Coupang, Inc. (CPNG) FY 2021 MD&A

Overview

We are a leading e-commerce player in Korea. We believe that we are the preeminent online destination in the market because of our broad selection, low prices, and exceptional convenience across our owned inventory selection as well as products offered by third-party merchants. Our unique end-to-end 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. 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.

We believe the true measure of our success will be shareholder value created over the long term. Our long-term investments in building a differentiated technology-orchestrated network and customer-facing functionality have helped build a business that we expect will deliver significant growth and cash flows at scale. We have in turn reinvested to expand into new offerings successfully, such as with our owned-inventory selection, Rocket WOW membership, Rocket Fresh, and Coupang Eats, among others. We will continue to reinvest cash flows generated by our established offerings into new initiatives and innovations for our customers. We plan to invest and maximize value for customers and shareholders in the long term over optimizing our short-term results.

Initial Public Offering

On March 15, 2021, we completed our IPO in which we issued and sold 100,000,000 shares of our Class A common stock at an IPO price of $35.00 per share. We received net proceeds of $3.4 billion after deducting underwriting discounts of $69 million and other offering costs.

Immediately prior to effectiveness of the Company’s IPO registration statement on Form S-1, Coupang, LLC, a Delaware limited liability company, converted into a Delaware corporation pursuant to a statutory conversion, which changed our name to Coupang, Inc. (“Corporate Conversion”).

As a result of the Corporate Conversion and IPO, our redeemable convertible preferred units (“preferred units”) and common units (which included common units designated as profits interests (“PIUs”)), in each case, automatically converted into an equal number of shares of Class A or Class B common stock, except with respect to a conversion adjustment to certain PIUs, which reduced the outstanding common units designated as PIUs that converted into the shares of Class A common stock. Also, our convertible notes were automatically converted into 171,750,446 shares of our Class A common stock. For additional information related to the Corporate Conversion and IPO, see Note 11 — "Redeemable Convertible Preferred Units and Stockholders'/Members' Equity (Deficit)" and Note 9 — "Convertible Notes and Derivative Instrument" in Part II, Item 8 - “Financial Statements and Supplementary Data” in our consolidated financial statements.

Fulfillment Center Fire

On June 17, 2021, a fire extensively damaged the Company’s Deokpyeong fulfillment center (the “FC Fire”) resulting in a loss of the inventory, building, equipment, and other assets at the site. Inventory and property and equipment losses from the FC Fire of $158 million and $127 million were recognized in “Cost of sales” and “Operating, general and administrative”, respectively, during the second quarter of 2021. The Company is insured on property losses from the FC Fire, however, whether and to what extent the Company may recover insurance proceeds on these losses is currently unknown, and as such, no insurance recoveries have been recognized. During the second quarter of 2021, the Company also incurred or accrued other costs directly related to the FC Fire of $11 million. The FC Fire resulted in an increase to our net loss of $296 million for the year ended December 31, 2021.

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Key Financial and Operating Highlights:

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(1)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” 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”).

(2)Gross profit is calculated as total net revenues minus cost of sales, and for the year ended December 31, 2021 includes $158 million related to inventory losses from the FC Fire.

(3)Non-meaningful.

(4)Net loss for the year ended December 31, 2021 includes $296 million in losses recognized during the second quarter of 2021 related to the FC Fire.

Key Business Metrics and Non-GAAP Financial Measures

We review the key business and financial metrics discussed below. We use these measures to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

Key Business Metrics

Active Customers

As of the last date of each reported period, we determine our number of Active Customers by counting the total number of individual customers who have ordered at least once directly from our 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 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 Active Customers as a key indicator of our potential for growth in total net revenues, the reach of our network, the awareness of our brand, and the engagement of our customers.

Net Revenues per Active Customer

Net revenues per Active Customer is the total net revenues generated in a period divided by the total number of Active Customers in that period. A key driver of growth is increasing the frequency and the level of spend of Active Customers who are shopping on our apps or websites. We therefore view net revenues per Active Customer as a key indicator of engagement and retention of our customers and our success in increasing the share of wallet.

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Non-GAAP Financial Measures and Reconciliations

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.

Free Cash Flow

Free cash flow is defined as cash flow from operations less purchases of property and equipment, plus proceeds from sale of property and equipment. We believe that free cash flow is an additional and useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our core 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. Free cash flow has limitations as an analytical tool and should not be considered in isolation or as substitutes for analysis of other U.S. GAAP financial measures, such as net cash provided by operating activities. A limitation of free cash flow is that it may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure. We expect our free cash flow to fluctuate in future periods as we invest in our business to support our plans for growth.

Adjusted EBITDA and Adjusted EBITDA Margin

During the first quarter of 2021, we began using adjusted EBITDA and adjusted EBITDA margin as non-GAAP financial measures. Adjusted EBITDA is defined as net income/(loss) 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. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of total net revenues. We use adjusted EBITDA and adjusted EBITDA margin as key measures 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 e-commerce industry for period-to-period comparisons as they remove the impact of certain items that are not representative of our core business, such as material non-cash items and certain variable charges. However, other companies may calculate adjusted EBITDA and adjusted EBITDA margin in a manner different from ours and therefore they may not be directly comparable to similar terms used by other companies. Adjusted EBITDA and adjusted EBITDA margin are not measures of financial performance under U.S. GAAP and should not be considered as alternatives to cash flow from operating activities or as measures of liquidity or alternatives to net income/(loss) as indicators of operating performance or any other measures of performance derived in accordance with U.S. GAAP. Adjusted EBITDA and adjusted EBITDA margin have limitations as analytical tools, and you should consider them in addition to, and not in isolation or as substitutes, for analysis of our results as reported under U.S. GAAP.

Constant Currency Revenue and Constant Currency Revenue Growth

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 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. 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.

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These results should be considered in addition to, not as a substitute for, results reported in accordance with U.S. GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not a measure of performance presented in accordance with U.S. GAAP.

The following tables present the reconciliations from each U.S. GAAP measure to its corresponding non-GAAP measure for the periods noted:

Free Cash Flow

Adjusted EBITDA and Adjusted EBITDA Margin

Constant Currency Revenue and Constant Currency Revenue Growth

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Impact of COVID-19

The COVID-19 pandemic and resulting global disruptions have affected our business, as well as those of our customers, merchants, and suppliers. To serve our customers while also providing for the safety of our employees, we have adapted numerous aspects of our logistics and infrastructure, transportation, supply chain, purchasing, and third-party merchant processes. We also made numerous process updates across our operations and adapted our fulfillment and delivery infrastructure to implement additional employee and customer safety measures. We have experienced and may continue to experience a net positive impact on our sales and consumer demand for our products and services following changes in consumer purchasing behavior and the implementation of governmental orders to mitigate the spread of COVID-19.

The global impact of COVID-19 continues to rapidly evolve, and we will continue to monitor the situation and the effects on our business and operations closely. Further, we do not yet know the full extent of potential impacts of the pandemic on our business or operations, including the impact of any future developments related to the duration and scope of the pandemic, any ongoing effects on consumer demand and spending patterns, ongoing logistics and fulfillment related labor constraints and costs including costs to attract and retain employees, or other impacts as a result of the pandemic, and whether these or other currently unanticipated consequences of the pandemic are reasonably likely to materially affect our results of operations, cash flows, or financial condition. These drivers make it challenging to reasonably quantify the direct impact the pandemic has had, or may have in the future, on our business versus those impacts that may have been, or may be, indirectly related to the pandemic. For additional details, refer to Part I—Item 1A. “Risk Factors” contained elsewhere in this Form 10-K.

Components of Results of Operations

Total Net Revenues

We categorize our revenue 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, 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.

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.

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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 provides customers with access to benefits such as access to Rocket Fresh, no minimum spend for Rocket Delivery, free shipping on returns, and access to Coupang Play content streaming, which is also included in net other revenue.

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 service costs from our restaurant delivery business, and depreciation and amortization expense.

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.

Interest Expense

Interest expense primarily consists of interest on our short-term borrowings and long-term debt, our convertible notes issued in our 2018 convertible note financing, and finance lease liabilities.

Other (Expense) Income, net

Other (expense) income, net consists primarily of changes in fair value recorded on the derivative instrument and foreign currency gains and losses.

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. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

We have a valuation allowance for our net deferred tax assets, including federal and state net operating loss carryforwards, and tax credits. We expect to maintain these valuation allowances until it becomes more likely than not that the benefit of our deferred tax assets will be realized by way of expected future taxable income in Korea and the United States.

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Results of Operations

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net Retail Sales

Net retail sales increased $5.4 billion or 49% (45% on a constant currency basis) for the year ended December 31, 2021, when compared to the prior year. The increase was primarily due to a 15% growth in our Active Customers in 2021, as well as 30% growth (26% on a constant currency basis) in our net retail sales per Active Customer during that same period, driven by increased customer engagement across more product categories. In addition, the growth in net retail sales for the year ended December 31, 2021 was impacted by the comparison to the year ended December 31, 2020, which benefited from an elevated increase in sales due to COVID-19 related changes in consumer behavior.

Net Other Revenue

Net other revenue for the year ended December 31, 2021 increased $996 million or 108% (102% on a constant currency basis) compared to the prior year. The increase was primarily due to a 15% growth in our Active Customers in 2021, as well as 81% growth (75% on a constant currency basis) in our net other revenue per Active Customer during that same period, driven by the continued expansion of newer offerings and increased merchants and related product selection on our marketplace.

Cost of Sales

Cost of sales for the year ended December 31, 2021 increased $5.5 billion or 55% compared to the prior year. The increase was attributable to increased product and logistics costs resulting from increased sales and customer demand as well as $158 million in inventory losses related to the FC Fire. Cost of sales as a percentage of revenue increased from 83.4% for the year ended December 31, 2020 to 84.0% for the year ended December 31, 2021 primarily due to costs related to the FC Fire and higher labor and operations costs, partially offset by a shift to higher margin revenue categories. The portion of the FC Fire loss that was recorded within cost of sales as a percentage of revenue was 0.9% for the year ended December 31, 2021.

Operating, General and Administrative Expenses

Operating, general and administrative expenses for the year ended December 31, 2021 increased $1.9 billion or 78%, compared to the prior year. The increase primarily reflects higher employee costs, to support growth and expansion of newer initiatives, increased advertising expenses following a significant decline in the prior year due to the initial impacts of COVID-19, higher stock compensation of $208 million related to a cumulative catch-up adjustment for awards that vested upon the completion of our IPO and additional grants in the current year reflecting a higher fair value over the previous period, as well as property, equipment and other losses of $138 million recognized related to the FC Fire. These expenses as a percentage of revenue increased from 20.9% for the year ended December 31, 2020 to 24.1% for the year ended December 31, 2021 primarily related to higher employee costs, advertising expense, and impact from the FC Fire.

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Interest Expense

Interest expense for the year ended December 31, 2021 decreased $62 million or (58)% compared to the prior year period. The decrease was primarily attributable to the conversion of our convertible notes into shares of our Class A common stock as a result of the Corporate Conversion and IPO during the first quarter of 2021.

Other (Expense) Income, Net

Other (expense) income, net for the year ended December 31, 2021 changed $161 million, or (107)%, as compared to the prior year period. The impact was primarily due to a gain of $150 million from a change in the value of our derivative instrument recognized in the prior year.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net Retail Sales

Net retail sales for the year ended December 31, 2020 increased $5.3 billion, or 91% (93% on a constant currency basis), as compared to the year ended December 31, 2019. The increase was primarily due to a 18% growth in our Active Customers in 2020, as well as 62% growth (64% on a constant currency basis) in our net retail sales per Active Customer during that same period, driven by a continual increase in product selection and additional offerings provided to our customers. Also impacting the increase in net retail sales was changes in consumer behavior in response to the COVID-19 pandemic.

Net Other Revenue

Net other revenue for the year ended December 31, 2020 increased $436 million, or 90% (92% on a constant currency basis), as compared to the year ended December 31, 2019. The increase was primarily due to the 18% growth in our Active Customers in 2020, as well as a 61% growth (63% on a constant currency basis) in our net other revenue per Active Customer during that same period, driven by an increase in merchants on our marketplace, and related offerings and product selection. Also impacting the increase in net other revenue was changes in consumer behavior in response to the COVID-19 pandemic.

Cost of Sales

Cost of sales for the year ended December 31, 2020 increased $4.7 billion, or 91%, as compared to the year ended December 31, 2019. The increase was attributable to increased product and logistics costs resulting from increased sales. Cost of sales as a percentage of revenue slightly improved from 83.5% in 2019 to 83.4% in 2020, primarily due to efficiencies of scale in our supply chain and direct sourcing from manufacturers, offset by additional COVID-19 related expenses in our logistics network and product costs.

Operating, General and Administrative Expenses

Operating, general and administrative expenses for the year ended December 31, 2020 increased $827 million, or 49%, as compared to the year ended December 31, 2019. The increase was primarily due to an increase in fulfillment center capacity, technology infrastructure and general corporate costs to support our overall growth, as well as additional expenses associated with the COVID-19 pandemic and related safety measures. These expenses as a percentage of revenue decreased from 26.7% in 2019 to 20.9% in 2020, due primarily to our ability to continue to generate leverage from the scale of our growing operations, and lower spending on advertising as a result of the COVID-19 pandemic.

Interest Expense

Interest expense for the year ended December 31, 2020 increased $11 million, or 11%, as compared to the year ended December 31, 2019. The increase was primarily attributable to an increase in interest expense on our convertible notes due to compounding paid-in-kind interest at higher average rates during 2020.

Other (Expense) Income, Net

Other (expense) income, net for the year ended December 31, 2020 increased $127 million, or 564%, as compared to the year ended December 31, 2019. The increase was primarily due to a gain of $150 million from a change in the value of our derivative instrument for the year ended December 31, 2020 compared with a $(37) million loss for the year ended December 31, 2019. Offsetting the increase from the change in derivative values was a $(21) million decrease in foreign currency gains and a $36 million gain on forward sale contracts that occurred in 2019.

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Quarterly Results of Operations

The following table presents our unaudited selected consolidated quarterly results of operations for the eight quarters ended December 31, 2021. These unaudited selected consolidated quarterly results of operations have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this Form 10-K. The operating results for any quarter are not necessarily indicative of results for any future period. Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter. The quarterly results were as follows:

____________

(1)During the first quarter of 2021, the Company changed its policy for recognizing equity-based compensation expense from the graded vesting attribution method of accounting to the straight-line attribution method of accounting for its equity-based compensation arrangements with service only vesting conditions. Comparative financial statements for prior periods have been adjusted to apply the

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straight-line attribution method retrospectively. Refer to Note 2 — "Change in Accounting Principle" in Part II, Item 8 - “Financial Statements and Supplementary Data” for further information on this change in accounting policy.

(2)As reported net loss per share for prior periods reflect the retrospective adjustments from the Corporate Conversion described in Note 15 — "Net Loss per Share" in Part II, Item 8 - “Financial Statements and Supplementary Data.”

Liquidity and Capital Resources

Liquidity

As of December 31, 2021 and 2020, we had stockholders’ equity and members’ (deficit) of $2.2 billion and $(4.1) billion, respectively. We anticipate that we will continue to incur losses for the next few years. We expect that our investment into our growth strategy will continue to be significant, including with respect to the 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 build several new fulfillment centers. We have entered into various new construction contracts for capital projects which are expected to be completed over the next three years. These contracts have remaining capital expenditures commitments of $514 million as of December 31, 2021. We expect that our future expenditures for both infrastructure and workforce-related costs will exceed several billion dollars over the next several years.

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 and cash equivalents and restricted cash of $3.8 billion as of December 31, 2021, compared to $1.4 billion as of December 31, 2020. Additionally, the Company has $1.0 billion available under its new revolving credit facility as described below.

During the first quarter of 2021, we completed our IPO, in which we issued and sold 100,000,000 shares of our Class A common stock at a price of $35.00 per share. We received net proceeds of approximately $3.4 billion from the IPO after deducting underwriting discounts of $69 million and other offering costs.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Operating Activities

Our net cash used in operating activities was $(411) million for the year ended December 31, 2021, representing a change of $(712) million, compared to $302 million of net cash from operations for the year ended December 31, 2020. The change in operating cash flow was primarily driven by a $(452) million reduction in cash flows due to changes in operating assets and liabilities, consisting of increases in accounts receivable and investments in inventory of $(116) million and $(24) million, respectively, as a result of higher sales volume and expanded available selection for customers, and a decrease in other liabilities and accounts payable of $(108) million and $(337) million, respectively, offset by an increase in accrued expenses of $156 million from the timing of payments for operating lease liabilities, payables and accrued expenses. Also contributing to the increase in cash used in operating activities was a $(1.1) billion increase in net loss partially offset by a $820 million increase in our non-cash expenses contributing to the net loss for the year ended December 31, 2021.

Investing Activities

Our net cash used in investing activities was $(676) million for the year ended December 31, 2021, representing an increase of $155 million, or 30%, as compared to $(521) million used in investing activities for the year ended December 31, 2020. This increase was mainly driven by a $189 million increase in purchases of property and equipment, primarily related to our fulfillment

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and logistics infrastructure, including increased purchases of building and land, as well as higher investments in technology equipment and capabilities. For the year ended December 31, 2021, purchases of land and buildings comprised $215 million of the $674 million in total purchases of property and equipment. For the year ended December 31, 2020, purchases of land and buildings comprised $102 million of the $485 million in total purchases of property and equipment.

Financing Activities

Our net cash provided by financing activities for the year ended December 31, 2021 increased $3.4 billion, compared to the year ended December 31, 2020. This increase was primarily driven by $3.4 billion of proceeds, net of underwriting discounts of $69 million and other offering costs, from the issuance of 100,000,000 shares of our Class A common stock upon the completion of our IPO, a $34 million increase in cash proceeds from the issuance of common stocks/units related to equity awards and $97 million in repurchases of common units and preferred units in the prior period, and a $147 million increase in proceeds from debt and short-term borrowings, net of issuance costs, partially offset by a $(297) million increase in repayments of debt and short-term borrowings.

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Operating Activities

Our net cash provided by operating activities was $302 million for the year ended December 31, 2020, representing an increase of $613 million, or 197%, as compared to $(312) million of cash used in operations for the year ended December 31, 2019. The improvement in our operating cash flows was primarily driven by a $326 million increase from changes in operating assets and liabilities, primarily driven by a $649 million increase in accounts payable, partially offset by a $225 million increase in inventory and a $132 million increase in other assets to support the overall growth in our business. Also contributing to the improvements in the cash flow from operating activities was a $234 million decrease in net loss, due in large part to a 91% increase in total net revenues with a slightly improved cost of sales margin. In addition, there was a $54 million improvement in our operating cash flow from non-cash expenses affecting the net loss in 2020, mainly attributable to a $240 million increase in various non-cash related expenses, partially offset by a $(187) million change in the fair value of our derivative instrument.

Investing Activities

Our net cash used in investing activities was $(521) million for the year ended December 31, 2020, representing an increase of $302 million, or 139%, as compared to $(218) million used in investing activities for the year ended December 31, 2019. This increase was mainly driven by a $267 million increase in purchases of property and equipment. Our capital expenditures primarily related to investments in our fulfillment and logistics infrastructure, as well as technology equipment and capabilities.

Financing Activities

Our net cash provided by financing activities for the year ended December 31, 2020 decreased $1.0 billion, or (85)%, as compared to the year ended December 31, 2019. This decrease was primarily driven by a $1.5 billion decrease in cash proceeds from the issuance of common units and preferred units, net of issuance costs, primarily from a $1.5 billion issuance of Class J preferred units in 2019, partially offset by a $310 million reduction in repayments of debt and short-term borrowing and a $155 million increase in proceeds from debt and short-term borrowings, net of issuance costs.

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. Refer to Note 10 — "Commitments and Contingencies"” in Part II, Item 8 - “Financial Statements and Supplementary Data” for disclosure of our future commitments. We generally enter into term loan facility agreements to finance the 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. The Company also has material operating leases which expire over the next ten years. Total minimum contractual

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commitments due within the next 12 months were $991 million as of December 31, 2021. Additionally, we have open purchase orders for inventories that are primarily due in the next twelve months, and they are generally cancellable, in full or in part, through the contractual provisions.

Our short-term and long-term borrowings generally include lines of credit with financial institutions available to be drawn upon for general operating purposes.

The following debt arrangements were entered into since December 31, 2020:

Term Loan Facilities

During August 2021, we entered into a new $169 million three-year term loan. We have pledged $202 million of certain land and buildings as collateral against the loan. The term loan bears interest at a fixed rate of 3.155%.

In October 2021, the Company entered into a new two-year loan agreement to borrow up to $139 million to finance the construction of a fulfillment center. The Company pledged up to $167 million of certain existing land and a building to be constructed as collateral. The loan bears interest at a fixed rate of 3.45%.

In November 2021, the Company entered into a new five-year term loan facility agreement to borrow up to $47 million to finance the construction of a fulfillment center and a new three-year term loan facility agreement to borrow up to $23 million for general operating purposes. The Company pledged up to $85 million of certain existing land and buildings. The loans bear interest at a fixed rate of 3.78% and 3.68%, respectively.

In December 2021, the Company entered into a new two-year loan agreement to borrow up to $152 million to finance the construction of a fulfillment center. The Company pledged up to $182 million of certain existing land and a building to be constructed as collateral. The loan bears interest at a fixed rate of 3.87%.

New Revolving Credit Facility

In February 2021, we entered into a new three-year senior unsecured credit facility (the “new revolving credit facility”) providing for revolving loans in an aggregate principal amount of up to $475 million (which automatically increased to an aggregate principal amount of $950 million based on us receiving at least $2.0 billion in net proceeds from our IPO). The new revolving credit facility provides us the right to request incremental commitments up to $1.25 billion, subject to customary conditions. During March 2021, the aggregate principal amount of our new revolving credit facility increased to $1.0 billion as a result of our IPO. As of December 31, 2021, there was no balance outstanding on the new revolving credit facility.

Borrowings under the new revolving credit facility bear interest, at our option, at a rate per annum equal to (i) a base rate equal to the highest of (A) the prime rate, (B) the higher of the federal funds rate or a composite overnight bank borrowing rate plus 0.50%, or (C) an adjusted London interbank offered rate (“LIBOR”) for a one-month interest period plus 1.00% or (ii) an adjusted LIBOR plus a margin equal to 1.00%. We are also required to pay other customary fees for a credit facility of this size and type, including letter of credit fees, an upfront fee, and an unused commitment fee. The new revolving credit facility contains a number of covenants that, among other things, restrict our ability to:

•incur or guarantee additional debt;

•make certain investments and acquisitions;

•make certain restricted payments and payments of certain indebtedness;

•incur certain liens or permit them to exist; and

•make fundamental changes and dispositions (including dispositions of the equity interests of subsidiary guarantors).

Each of these restrictions is subject to various exceptions.

The new revolving credit facility requires us to (i) maintain a ratio of secured indebtedness to total consolidated tangible assets of less than 35%, if we have $1 or more of revolving loans or any unreimbursed drawn letters of credit outstanding under the new revolving credit facility at the end of each fiscal quarter and (ii) maintain a minimum amount of liquidity of at least $625.0 million (or $312.5 million to the extent the aggregate commitment of the new revolving credit facility is $500 million).

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The new revolving credit facility is guaranteed on a senior unsecured basis by certain material restricted subsidiaries of Coupang, Inc. (including Coupang Corp.), subject to customary exceptions. The new revolving credit facility also contains certain customary affirmative covenants and events of default for facilities of this type.

Refer to Note 8 — "Short-Term Borrowings and Long-Term Debt" in Part II, Item 8 - “Financial Statements and Supplementary Data” for disclosure of our debt obligations, collateral, and covenants.

Critical Accounting Policies and Estimates

We have identified the following accounting policies we believe as the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of our operations. The application of these policies requires significant and complex management estimates, assumptions, and judgment, and the reporting of materially different amounts could result if different estimates or assumptions were used or different judgments were made. See Note 1 — "Description of Business and Summary of Significant Accounting Policies" to our consolidated financial statements appearing elsewhere in in Part II, Item 8 of this Form 10-K for a description of our other significant accounting policies. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and judgments that affect the amounts reported in those consolidated financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, given the inherent uncertainty involved in making those estimates and due to the impact and unforeseen effects on the global economy from the COVID-19 pandemic, those estimates required increased judgment, and actual results reported in future periods could differ from those estimates and assumptions.

Revenue Recognition

Our revenue principally consists of retail sales earned from our online product sales to customers, commissions earned on transactions through our online business, consideration from online restaurant ordering and delivery services, third-party advertising, and subscription fees. Revenue represents the amount of expected consideration we are entitled to receive upon the transfer of promised goods or services in the ordinary course of our activities and is recorded net of estimated returns, promotional discounts, earned loyalty rewards, and value added taxes. Consistent with the criteria of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, we recognize revenue when performance obligations are satisfied by transferring control of a promised good or service to a customer. For performance obligations that are satisfied at a point in time, we also consider the following indicators to assess whether control of a promised good or service is transferred to the customer: (i) right to payment; (ii) legal title; (iii) physical possession; (iv) significant risks and rewards of ownership; and (v) acceptance of the good or service. For performance obligations satisfied over time, we recognize revenue over time by measuring the progress toward complete satisfaction of a performance obligation.

The application of various accounting principles related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, complex arrangements with non-standard terms and conditions may require relevant contract interpretation to determine the appropriate accounting treatment, including whether the promised goods and services specified in a multiple element arrangement should be treated as separate performance obligations. Other significant judgments include determining whether we are acting as the principal or the agent from an accounting perspective in a transaction.

For revenue contracts with multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We primarily determined stand-alone selling prices based on the prices charged to customers.

For certain arrangements, we apply significant judgment in determining whether we are acting as the principal or agent in a transaction. We are acting as the principal if we obtain control over the goods and services before they are transferred to customers. Generally, when we are primarily obligated in a transaction and are subject to inventory risk or have latitude in establishing prices, or have several but not all of these indicators, we act as the principal and record revenue on a gross basis. We act as the agent and record the net amount as revenue earned if we do not obtain control over the goods and services before they are transferred to the customers.

Inventories and Cost of Sales

We account for our inventories, which consist of products available for sale, using the weighted average cost method, and value them at the lower of cost or net realizable value. This valuation requires management judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product suppliers, or liquidations, and expected recoverable values of separate inventory categories. If changes in market conditions result

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in reductions to the estimated net realizable value of our inventory, we would increase our valuation in the period in which we made such a determination.

Cost of sales primarily consist of the purchase price of products sold to customers where we record revenue gross, and include logistics center costs. We include inbound shipping and handling costs to receive products from suppliers in inventory and recognize them in cost of sales as products are sold. Additionally, cost of sales includes outbound shipping and logistics related expenses, and delivery service costs from our restaurant delivery business, primarily where we are the delivery service provider, and depreciation and amortization.

We receive consideration from suppliers for various programs, including rebates, incentives, and discounts, as well as advertising services provided on our apps and websites. We generally record these amounts received from suppliers to be a reduction of the prices we pay for their goods, and a subsequent reduction in cost of sales as the inventory is sold.

Leases

We determine if an arrangement is a lease or contains a lease at inception. We recognized lease liabilities based on the present value of the remaining lease payments, discounted using the discount rate based on our incremental borrowing rate (“IBR”) or implicit rate (when available). The determination of the IBR requires judgement. We primarily base the IBR for each lease on publicly available information for companies within the same industry and with similar credit profiles. We adjust the rate for the impact of collateralization, the lease term, and other specific terms included in our lease arrangement. The IBR is determined at the lease commencement and is subsequently reassessed upon a modification to the lease agreement.

Equity-Based Compensation Expense and Valuation of Underlying Awards

We account for equity-based employee compensation arrangements in accordance with the provisions of ASC Topic 718, Compensation – Stock Compensation, which requires companies to estimate the fair value of equity-based payment awards on the date of grant. Determining the fair value of equity-based awards can require significant judgment.

Prior to the IPO, We issued equity awards in the form of unit options, profits interests (“PIUs”) and restricted equity units (“REUs”) to certain employees and consultants. We estimated the fair value of unit options using the Black-Scholes valuation model, which requires inputs such as the fair value of our ordinary units, risk-free interest rate, expected dividend yield, expected life, and expected volatility. We estimated the fair value of PIUs and REUs based on our estimated equity value for each unit class at the time of grant. The relevant assumptions used to calculate the fair value of equity awards were evaluated and revised, as necessary, to reflect market conditions and our historical experience.

Subsequent to the IPO, we have issued equity awards in the form of restricted stock units (“RSUs”) to employees. We estimate the fair value of RSUs using the market closing price on the grant date.

We record equity-based compensation expense in our consolidated statements of operations and comprehensive loss over the requisite service period of the award, net of estimated forfeitures, based on the fair value of such awards. The expense is recognized on a straight-line basis for awards with only service conditions, and on a graded vesting basis for awards with a service and performance condition. We estimate the forfeiture rate based on historical forfeitures of equity awards and adjust the rate to reflect changes when necessary. We revise our estimated forfeiture rate if actual forfeitures significantly differ from the initial estimates.

Determination of the Fair Value of Common Units

Prior to the IPO, as there had been no public market for our common units, the estimated fair value of our common units had been supported with input by third-party valuations with input of a combination of objective and subjective factors that management believes are relevant. These third-party valuations were performed in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation.

Our management has exercised reasonable judgment and considered numerous factors to determine the best estimate of fair value of our common units, including:

•valuations of comparable publicly traded companies;

•our operating and financial performance;

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•current business conditions and projections;

•the likelihood of achieving a liquidity event for the underlying equity instruments, such as an initial public offering or sale of our company, given prevailing market conditions;

•the prices of the recent redeemable convertible preferred unit sales by us to investors in arm’s-length transactions;

•the price paid by us to repurchase outstanding units;

•the preferences held by our redeemable convertible preferred unit classes relative to those of our common units; and

•the lack of marketability of our common units.

We determined the fair value of our common units using the income and market approach valuation methods. The income approach estimates the enterprise value of our business based on our expectation of future cash flows discounted to their present values using a discount rate based on our weighted-average cost of capital. The market approach estimates the enterprise value of our business based on a comparison to a group of public companies with similar financial and operating characteristics. A representative market value multiple is determined and applied to our historical results and forecasts to estimate the enterprise value of our business.

The enterprise value was then allocated to our common units using the option pricing method, under which our common units are considered to be a call option with a claim on the enterprise value at an exercise price equal to the remaining value immediately after the preferred units are liquidated. We also considered prior arm’s length sales of our units as indicators of their fair value, including recent secondary transactions and repurchases of our outstanding units. Finally, we applied a non-marketability discount in consideration of the fact that unitholders could not freely trade the common units in the public markets.

Application of these approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue and expenses, future cash flows, discount rates, market multiples, and the selection of comparable companies. Changes in any or all of these estimates and assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common units.

Following the IPO, we determine the fair value of our common stock, on the grant date, using the closing price of our Class A common stock.

Defined Severance Benefits

We have severance benefits covering employees in Korea. See Part II, Item 8 “Financial Statements and Supplementary Data” — Note 14 — "Defined Severance Benefits" to the consolidated financial statements.

Actuarial valuations are used in determining amounts recognized in the financial statements for our severance benefit plans. These valuations incorporate the following significant assumptions:

•Discount rates; and

•Salary growth rates

Management believes that these assumptions are critical accounting estimates because significant changes in these assumptions could impact our results of operations and financial position. Management believes that the assumptions utilized to record its obligations under its plans are reasonable based on the plans’ experience and advice received from its outside actuaries. We review the severance benefit plan assumptions annually and modify the assumptions based on current rates and trends as appropriate. The effects of such changes in assumptions are amortized as part of plan income or expense in future periods.

At the end of each fiscal year, we determine the weighted-average discount rates and salary growth rates used to calculate the projected defined severance benefits obligation. The discount rates are an estimate of the current interest rate at which the benefit plan liabilities could be effectively settled at the end of the year. As of December 31, 2021, we determined the discount rates for the severance benefit plan used in determining the projected and accumulated benefit obligations to be 2.70% to 3.00%, as compared to 1.73% to 2.57% as of December 31, 2020. In estimating these rates, we review rates of return on high-quality corporate bond indices, which approximate the timing and amount of benefit payments. Assuming all other defined benefit plan assumptions remain constant, a one percentage point decrease in the discount rates would result in an immaterial change in benefit plan expense during 2022. As of December 31, 2021, we determined the salary growth rates for the severance benefit plan used in determining the projected and accumulated benefit obligations to be 5.00% to 5.24%, as compared to 1.48% to 5.00% as of

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December 31, 2020. In estimating these rates, we review historical and expected rates of the Company as well as industry growth rates. Assuming all other defined benefit plan assumptions remain constant, a one percentage point decrease in the salary growth rates would result in an immaterial change in benefit plan expense during 2022.

Recently Adopted Accounting Pronouncements

See Note 1 — "Basis of Presentation and Summary of Significant Accounting Policies" to the consolidated financial statements included elsewhere in Part II, Item 8 of this Annual Report on Form 10-K.