Earnings Call
Coupang, Inc. (CPNG)
Earnings Call Transcript - CPNG Q2 2021
Operator, Operator
Good afternoon. My name is Mattie and I will be your conference operator today. At this time, I would like to welcome everyone to the Coupang Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. Now, I'd like to turn the call over to Michael Senno, Vice President of Investor Relations. You may begin your conference, sir.
Michael Senno, Vice President of Investor Relations
Thanks, operator. Welcome to Coupang Inc.'s quarterly earnings conference call for the second quarter ended June 30th, 2021. I am pleased to be joined on the call today by our Founder and CEO, Bom Kim; and our CFO, Gaurav Anand. The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information except as required by law. Certain statements made on today's call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements. Please refer to today's earnings release as well as the risks and uncertainties described in our most recent quarterly report on Form 10-Q filed with the SEC on May 13th, 2021 and other filings made with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. During today's call, we will present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including reconciliations of non-GAAP measures to the most comparable GAAP measures, are included in our earnings release and our SEC filings, each of which is posted on the company's Investor Relations website. And I remind you that these numbers are unaudited and may be subject to change. Let me now turn the call over to Bom.
Bom Kim, CEO
Thanks, Michael, and thank you everyone for joining us today. Our unrelenting focus on WOW customers resulted in our 15th consecutive quarter of over 50% constant currency revenue growth. Our revenue has more than tripled in just the past two years, now reaching $18 billion on an annualized run rate basis. Total reported revenues increased a robust 71% in Q2, even as we operate with industry-leading scale. We believe we're the largest e-commerce player, growing at a multiple of one of the biggest and fastest growing e-commerce opportunities in the world. Our top of the funnel continued to expand with not only strong active customer growth, but revenue per active customer increasing 36% against strong COVID-fueled costs last year. Balancing that growth is an improving profitability profile. Direct investments in just two of our new initiatives, Rocket Fresh, our fresh grocery offering, and Coupang Eats, our food delivery offering, accounted for $120 million of the $122 million adjusted EBITDA loss. That highlights the profitability of our mature offerings. As we will describe in more detail, our confidence around the future cash flows of Fresh and Eats has never been stronger. Their rapidly improving economics with increasing scale confirm that they are on a similar trajectory as our earlier offerings. We see these results as a validation of the operating tenets of our company. One, we exist to deliver new moments of WOW for customers. As we create these moments, we will continue to unlock a better world for every customer, merchant, and employee we touch, leaving all to wonder, how did we ever live without Coupang? Two, we don't start with what looks easy. We work backwards from imagining jaw-dropping customer experiences and we embrace the hard work required to challenge trade-offs that customers take for granted. Three, we will employ technology, process innovation, and economies of scale to create amazing customer experiences and drive operating leverage and significant cash flows over time. Four, we always prioritize growth in long-term cash flows. When we find opportunities, we reinvest cash flows from established offerings to generate greater cash flows in the future. And five, we are disciplined capital allocators. We start with small investments, then test and iterate rigorously. We invest more capital over time in opportunities that have the best long-term cash flow potential. As we are still early in our journey as a public company, we thought it would be helpful to spend time on three foundational topics today before discussing the quarter. First, the flywheel that we're building and how it is accelerating across all our offerings. Second, our disciplined investment approach and how our latest projects are following the trajectory of our earlier successes. And third, how our model is setting the global standard and creating unparalleled benefits for local economies, small businesses, and employees. First, on how our flywheel is perpetuating growth across all offerings. Korea is a massive e-commerce market opportunity, poised to exceed $530 billion by 2024. We believe Coupang is already the largest e-commerce player in Korea and we're growing meaningfully faster than the rest of the e-commerce segment. Importantly, we see our size and momentum as an indication that we're becoming the default destination for customers to begin and end their journey entirely on our services. This is due to the shared flywheel of our offerings. Every new moment of WOW broadens the top of the funnel that in turn drives growth to other offerings. We believe that a key measure of success is how quickly that top of the funnel or the number of e-commerce journeys that begin at Coupang is growing. A platform with a stalling top of the funnel can still have a fast-boring offering, but only at the cost of another product line's growth. But a booming top of the funnel is typically a rising tide that lifts all boats. For Coupang, all of our offerings are growing quickly. As one offering grows, we see customer frequency drive growth in other offerings. New products create more reasons for customers to start their journey on Coupang, and that expansion of the top of the funnel drives growth in existing products as well. Let's take a moment to walk through how our own inventory retail offerings or 1P helps drive the broader flywheel that accelerates the growth of our third-party marketplace for 3P. Despite 1P being a harder problem to solve, we chose to invest in 1P before 3P because we believe 1P leadership is the foundation for providing the best overall experience, including the best 3P offering in the market. By breaking the trade-offs across price, service, and selection, our superior 1P offering attracts more and more customers to make Coupang their default shopping destination. This increased traffic leads to more sales for 3P, which attracts more 3P sellers, who further expand the selection on Coupang. That increases selection and convenience for customers, which in turn attracts even more customers and higher frequency, broadening the top of the funnel for both offerings. To jumpstart the flywheel, we first invested in 1P and we're now seeing the fruits of that decision. Total 3P sales have grown at more than double the rate of the Korean e-commerce segment over the past two years, and that trend continued in Q2. Some of the strongest proof that our 1P flywheel drives the 3P flywheel is that our largest 3P offerings are in the exact categories and use cases where we have our largest 1P offerings. Consumables, where we focused on building Rocket services, first became our largest 1P category. The sales of 3P consumables followed suit, increasing at an approximately 80% CAGR from 2018 to 2020 to become our largest 3P category. We are seeing the same story play out in consumer electronics. 3P and CE grew at a CAGR of over 60% from 2018 to 2020 on the back of a strong 1P flywheel, even though the category involves very different product types, price points, and purchase frequencies from consumables. We ended Q2 with an annualized run rate transaction volume of over $2 billion in soft-line, a category we began investing in later, which includes apparel, shoes, and accessories. Aided by triple-digit growth in 1P soft-lines, 3P in soft-lines is growing meaningfully faster than the broader online sector, and its metrics appear similar to what we saw on consumable 3P several years ago. We believe we're on pace to become the largest soft-line destination online in time. The 1P flywheel that we spent over seven years building is not only hard to replicate, it serves as a foundation for the flywheel of other offerings. We are consistently seeing significant 3P growth follow 1P hyper growth in the categories we focused on first. The underlying metrics for nascent 3P categories indicate that they are on track to repeat the success of the earlier categories. As our 3P offering continues to accelerate, it puts us in prime position to unlock additional opportunities in areas like merchant services and FinTech that will further perpetuate the virtuous cycle of growth across our entire business. It's why one offering's growth doesn't come at the cost of another's at Coupang. All offerings are growing fast and fueling one another, and each additional moment of WOW broadens the top of the funnel shared by all. All growth is not reflective of our full top of the funnel customer demand, which exceeds our capacity in many areas. This is most apparent with our Fresh offering, where we continue to see remarkable growth. Fresh grocery revenue more than doubled year-over-year in Q2. Less than three years after its launch, it is the leading nationwide online grocer, with annualized run rate revenue well above $2 billion. Meanwhile, Eats revenue nearly tripled over just the past two quarters as we continue to expand and invest in the service. Both offerings are growing faster than we expected, and continuing to scale at this rate requires large investments. For context, total adjusted EBITDA in Q2 was negative $122 million, of which direct investment in Fresh and Eats accounted for $120 million. While the accelerated growth of Fresh and Eats drove higher losses for the period, the contribution margin for both is improving with scale, and we are even more confident that these offerings are on track to reach profitability. In Fresh, the contribution margin improved by nearly 1,000 basis points over the last year. The underlying metrics give us high confidence that Fresh will replicate the positive cash flow dynamics of our more mature investments. Eats is earlier in the journey than Fresh, but following a similar trend line. While revenue nearly tripled over just the past two quarters, the loss per order has decreased every quarter since the beginning of 2020. In Q2, it was down over 50% year-over-year. Fresh grocery and food delivery are significant opportunities with large addressable markets and low online penetration. The trends we're seeing give us even more conviction that we can be a leading player and achieve healthy long-term ROI and cash flows for both Fresh and Eats. We plan to lean in and continue to invest aggressively to scale these offerings and to create even better experiences for our customers. In addition to Fresh and Eats, we're investing in capacity across the business. In total, we continue to make progress on our plans to add more than 14 million square feet to our market-leading 25 million square feet of e-commerce fulfillment and logistics infrastructure, as we announced last quarter. These investments continue to strengthen our moat, providing the foundation to support growth, drive economies of scale, and raise the bar even higher on service levels for customers. Everything we do at Coupang revolves around wowing our customers and creating new moments of WOW is hard to do. Building truly differentiated offerings requires bold and unconventional thinking, as well as investment of time and capital. But we employ a disciplined investment approach. We start with small bets, then test rigorously and invest more capital over time, but only into the opportunities we feel strongest about. We're making sizable investments in Fresh and Eats, for example, because we believe they're just earlier on the same trajectory as our mature offerings, which are profitable and true to our DNA. We're continuously seeing new initiatives develop as the next vectors of growth. We’re excited to highlight in this category opportunities like merchant services, international expansion, and FinTech. There are many other early-stage initiatives in the portfolio, and I expect that we will not continue all of them. Only the investments whose underlying metrics show strong potential for meaningful cash flows in the future will earn their way to more significant investment. The initial capital for these projects is small, and the real capital investment comes over time as we overcome hurdles and become more confident about future cash flows. It's the same proven, disciplined approach we use to build our earlier projects. In the same way that we increase investments in Fresh and Eats as our early offerings mature and become self-funding, the most promising among these new initiatives will become the next major investment focus. Our investments that continuously strengthen the virtuous cycle across our business are driving significant growth for merchants and vendors. Small and mid-sized businesses or SMEs are among the biggest beneficiaries. As we continue to strengthen our 3P offering and drive strong growth, SMEs have benefited exceptionally. SMEs in our marketplace grew sales over 87% year-over-year in Q2, with eight of our investments in products and services that help merchants better reach and serve customers. This is a remarkable feat, considering that total offline sales for SMEs declined 7% year-over-year in Korea during the same period. Our investments are also driving robust job creation throughout Korea, including regions outside Seoul and other major metropolitan areas. We were the number one private job creator in Korea last year, and we expect that will be the case this year as well. About 80% of the jobs created are located outside of Seoul, consistent with our commitment to advance long-term economic development throughout the country. We're also continuing to make Coupang the best workplace. We offer all of our drivers full-time employment, and we're the only major logistics company in Korea to directly employ 100% of our full-time drivers. Our drivers have an industry-best five-day workweek, insurance and benefits from day one, and a minimum of 15 paid days off per year. That stands in sharp contrast to the rest of the logistics industry that hires the vast majority of their drivers as third-party contractors with six-day workweeks, no insurance or benefits, and no paid time off. We were the first company in Korea to make our frontline employees stockholders at scale, providing over 39,000 frontline workers with restricted stock awards at our IPO. We're also making meaningful investments to help employees improve their health and increase health awareness. Offering direct employment has far-reaching implications. For example, companies are required to report work-related injuries of employed drivers, but not work-related injuries of contracted drivers, most of whom are responsible for their own health as well as their own insurance, vehicles, and accidents. By directly employing our drivers, we're also taking responsibility for their health and safety, and we're committed to being a global leader in this area. For example, since the beginning of 2020, we've added over 600 safety employees and invested over $200 million in worker safety initiatives. While all this comes with additional costs and responsibilities, we gladly take it on because we believe this is the right thing to do. We want to continue leading not only in offering an exponentially better customer experience, but also in setting the global standard in safety, working conditions, and benefits for frontline employees. In closing, we have terrific momentum across the business. Our unique position in the market enables us to harness this momentum to continue driving value for customers, merchants, and employees, among others in our growing ecosystem. As always, we will continue to attack the biggest trade-offs for customers, making bold decisions and disciplined investments, and building sustainable long-term value, while striving to create a world where everyone wonders how did I ever live without Coupang. Now, I'll turn the call over to Gaurav to go through the financials in more detail.
Gaurav Anand, CFO
Thanks, Bom. Q2 was strong with reported revenue up 71% year-over-year, and constant currency revenue growth at 37%, marking our 15th consecutive quarter exceeding 50% of constant currency growth. Quarterly active customers increased 26% to 70 million, another indication of our strong and growing top of the funnel. It's a direct result of our trending product flywheel and strong customer loyalty as Coupang becomes the default online shopping destination for more and more consumers. With over 37 million internet shoppers in Korea, we will have an opportunity to more than double our customer base over the coming years as we continue creating new moments of WOW. Revenue per customer grew 36% as customers continue to increase purchase frequency across more categories and spend on new offerings. Revenue growth accelerated sequentially, increasing 151% year-over-year as our 3P and advertising offerings continue to drive robust growth. Before moving to our key P&L metrics, I want to provide the Q2 P&L impact related to the fulfillment center fire. We recognized an inventory write-off of $158 million in cost of sales and $138 million in assets write-offs and other related costs in operating general and administrative expenses. These costs are excluded from our adjusted EBITDA, but the inventory write-off does impact our reported gross profit. Upon completion of the investigation, any insurance recoveries will be recognized in future quarters. Gross profit excluding the impact from the fire was up 86% year-over-year to $816 million, and gross margin expanded 140 basis points to 18.2%. We expect to continue delivering margin expansion longer term, driven by continued growth in categories like soft lines, improving profitability, especially at scale, an increasing mix of advertising revenue, and further operational efficiency. In Q2, total adjusted EBITDA was negative $122 million. That includes the $120 million in investments to scale Fresh and Eats, and the $120 million does not include investments to fund other new initiatives and higher costs due to COVID-related operational headwinds. Trailing 12-month operating cash flow was $74 million in Q2, up from $47 million in Q2 last year. The improvement was driven by working capital inflows from the continued growth in our business, slightly offset by the higher investment reflected in our P&L. Overall, a leading position in Korean e-commerce was on display in Q2 with strong growth trends across our offerings, and momentum is only getting stronger. With that, I'll now turn the call back to the operator to begin the Q&A. Thank you.
Operator, Operator
Your first question comes from Eric Cha from Goldman Sachs.
Eric Cha, Analyst
Thank you for this opportunity. I have two questions. What is your gross merchandise volume or sales growth outlook for the second half, particularly in light of the losses mentioned? How does this impact your expected first-party and third-party mix? My second question is regarding your mention of Fintech as a future initiative. Since Fintech encompasses many areas, which specific area are you focusing on? Additionally, it would be helpful if you could provide a timeline for this. Thank you.
Bom Kim, CEO
Hi Eric, thanks for the question and your time. Regarding your first question on the outlook, we prioritize decisions that favor long-term success over short-term results. We will continue to invest in initiatives we believe in, particularly those that leverage technology and process innovation to increase economies of scale. Although this involves significant effort, we're committed to it. For example, parts of Korea recently entered a phase four lockdown due to COVID, which has led to a surge in customer demand that we are striving to meet, but it has also presented challenges in capacity that we are actively addressing. We are confident in the business's momentum and have observed that COVID-related expenses tend to be temporary. Our ongoing investments aim to meet demand while ensuring that customer experience and long-term trust remain intact. We expect our investments to yield positive results over time, but there may be fluctuations quarter-to-quarter, and we prefer not to speculate on those. I hope you recognize the long-term momentum we are building, which will benefit customers, merchants, employees, and shareholders in the coming quarters. Regarding your second question about Fintech, there are numerous exciting opportunities in that broad space. Long-term, it is clear we are increasing transaction volumes and expanding our reach, creating new opportunities. We are experimenting with various approaches to enhance customer experience while minimizing costs. We'll evaluate which modalities to scale first based on the solutions that excite our customers and merchants the most. Currently, we are still in the learning and experimenting phase, but we believe there are substantial opportunities ahead. Our growing foundation is driving the acceleration of our third-party business and expanding our capabilities, positioning us well to offer a range of solutions and services to our customers and merchants in the long run. We are thrilled about these prospects.
Gaurav Anand, CFO
Let me add on the impact of the fire and the influence of 1P and 3P that you mentioned, Eric. So, we didn't have material impact from the fire; operationally, our technology and additional capacity we had in 1P have enabled a relatively seamless customer experience, allowing us to reroute the orders with our facilities. We have been doing this during COVID with shutdowns in our facilities. But this is just another challenge that we have to work through, and we've continued to rebuild for longer-term on the financial side and continue to optimize our network. We don't expect any material impact between 1P and 3P. Thank you.
Eric Cha, Analyst
Thanks.
Operator, Operator
Thank you. And your next question comes from the line of Stanley Yang with JPMorgan.
Stanley Yang, Analyst
Hi. Good afternoon. What is the GMV mix trend between this 1P and 3P? Is there any noticeable trend in terms of the mix shift during the quarter or during the first half? Or do you expect this new mix trend to continue in the second half? I'm just wondering how fast your 3P core GMV revenue is growing excluding the Eats services? Compared with open markets, because we are seeing price deceleration of the 3P marketplaces actually GMV or topline growth this year. And also, I'm just wondering if there was any meaningful pickup of JIT delivery contributing to your 3P topline growth during the quarter?
Bom Kim, CEO
Hi Stanley. Thanks for your question. I think we can say, as we highlighted, 3P really shares the flywheel with 1P. In our earlier categories, we saw 3P accelerating on the back of strong 1P growth. We're continuing to see that in our big categories. We're seeing that also in categories we've entered later, like soft lines and consumer electronics. We're really encouraged by 3P continuing to grow at a multiple of the e-commerce segment. All of our product offerings across the board are growing much faster than overall e-commerce. Certainly, 3P fits that trend, so we are very optimistic that we continue to see strong 3P growth, and certainly all the later categories in 3P appear to follow a similar trajectory as our earlier 3P categories. As for Just-in-Time (JIT) delivery, that's an area that we're really excited about. There is huge long-term potential opportunity to increase selection on Rocket; ultimately, right now, we still have just a fraction of the overall total selection on Rocket. We are adding more selections, and that is certainly another way to do that. We are seeing positive signs, but I think we'll have more to talk about in the future. This connects to the earlier question Eric asked regarding timing; we know these opportunities are significant, we're excited about them, and they are waiting for us. But we are disciplined in our investment. Before we invest to scale anything, we really want to ensure we are solving hard problems upfront. We're seeing positive signs that this could be a great, amazing customer experience that has the foundation to drive operating leverage and significant cash flows over time. We want to solve the challenges before we scale them. That's been the story of how we built Eats, for example. Before we scaled that nationally, we focused on one area in Seoul to really iterate and test rigorously. We don't rush ourselves to scale these things because we know these huge opportunities are there; our position to take advantage of these opportunities only gets stronger as our flywheel gets bigger and as our top of the funnel expands. A lot of these early-stage initiatives are focused on solving problems, improving customer experience, and ensuring the foundations are there for significant cash flows over time. That's certainly the same approach we're taking with JIT delivery.
Stanley Yang, Analyst
Thank you.
Operator, Operator
The next question comes from John Yu with Citi.
John Yu, Analyst
Hi. This is John Yu from Citi. Do you hear me well?
Bom Kim, CEO
Yes. I can hear you.
John Yu, Analyst
Yes. Thanks for the opportunity to ask a question. I have two questions. Firstly, on Rocket Fresh, you mentioned earlier that its contribution margin improved nearly 1,000 basis points based on the strong growth of over 100% year-on-year. So, could you please elaborate more about the current level of contribution margin of Rocket Fresh and your long-term estimate? And secondly, on Coupang Eats, in the second quarter some competitors also launched their own delivery, trying to catch up with Coupang Eats and delivery speeds, and indeed they seem to regain market share. So I would like to ask you how you measure the current competitive landscape in Korea's food delivery market and also any recent changes in the industry-wide delivery fees to free riders? Thank you.
Bom Kim, CEO
Great. I'll try to cover many of those. On Fresh, we believe we're still the largest nationwide online grocery provider, and we believe we're the fastest growing. As you pointed out, we improved our contribution margin by 1,000 basis points year-over-year, and that's in the face of triple-digit growth. We're continuing to see enormous demand, and we're still trying to keep up with that demand. The scale of Fresh has now exceeded over $2 billion in annualized revenue. What are the inputs to all of this? We've invested not only in Fresh, but also in our general core, because Fresh leverages the infrastructure, processes, and technology that we've built for our core. We are able to provide the best experience at low prices. We believe that Fresh provides the best convenience while maintaining low delivery fees. These are advantages and customer experience advantages we can provide because we are building the lowest cost structure. The efficiency gains we're getting from our technology improvements and process improvements enhance our economies of scale. Our earlier or more mature facilities, which represent about half of our active facilities, now operate close to breakeven despite COVID challenges. That's before we've made significant optimization improvements. We're extremely excited not only about the customer experience improvements we're continuing to make but also the efficiency improvements we're achieving. Overall, we believe Fresh will follow the same trajectory as our mature offerings which are profitable. As for your question about Eats, could you repeat your question around Eats just so that I can have a little bit more color there?
Operator, Operator
He's disconnected from the phone again.
Bom Kim, CEO
I see. Oh, okay. I think if your question was around the competitive landscape around Eats, we've seen tremendous growth in this category. Like Fresh, it is a huge category with low online penetration. Eats nearly tripled in just the last two quarters. We continue to focus on improving customer experience and efficiency. We believe the WOW we deliver for our customers solves trade-offs. How do we create the best customer experience that is convenient without higher costs? We keep investing in technology improvements and process enhancements. Our growth has continued to be very fast. We focus less on what other players are doing in the market. The exciting areas for us with Fresh and Eats include the vast opportunity yet to be captured, and the strengths we have, which include our cultural innovation, technology, and operational excellence. Establishing this WOW moments for our customers drives many new developments that will continue to raise the bar on customer experience while uncovering new efficiency improvements that lower costs. It’s early days in both areas.
Operator, Operator
Thank you. And your next question comes from line of Jennifer Han with UBS.
Jennifer Han, Analyst
Hi. This is Jennifer Han from UBS. I just have one question; there have been press reports that you'll be expanding or you've already expanded your quick commerce business in both Japan and Taiwan markets. I was wondering if you could provide any color on that expansion and what kind of opportunities you see there, as well as how much losses should we be expecting from that business in the near term?
Bom Kim, CEO
We are excited about the long-term opportunities in those markets, especially opportunities to break trade-offs for customers. We'll be very early in this endeavor; we are experimenting with different modalities. We’ve had success with various approaches in previous investments. We’ll test things we’ve done before, and we’ll test new methods. To answer your question about investment, our approach has always been disciplined and iterative. Our initial investments are small where we will test and iterate. The real capital investments will increase over time as we solve hard problems, clear hurdles, and our confidence increases. These phases will take some time, but we are excited about the potential opportunities in these markets. Seeding these investments now at a small scale will allow us to create new moments of WOW and build exciting opportunities for us in the future.
Operator, Operator
We will now take our last question from the line of James Lee from Mizuho. Your line is open.
James Lee, Analyst
Great. Thanks for taking my questions. Just a quick follow-up on international expansion. Can you guys add more color as to why you find Japan and Taiwan attractive markets? Are there any specific friction points in these markets that you've discovered that you can resolve? Also for Gaurav, could you quantify the surge in demand that you've seen recently from rising Delta cases and from which categories?
Bom Kim, CEO
Sure. We value our international expansion investments when we have higher confidence that we have strong hypotheses on how to break trade-offs. We believe we’ve solved some hard problems that give us confidence in providing great customer experiences and achieving attractive cash flows over time. We are ready to share more about what we've learned as we advance. On the other hand, for Fresh and Eats, as shared today, they're on a similar path to our mature offerings, which are profitable and sponsoring beyond that. In terms of other nascent initiatives like international, it is too early. I'm going to reserve that commentary on our hypotheses and progress until we're a little further along, and reserve detailed commentary on that for a later time.
Gaurav Anand, CFO
Yes, we are seeing COVID levels rising; case numbers during the level four and are at an all-time high. We continue to see demand increase across all categories. Unfortunately, in coping with COVID level four, we are seeing challenges meeting this demand. We are aggressively pursuing avenues to increase our capacity to meet unexpected demand. These are great long-term investment opportunities to meet customer expectations. As for the surge in demand, one of the things we’re excited about is that Fresh and Eats accounted for $120 million of the $122 million adjusted EBITDA loss. We see opportunities in many other investments. Of course, there are short-term COVID operational costs, but we’re excited about investing in these because we have more confidence than any point before that these initiatives will pay off in the long-term.
James Lee, Analyst
Is it fair to assume that the revenue surge you seem intense from the rising cases could reasonably exceed the previous quarter's growth of 71%?
Gaurav Anand, CFO
You know, I'd put it this way: we have growth that does not fully reflect the top of the funnel demand. We have capacity constraints in many areas, especially in Fresh. We are trying to keep up, but we haven’t been able to keep up with the full demand. I think, as we mentioned in the call, particularly in Fresh, we are always trying to keep up, and if we haven't, we are in a slightly more long-term state of constrained capacity right now. But we know these are great opportunities to invest long-term and meet customer expectations. There will definitely be noise; some of it will come early and some will come later. However, we are excited to capture the full market opportunity, knowing that customer demand is out there.
James Lee, Analyst
Great. Thanks so much.
Gaurav Anand, CFO
Thank you.
Operator, Operator
That concludes our Q&A. I would now like to turn the call back over to Bom Kim for closing remarks.
Bom Kim, CEO
Thank you, everyone, for joining this call. The momentum you see here is a result of hard work over many years by employees. I want to thank them for working with passion and creativity to break trade-offs, while serving customers and building a better world for all the people that we touch. Thank you everyone for your time today. We look forward to speaking with you again next quarter.
Operator, Operator
This concludes today's conference call. You may now disconnect.