Q1 2020 Earnings Call
Good morning, and good evening.
Welcome to the C Limited first quarter Twentytwenty results conference call.
All participants will be in listen only mode.
Do you need assistance at least Ugly conference specialist.
The Starkey followed by zero.
After today's presentation, there will be an opportunity to ask questions.
Please note this event is being recorded.
I would now like to turn the conference over to MS. Young Jeanne Wong. Please go ahead.
Thank you operator.
Good evening and good morning, everyone and welcome to see 2021st quarter Earnings Conference call I Am Yenching, well see school Chief Corporate Officer. If all we continue I would like to remind you that we may make forward looking statements, which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons.
As stated in our press release also this quarter includes discussion of certain non-GAAP financial measures such as adjusted revenue adjusted EBITDA and net loss, excluding share based compensation and changes in fair values. All said 2017 convertible notes.
We believe these measures can enhance oh investors' understanding some of the actual cash flows are major businesses when used as a complementary skills gap disclosures, but discussion the use of non-GAAP financial measures and reconciliation with the closest GAAP measures. Please refer to the section.
GAAP financial measures not press release.
Half here with me sees chairman and Chief Executive Officer, forcibly and Cook Chief Financial Officer Tony.
For some Tony Wilshere strategy and business updates operating highlights and financial performance for the quarter. This will be followed by a <unk> session, which we welcome any questions you have with that let me turn the call that too far.
Thank you.
Hello, everyone and thank you always for joining todays call.
I hope that you are all you know and they say.
On behalf of all about the I would like to thank you for your ongoing Oh, you read the exceptional teary.
This time, offset any kind of change and the disruption for communicate economically and the businesses around the world.
Against this challenging basketball well crowd not happy that our recent girl and we are reporting very strong result for the fourth quarter.
Our communities are increasingly rely on our platform your independently.
Our user attorney to get arena enjoy interactive entertainment and the social life, we do you want to social isolation off the locked up.
Sure he called me a more equal parts off the commercials could be some each all harbor market.
With consumer not relying on our platform, but your April daily essential and other company.
At the same time Warner Center migrating to where we like more in Chicago.
Then on the girl therapies in it.
That's our economic become more online and the contact me.
The digital payments and the financial services.
Money for why.
He called me I ever more important part of that you structure in our region.
That's correct over price it is driving that change in the girl office. He told you cannot move globally, particularly in the market and the segment where he operates.
He has materially celebrated a shade to online lifestyle not just for all the at least I'll review you responsible.
You would you on our market leadership is some of that he and the largest the segment of the digital novel. We believe we are gaining and well continue to gain a disproportionate share that girl.
Our growth is also well supported by strong balance sheet and the cash flow from operation.
And we'll continue to use bad.
Yes, hi be prudent way to maximize sufficiently.
He was born in the middle of the global financial crisis.
We believe that certain key qualities like humility Walker commitment resilient adaptability and the prudent helped us a wide and the thrive in those difficult day, when we first started our business.
We believe that this quality still be buying today and the fat I'm more valuable to us in the cars climate than ever before.
That's a business is a threat stress tested by the crisis.
Our related and capability have enabled us to respond well to service the user demand well be navigate the physical coughing.
Disruption caused by the Corona virus pricing.
For example, Oh Luxoft is key market, we have lost and the dramatically build up our operating cost rated health and the hiking, Florida and the essential output I said in a matter off day.
We're also doing everything we can put the Polish economic recovery across our market.
We launched a region, while shopping center to post package to accept merchants to get back on their fee.
This includes a number on initiative localized for the specific need a merchant and on the ground conditions he top our market.
This range from Treaty and it's the post per well to talk new seller move online for 50 distinct better to grow their business.
Rig working coated access to our services like for them, but I'd and the marketing that enable that are attracting new customers online.
Furthermore, we are providing we believe for some of our seller services to east the financial burden on the you really difficult period.
Meanwhile, our during the key quickly scaled up our capacity to meet right course tours in customer B mall.
We have also worked hard to create new way for our user to engage online from creating dedicate all like you sport, but those are our communities to interact with each other you will take place cars using our platform to regional wearily upheld and the 50 back to practice it in.
And creative way.
Over adaptability ensures that our platform catapult, our customer an ecosystem partner will lead off mall.
This is talking about feel strong falls off the PK, we've done that will allow this crisis.
Just as importantly, this is sure not based on continued to grow our businesses and then our leadership even in the most affecting circumstances.
I'm equally proud to see how our key come together to got eight to where it's needed mobile.
Across our market, we have worked with local authorities to provide financial the Pope as well as essential medical pigment such as well as later my.
And the personal protective equipment.
For the hospital and health care Walker from line up the battle against the crossover.
This mission is to pattern in light of consumer and small businesses through technology and it has never been more important for up to lead up to that mission.
Let me now turn to our result for the first the quarter.
Oh level adjusted revenue grew 58% year on year to 913.9 million dollar for the fourth quarter.
Well forfeit for the quarter, what are what kind of me under 24% year on year to reached 206.8 million dollar.
Her to 39.5 million dollar in the same quarter of 2019.
Adjusted EBITDA was negative 69.9 million dollar.
Compared to negative 32.0 million dollar in the theory in 2000 Nike.
Let's now at our digital entertainment business.
Guerrino Westergaard broke records in the first quarter.
But adjusted revenues grew by 30% year on year to 500 under 12.4 million dollar.
Robot topline growth was primarily driven by strong growth in both active user and paying user.
Yes, we should we knew high in terms of quarterly active user.
We recorded 48% growth year on year to 400 based on the 2.1 million quantity active user.
Well I'll quickly paying user grew 73% year on year to 35.7 million.
The quarterly paying user ratio remained strong at 8.9%.
Brief bar soap particular strong growth in the first the quarter and I'm pleased to note that the strong growth extended into the second quarter.
The game recently issued a new record.
Piece daily active user of 18 million.
The April three bar achieved another record high in monthly paying user which more than doubled year on year.
Yes, our monthly paying user at the percentage of monthly active user already exceeded 10% in April.
We believe this girl our user base is attributable both to the macro trends as well as our constant effort to engage new and existing user with fresh created and highly localized content.
For example, we introduced a new Matt coat color Harvey.
Yes feature of the Desert theme, we factor Morientes game play.
The Colombian might prove very popular with our user well what for Palisades elect even a few months ago.
And how to think being made a permanent part of the game.
We have also rolled out a number of new feature based on feedback from our community.
Such that the rough mall, where our popular classical Kamal.
The crack cocaine mobe.
Feature key core competing against each other in 10 best up seven matches that lot just 1.5 many each.
Okay being a big piece with the community and the addition, upper right at the mall based on their feedback as a new competitive element, where key kind of challenge themselves against the bat opponent, India region.
Alongside this global content push it.
Our local teams are focused on developing highly localized content for our user.
Even easier for example, we have partnered with one off the countries most popular actor and star of Mortal Kombat.
Joel testing to create a player, but he said kind of incur call total up more those after dosing sell.
Two promoting we've also worked with one lawful nisha most popular director to create a short appeal with Joe showcasing its favorite Marshall our skill.
So far in Asia over half of our user played at Delta.
This initiative highlight how the element of local labor really resonate with our user.
Similarly, India, we partnered up with popular after a multi Russia to produce a theory salt life market, leading highlighting brief our key feature.
This medium quickly, but viral and today have recorded over 37 million view you too.
We also likely sport Eva generally Paul we have quickly adapted and introduced the new ways to sustain our engagement with a brief our community.
For example in April we hosted a special one off global embedded cold Wonderland Pete.
This was a week long celebration featuring special character Isis and he gave challenges to excite our community around the world and to reward our most along the user.
This was also prepared remarks, the engagement topic here, so far and away so significant user number grow as a result.
Moreover, we are working with local celebrities rebar fab two great fun and engaging online competition not being very popular with our user.
In Brazil, our long term partner eating a lot quicker, while Brazil is most popular music musical arty.
Our online competition against the some of the best known local brief part with Mr., that's a warm up for hugely popular lifestyle perform across local social media channels.
Meanwhile, in Colombia to office come with respect to long voter had rocket and as Debbie Athena each test to see a free parking producer in the online charities tournament that attracted over a million view.
In the fourth quarter through recorded over 19 million all I knew for free far east for people globally.
This is a testament to the growing reach and the popularity of this game across the world.
You will hear all this growing an important based the user base. We will continue to focus on developing brief are in for a long lasting IP and the bigger platform.
The lottery user base auto production reached our monetization opportunities over the longer run.
I'm here for 44 could execution and leveraging the real strong momentum for further accelerated growth globally.
Let's turn now to shop.
Like Arena Sharpie also recorded Dundalk result for the first the quarter and into the second quarter.
Throughout the quarter and this young we have been making every effort to win the heart and the mine our consumer and the merchant during this difficult time for them.
We need a new record high for DMD of 6.2 billion dollar representing year on year grown up 74.3%.
The year on year growth rate increased by almost a 10 percentage points compared to 54.8% for the last quarter.
Despite the disruption thought the current American pricing.
We also recorded strong growth in order.
111% year on year to 400, and a 29.8 million.
The year on year growth rate of four older further accelerated to more than 110% to 14% in April as we saw the strong growth momentum on our platform carry into the second quarter.
In the first the quarter, we further extending our market leadership and the continues to ramp for across southeast Asia by download monthly active user and the total time is that I enjoy according to plan.
Notably, we what the top rest AD spend monthly active user each off Taiwan, Indonesia, Vietnam and Malaysia.
As we further expanded our user base sharpies ranked third in the shopping pedigree globally by download across the Iowa and Google play at store combined during the fourth quarter.
Adjusted revenue grew strongly to 314.0 million dollar.
100, 311% year on year.
And the marketplace revenue grew even more quickly to 200.
$36.7 million.
132% year on year.
We believe this indicates the drug and the resilience of our platform despite the macro environment.
Merchants are willing to keep investing in shockey, even in this part time, because they recognize the value that we offer our unrivaled reach to consumer and the return on their investment that shopkeeper while.
The last quarter on quarter decrease in our overall and the markets. They take rate is mainly due to the locked down and other movements restrictions in the fourth quarter.
This disruption had a particularly significant impact on some of our cross border merchant.
As a result, we saw an impact on revenue derived from sales by those merchants.
This includes revenue from cross border logistic dockets recognize our growth base spaces.
We've also provided the relieved to our cross border merchant or materially impacted by the krona virus pricing.
Into the second quarter, we have seen meaningful recovery of cross border transactions on the platform.
Adjusted EBITDA loss per order decline quarter, 40 by 48% year on year to 60 cents compared to one dollar an assistant for the state tier rate in 2019, and the 70 cents last quarter.
Our ability to drive sustained improvement in unit economics.
In this difficult environment highlights our focus on dealing with efficiency and our disciplined approach to growing our business.
Even in Asia, where shockey is the largest E commerce platform by other.
Shop, you Register or 185 million order for the market in the fourth quarter or a daily average of over 2 million order.
That represent an increase of 110% to 23% year on year further extending choppy market leadership.
Shopping also address a further Indonesia average monthly active user download and the total tight band at I enjoyed in the shocking pedigree during the quarter According to happen.
Our son this focus on engaging our user continues to be a key driver of platform growth.
As our community has filled out we are now able to drive engagements the to activity in a much more personalized and the targeted way.
For example, we launched a membership base the service called Shockey mop cloud across our marketing.
This survey target mother, who use our platform and enable them to discover unique selection of highly quality.
Theresa product and Brent.
Some of this product and brand only available to member.
They also enjoy E com, how many come item such as diaper.
These targeted group engagement to stronger user business activity.
And we are loading up similar positive operating in other categories like health and beauty.
From pretty much onward government in our market began to introduce restriction on movement to curve the spread off the crossover.
In response to the.
Our local keep working extremely hard to quickly launch and the scale of our offering of FMCG pull on the leading and other categories are essential and also too.
We know without a special program called Shockey from home in every market.
This program was designed to encourage our user to follow government guideline and stay home by buying their essentially online.
We also onboarding thousands of new merchant to help them migrate their business online during these difficult time and overcome the technical logistical and operational challenges imposed by the locked up.
At shop, easy comps and increasingly vital part of the retail landscape in our market for into more of the word top brand of eating up their partnership Lisa.
In early May we rolled out a region wide partnership we pour cost per annum Gamble call show me My home.
For this in the weakest campaign Shockey and the PNG collaborated to create that is pacing micro side for each shockey market that feature a curated selection of top PNG Brad.
Hi, good worldwide by different rooms of the hall.
It's tempting aim to de consumers, a new fun and engaging way to find the product that they want from PNG towards Famer Brent on shop.
I'm really proud off our team for managing the business through the challenging environment, we have paid in recent multi.
We must increase the demand of our consumers on the merchant despite all significant dressed test our visiting and our ecosystem is whole by the condemning sell.
And the wireless restriction introduced us to curb the spread off the barrier.
We are well positioned to continue capturing the expanded growth opportunity in the sector and the further extending our market leadership.
We believe that the strong leadership position combined with the resilient commitments and the ability of our team will drive a celebration long term growth.
Finally see money continues to be very strong growth.
Propelled by increased the user demand for additional payment and financial services during the pandemic.
Accelerated growth of our shockey platform and the deeper integration of our mobile wireless services with the platform.
In the current climbing the oral digital economy is growing rapidly in particular more people are spending wore off their time and the money online.
And then that is driving increased the need for both online payment services and the financial services as well as the increased the need for contactless payment option.
That entire means that more people adopting digital payment and the financial services option as well not their primary channels up toys.
Building on that we're encouraged by the progress we have made in driving adoption of steam is offering.
In the birth the quarter, our mobile wallet total payments awarded for TV exceeded 1 billion dollar.
Milestones achieved in just about a year. After we started to integrate the mobile what is the rate with our shockey platform.
The quarterly paying user for our mobile wallet services the past the 10 million.
More than 40% of shopkeep or older Indonesia, our largest the market for the money or pay using our mobile wireless services in the month of April.
Moreover, we are rapidly spending third party use cases and partnerships online and offline.
In March 2020, we joined forces with Google to offer our mobile wallet as payment option for the Google play store in Thailand.
We see significant growth ahead in the digital payment and additional financial services segment, and we see that growth accelerating at the corner murder prices drives more consumer activity online.
We also believe that the money is in excellent condition to capture this growth has reduced our strategic leadership position in some of the largest the use cases in digital payment.
We will continue to focus on scaling the money effectively and efficiently to re strong leadership position across our key market.
To conclude we are glad to be reporting goal number for the fourth quarter.
This performance demonstrates the fundamental strength and the resilience of this business and our position as the market leader this sector of the inami not experiencing the strongest the girl.
Looking ahead, well, we expect to face uncertainty in the near term due to the current no merit increase pricing.
We believe that step change adoption of the digital novel that we have theme in recent months is here to stay.
And it will experienced rapid growth in our market in the years ahead.
More importantly, we believed that the three core businesses as a leader in the or sector will capture an outside the share of that growth.
He has been dressed pet in recent months due to the from Novartis pricing.
And our performance under these conditions had underline the fundamental strength and the resilience of our business.
This Isa commented that we are well quid to match the current economic turbulence and ready to capture the long term growth opportunity.
We will therefore continue embed our future and focused on winning the car and the mine of the user across all of our platform given the time when they need us more.
We believe that de will emerge from the crises in an even stronger condition and the better prepared for our long term growth.
With that I want you might pony to discuss our financial.
Thank you for it and thanks to everyone for joining the call. We have included detailed quarterly financial schedules together with the corresponding management analysis in today's press release and far it has discussed some of our financial highlights. So I'll focus my comments on the other key financial metrics.
Let's see overall total adjusted revenue grew by 58% year on year to $913.9 million, which was mainly driven by the growth of our digital entertainment business.
Especially our self developing free back and our continued monetization efforts our ecommerce business in the past quarters.
The 30% year on year growth in digital entertainment adjusted revenue to 500, and Copeland $4 million was primarily driven by the increase of our active user base and deepened paying user penetration.
And in particular, the continued success of feedback.
Digital entertainment adjusted EBITDA was $298.4 million, an increase of 32% year on year, mainly due to the strong topline growth and our self developed games accounting for an increasing share of revenue.
Our E commerce adjusted revenue of $314 million included marketplace revenue of $236.7 million cop, 132% year on year.
And product revenue of $77.3 million.
64% year on year.
This growth is a result of our commitment to continue enhancing our service offerings as we seek to create greater value for our tech from users.
E Commerce adjusted EBITDA loss was $260 million as we continued our investment to cling to capture the market opportunity in the region.
We will continue to invest prudently and drive high quality growth by serving the users' needs better in the long run.
Digital financial services adjusted revenue was $10.7 billion, an increase of 278% year on year from $2.8 million in the first quarter of 2000 and Nike.
Adjusted EBITDA loss was $101.6 million in the first quarter of 2020 compared to a loss of $11.9 million in a same period of 2019.
This was primary due to our continued efforts to integrate our mobile water services with our shop, you tack on across different market.
We have also been extending the use cases of our mobile wireless services outside of systems to include other online and offline merchants along with a variety of third party use cases.
Returning to our consolidated numbers, we recognized a net non operating income of $11.2 million in the first quarter of 2020 compared to a net non operating loss of $442.8 million in the first quarter of 2019.
The net non operating loss in the first quarter of 2019 was primarily due to a fair value loss of $436.1 million arising from the fair value accounting shipments for the 2017 convertible notes.
We have we had a net income tax expense of $23.2 million in the first quarter of two and 20, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment business.
As a result net loss, excluding share based compensation and exchange and changes in fair value of the 2017 convertible notes was $239.4 million in the first quarter of 2020 as compared to $237.3 million for the same period.
In 2019.
From a foreign exchange standpoint, we haven't seen increased volatility in the exchange rates of some of our local currencies against the U.S. dollar and that meant for us.
Constant currency basis, the topline metrics would have been neutral to modestly better in some of the cases.
But we did not assess the defenses to be material.
With that let me turn the call backing Angie thanks.
Thank you slice and time, we're now ready to open the call for questions operator.
We will now begin the question and answer session.
Yes. Good question in the press Star then one on your Touchtone phone. If you are using speakerphone. Please pick up your handset before pressing the key.
Withdraw your question. Please press Star then too.
And the interest to climb.
We will take a maximum of two questions at a time from each caller.
If you wish to ask more questions. Please request to join the question can you again after your first question for been addressed.
At this time, we will pause momentarily to assemble our roster.
The first question comes from junction quote of Goldman Sachs. Please go ahead.
Thank you.
Everything congrats on the results.
Set of questions. Please firstly a gaming.
And you talk about what fits to revenues would have been on FX neutral basis.
Which countries did okay active users come from.
Hey ratio for.
Q over Q.
Secondly on E Commerce. It was mentioned cross border. What's the reason for the decline decrease that cannot confirm that it has hit your conviction revenue small quarter to quarter, then advertising and costs.
And given merchant supplier initiate this in second quarter, where we'd like you see more revenue decline.
In that quarter on revenue, particularly declined in the quarter.
And I come from that cannot come towards the equity E Commerce revenue guidance.
Pain as well thank you.
Hi, Thanks, Dusty and I'll address the ink question first at the 20 mentioned earlier.
Hes been Stan.
As far access related.
Fluctuations and Jeff that me FX neutral basis, our topline number including the game revenue.
Slightly better than what we recorded but if you noted that.
As Tony mentioned, we assess defense not to be material.
And we'll continue to monitor the situation if we think there.
I need to.
The point more Slovaks, new actual numbers, we will do so in the future.
In terms of the after music wells it came from across different market in Southeast Asia, Latin America, India as well as the other market and Middle East Europe, and Gilats, Russia, So I think that during the cold Vic.
Time, I think we see more people at their confine to call.
In social isolation, they tend to our game.
Which is highly interactive social offline post entertainment as well as.
The human interaction with their friends and family and colleagues and do we definitely see well, let's use the active user increase pays the increase paid.
So I play time increase.
That we think in the longer Ron I will continue to drive.
The longevity of an IP as well as monetization as we mentioned in earnings release for fleet Bar in April we thought that pay is there more than doubled and.
I think time.
For example, another country, India, where people usually do not see at a update E sports market. In fact, it has been off the biggest market for us for fleet Fiat and in the same time, we see that sat in terms of.
Monthly pay is a ratio it has already exceeded 10%.
Well that is increasing we also see average revenue per use the increasing.
The India as well I think all the other markets.
That that you know so I think overall for our game side acting.
Very positive.
Trend, where optionality and.
We hope to outperform our full year targets.
And.
If we have more data we my update at the market down the down the road later on the E Commerce site.
So it comes up.
Take rate.
Thank you can look at Q1.
Overall Q1 is that traditionally a not a shopping season. It is also a shorter quarter compared to Q4 and in fact Q on Q E Commerce.
Continue to grow and.
Gross rate in terms of GMB, yes, it will say even accelerated in Q1.
By about 10, 10 percentage points compared to Q4, which at that very thick shopping season for us.
This is despite all the impact that might come from cross border and a more of a total locked down a in a sort of thing.
So this shows how resilient our marketplace is.
The strength of the marketplace leadership and in that in Q1, despite the physical constraints and marketing businesses. The Dow region, maybe safety and in fact as we look at a Q2, we mentioned in our earnings release that.
Our April one that actually grew more than 840% year on year. So if you look out to the different market. She this as a step change in terms of adoption rate of E. Commerce that is with benefit disproportionately accruing to act as a strong market.
Leader.
In terms of the take rate the Q1 take rate drop from Q4 is mainly driven by the adds value added services, which is primarily cross border logistics that we recognized a close date basis, which makes it a.
Stellar pace at $2 flow.
Costco logistics fees, we paid the third party logistics providers $2, we recognize the $2 as revenue as well as cost of revenue.
So with that.
If you look at what happened in Q1.
China.
Had a lockdown during that period.
Which.
Did have an impact on the cost for the logistics side, both cost what a sales volume as well and to let the customer logistics and that is reflected in that unit take rate that were looking at for Q1.
Fixed China has opened up and resumed.
Most of the normal activities, we have seen.
Hi, bottom out in February and meaningfully the coverage.
In April and we continue to see cost will adjust the uptick.
In may and on what so we think thats, one or not it's not a permanent impact on act and do expect us take rate to gradually right back to the previous level.
And our revenue is going to be both given by that right take rate as well as that the increase in the volume itself.
So we're not worried about to long term monetization E commerce platform.
Platform. This does not change our view in fact, it makes us even more more bullish.
The ecommerce business as a whole given the step up in the penetration rates. If you look at our markets where the penetration.
Of ecommerce and digital economy as opposed to route to the low.
Well the situation actually drive a lot of people online.
The API shops are closed and we.
Oh operations remain open and we deliver as normal in most of our markets so throughout that period.
This allow us to capture a disproportionate amount of growth.
And also when the hearts and minds of our users with with the quality of the services with platinum I saw at assistance were providing them, especially the.
SMB sellers our platform.
What kind to move that business online App and this will also be reflected in our seller Commission relief program. The eight program as well as.
The marketing credit that we might get to sellers.
Sure Tom we might continue to see and take rates being a bit lower than what used to be difficult situation, but long term we have.
That does not change at all our view of the steady state takeaway is achievable and to the monetization potential of the platform is also trial Joe further our growth.
That's a market leader.
So in terms of.
Guidance for Sharpie at this point Oh, we think that you know asset situation still evolving daily all while we continue to see strong growth we think it up.
I would like to.
Update the market.
It there.
Our data later, but at this stage, we don't see that they need to change the guidance.
And the interests of time, we will take a maximum of two questions at a time from each caller.
Next question comes from Thomas strong of Jefferies. Please go ahead.
Hi, Good evening brings management.
My questions.
Given that we have seen via has reached another milestone in times of the peak active users can you comment about.
The long term trend or to see called life cycle.
And we also seeing that India in terms of their pain. We show is also doing well.
How should we think about the longevity.
The fire in comes off the floor momentum.
But there will be a multi year or five to 10 years kind of.
Socially phenomenal games.
Any color on that.
I would be great and then my second question is back to shop.
Given the fact that we may see some.
What activity in comes off that pick weights.
The DFM because of the uncle, Bob Wiberg and as we are seeing the trying the cost for the E. Commerce. This also.
Coming back.
Factsets pick ways to Frac school.
Year on year will trend.
Back in the second half.
On on on Thats once.
About it comes off the impact of Oh, I was in different geographies I yi.
Yeah, Hi won.
Philippines, Singapore, I, just wanted to get a sense about how the G.M., we actually are trending up because of the colomer libraries and also the pace of the couple of we in different countries. Thank you.
Thank you I'll start with definitely far I think we see very positive trend.
As you mentioned gel, we recently hit a peak data aptitude active use of more than 80 million.
And save time, we also see.
Pay user increase significantly.
With.
Hey, RPP you at a pretty steady state that shows that eight monetization potential. This game is huge and to be we think the this also helped with the longevity. When you have more players pay playing this game and will play as painful that's game.
They tend to stick with a game for longer and also given how social error active. This game is a more people play with the play this game that automates Malia fund family other people in the game and they talk about it that's part of your social life cycle, you ought to stick with the King.
A longer I think the we're trying to really how to focus on managing.
And maximizing the upside of the game and building it into a not only a long living classic IP, but also increasingly social platform as you can see that we introduced a new map you contents.
In collaboration with other games.
As well as fully dive football starch and two we introduced a music video into the game.
So I will characterize.
After in the music video. So these are all these features were introducing setup farewell calm and.
They're well received about users who are engaging with us in the game and also outside of game the online forums.
Last streaming and to watching.
Again, the deals on different platforms. So I think that there's definitely the focus.
Not to continue to build out the IP ended this huge platform, which now 180 million people interacting with each other Danny So I think that is something that we are very much focused on.
And in terms of E commerce take rate, we're not worried at all about volatility in the take rate as mentioned Q on volatility is.
More actually beautiful to cross border logistics assets, which is the revenue recognized on cost basis, but as you can actually previously mentioned.
A lot the majority of our revenue Akshay came from the high margin revenue I Eat commission handling fees advertisement et cetera.
And and the continued to be highly resilient. During this period now we do by choice actively gave seller some relief.
And assistant packages to help them transition, especially those SMB sellers, who are more severely affected impacted by this circle the situation to transition through this period. This is something we think.
We're very fortunate to be able to do from a position on the stress to help our communities of sellers.
The broader communities to help them get on seat back on their feet. So it is something that we might continue to do.
In the near tongue as they recover.
But the on unit count. This is something that we think in the longer run will help us when the goodwill and build a stronger deep a bomb with our key participants in our platform and is that there was a while investments we're making.
In terms of the.
Defense impact in geography, I think Oh.
Oh, probably I'm seeing a broad basis three categories, one is market where the.
The locked down was.
There wasn't a extended period of.
Very strict or total locked down so these are markets like.
Taiwan, and Vietnam Bynum did have a locked up but relatively short.
And then they're also markets, where you see more extensive locked down that would include.
Let's say a from Malaysia, Thailand, Indonesia.
And then there's also the.
Sure the based which is Ah Ah Ah.
That that has a lockdown that also.
For their short period of time in March that prevents well delivery, we are actually while the first players to receive exemption.
On the government chose to deliver essential goods.
To our usage and shall we also start to see lockdown easing in Philippines over time to allow more categories of good to be delivered.
And then there's also China, where the cross border.
Impact is from US I think these markets are different in effect that.
For the market that has a relatively less impact from.
The locked out we see normal for a more normal growth.
Yes, again quarter on quarter like before and we continue to grow very shortly and in markets that have more extended locked down where our operation.
Still.
Okay, and as I would say as much as normal as possible.
Despite the physical constraints our teams phase two which also speak volumes about the resilience and execution capability of our team.
Actually see even more.
Stronger more profile increasing.
Demand for services.
And do we have being able to deliver that and that is the markets that we think that.
To extend to lock Dallas doing place, who will continue to see strong demand.
And in market well like Philippines.
That does affect.
E Commerce logistic delivery.
There is a decrease in overall volumes can be fulfilled, but again, we start to see that being east.
And as a market leader this affects everybody, but as a market leader I think we are still doing probably better than many other players in that regard and for China, I think that's low or no.
The pretty much the bottom has passed.
By the end of February and we see recovery in March April so the cost what are we think we'll be well be back.
Quickly.
And the interests of time, we will take a maximum of two questions at a time from each caller.
The next question comes from Alicia Yap of Citigroup. Please go ahead.
Hi, I'm, good evening far as Tony and James and other management. Thanks for taking my questions I'm very quickly I know the pre fire has sustained really strong momentum, but just curious out off due to soft economy to we anticipate the spending behavior.
I will get more cautious as some macro outlook.
Worsened and also you know as we emerged from the locked down and then for quickly on the shopping site.
Any thoughts on comes off the longer term strategy that we potentially would put more emphasis on building a combinations off the Brendan section store model.
Well the together with the long tail much. Thank you.
Thank you Alicia.
In terms of the macro outlook of course, you know this this the situation is evolving Daddy it really depends on how long the locked on might be and.
The impact on the economies.
Market by market over I think.
We do see game business generally to be quite countries cyclical.
Even during the during.
Recession.
People skill mix some form of.
Social engagement and entertainment and do what they might pay for gain especially all market. If you compare to like say movie ticket for subscription of.
Streaming video streaming services et cetera that stuff.
Well, that's the reason we quite a micro transaction I think this is that something thats highly affordable to people still and also.
The four games were not targeting a very all game, especially as a large E sports Heidi social game, we're targeting very broad base of consumer interest and therefore, you know having a very large user base and we focus on you know two way you.
Two p. you daily active users et cetera is very important that gave us a much better resilience against any.
Potential downturn and given that our gain is not concentrated in any particular market. In fact, we see times a user contribution as well as revenue contribution increasing balance across different markets.
You know, including.
Southeast Asian, Taiwan not.
Yes, I tried to other markets that gave us.
In a way.
Our protection against any particular market downtime. So we think that went up quite fortunate to be to begin this business at this time.
And Oh in terms of all lumped with strategy for E. Commerce, I think we will continue to grow Bose.
We see very strong bullish on shopping mall I.E. the branded merchants.
Platform, both before and called it a start to it and as well as during this period as Brent also started to look at online commerce as it is not.
Not as after thought or at a good to have alternative now more I'd say.
Probably a more of a must have alternative or even.
Greater focus, especially when the offline retail is pretty much shutdown.
So I think we are a disproportionately benefiting from that migration and we're very focused on serving them well to retain our users and capture that growth and I think Tom are we still think our market.
There are lot of SMB sellers that we can benefit from our marketplace and choppy and stuff.
You know when we designed it to be a general merchandise marketplace.
As opposed to a more of a niche kind of a marketplace or lumpy mocking say a lumpy kind of model. It's precisely because we think there on large number of smaller merchants SMB much of that can grow with our marketplace and our markets.
And do we have a unique advantage in our ability to serves millions and tens of millions of them well I was very highly localized operations and high quality.
Management of the Salish category by category. This differentiates us from a lot of the existing players and help us.
Well to the market leader, we are now so we're continuing to focus on focusing on sex, serving them well and make them grow with our platform.
In the interest of time.
We are limiting in maximum two questions at a time from each caller.
Next question comes from Jon Block like T of Cowen. Please go ahead.
Great. Thanks.
I'm shop, any particular certain categories that drove the.
The growth acceleration in the.
And further chart April and.
On the problems on the 104.
In April cure or growth is tracking.
Okay.
Sorry can you see the question seats.
Yes can you hear me.
Yes Center.
Okay.
Choppy any.
In particular top categories that drove the acceleration and in ER in one Q.
For toleration in April that [noise].
Great that you're seeing.
Thank you maybe seeing embedding and then on C. money to rethink about long term opportunity and also just the near term trajectory first TV, but EBITDA losses, which were 50 million Hot higher you procedure.
Thank you.
Yes. Thank you in terms of the T M B.
Well I think up if you look at our traditional Oh.
Assessment or not a categories that are largest all pop army could fascia health and beauty home and living baby product, we see very strong growth accelerate as gross and particularly in common living.
Health and beauty.
I'd products, we also see straw accelerate growth in FMCG are the FMCG. Good staple that we are well also focusing on now to me that surges in demand.
So we think a went on lockdown in place still in most markets. This will probably continue oh, well for a while after the lockdown, Oh, well well have drops of when like back to normal.
How much of that volume will continue to.
To slow to us, but I think what we focus on is you know.
At this stage when the Usan being.
Kind of naturally turning to online for to fulfill their needs.
And de Souza oftentimes the first time use us if you look at the E Commerce and no ecommerce penetration rate in all markets.
We're not talking about you know.
I will turn to mop a lot of share what actually talking about a increase in the in in terms of a baseline of you use is coming naturally keen to be educated on how to use ecommerce and we are there probably the flushing passion and providing a first time experience of E commerce to them. So this is what we focus on whether they were.
On a by health products or FMCG or staple food.
We tried to as much as possible so if their needs well and.
And with our engage engaging experience as well as some larger sort of things we can.
Convert them into more frequent buyers into other products and goods as well. So during this period of time, we see increasing active buyers sellers as well as.
By frequency, we used to be a 3.5, we see increasing getting to above five and plus a market even above six times a month.
So all the other categories also increasing even small fashion, which people might think as a more discretionary will still continue to see yelling equals in April professional order, but Ah Ah I would say the auto category. The order of course, probably the more pronounced.
Compactrio fashion has now people don't have to go out as much.
So I think though we will continue to have those are going to me.
In terms of the long term opportunities.
And versus the EBITDA loss, if you look at Darla.
Adjusted EBITDA loss per order at that 60 cents now, which is a us being increased a decreasing young yen Q on Q and save time.
If you look at Oh game EBITDA.
This is.
Now it's meaningfully larger.
Then a shot EBITDA loss for this quarter, which again as we said many times before that we want to breakeven we can anytime but.
We are focused on investing English and extending our market leadership.
That will bring us a much better retaining a longer run and profitability, but very much focused on its playing to growth and efficiency of growth.
And the same types, our view does not change that.
The investment in shopping now is very effective and efficient and it's increasingly covered by our cash generated from most shopping monetization itself as well as.
My transition from their digital entertainment side, which also strong strong enjoying strong goes so we're in a oh is it better than ever position now and where they focus on maximizing the upside of being presented to us I'm in a special situations.
Basically where fast forwarding into the future. The reason we focus.
Just two entertainment you call months and show financial services.
At our three core businesses, because I want to strong conviction in the course of additional economy, our region and that the three sectors are the largest opportunities in a digital economy of region and what the current situation, we see that the adoption of to show economy.
Hi, it's accelerated.
And in a baseline has increased and all three segments.
At the we're focused on happened to be the best biggest beneficiaries and we'd be in a market leader in these segments again being the biggest beneficiary winning these settlements. So we're very much focused on investing was disappointing to capture that gross follow long term potential.
This concludes our question and answer session I would like to turn the conference back over to young Jen Wong.
For any closing remarks.
Thank you for everyone for joining today's call. We look forward to speaking to you all again next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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