law, the issues addressed in the investigations can be resolved through civil, administrative, or criminal proceedings. The ultimate case resolution could include fines, orders to alter our processes or procedures, and criminal investigations or charges against individuals or us. We cannot reasonably estimate any penalties, loss or range of loss that may arise from these other KFTC Investigations, in excess of the amounts accrued. Accordingly, we can provide no assurance as to the scope and outcome of these other matters and no assurance as to whether our business, financial position, results of operations or cash flows will not be materially adversely affected.
11. Business Combinations – Farfetch
Farfetch Acquisition
On January 30, 2024 we completed the acquisition of Farfetch. We believe the acquisition will allow us to expand into luxury retail. We have accounted for this acquisition as a business combination. Total purchase consideration consisted of amounts previously funded to Farfetch under a loan prior to acquisition (the “Bridge Loan”) and required partial repayment of the Farfetch Term Loans at the close of the transaction.
We have estimated the preliminary fair value of assets acquired and liabilities assumed based on information currently available and will continue to adjust those estimates as additional information becomes available during the measurement period. The measurement period will end no later than one year from the acquisition date.
The following table summarizes the preliminary allocation of purchase consideration and the fair value of the assets acquired and liabilities assumed as of the acquisition date:
(in millions)
Estimated Fair Value
Assets acquired
Cash and cash equivalents
$
126
Accounts receivable, net
288
Inventories
310
Prepaids and other current assets
224
Property and equipment, net
95
Intangible assets
325
Operating lease right-of-use assets
209
Other non-current assets
227
Liabilities assumed
Accounts payable
(505)
Other current liabilities
(169)
Long-term debt
(557)
Operating lease obligations
(214)
Other non-current liabilities
(177)
Net assets assumed
182
Noncontrolling interests
(78)
Goodwill on acquisition
104
Total consideration
$
208
The excess of purchase consideration over the fair value of net identifiable assets acquired and liabilities assumed was recorded as goodwill which is not deductible for tax purposes. Goodwill represents the future economic benefits we expect to achieve as a result of the acquisition, including the workforce of the acquired business as well as future operational and logistical cost efficiencies expected to be achieved. During the three months ended September 30, 2024, certain insignificant measurement period adjustments were made to the initial allocation, and the preliminary amount of goodwill was increased by $22 million. Goodwill was recorded in our Developing Offerings segment.
The identifiable intangible assets acquired were as follows:
(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
The results of Farfetch included in our consolidated statement of operations since the closing of the acquisition were as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
Total net revenues
$
439
$
1,187
Net loss
$
(44)
$
(274)
Acquisition-related costs were recorded as operating expenses for the three months ended September 30, 2024 and were not material.
The following financial information presents our results as if the acquisition of Farfetch had occurred on January 1, 2023:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Pro Forma Information
Total net revenues
$
7,866
$
6,791
$
22,490
$
19,558
Net income (loss)
$
61
$
103
$
(167)
$
158
These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are illustrative only and are not the results that would have been achieved had the acquisition actually occurred on January 1, 2023, nor are they indicative of future results. The pro forma results include adjustments related to the business combination, including amortization of acquired intangibles, stock-based compensation, lease expense, and income taxes.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Form 10-Q, as well as our audited consolidated financial statements included in our 2023 Form 10-K. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Form 10-Q. As a result of many factors, including, without limitation, those factors set forth in the “Risk Factors” section of our 2023 Form 10-K and the “Risk Factors” section of subsequent Quarterly Reports on Form 10-Q, our actual results or timing of certain events could differ materially from the results or timing described in, or implied by, these forward-looking statements. In the following discussion and analysis, amounts may not foot due to rounding.
Coupang is a technology and Fortune 200 company listed on the New York Stock Exchange (NYSE: CPNG) that provides retail, restaurant delivery, video streaming, and fintech services to customers around the world under brands that include Coupang, Coupang Eats, Coupang Play and Farfetch. Headquartered in the United States, Coupang has operations and support services in geographies including South Korea, Taiwan, Singapore, China, India and Europe. Coupang’s mission is to revolutionize the everyday lives of its customers and create a world where people wonder, “How did I ever live without Coupang?”
We believe that we are a preeminent retail destination because of our broad selection, low prices, and exceptional delivery and customer experience across our owned inventory selection as well as products offered by third-party merchants, in Korea. Our unique end-to-end integrated fulfillment, logistics, and technology network enables Rocket Delivery, which provides free, next-day delivery for orders placed anytime of the day, even seconds before midnight—across millions of products in Korea. Our structural advantages from complete end-to-end integration, investments in technology, and scale economies generate higher efficiencies that allow us to pass savings to customers in the form of lower prices. The capabilities we have built provide us with opportunities to expand into other offerings and geographies.
In January 2024 we acquired the business and assets of Farfetch, a leading global marketplace for the luxury fashion industry which connects customers with some of the world’s best luxury boutiques and brands.
Our segments reflect the way we evaluate our business performance and manage operations. See Note 3 — "Segment Reporting" to the condensed consolidated financial statements included elsewhere in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Product Commerceprimarily includes our core Korean retail (owned inventory) and marketplace offerings (third-party merchants) and Rocket Fresh, our fresh grocery offering, as well as advertising products associated with these offerings. Revenues from Product Commerce are derived primarily from online product sales of owned inventory to customers in Korea, commissions, logistics and fulfillment fees earned from merchants that sell products through our mobile application and website, and from Rocket WOW membership.
Developing Offerings includes more nascent offerings and services, including Coupang Eats, our restaurant ordering and delivery service in Korea, Coupang Play, our online content streaming service in Korea, fintech, our retail operations in Taiwan, as well as advertising products associated with these offerings, and also includes Farfetch, our newly acquired global luxury fashion marketplace. Revenues from Developing Offerings are primarily generated from our global luxury fashion marketplace, online restaurant ordering and delivery services in Korea and retail operations in Taiwan.
(1)Includes results of operations of Farfetch from acquisition date, January 30, 2024.
(2)Total net revenues, constant currency; total net revenues growth, constant currency; adjusted EBITDA; adjusted EBITDA margin; and free cash flow are non-GAAP measures. See “Non-GAAP Financial Measures” and “Reconciliations of GAAP to Non-GAAP Measures” below for the reconciliation of the Non-GAAP measures with their comparable amounts prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
(3)Gross profit is calculated as total net revenues minus cost of sales.
Key Business Metrics
Three Months Ended
Net revenues per Product Commerce Active Customer
September 30,
June 30,
March 31,
2024
$
307
$
296
$
302
2023
$
296
$
293
$
305
Percentage change
4
%
1
%
(1)
%
Three Months Ended
Product Commerce Active Customers (in millions)
September 30,
June 30,
March 31,
2024
22.5
21.7
21.5
2023
20.2
19.4
18.6
Percentage change
11
%
12
%
16
%
Net Revenues per Product Commerce Active Customer
Net revenues per Product Commerce Active Customer is the total Product Commerce net revenues generated in a period divided by the total number of Product Commerce Active Customers in that period. A key driver of growth is increasing the frequency and the level of spend of customers who are shopping on our Product Commerce apps or websites. We therefore view net revenues per Product Commerce Active Customer as a key indicator of engagement and retention of our customers and our ability to drive future revenue growth, though there may be a short-term dilutive impact when a large number of new Product Commerce active customers are added in a recent period.
As of the last date of each reported period, we determine our number of Product Commerce Active Customers by counting the total number of individual customers who have ordered at least once directly from our Product Commerce apps or websites during the relevant period. A customer is anyone who has created an account on our apps or websites, identified by a unique email address. The change in Product Commerce Active Customers in a reported period captures both the inflow of new customers as well as the outflow of existing customers who have not made a purchase in the period. We view the number of Product Commerce Active Customers as an indicator of future growth in our net revenue, the reach of our network, the awareness of our brand, and the engagement of our customers.
Results of Operations
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
% Change
2024(1)
2023
% Change
Net retail sales
$
6,140
$
5,315
16
%
$
17,814
$
15,660
14
%
Net other revenue
1,726
869
99
%
4,489
2,162
108
%
Total net revenues
7,866
6,184
27
%
22,303
17,822
25
%
Cost of sales
5,597
4,618
21
%
15,963
13,312
20
%
Operating, general and administrative
2,160
1,478
46
%
6,216
4,168
49
%
Total operating cost and expenses
7,757
6,096
27
%
22,179
17,480
27
%
Operating income
109
88
24
%
124
342
(64)
%
Interest income
55
50
10
%
163
124
31
%
Interest expense
(36)
(13)
177
%
(100)
(34)
194
%
Other income (expense), net
4
(8)
(150)
%
7
(20)
(135)
%
Income before income taxes
132
117
13
%
194
412
(53)
%
Income tax expense
68
26
162
%
259
85
205
%
Net income (loss)
$
64
$
91
(30)
%
$
(65)
$
327
(120)
%
(1)Includes results of operations of Farfetch from acquisition date, January 30, 2024.
Total Net Revenues
We categorize our total net revenues as (1) net retail sales and (2) net other revenue. Total net revenues incorporate reductions for estimated returns, promotional discounts, and earned loyalty rewards and exclude amounts collected on behalf of third parties, such as value added taxes. We periodically provide customers with promotional discounts to retail prices, such as percentage discounts and other similar offers, to incentivize increased customer spending and loyalty. These promotional discounts are discretionary and are reflected as reductions to the selling price and revenue recognized on each corresponding transaction. Loyalty rewards are offered as part of revenue transactions to all retail customers in Korea, whereby rewards are earned as a percentage of each purchase, for the customer to apply towards the purchase price of a future transaction. We defer a portion of revenue from each originating transaction, based on the estimated standalone selling price of the loyalty reward earned, and then recognize the revenue as the loyalty reward is redeemed in a future transaction, or when they expire. The amount of the deferred revenue related to these loyalty rewards is not material.
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in millions)
2024
2023
As Reported
Constant Currency
2024
2023
As Reported
Constant Currency
Net retail sales
$
6,140
$
5,315
16
%
20
%
$
17,814
$
15,660
14
%
18
%
Net other revenue
1,726
869
99
%
105
%
4,489
2,162
108
%
115
%
Total net revenues
$
7,866
$
6,184
27
%
32
%
$
22,303
$
17,822
25
%
30
%
Net retail sales represent the majority of our total net revenues which we earn from online product sales of our owned inventory to customers. Net other revenue includes revenue from commissions earned from merchants that sell their products through our apps or websites. We are not the merchant of record in these transactions, nor do we take possession of the related inventory. Net other revenue also includes consideration from online restaurant ordering and delivery services performed by us, as well as advertising services provided on our apps or websites. We also earn subscription revenue from memberships to our Rocket WOW membership program, which is also included in net other revenue.
Fulfillment and Logistics by Coupang (“FLC”) is a Product Commerce offering that enables participating merchants to leverage our end-to-end integrated logistics and fulfillment network. Prior to the second quarter of 2023 contract terms with FLC merchants resulted in the transfer of control of the merchants’ products to us and Coupang is the seller of record in these transactions, whereby revenue is recorded on a gross basis (principal). Beginning in the second quarter of 2023, we changed the FLC program and related contracts with merchants, streamlining the overall process for merchants and us. As a result of these changes, control of these products is no longer transferred to the Company prior to sales. The change impacted how we recognize a portion of our revenue, from a gross basis (principal) to a net basis (agent). As of the end of the second quarter of 2023, the previous contract terms had expired, after which commissions and logistics and fulfillment fees earned from FLC merchants under the new contracts are recorded in net other revenue.
The following table presents our total net revenues by segment.
Three Months Ended September 30,
% Change
Nine Months Ended September 30,
% Change
(in millions)
2024
2023
As Reported
Constant Currency
2024
2023
As Reported
Constant Currency
Product Commerce
$
6,891
$
5,966
16
%
20
%
$
19,816
$
17,306
15
%
19
%
Developing Offerings
975
218
347
%
356
%
2,487
516
382
%
392
%
Total net revenues
$
7,866
$
6,184
27
%
32
%
$
22,303
$
17,822
25
%
30
%
The increase in Product Commerce net revenues for the three and nine months ended September 30, 2024 is primarily due to continued growth in both our total net revenues per Product Commerce Active Customer and Product Commerce Active Customers, increasing 4% and 11% year-over-year, respectively driven by increased customer engagement within and across more product categories. The growth rate for the nine months ended September 30, 2024 was partially offset by a 5% net revenue decline from our transition of FLC merchants to new contracts now recognized on a net basis.
The increase in Developing Offerings for the three and nine months ended September 30, 2024 is primarily due to incremental revenues from our acquisition of Farfetch in the first quarter of 2024 of $439 million and $1.2 billion, respectively. The remaining increase is primarily due to our growth initiatives in Eats and Taiwan.
Cost of Sales
Cost of sales primarily consists of the purchase price of products sold directly to customers where we record revenue gross, and includes logistics costs. Inbound shipping and handling costs to receive products from suppliers are included in inventory and recognized in cost of sales as products are sold. Additionally, cost of sales includes outbound shipping and logistics related expenses, delivery costs from our restaurant delivery business, and depreciation and amortization expense.
The increase for the three and nine months ended September 30, 2024 primarily reflects higher volume from increased sales and customer demand. Additionally, the acquisition of Farfetch increased cost of sales by $256 million and $679 million for the three and nine months ended September 30, 2024, respectively. Cost of sales as a percentage of revenue decreased from 74.7% for both the three and nine months ended September 30, 2023 to 71.2% and 71.6% for the three and nine months ended September 30, 2024, respectively, primarily due to further operational efficiencies, continued supply chain optimization, and an increased percentage of revenues earned from higher margin revenue categories and offerings. Cost of sales as a percentage of revenue also benefited from the inclusion of Farfetch, which operates with a higher gross profit margin, resulting in a 0.8% reduction of cost of sales as a percentage of revenue from both the three and nine months ended September 30, 2023. These benefits were partially offset by 0.6% and 1.0% impacts, respectively, from our other growth initiatives in developing offerings.
Operating, General and Administrative Expenses
Operating, general and administrative expenses include all our operating costs excluding cost of sales, as described above. More specifically, these expenses include costs incurred in operating and staffing our fulfillment centers (including costs attributed to receiving, inspecting, picking, packaging, and preparing customer orders), customer service-related costs, payment processing fees, costs related to the design, execution, and maintenance of our technology infrastructure and online offerings, advertising costs, general corporate function costs, and depreciation and amortization expense.
The increase for the three and nine months ended September 30, 2024 primarily reflects increases in technology and infrastructure costs to support our continued growth. Additionally, the acquisition of Farfetch increased operating costs for the three and nine months ended September 30, 2024 by $213 million and $706 million, respectively. The increase for nine months ended September 30, 2024, also includes the impact of the administrative fine of $121 million. These expenses as a percentage of revenue increased from 23.9% and 23.4% for the three and nine months ended September 30, 2023 to 27.5% and 27.9% for the three and nine months ended September 30, 2024 primarily consisting of 1.2% and 1.8% due to the inclusion of Farfetch, which operates with a higher expense margin. The remainder of the increase is due primarily to the increased technology and infrastructure costs. Specific to the nine months ended September 30, 2024, there is a 0.5% impact due to the administrative fine.
Interest income primarily consists of interest earned on our deposits held with financial institutions.
Interest income for the three and nine months ended September 30, 2024 increased $5 million and $39 million compared to the prior year periods, primarily due to higher interest rates combined with higher average cash balances.
Income Tax Expense
We are subject to income taxes predominantly in Korea, as well as in the United States and other foreign jurisdictions in which we do business. Foreign jurisdictions have different statutory tax rates than those in the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rate is subject to significant variation and can vary based on the amount of pre-tax income or loss, the relative proportion of foreign to domestic income, use of tax credits and changes in the valuation of our deferred tax assets and liabilities. Beginning in 2022, the Tax Cuts and Jobs Act, as currently enacted, requires taxpayers to capitalize research and development expenses with amortization periods over five and fifteen years, which has and is expected to continue to increase the amount of our global intangible low-taxed income (GILTI) inclusion.
The increase in our effective tax rate for the three and nine months ended September 30, 2024 is primarily due to the loss before income taxes incurred by Farfetch with no offsetting tax benefit and the prospective impact of releasing the valuation allowance on our Korean deferred tax assets in the fourth quarter of 2023. Specific to the nine months ended September 30, 2024, our effective tax rate also increased due to the impact of the non-deductible KFTC administrative fine.
Our effective rates for the three and nine months ended September 30, 2024 and 2023 differed from the federal statutory rate due to the impact of valuation allowances on our deferred tax assets, and tax credits used for the period, the impact of the administrative fine, and the mix of our income before income taxes generated across the various jurisdictions in which we operate, including the impact of international provisions of the Tax Cuts and Jobs Act and permanent differences from non-deductible expenses. We expect that our effective tax rate in future periods will continue to differ significantly from the applicable statutory rate.
Segment adjusted EBITDA
The operating performance measure of each segment is segment adjusted EBITDA. Segment adjusted EBITDA is defined as income (loss) before income taxes for a period before depreciation and amortization, interest expense, interest income, income tax expense (benefit), other income (expense), net, equity-based compensation, impairments, and other items that we do not believe are reflective of our ongoing operations associated with our segments.
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
% Change
2024
2023
% Change
Product Commerce
$
470
$
399
18
%
$
1,467
$
1,095
34
%
Developing Offerings
(127)
(161)
(21)
%
(513)
(316)
62
%
Consolidated adjusted EBITDA
$
343
$
239
44
%
$
954
$
780
22
%
Product Commerce
The increase for the three and nine months ended September 30, 2024 was primarily due to the increase in net revenues described above.
Developing Offerings
The decreased loss for the three months ended September 30, 2024 was the result of growth in revenue, as discussed above, combined with improved margins, partially offset by $2 million of incremental adjusted EBITDA loss from Farfetch. The increased loss for the nine months ended September 30, 2024 in Developing Offerings adjusted EBITDA was the result of increased investments in our Eats and Taiwan offerings, higher content costs for our Coupang Play offering and $64 million of incremental adjusted EBITDA losses from Farfetch.
Non-GAAP Financial Measures
We report our financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures provide investors with additional useful information in evaluating our performance. These non-GAAP financial measures may be different than similarly titled measures used by other companies.
Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with U.S. GAAP. Non-GAAP measures have limitations in that they do not reflect all the amounts associated with our
results of operations as determined in accordance with U.S. GAAP. These measures should only be used to evaluate our results of operations in conjunction with the corresponding U.S. GAAP measures.
Non-GAAP Measure
Definition
How We Use The Measure
Free Cash Flow
• Cash flow from operations Less: purchases of property and equipment, Plus: proceeds from sale of property and equipment.
• Provides information to management and investors about the amount of cash generated from our ongoing operations that, after purchases and sales of property and equipment, can be used for strategic initiatives, including investing in our business and strengthening our balance sheet, including paying down debt, and paying dividends to stockholders.
Adjusted EBITDA
• Net income (loss), excluding the effects of: - depreciation and amortization, - interest expense, - interest income, - other income (expense), net, - income tax expense (benefit), - equity-based compensation, - impairments, and - other items not reflective of our ongoing operations.
• Provides information to management to evaluate and assess our performance and allocate internal resources.
• We believe Adjusted EBITDA and Adjusted EBITDA Margin are frequently used by investors and other interested parties in evaluating companies in the retail industry for period-to-period comparisons as they remove the impact of certain items that are not representative of our ongoing business, such as material non-cash items, acquisition-related transaction and restructuring costs, significant costs related to certain non-ordinary course legal and regulatory matters, and certain variable charges.
Adjusted EBITDA Margin
• Adjusted EBITDA as a percentage of total net revenues.
Constant Currency Revenue
• Constant currency information compares results between periods as if exchange rates had remained constant. • We define constant currency revenue as total revenue excluding the effect of foreign exchange rate movements, and use it to determine the constant currency revenue growth on a comparative basis. • Constant currency revenue is calculated by translating current period revenues using the prior period exchange rate.
• The effect of currency exchange rates on our business is an important factor in understanding period-to-period comparisons. Our financial reporting currency is the U.S. dollar (“USD”) and changes in foreign exchange rates can significantly affect our reported results and consolidated trends. For example, our business generates sales predominantly in Korean Won (“KRW”), which are favorably affected as the USD weakens relative to the KRW, and unfavorably affected as the USD strengthens relative to the KRW.
• We use constant currency revenue and constant currency revenue growth for financial and operational decision-making and as a means to evaluate comparisons between periods. We believe the presentation of our results on a constant currency basis in addition to U.S. GAAP results helps improve the ability to understand our performance because they exclude the effects of foreign currency volatility that are not indicative of our actual results of operations.
Constant Currency Revenue Growth
• Constant currency revenue growth (as a percentage) is calculated by determining the increase in current period revenue over prior period revenue, where current period foreign currency revenue is translated using prior period exchange rates.
Constant Currency Revenue and Constant Currency Revenue Growth
Three Months Ended September 30,
Year over Year Growth
2024
2023
(in millions)
As Reported
Exchange Rate Effect
Constant Currency Basis
As Reported
As Reported
Constant Currency Basis
Consolidated
Net retail sales
$
6,140
$
221
$
6,361
$
5,315
16
%
20
%
Net other revenue
1,726
56
1,782
869
99
%
105
%
Total net revenues
$
7,866
$
277
$
8,143
$
6,184
27
%
32
%
Net Revenues by Segment
Product Commerce
$
6,891
$
256
$
7,147
$
5,966
16
%
20
%
Developing Offerings
975
20
995
218
347
%
356
%
Total net revenues
$
7,866
$
277
$
8,143
$
6,184
27
%
32
%
Nine Months Ended September 30,
Year over Year Growth
2024
2023
(in millions)
As Reported
Exchange Rate Effect
Constant Currency Basis
As Reported
As Reported
Constant Currency Basis
Consolidated
Net retail sales
$
17,814
$
698
$
18,512
$
15,660
14
%
18
%
Net other revenue
4,489
155
4,644
2,162
108
%
115
%
Total net revenues
$
22,303
$
853
$
23,156
$
17,822
25
%
30
%
Net Revenues by Segment
Product Commerce
$
19,816
$
801
$
20,617
$
17,306
15
%
19
%
Developing Offerings
2,487
52
2,539
516
382
%
392
%
Total net revenues
$
22,303
$
853
$
23,156
$
17,822
25
%
30
%
Liquidity and Capital Resources
Liquidity
Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. Our primary sources of liquidity are cash on hand, supplemented through various debt financing arrangements and sales of our equity securities. We had total cash, cash equivalents and restricted cash of $6.0 billion as of September 30, 2024, of which $4.9 billion was held by foreign subsidiaries, primarily in Korea, and may not be freely transferable to the U.S. due to local laws or other restrictions. Additionally, we have $1.1 billion available under our revolving credit facilities as described below.
The ability of certain subsidiaries to transfer funds or pay dividends to Coupang, Inc. is also restricted due to terms which require the subsidiaries to meet certain financial covenants, including requirements to maintain a positive net equity balance or having current period income.
As of September 30, 2024 and December 31, 2023, we had equity of $4.2 billion and $4.1 billion, respectively. We may incur losses in the future. We expect that our investment into our growth strategy will continue to be significant, particularly with respect to our Developing Offerings segment, which will continue to focus on our newer offerings and entrance into new geographies, as well as overall expansion of our fulfillment, logistics, and technology capabilities. As part of this expansion to fulfill anticipated future customer demand and continuation to expand services, we plan to acquire and build new fulfillment centers. We have entered into various new construction contracts for capital projects which are expected to be completed over the next two years. These contracts have remaining capital expenditures commitments of $328 million as of September 30, 2024. We expect that our future expenditures for both infrastructure and workforce-related costs will exceed several billion dollars over the next several years.
Net cash (used in) provided by financing activities
(89)
362
(451)
Operating Activities
Nine Months Ended September 30,
(in millions)
2024
2023
Change
Net (loss) income
$
(65)
$
327
$
(392)
Adjustments to reconcile net (loss) income to net cash provided by operating activities
1,404
903
501
Change in operating assets and liabilities
(129)
813
(942)
Net cash provided by operating activities
$
1,210
$
2,043
$
(833)
The year-over-year change in operating cash flow was driven by a $392 million decrease in net income, which resulted in a net loss for the current period. Cash provided by operating activities was also impacted by the changes in operating assets and liabilities, including $199 million from other assets and $925 million from accounts payable primarily as a result of improved payment terms, primarily with certain large, multi-national suppliers which occurred in 2023, and $147 million from inventories primarily from the implementation of the FLC program in the prior year, partially offset by the accrual of the administrative fine during the second quarter of 2024.
Investing Activities
The decrease in cash outflow was mainly driven by the net cash acquired in the acquisition of Farfetch in exchange for the noncash contribution of the outstanding bridge loan. This was partially offset by the additional $75 million bridge loan made to Farfetch prior to the closing of the acquisition
Financing Activities
The cash outflow was primarily driven by a $319 million increase in repayments of debt and short-term borrowings due to the timing of maturities and the repurchase of 10 million shares of our Class A common stock for $178 million.
We believe that our sources of liquidity will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, we may need additional cash resources in the future if we find and pursue opportunities for investment, acquisition, strategic cooperation, or other similar actions, which may include investing in technology, our logistics and fulfillment infrastructure, or related talent. If we determine that our cash requirements exceed our amounts of cash on hand or if we decide to further optimize our capital structure, we may seek to issue additional debt or equity securities or obtain credit facilities or other sources of financing. This financing may not be available on favorable terms, or at all.
Capital Resources
We have entered into material unconditional purchase obligations. These contractual commitments primarily relate to technology related service contracts, fulfillment center construction contracts and software licenses. We generally enter into term loan facility agreements to finance the acquisition of property or construction of our fulfillment centers. These agreements may require that we provide for collateral equal to or greater than the amount borrowed under the arrangement. As we continue to build additional fulfillment centers, we expect our borrowings under debt financing arrangements to continue to increase.
Refer to Note 13 — "Commitments and Contingencies" of our consolidated financial statements in Part II, Item 8 of our 2023 Form 10-K for disclosure of our minimum contractual commitments. As part of the acquisition of Farfetch, we have a technology related service contract with minimum payments of $170 million covering services through 2027. Additionally, we assumed a license arrangement with minimum guaranteed royalties, refer to Note 10 — "Commitments and Contingencies".
Our short-term and long-term borrowings generally include lines of credit with financial institutions available to be drawn upon for general operating purposes.
In January 2024, our senior unsecured credit facility (“the Revolving Credit Facility”) was amended to extend the maturity date to February 2026 and to bring the aggregate principal amount to $875 million. The Revolving Credit Facility continues to provide us the right to request incremental commitments up to $1.25 billion, subject to customary conditions.
Refer to Note 12 — "Short-Term Borrowings and Long-Term Debt" of our consolidated financial statements in Part II, Item 8 of our 2023 Form 10-K for disclosure of our debt obligations and collateral.
Taiwan Revolving Credit Facility
In September 2024, a Taiwan subsidiary entered into a new five-year senior unsecured credit facility (the “Taiwan Revolving Credit Facility”) providing for revolving loans in an aggregate principal amount of up to $207 million. The Taiwan Revolving Credit Facility permits the borrower to obtain incremental commitments up to $307 million, subject to customary conditions. Borrowings under the Taiwan Revolving Credit Facility bear interest at a rate per annum equal to the Taipei Interbank Offered Rate (TAIBOR) plus 1.25%.
The Taiwan Revolving Credit Facility contains customary affirmative and negative covenants, including certain financial covenants. As of September 30, 2024, there was no balance outstanding on the Taiwan Revolving Credit Facility.
Farfetch Acquisition
On January 31, 2024, we completed the acquisition of the business and assets of Farfetch, a leading global marketplace for the luxury fashion industry. In advance of the acquisition, our subsidiary provided $150 million to Farfetch under a bridge loan which was contributed towards the Farfetch Acquisition.
As part of the Farfetch Acquisition, a subsidiary of the Company assumed the then outstanding syndicated Term Loans under Farfetch’s existing Credit Agreement with certain banks and financial institutions of $575 million, inclusive of fees incurred and less $58 million we repurchased upon acquisition. The Farfetch Term Loans are due in quarterly installments, of 0.25%, payable on the last business day of each fiscal quarter. The Farfetch Term Loans mature in October 2027, and early repayment is permitted. The Term Loans bear interest at a rate equal to SOFR plus 6.25% per annum.
The Term Loans contain customary affirmative covenants as well as customary negative covenants, including, but not limited to, restrictions on certain entities within Farfetch’s ability to incur additional debt, make investments, make distributions, dispose of assets, or enter into certain types of related party transactions. The loans are secured against specified assets of the Farfetch group and guaranteed by certain subsidiaries of Farfetch.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with U.S. GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. For a discussion of our critical accounting policies and estimates, refer to the section entitled “Critical Accounting Policies and Estimates” in our 2023 Form 10-K.
Other significant accounting policies are also discussed in Note 1 — “Description of Business and Summary of Significant Accounting Policies” to the consolidated financial statements in Part II, Item 8 of our 2023 Form 10-K.
Recently Adopted Accounting Pronouncements
See Note 1 — "Basis of Presentation and Summary of Significant Accounting Policies" to the condensed consolidated financial statements included elsewhere in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
In addition to the risks inherent in our operations, we are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates, foreign currency, and credit.
Interest Rate Risk
As of September 30, 2024, we had cash, cash equivalents, and restricted cash of $6.0 billion. Interest-earning instruments carry a degree of interest rate risk. Our interest rate risk arises primarily from our variable rate debt as well as our undrawn revolving credit facilities. Borrowings issued at variable rates expose us to variability in cash flows. We are a party to interest rate swap agreements to reduce some of our exposure to interest rate volatility of certain term loans. Our policy, in the management of interest rate risk, is to structure a reasonable balance between fixed and floating rate financial instruments as well as our cash and cash equivalents and any short-term investments we may hold. The balance struck by our management is dependent on prevailing interest rate markets at any point in time.
Our borrowings generally include lines of credit with financial institutions, some of which carry variable interest rates, and the Farfetch Term Loans which carries a variable interest rate. As of September 30, 2024, there were no balances outstanding on our revolving credit facilities and $571 million outstanding on the Farfetch Term Loans. Any future borrowings incurred under our revolving credit facilities would accrue interest at rates subject to current market conditions.
Foreign Currency Risk
We have accounts on our foreign subsidiaries’ ledgers, which are maintained in the respective subsidiary’s local currency and translated into USD for reporting of our consolidated financial statements. As a result, we are exposed to fluctuations in the exchange rates of various currencies against the USD and other currencies, including the KRW.
Transactional
We generate the majority of our revenue from customers within Korea. Typically, we aim to align costs with revenue denominated in the same currency, but we are not always able to do so. As a result of the geographic spread of our operations and due to our reliance on certain products and services priced in currencies other than KRW, our business, results of operations, and financial condition have been and will continue to be impacted by the volatility of the KRW against foreign currencies.
Translational
Coupang, Inc.’s functional currency and reporting currency is the USD. The local and functional currency for our Korean subsidiary, Coupang Corp., which is our primary operating subsidiary, is the KRW. The other subsidiaries predominantly utilize their local currencies as their functional currencies. Assets and liabilities of each subsidiary are translated into USD at the exchange rate in effect at the end of each period. Revenue and expenses for these subsidiaries are translated into USD using average rates that approximate those in effect during the period. Consequently, increases or decreases in the value of the USD affect the value of these items with respect to the non-USD-denominated businesses in the consolidated financial statements, even if their value has not changed in their original currency. For example, a stronger USD will reduce the reported results of operations of non-USD-denominated businesses and conversely a weaker USD will increase the reported results of operations of non-USD-denominated businesses. An assumed hypothetical 10% adverse change in average exchange rates used to translate foreign currencies to USD would have resulted in a decline in total net revenues of approximately $683 million and $2.0 billion and an immaterial impact in net income for the three and nine months ended September 30, 2024, respectively.
At this time, we do not, but we may in the future, enter into derivatives or other financial instruments in an attempt to hedge our foreign currency risk. It is difficult to predict the impact hedging activities would have on our results of operations.
Credit Risk
Our cash and cash equivalents, deposits, and loans with banks and financial institutions are potentially subject to concentration of credit risk. We place cash and cash equivalents with financial institutions that management believes are of high credit quality. The degree of credit risk will vary based on many factors, including the duration of the transaction and the contractual terms of the agreement. As appropriate, management evaluates and approves credit standards and oversees the credit risk management function related to investments.
As of September 30, 2024, our disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were evaluated, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), to assess whether they are effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Based on this evaluation, and subject to the below exclusion, our CEO and CFO have concluded that, as of September 30, 2024, our disclosure controls and procedures were effective at a reasonable assurance level.
In accordance with the interpretative guidance issued by the SEC staff, companies are allowed to exclude acquired businesses from the assessment of internal control over financial reporting during the first year after completion of an acquisition and the disclosure controls and procedures of the acquired entity that are subsumed in the internal control over financial reporting from the assessment of disclosure controls and procedures. Based on this guidance, our assessment of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024 excluded the portion of disclosure controls and procedures that are subsumed by internal control over financial reporting of Farfetch. The Company completed the acquisition of Farfetch on January 30, 2024. Farfetch, excluding the effects of purchase accounting, represented 8% and 5% of the Company’s consolidated total assets and consolidated total revenues, respectively, as of and for the nine months ended September 30, 2024.
Material Weakness in Internal Control over Financial Reporting of Farfetch
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. Farfetch disclosed the existence of material weaknesses in its internal control over financial reporting in Item 15 of its Annual Report on Form 20-F for the year ended December 31, 2022.
The unremediated material weakness identified and disclosed by Farfetch related to the operating effectiveness of certain business process and information technology controls in the New Guards business. We are in the process of reviewing the operations of Farfetch and implementing Coupang’s internal control structure over the acquired operations. While we did not include Farfetch in our assessment of internal control over financial reporting as of September 30, 2024, we determined the material weakness previously disclosed by Farfetch was not fully remediated as of September 30, 2024 and could result in a material misstatement of our annual or interim consolidated financial statements that will not be prevented or detected on a timely basis. We are actively engaged in the remediation efforts.
Changes in Internal Control over Financial Reporting
We are taking actions to remediate the material weakness relating to the New Guards business. There was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
The information set forth under Note 10 — "Commitments and Contingencies" in our accompanying notes to the condensed consolidated financial statements under the caption “Legal Matters” is incorporated herein by reference.
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties disclosed in Part 1, Item 1A, under the caption “Risk Factors,” of our 2023 Form 10-K which risks could materially and adversely affect our business, results of operations, financial condition, and liquidity. No material change in the risk factors discussed in such Form 10-K has occurred. Such risk factors may not be the only ones that we face because our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations. Our business operations could also be affected by additional factors that apply to all companies operating globally.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
c) Trading Plans
Mr. Bom Kim, our founder and Chief Executive Officer, adopted a pre-arranged stock trading plan (the “Plan”) in accordance with the SEC guidelines specified under Rule 10b5-1(c) under the Exchange Act and the policies of Coupang regarding stock transactions, to sell up to 15,000,000 shares of Coupang Class A Common Stock (the “Shares”), subject to certain terms and conditions, beginning no earlier than November 11, 2024. The Plan, which was entered into on August 12, 2024, will terminate the earlier of the sale of all 15,000,000 Shares pursuant to the Plan or August 29, 2025. Mr. Kim entered into the Plan to satisfy significant financial requirements, including tax obligations.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
