Q3 2019 Earnings Call
Good morning, and good evening welcome to see limited third quarter 2019 results conference call.
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I would now like to turn the conference over to mess you hadn't Jeanne Wong. Please go ahead.
Thank you.
Good evening and good morning, everyone and welcome to see 29 to the quarter earnings Conference call I am gantry, well see scoop Chief Corporate officer.
Well, we continue I would like to remind you that we may make forward looking statements, which are currently subject to risks.
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Not be realized in the future for various reasons as stated.
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Also this call include discussions about sort of non-GAAP financial measures such as adjusted revenue adjusted EBITDA and net loss excluding share based compensation changes in fair value of the 2017 convertible notes. We believe these measures <unk> Oh investors' understanding of the actual cash flow.
Okay, all major businesses, we used as a complement to get disclosure.
For discussion of the year non-GAAP financial measures and reconciliation with the closest GAAP measures. Please refer to the section all non-GAAP financial measures press release.
I have here with me see chairman and Chief Executive Officer, Philosophy, and Cook, Chief Financial Officer, Tony Hope for Us and Tony Wilshere strategy and business update operating highlights and financial performance for the quarter.
Well be followed by acuity session, which we welcome any questions you have.
With that let me turn the call that your forest.
Thank you yet you.
Hello, everyone and thank you Oh wait for joining today's call.
We are happy to announce a strong I don't recall.
Her.
Let's see so our adjusted revenue tripled year on year to reach 753.3 million dollar.
Adjusted EBITDA.
Improved year on year to negative 13.8 million dollar compared to negative $183.8 million a year ago.
We continue to fund our growth primarily with cash generated through operation.
And I cannot talk condition to for their captured the significant growth opportunities ahead.
[noise] actually mercent before our strategic goal for 2019 being stressing our leadership across different markets and to be this line.
Scale with increasing efficiency.
If you want their engagement and monetization.
The results we reported today show it out we are making excellent progress this strategy.
You up our were encouraging performance in Q3, an already strong outlook whatever remainder of 2019.
I have decided to once again read our guidance for our we are adjusted revenue for both digital entertainment and ecommerce.
For digital Entertainment, we now expect for your 2000 lighting adjusted revenue to be between $1.7 billion under 1.8 billion dollar.
Representing 157.2% to 172.3% growth from 2018.
This call apart for the previous guidance.
Between 1.6 billion, daughter, and 1.7 billion dollar.
We're also increasing our guidance for full year adjusted revenue for E Commerce.
<unk> $818 million, a 920 million daughter.
Representing 200, and a 2.7% to 200.
Thanks, good 0.5% growth from 2018.
This compares to the previously stated guidance of between $718 million an $820 million.
[noise] I would turn first to our digital entertainment isn't it.
This was another great quarter book Arena.
[laughter] success on par with global my cheap free bar, which recently joined the be didn't daughter crop that's why not the higher the grossing mobile games going to work.
Let's look at some of our key metrics for the third quarter.
Adjusted revenue part of digital Entertainment business grew by 200, and a 12% year on year to $451 million.
We continue to de lever and excellent performance on the bottom line, we took adjusted EBITDA, increasing 395% year on year to 256 million dollar.
The increased adjusted revenue was mainly driven by any great. How are you with their numbers and the deepening pay you with their penetration.
Particular, <unk> active use their numbers for Q way, you increased by 82% to two to 321.1 million compared to 176.1 million a year ago.
Under the pay you would the ratio, which is quarterly paying you with her as a percentage on fewer you increased again in a third quarter, two 9.1% compared to 4.1% a year ago.
Turning to our games are for you.
If our celebrated its second anniversary recently.
It continues to be one knocked awards most popular mobile I told you all game.
According to <unk> in Q3, <unk> ranked among the top five most downloaded mobile games globally for the third straight quarter.
And whats the highest grossing mobile game in Latin America, and southeast Asia in the quarter.
We believe not free far continued global popularity also reflects the success of our effort to build a highly engaged global community around the game.
And to keep this community engaged by constantly providing fresh high quality in game content as well as driving extremely successful global E sports programming.
So I mean this level community engagement.
Important focus with arena.
We are convinced that the popularity of a brief our worldwide Eva opportunity to build a long lasting French hype around this IP.
Let me share our fuel refund examples of our initiatives to drive community engagement.
In terms of content, we rolled out a number of new experimental mode All play.
The response from our community.
Overwhelmingly positive.
Hi, Crush square mode. For example, allow teams talk talk to compete against each other and approved extremely popular with our player.
That's free fire has increasingly become a national past time in Latin America.
So do you foresee young and social population.
We have further extended the game reach into the local communities. We are nice work force you for this earth, that's well I've popular I call.
For example, we partnered with the DJ Alok Bird deal with most of the popular DJ and a one off the country back to love to music Star for game.
A lock is now a play okereke turning our game.
Well also provided one lucky so we're pretty far and our E sports but.
It's worth its also a key driver of user engagement and deepening.
Over the past the several weeks, we have been rolling out our largest Ivor sports event for free fire the free fireworks theories.
Yes. The September we hosted regional qualifiers across our markets globally for the war theories.
This included hugely successful export even our newer markets such as India.
India fourth minister attended already but that's how it gets a corner.
We also partnered on this event with one off the country's largest the media powerhouses, India today.
We're seeing very strong online engagement with these events.
The final match all power per deal qualifiers recorded over 1 million concurrent viewers online.
Date, our worst series events around the globe has accumulated over 100 million viewers.
Oh platform.
How do you anticipate more serious well conclude grounds fine obviously real field day time.
We are encouraged by the stress that's on a strong gamer affinity not free fire is demonstrating.
By combining this with our unique ability to build and deepen engagement with game communities on a hyper local level in diverse markets globally. We are confident you free for our long term success for years to call.
Looking at the publishing side of the during a business. We continue to work with the worth talk developers to bring to high quality titles to our markets.
Yeah October we lost a cost you T mobile.
From our pacing southeast Asia under Taiwan.
The game received a immediate strong reception from our users.
You know what the most downloaded mobile game on both the will play an iOS App store. So you talk our market for the myself October .
For the rest of the year younger we will continue to work closely with activation and the test and putting a large the games user base and the deepening user engagement our markets.
I'm pleased to note that were seeing the strong momentum of the third quarter, so turning into Q4.
October we keep a new record high for monthly digital entertainment adjusted revenue, which was mainly attributable to the continued growth of free fire.
Our strategic goal for Guerrino for this year has been to enhance our position as the leading global game developer and to property sure to extend our global footprint and to translate this into some tend to be the success.
Our results for the quarter demonstrate that the strategy is a well on track and we believed that the arena if in a stronger position than ever as we head into the fourth quarter under beyond.
Let's look now at ecommerce.
In the third quarter Shockey assistant its strong growth momentum and the continued to expand its lead at the forefront of the very promising e-commerce opportunity in southeast Asia and the Taiwan.
The recent Google under Tomasek report project take that E Commerce Dnbi in Southeast Asia will grow from 38.2 billion U.S. dollar in 2019 to 153 billion U.S. daughters by 2025.
At the market leader, we believe shop, the ideal condition to capture on outside the share of this growth opportunity.
And our results for the quarter underlying how shop is clear leadership is translating into business success.
During the quarter the pace of growth in total order for their a seller rated to our year on year rate of 103% to reach 321.4 million order.
Meanwhile, GMB increased to 4.6 billion dollar up 70% year on year.
In the third quarter, we also extended our lead.
The most popular ecommerce platform in our region.
According to App Annie choppy whats once again, the leading ecommerce platform in both southeast Asia under Taiwan by average monthly active users and the download across the Google play an iOS app stores combined.
And at the top wrapped up in southeast Asia, as the Ho and each of our five market to market by total timing App Android.
Showpiece now why not the most popular and the fastest growing e-commerce platform globally.
Third quarter in what's right the faced most downloaded app in the shocking kind of great worldwide across both Google play an iOS app stores According to App Annie.
Our largest market, Indonesia Shopkeep continues to solidify its market leadership at the shocking platform of choice.
Order, Indonesia grew 118% year on year to 138 million order in the third quarter.
Which we believe makes a shopkeep clear leader by order in that market.
That is a daily average more than 1.5 million order.
Prior to our daily average of 1.2 million order in the second quarter.
Chunky, what's also the number why ramped up in the shocking pedigree, Indonesia by all key metrics in terms of average monthly active users and the downloads across the Google play on the iOS App stores combined as well as in terms of total time it up I enjoyed.
According to App Annie.
Our leading market position across the region, it's reflected in our rare strong performance during our recent shopping festival.
Building on our successful branding campaign, featuring the football I call, Chris Adult Renardo.
We recorded three times more orders I'll September nice alone now we did a year ago during our double nice sharpton event.
Our double 11, Excel, which we concluded yesterday was also a huge success with approximately 70 million items sold during the 24 hours of November 11.
We saw very strong user engagement during the double 11 festival cure rate with our Shockey live streams recording approximately 65 million views during the three weeks off the sales campaign.
At the same time are growing scale and efficiency is translating into improvements in both revenue and our key bottom line matrix.
We continue to run pop monetization during the quarter.
In the third quarter hour or take rate in terms of ecommerce adjusted revenue as a percentage off dnbi increased from 2.6% for the same cure rate a year ago to 5.6%.
Adjusted revenue rising by 261% year on year to $257.2 million.
Our overall unit economics or Shockey also improved further this quarter.
Adjusted EBITDA loss per order further declined by 41.9% to 79 cents compared to a dollar under 36 cents in the same pure rate last year.
In Taiwan, we recorded positive adjusted EBITDA Eva after location of the headquarters come out expenses in the third quarter.
To conclude.
Okay, well on track with our strategy to scale with efficiency capture increasing market share across our region and the deepen monetization.
It is now formally established at the clear market leader and in a better than ever position to benefit from the rapid growth of e-commerce in our region.
With that.
In my 20 to discuss our financial.
Thank you for us and thanks to everyone for joining the call.
We have included detailed quarterly financial schedules together with a corresponding matchmaker analysis in today's press release, So I'll focus my comments on the key financial metrics.
Let's see overall, our third quarter total adjusted revenue was $763.3 million, an increase of 214% year out year.
This was mainly driven by the growth of our digital entertainment business, especially our self developed games pre fire.
And our continuous monetization efforts in our ecommerce business in the past quarters.
Digital Entertainment adjusted revenue was $451 million, an increase of 212% year out year. The gross was primarily driven by the enlarged paying user base as we continue to improve the monetization of our games, especially the feedback.
Digital entertainment adjusted EBITDA was $266 million, an increase of 395% year on year, mainly due to strong topline growth and our self developed games accounting for an increased share of revenue.
The increase was also partially due to the improved operating efficiencies as shown by the lower sales and marketing expenses as a percentage of adjusted revenue as well SGN expenses as a percentage of adjusted revenue.
Ecommerce adjusted revenue was $257.2 million.
261% year out year.
Within this marketplace revenue was $208.1 million.
314% year on year, well product revenue was $49.2 million.
535% year out yet.
E Commerce adjusted EBITDA loss was $253.7 million as we continued our investment to fully capture the market opportunity in that region.
We will continue driving the high quality growth by serving the USIS needs better and improving operational efficiencies in the long right.
Digital financial services adjusted revenue was $2 million, a decrease of 35% year out here from $3.1 million in the third quarter of 2018, as we focus our efforts are strengthening the infrastructure to support our existing platforms.
Adjusted EBITDA loss was $33.6 million in the third quarter of 2019 compared to a loss of $7 million in the same period of 2018.
This was primarily due to our continued efforts to integrate our epay and sharpie platforms.
Returning to our consolidated numbers, we recognized net non operating income of $9.8 million in the third quarter of 2019 compared to a net non operating income of $30.9 million in the third quarter of 2018.
We had a net income tax expense of $27.4 million in a third quarter of 2019, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment business.
Finally, net loss, excluding share based compensation and changes in fair value of the 2017 convertible notes was $175.2 million in the third quarter of 2019 as compared to $237.6 million.
For the same period in 2018.
With that let me turn the call back 200.
Thank you for us and Tony we're now ready to open the call for questions operator.
Thank you.
We will now begin the question and answer session.
You asked a question. He May press Star then one on your touched on sand.
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[noise] withdraw your question. Please press Star then too.
Any interest of time, we will take a maximum of two questions at a time from each caller.
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At this time, we will pause for a moment to assemble a roster.
The first question today will come from being Chen CFO of Goldman Sachs. Please go ahead.
Hi, Congratulations great results. The two questions from me Christy can get a sense of utilize the revenue contribution.
Corridor and along that line you a new gaming revenue guidance.
Fourth quarter, even revenue was up 430 million head into it.
Good day it at a high and just wondering what sounds like this you know me sleek revenues by.
So.
It either <unk> or is it we cutting price trends as well that may result in debt.
And the second question is more around Latin America, we discussed on the gaming site. How is it 52 weeks so far any like any like the new titles.
And those ecommerce is that Dan.
And then should all be has started to cross border business there.
Clarification on the healthy said they should to slow in that that thank you.
You can see.
So in terms of at least fire revenue and a new revenue.
Guidance for our gaming business.
The reason we are revising the guidance is because we continue to see strong well from fleet fire. Both in terms of users and pay us a penetration up while we continue to focus on user engagement.
Annotation just naturally follows.
Which has a very positive sign for this game that we see as a.
Slide show that 72, Devop this into a long time franchise and a classic IP.
Importantly, we see this game has increasingly become a platform with hundreds of millions of users playing this game and interacting with each other building on communities online and offline and an amount of creativity and said that.
Connections coming from this kind of committee that and interactions wedding and outside of game.
Give us a lot of encourage you mean country to build out the franchise and to maximize its long term potential.
So for this game when not look at any quarter on quarter, well month on month, leaving yelling yeah.
Sure Tom performance, but we're really looking to build the into a long time IP franchise.
So therefore, I think while we reflect a potential monetization potential into in the revised gaming revenue guidance, but I would like that that's our investors can we need to be looked at long term for what that skiing and Chad potential what are they use a community building.
The platform as well is on monetization that will bring with it.
In terms of black hat.
So that exciting market for us.
I say, obviously, you know with more than 600 million population.
And with our FIFO Latam.
We have side basically doubled or the total addressable markets. So if you look at the populations as elect habits at about same Massa Southeast Asia and also with very young.
Population and a high growth publishing side.
Deepening pen mobile penetration in Dallas markets. So all the market dynamic present, great opportunities for us to to grow that the digital entertainment business there and after we file we have also introduce does speak just oh.
Also that came from Tencent into Latin markets uptake success on to our publishing arrangement with Tencent Southeast Asia again.
He is a show of our strength in publishing.
Partnership.
That well footprint globally.
With our large user base that we now have from the Latin America or based on the fleet Fiat success as well as our local operation capabilities that fast building up in local markets.
We're very optimistic in a long term prospects of our digital entertainment business in Black hat I saw us E Commerce is concerned.
As we mentioned it before it say Oh initiated by our cross border team to cater to that in many of their existing cost, but a much sense, what led to excess small markets globally and given that we have the capabilities and our team will like to stuff does that.
We are as a group I supportive of such a bottom up initiated by our team to service them much better.
Just to clarify are you looking at the showpiece engagement and let them in a similar fashion as in Southeast Asia.
Lastly, just sort of a bit more peripheral to that.
I think.
Latam Shafi I think our approach has been just as I said before to stuff the cross border by chance.
Our next question today will come from John Blackledge of Cowen. Please go ahead.
Great. Thank you just curious what the key drivers of the order growth accelerate acceleration, we're a choppy.
And also the marketplace take rate was better than what we expected. It if you can discuss the drivers there and then also on choppy.
Just.
Just curious is 2019 to the peak EBITDA loss a year. Thank you.
Thank you for the questions on the acceleration of I shall be schools.
And I think you know as we.
Mentioned earlier, we believe that Oh, we have captured the like market like time with a REIT business model and that's very important where that two sided marketplace model, we enjoy a strong flywheel effect and overall economies of scale as we send it to pocket leadership and to now for the extending.
Our leadership visas.
Here is in the markets. So this is actually sharpening our results quarter on quarter as choppy continued to accelerate growth and claim more market share over time.
And we think as we mentioned before we said.
Very good position to gain from the overall market growth as well in terms of the take rate.
We've been working with our Celledge too you know improve also this is to increase their retirements.
And the same time Esa growing the marketplace and as a result that is reflected in our Bachelor deepening of monetization as well and Oh, we have rolled out job more programs, what a salish to advertise our platform and check more biased to.
To their shops and services for Dom.
Not to we're also able to touch a higher take rates over time.
As we mentioned before.
That's meant a in the long term growth of the platform. We believe is highly efficient and Joe will eventually generate a.
Long term profitability and now is for us It say a good to talk to continue to invest in growing the market in growing our market leadership and improving.
Future, our long term profitability and therefore, I will continue to investing for growth.
Our next question will come from Mike Olson of Piper Jaffray. Please go ahead.
Thanks for taking my questions. So you mentioned strong downloads of call of duty mobile is there anything else you can say about how that games doing so far and just to what extent the success of that title could be competitive with free fire and I guess potentially cannibalize you fired do you really see it as just a different player base and then for shop. The what are you.
Seeing competitively right now in the core Southeast Asia ecommerce market is.
Is there any kind of change in marketing trends or other signs of aggressiveness from other competitors. Thanks.
Thank you.
Yeah. So were very excited about the strong performance of Oh cough duty mobile so far and get received.
Reception, you all markets by users, which is that when they all expectation and right now we'll continue to focus on further tearing the content to fall in local markets in partnership with Tencent activation for best game.
It's too early to tell the you know the long term.
Monetization potential for this game at this stage as it was just launched we will come to work hard on that.
Observed the trends closely.
So oh our.
Okay cool marketplace, a competitive landscape, we believe we continue to extend our market leadership.
Yeah.
Ultimately how fast we can grow is now increasingly.
Depend on how well we sell our users Oh, my trends as well as buyers and jazz scale Dimmock placed with efficiency it will increasingly less and less affected by what God. The other peers might be doing in the market as we extend our market leadership and continue to gain market share.
So I would say, we don't observed a much change in a trend nor did that have much impact on us anymore.
Our next question will come from only SIOP ups Citigroup. Please go ahead.
Hi, I'm good evening far as.
Tony on chain and out of management. Thanks for taking my questions. Congrats on the very strong number of my first question is related to the caught off beauty and free fire. So based on your team SP Rins, what do you still expectations for the longevity of caught off duty mobile.
And monetization potential as compared to free Fiat and then for Latin America. It seems that free Fiat remain very strong. Despite the launch off part of duty mobile could you share leave us what is the secret sauce for pre fire to remain so we see lend and so strong.
I can second questions I used on e-commerce .
If we take a little bit like three to five years, you sign longer term could you Chevy bolt on your E Commerce monetization model breakdown, what could be the percentage contribution from for example, the advertising revenue versus the commission take rate and versus to logistics delivery.
And the cross border fee.
Given the ASV seems you know quite stable and if we assuming a annual consumption power or what could be done the I know the spending per user that you're expecting in three to five years. Thank you.
Thank you Alicia.
So regarding sales yeah in terms of longevity and the monetization potential again.
Too early to tell at this stage.
But we see very strong initial trends and we'll continue to work hard with the developers to to improve the gaming and further tailored to the markets to continue to improve the that games content and also.
User base over time.
And Oh question, we hope to have as long as game life sets out possible and deep monetization.
For this game a given that it has say.
Not to the strong you the fall base for this IP as well as the you know traditionally P.S. games in our region intends DARPA, if we filed a casino stressing that can.
As we mentioned before and we're not to worry about a you know people were wondering about potential cannibalization before we launched assay OTN.
And we always said, we believe these games that cater to different crowds and shot.
And also has a.
Complementary to each other waiting out portfolio as we are very careful about selecting game. So within the portfolio in the pipeline. So this is Ed Lucky played out as a as we believe it was a and if we find continuous trends we believe is.
Attributable to eight at the depth and of the gain a itself and Oh, the the net effect of a game that supports a 50 and.
You just plain interacting with each other I think session.
Same time building, a large community online offline and building more cultural game entertainment other forms of elements into the game over time.
And we crossed learning from a with cost learning from other.
Games as well as other forms of entertainment and of course, our teams efforts and Inc. a continued to build out this game and share their creativity, Jeff <unk> understanding of the local markets with a large you. The data we have already for this game. So I think that's why we remain there.
Optimistic about the longevity of the future monetization of Ah, we file over the long run.
Himself e-commerce .
Revenue breakdown so.
We see a pretty significant increase undertake weighed down quarter on quarter, and that's largely attributable to a high margin a transaction based fees and commissions I handling fees and advertisement.
We believe that or the high margin revenue will continue to well drive or the growth of our E. Commerce monetization of course, a dollar value added services.
Creating a cost so one of logistics revenue will continue to quell as we can do to quote a platform a and.
Increasing me, however that though the revenue grows as well as a in the longer run the margin expansion with.
And then by the high margin items, winning the revenue, although it's a bit to only till you know detail out the exact break down between the different streams of that but and incomes of spending and Ah you know.
Cost of revenues, so quite sharp Oh right now we see that our first party pod that revenue pretty much a re offset Chad.
Cost of revenue.
Cost of goods sold and also at same time, the or the cost of cost what other just sticks and being offset by a cross border logistics revenue as well so increasingly.
Well, hoping to cover the cost of revenue as well as set on D.J. and of course that sales marketing costs over time with economy of scale. So we believe that a you know the long term profitability of that you complex model, it's very clear to us.
The next question will come from Roger on Sharma of JP Morgan. Please go ahead.
Hi, good evening and thank you for the coal.
My questions.
Two questions from my side boots on gaming.
Firstly on India. It seems like you.
The good thing about it is growing the you have partnered with India today, which is all the leading magazines in the market.
Would you all to be looking to establish a presence in India like what do you have done with Latin America.
And potentially bring more.
Third party IP into that market as well.
The second question is on the margins for the gaming business.
Did feeds.
The increase but.
Software revenues are coming from non.
Store all Google play stood up so let's go to all chose can you give us a sense and how big that number is and if that's growing much faster than your revenues on a on a different.
Up stores. Thank you.
Sure. Thank you.
He comes up a India. We are very encouraged to see the results that India that recently, especially we now become the top grossing game and based on any of October in a country until we have also rolled out a.
Lots of E sports and commedia voting events. We currently don't have a meaningful physical presence locally and Oh like last time, we will assess the situation to see if that I standpoint, it's appropriate to to build up some local teams to help with local community building and operational.
Capacity, so on that front will.
That makes flexible and assessed based on business needs.
And of course, we are hopeful off you know strengthening our global footprint and India is a huge market was great potential Oh, we're seeing very encouraging user growth there and are very encouraging pay use of low stare. That's it's very important actually sign for.
Our potential gaming.
Opportunities there and we do hope to walk with a global partners to further strengthen the presence in that market and export a huge market potential in that market. I think you know will continue to innovate as we always mentioned to a belief that where's that big of a user base and.
Creativity, we're optimistic that a eventually will be able to make something out of that if they're a big markets and we already kind to start to see those adults.
And in terms of Ah Ah Ah Ah the vouchers to versus Oh, Google play apps go up a achieve well or most of all give me revenues telephone for mobile game has come from Google play and App store or they are some alternative channels in different markets based on local getting.
Men's and circumstances.
But yeah, we won't be that Ah Ah that's a dry.
Makes a significant difference at this stage.
Our next question today will come from Thomas Chong of Jefferies. Please go ahead.
Hi, Dan management, Baltic well, taking my question, Oh about or how many game developers do we have right now just John hi versus last quarter, our headcount and follow up game be vitamins team next year.
And my second question you about the revenue will make in southeast Asia, but since that time I'll go into trying to try and do you.
How how should we think about also comes off the opinion wasteful, that's what's the optimal up between the two regions. Thank you.
Thank you.
We we have more than 300 developers in Shanghai studio I think last time, we disclose that was down one and 200 about a couple of quarters ago until we will continue to build out our development capabilities and augment our development team.
In Shanghai and now also other places, where we find a great gaming top talent as.
It will be a very important focus for us.
Becoming quota and going forward as we continue to build our development capabilities and leveraging the existing a you know use a information data and strengthen we already have global footprint booking but at the same time will be very.
Prudent Inc.
Wrapping all the team as we pay to people well with proven track record.
She that arise and people like surely passionate about game, that's your life twice a Korea.
And that the these other people that we want to bring to our home and Joe We focus on Scott looking for such talent globally as opposed to just adding calling up a number so and so overall a G.N. a and R&D expenses have been very efficient if you look at the hour.
Margin as well and we'll continue to to match that with a lot of prudence.
In terms of Ah Ah.
When you.
Mixed I think we see that a lot time has become increasingly important market for us as we continue to build out our came presence there and do we also have a increasing revenue contribution for the newer markets such as India.
Russia Mena as we mentioned it before and in terms of pay racial and Jay RPP you, we do not see material difference between Latin and South East Asia or I think it's more of a more depend on the specific gang type, but we think the market potentially there.
And also sometimes you know as.
An example for Indonesia, we my traditionally people might think a it's a it's not that most affluent to market in the world and therefore attribute a low pay surveys show low ARPU to this market share and to assess the kind of low monetization potential, but oh, Oh games Wi Fi has Ah.
Definitely prove that otherwise all we see very high double digit paying ratio coming from Indonesia market as well as a very Ah you know what a monetization potential. So we think at the end a day. It is about knowing the markets are getting the right IP to that to a REIT crowds and.
To be able to execute well and accurately.
So that you can maximize monetization potential IP any particular market.
Which we think.
It's something that we're super focused on doing a and we are ready reaping the fruits of such effort for several markets already and will continue to expand olive.
Our presence in a global emerging markets, where we have already a tumor there's so much know how and operational expertise.
Our next question today will come from Bob Rune Rucia of Credit Suisse. Please go ahead.
Hi, good evening and congrats on a good set of numbers a good quick three questions.
Q4 guidance increase so would you guys. Using these guys do you think how much is it slumping deal do you think are you seeing go after this last few quarters.
For that been putting as it clearly bumper stage, where they can start contributing meaningfully in Fourq you do you think.
If we just coming.
From India, that's number one.
Number two can you give little bit more collateral and so do you find a how do you see Oh uses graduating from pre policies too.
Hi, My I didn't know what should I do like them. So booties.
Because you still ought to boost continues to go down but existing users how much have you seen a big due to higher margin products that somebody.
And number three if he can give some color on new game launches I know you're really.
You don't disclose much but any clemente how are you thinking about this landscape and any you a set of doing up game Oh, they need to thinking about it.
Because we do almost three years since you launched by next year you own gets anything on that front would be helpful. Thank you.
Thank you.
So in terms of or the Q4 guidance increase.
Based on what week observing the revenue increase a show it.
We see increasing revenues across different markets in southeast Asia, Lat am as well as the new markets, including yeah.
It's not a any kind of single market kind of event, it's really more across different across the region for us and for India. We believe that the market potential is that is huge and while the income self pay they show it's still below the average for us.
In South Southeast Asia, and July 10, but the increasing the paying user is very encouraging which is filled by both the increasing the user base as well as increasing to pay surveys show. So I think we'll continue to experiment with different things such as the steadily process, which has been quite effective.
Helping converting a free users to pay use for some of them pockets over time and also some of the or the airdrop packages. For example, we have personalized.
Attractive item scoping tour packages with personalized up prices are targeting different users to comfort that into a paying user. So we'll continue to innovate tell with different oh.
Yeah features into the game in town to help out deepened of monetization list. So at the same time, we want to keep building out the user base and we're very encouraged by this high switching gear as well as that defend markets.
Well on operating.
Himself.
Hi, a pass so every Pos.
Mesh until we believe that tool has Ah Ah you know stuff that it's a intended purpose of creating a free user to paying user at the same time, increasing user stickiness as well as a engagement level based on data. We have so we will continue to deployed.
That from time to time and crush my well come up with new innovation for example, bundling or themed passives et cetera tend to further exploring the potential its potential and in terms of a new game launches.
Oh, it's for.
Commercial reasons, we don't discuss a game pipeline for confidentiality, but again you can't trust that Oh, that's number one priority or that we're focused on is in a longer run continue to bring a top IP to our well users.
As a as I can't give up on a publisher we are well blast up by the you know that our stress in both development and stuff to them as well as our partnership with global developer shot to send us very well to hopefully capture any opportunities a new creativity rising.
A in a war gaming communities and bring that's not a weather throughout long development capabilities or publishing arrangement to our users and again, Oh, let's not forget right unless you're feels that we also have a with a 10 cents, a which are sell won't sell off the largest gaming company.
And we continue to see some pipeline and we will.
Of course select a potential IP based on the appropriateness for our market and I'll assessment Alpha that Oh on portfolio.
Our next question today will come from Conrad Warner of Macquarie. Please go ahead.
Hi, Thanks, a lot for taking my question. The first one is just maybe since the last quarter's update.
Have you been able to or felt it was appropriate to introduce kind of either new or higher commissions in any of the markets.
For E Commerce, that's the first question.
And then also kind of related to kinda competition question, maybe putting it to looking at it the other way I mean, the are you almost kind of what's the point now where you're sort of see.
Less competition in your chosen categories. Because you are kind of achieves this sort of a multiple in terms of scale.
Versus a than yours competitors and you know, perhaps maybe in some of the markets even in Indonesia, We're seeing people kind of drawing back and not maybe wanting to compete generally but compete more of their chosen categories about kind of makes life a little easier for you in your categories is that something you might be seeing those are mature.
Question.
Yeah, I think you thought income so the commissions and Ah we continue to gradually ramp up a commission in different markets overtime of course. It is something that we may do from time to time base all local market conditions.
And Oh assessment of the appropriateness of different levels of commissions and seasonal also taking to account of the seasonally soft.
So more recently for example, a we increased Ah Ah that now law seller Commission for Taiwan or slightly and also the.
Hello Commission for Marcellus a Indonesia.
So these are some of the you know the measures that you know we are taking to hook too.
Further differentiate the best performing merchants and also with more resources to be invested into the ecosystem to stuff on much as data to help them faster. So I'd say kind of we situation between the the platform and at the by chance or and then cheap.
Benefit that our buyers so in terms of Ah competitive landscape, we always stay competition very seriously about at the end regardless of whether competitors do a we always have our playbook in terms of Ah Ah you know grow the marketplace model focusing a core categories that we have always focus.
Just on pharma that beginning and continue to capture the market share and also a self I'll use us that eventually we think you know that will lead us to very strong market leadership position and we are well pass to doing that and I think.
Right.
Wait that Oh, Hansa, increasing our destiny as increasing our own hence a it's a less relevant to US you know what our competitors doing day to day, but a increasing its more about how weekends of always et cetera.
Our next question will come from Mark Goodrich of Morgan Stanley . Please go ahead.
Hi, guys. Just a quick question from me on the gaming business. It looks like the average revenue per paying user sale in Q3.
Specifically was that just you to the mix shift to the low paying markets or was that more would you to some of the promotion like TV you had for free fiveth anniversary during the quarter.
Yes.
Yeah. Thanks, Mike.
So.
Pp you.
Decreased a little bit mainly due to a two factors one is the increasing revenue mix actually beautiful to flee fight with strong growth and as we mentioned before RPP you sometime is a sad sean or specific for 45.
Type of Sean or where you are targeting mass audience with hundreds of millions of active users you tend to see lower a RPP you come Pat to some of the you know the mid core game such as for example, speed or where you see you will see hire a RPP use so I think it said.
Kelly natural based on the game revenue mix and second we also.
You know introduced a.
For example, the add dropped packages and other elite process et cetera to continue to grow our pay user racial in the region, because we believe that with larger user base and to larger pay user base will lead to a longevity of the game and be better.
Hi station over the longer run and this in fact is playing out as we are believed and as far as mentioned.
Yeah earlier that tell we see a new record high in monetization or they saw results same October so far and to that we believe is a positive effect coming from our expansion of the you know pay use a poll one to attract more paying user and inc.
Reaching a game stickiness.
So I think this overall is a strategy that so well played out for us but.
Also if you look at Ah Ah revenue per user which is stable at 1.4 dollars a that shows that a while we are expanding our pay user.
Base and to further strengthen our long term monetization potential when not sacrificing our meat immediate monetization opportunity either.
Ladies and gentlemen, this will conclude our question and answer session.
This time I'd like to turn the conference back everybody Angie mom for any closing remarks.
Thank you operator, thank everyone for joining today's call. We look forward to speaking to all again next quarter.
Ladies and gentlemen, the conference has now concluded and we thank you for attending today's presentation. You may now disconnect your lines.