Q1 2022 Sea Ltd Earnings Call
Good morning, and good evening welcome to the Sea limited first quarter 2022 results conference call. All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being record.
I would now like to turn the conference over to MS. Ms. Zhu song. Please go ahead.
Thank you and Hello, everyone and welcome to seize on 2022 first quarter earnings Conference call. I mean, you saw from Pes group Chief Corporate Officer.
Before 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 call includes a discussion of certain non-GAAP financial measures such as adjusted EBITDA and net loss excluding share based compensation. We believe these measures can enhance our investors.
Understanding of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures.
For a discussion of the use of non-GAAP financial measures a reconciliation with the closest GAAP measures. Please refer to the section on non-GAAP financial measures in our fashion.
With me Sea's, Chairman and group Chief Executive Officer for three group, Chief Financial Officer, Tony Hull and group Chief Corporate officer in anyway.
I will share strategy and business updates operating highlights and financial performance for the first quarter of 2022. This.
This will be followed by a Q&A session in which we welcome any questions you have with that let me turn the call over to you for it.
Hello, everyone and thank you for joining today's call.
I'm pleased to share that we have made a strong start.
2013.
We reported solid results across our business in the fourth quarter of 2022, despite challenging comparison to the same period last year.
COVID-19 restrictions.
As a result.
Well on track to achieve our previously shared protections appropriate ability in our Asia market well.
While continuing to scale, our business and capture market share globally.
During the fourth quarter.
Our GAAP revenue grew 64% year on year to reach $2.9 billion.
And we generated gross profit of $1 $2 billion.
Increase of 81% year on year.
Choppy on the seed money continues to enjoy operating leverage and efficiency gains as they scale.
Phil and strengthen their market leadership position.
In particular shopping at adjusted EBITDA loss per order before allocation of HQ costs in southeast Asia on the Taiwan improved by more than 70% year on year to four cents.
It shows that shopping is well on track to achieve positive adjusted EBITDA before allocation of eight.
Fuel costs in the region.
In addition, we currently expect shockey to achieve positive adjusted EBITA, even after allocation of HQ costs.
Last year for each region.
At the same time choppy.
Choppy in joint very strong growth.
Against the tough comparisons to last year.
It's older grew more than 70% year on year, and the best marketplace revenue increased by more than 75% year on year.
Well, they're extending <unk> market leadership, both in terms of transaction volume and the commercialization capability.
Hey, Manny the adjusted EBITA loss also narrowed both quarter on quarter and year on year, while GAAP revenue grew close to 350% compared to last year.
The active users grew more than 78% year on year. This.
This is also a strong indication of the.
Money be on track to achieve positive cash flow as we previously projected while at the same time continuing to scale rapidly with efficiency.
The significant scale strong leadership and a clear synergy achieved by sharply in the seed money in southeast Asia and Taiwan.
Our consumer Internet ecosystem in the region is naturally approaching a stage of long term profitable growth.
Well the arena here.
It's growth post the Colgate, we saw some preliminary positive effects from our effort.
User engagement Repower.
In particular, the monthly user trends for free fire began to show some early signs of stabilizing towards the end of the fourth quarter.
We are assessing the long term trend.
Engagement post the Colgate.
That's a pillar of our strategy and areas of focus.
Building ever more engaging content.
Free fire and strengthening our pipeline of new games remain our key priority.
In the past two years, we successfully navigated the major uncertainties brought by the pandemic to capture the second growth opportunity presented to us across all businesses.
Oh, I'm, sorry, Neal PRA, we recognize that the current micro trends and uncertainties.
Our region under the work in the near to mid term.
Okay.
Capabilities resources and further strengthen leadership conditions, we managed to accumulate and achieve given the Pos appear rates has put us in a stronger than ever position to navigate the spectacle.
And chase.
More importantly capture opportunities definitely also a rise in our region.
As always we will continue to focus on being humble pragmatic and agile.
While consistently driving strong execution.
The large underserved communities in our regions.
With that let me now discuss each business individually.
In the fourth quarter Sharpie continued to significantly improve unit economics, while capturing market share and expanding leadership position across our market.
Online consumption continued to grow our shop platform, resulting in strong year on year growth.
Chop is GAAP revenue was one $5 billion up 54% year on year in the fourth quarter.
And the gross orders grew 71% from last year to reach one 9 billion.
EMEA was $17 $4 billion and inquiries up 39% year on year and growing at a 58% CAGR from the first quarter of 2020 before the pandemic.
Good morning Citation also saw improvement with gas marketplace revenue as a percentage of total G. M D rising to seven 2% during the quarter compared to five 7% last year.
It was great to see that shock is gross profit margin improved year on year due to the faster growth of transaction based fees, but there are tied to each call.
Which had higher profit margin compared to revenue generated from other value added services.
At the same time.
Perfect margin revenue generated from other value added services also improved quarter on quarter.
Moreover, we continue to be highly for crystal efficiency.
I would like to share a bit more our approach will continually improving cost efficiency.
Our business model Optimizes, our unit economics.
Growing operating elaborate across our e-commerce ecosystem with scale.
We are investing abroad.
Our broad base of buyers and sellers across comprehensive online marketplace categories and the deepening engagement.
This promote user calls conversion and the retention as well as purchase frequency, which allows us to efficiently grow all their water and the density.
With sufficient and continually improving all of their wallet and the density we aim to achieve cost of leadership for our ecosystem to profitably serve the broadest debate, both buyers and sellers as well as the largest range of consumption categories.
This also allows us to efficiently cross sell more products and service offerings.
Including digital financial services, especially to the underserved mass market.
Our market segment, which we believe represents the largest opportunity in our global markets.
We believe this strategy drive significant scale strong profitability and a deep competitive moats in the long run.
Our track record in Southeast Asia and Taiwan.
Proving the success of this model.
Our conviction has only what their grill with what we have achieved in Brazil, We think a short period of time.
I'm pleased to note that since two our focus on enhancing monetization and optimizing costs.
Once again, our recorded significant improvement.
Economics in the first quarter.
Adjusted EBITDA loss for older before HQ costs improved both year on year and quarter on quarter, where sharpie overall.
In Southeast Asia and Taiwan.
Adjusted EBITDA loss per order before allocation of HQ costs was four cents.
An improvement from <unk> and.
In the first quarter of 2021.
We also made very healthy progress in Brazil in the fourth quarter, where such loss was $1 52.
An improvement of more than 45% year on year.
Our efforts on expanding the total addressable market across our key markets.
<unk> sharpie, continuing could be ranked highly our key engagement metrics among global peers.
It includes data about AI shop eat breakfast first in the shopping category globally by downloads in the first quarter choppy.
<unk> also ranked first globally by total time spent.
And the second by average monthly active users in the shopping category on Google play in the first quarter.
Meanwhile, <unk> was the top ranked app in the shopping category across both iOS and Google play average monthly active users and the total Tam spending up in each of southeast Asia and Taiwan.
Based on data about AI.
In Indonesia. We were also ranked number one across the same metrics with gross orders up around 7% to 7% year on year during the fourth quarter.
In Brazil shopping rapid birth by download and the total time spending up and the second average monthly active users or the shopping category. According to data about AI.
In March and April Sharpie, Brazil had the highest number of monthly active users in the shopping category as we further extended our leading position.
We're also growing our local sellers with over 2 million Brazilians seller registered on the shop your platform currently.
A range from SME.
Established brands and we are working across the broad enabled them to sell more buyers across more categories and mcguire fix and the consumption locations.
Our positive traction in Brazil stake underlines, our belief that there is a large and highly promising opportunity to serve underserved community of sellers and the buyers in that market.
Continue to invest behind these opportunities, while delivering more value to our seller and buyer.
While all work.
Across our core market shopping mall has continued to power the way forward for our brand partners with innovative solutions and tools to support sustained growth.
In the recent quarter, our more than 36000 brand partners. So strong growth momentum and the reached a new milestone accounting for around 15% of GMB compared to 12% a year ago.
We have also on boarded more threads hockenbury, such as Q in Singapore, as well as Kate Spade and the Buck.
In Thailand.
Okay.
Looking ahead, our position is stronger than ever before.
First our core market.
And the system E Commerce penetration is expected to continue.
At the same time, we are extending our leadership and are reaching breakeven in southeast Asia and Taiwan.
And adjusted two years after entering Brazil Award six largest markets by population.
We are making rapid progress towards market leadership.
We still have work remains focused on high quality execution, alongside consistent innovation and investment in our tech capabilities.
Why the depreciated experience to our users.
This will further enhance our competitive strengths and improve efficiency to best position, sharpie, where long term growth and profitability.
Meanwhile, given the current environment of elevated.
In certain cases.
We now see a wider range of scenarios and outcomes for shop each year.
While we believe that our previous guidance is still achievable.
We're revising our e-commerce guidance will correspondingly reflect our expectations around the upcoming macro uncertainties.
We now expect ecommerce GAAP revenue to be between eight 5 billion and a $9 $1 billion, representing 70, 272% year on year.
Gross and.
Of the guidance.
Yeah.
Let us turn to digital entertainment.
That's reflected last quarter.
Things softening in user base and bookings compared to the lockdown peer rates during the pandemic.
Which was weather impacted by Threep are continuing to be available across app stores in India.
However, despite the pullback from our Federation, we sold during the pandemic.
When we put our fourth quarter results into perspective, our quarterly active users have shown strong growth with a CAGR of almost 24% from the fourth quarter of 2020.
Yeah.
I'll review regarding Marina Repower being a long term platform with digital consumption remains unchanged. Therefore, we remain focused on attracting retaining and deepening engagement with our users through investing in enhanced and diversified content.
UGC to improve accessibility and other user friendly features.
These investments alongside with the lower bookings has led to a year on year.
Klein of adjusted EBITA as the percent of bookings for this quarter.
We will continue to take a long term view on such enhancements as they are critical for the system.
T and the diversification of our key gaming franchisees kind of platform.
Moreover.
As we navigate the space of moderation, we are focused on a user basis stabilization we.
We saw some preliminary signs that this is starting to bear fruit with the monthly user trends. So we are beginning to show some early signs of stabilizing towards the end of the first quarter.
Well Nissan car range encouraging sign.
The longer term impact of opening a wrong online gaming REIT parenthetically remains to be thing.
We will continue to focus our yogurt engagement and the user base stabilization.
We are also very pleased to see that require continues to be one of the most popular games across the warrants.
We continue to focus on high quality content and ensuring that free fire is accessible to and enjoying both for our large player base.
Indeed, according to data the AI <unk> remained the number one most downloaded mobile game globally in the fourth quarter.
Gabe, let the third globally by average monthly active users for all mobile game on Google play during the same peer rates.
Our mission of building <unk> into a long term gaming franchise and the platform remains an ongoing strategy.
We are focused on innovating around <unk> and the investment required across more user engagement content and events.
Very fast recent partnership with D. T S. One of the most popular K pop groups globally is a success.
We worked closely with the RP to design, new eye hygiene, Hudson's costumes and action.
Resonate well with payers and thanks a lot.
Videos, featuring Pts artists and content on our social media channels reached over 115 million views.
Additionally, heartland, our mass editor feature so strong traction to driving greater engagement and interaction across core HR and the gamers in our community.
In the course of the quarter hundreds of millions of gamers played new maps on cropland across billions of games.
They're generated content with a growing key part of <unk> ongoing engagement strategy and we plan to continue improving and extending the partner experience.
Sure before digital entertainment is a key long term focus of our business with increasing importance of workflow consumption from the rising digital native generation.
We're committed to investing behind our existing top tier franchises, while further diversifying our portfolio of games across more new Janice.
An example is moonlight blade, a third party massively multi player online low playing game.
We'll be launching across both mobile and PC in Thailand in the coming months lease up to an earlier launch last year in Taiwan.
Our developers have been whats been a new games across a wide variety of generous.
At the same time, we are exploring publishing partnerships and making early investments in game studios across the war.
Our digital financial services business.
<unk> continued its strong growth into the fourth quarter of 2022.
We remain focused on driving the adoption of our products and services in a thoughtful and disciplined way well leveraging the multiple synergies across our shopping see money ecosystem.
GAAP revenue for the quarter was $236 million up 350% year on year.
Active users across our key money products and services grew 78% year on year to reach 49 million.
Adoption of Siemens financial products and services across credit and digital banking was key drivers of revenue growth during the quarter and we expect this to continue.
As we optimize our models and expand our partnerships with financial institutions.
Product package to be solid and high quality value drivers in the long run without the need for a second.
Investment to scale.
The total payment volume on our mobile wallet was $5 $1 billion in the fourth quarter.
An increase of 49% year on year.
Over the past few years, we have successfully leveraged the shop the ecosystem to build leading mobile wallet if conditions across our markets.
We have also expanded our credit products across more markets assessable to more widely to users.
Our credit portfolio currently serves both consumers and merchants across a variety of products.
Our digital banking initiatives, so strong early traction as well.
On a related note I'm proud to share that our application for a digital bank license in Malaysia, together with Y T. L. Digital capital was approved in April .
Indonesia, which has the most comprehensive sets of products and services among our markets.
It's 30% off the quarterly active users.
Use the multiples seem any products or services in the course of the quarter.
The size of the opportunity for the money is massive.
It has only been expanding as we have grown the suite of products and the services we offer.
Our served markets.
We're excited about the growth prospects of the segments as well as a strong ecosystem benefits across both sharpie and seed money.
To conclude we believe that we are in a much stronger position now compared to a couple of years ago. When the pandemic just starting with.
<unk> significantly expanded capabilities more resources are proving track record and a much clearer and more certain path to achieve our long term objectives.
With choppy with continued to capture market share and deepen our strong balance with sellers and the consumers across our markets.
We have highly promising growth opportunities in front of us and we continue to invest prudently and decently well driving ever improving efficiency across the business.
With arena.
We are leveraging our strengths in content creation and community engagement to ensure the popularity of our platform endures.
Even as the global gaming industry faces headwinds from market openings.
Concurrently we are focused on broadening our portfolio of games across different generous.
And with the money.
Scaling up our third growth engine in a highly disciplined and efficient way ensuring that we are ideally placed to capture the significant growth opportunity ahead of us in each segment.
Building on the strong first quarter performance, we will continue to focus on strong execution with balanced growth and efficiency to deliver solid results.
With that I will invite Tony to discuss our financials.
Thank you Forrest and thanks to everyone for joining the call.
We have included detailed financial schedules together with corresponding management analysis in today's press release and Forest has discussed some of our financial highlights.
I will focus my comments on the other relevant metrics.
Well see overall total GAAP revenue increased 64% year on year to $2 9 billion. This was mainly driven by the growing adoption of products and services across our E Commerce and digital financial services businesses as we continue to leverage the synergies across our various platforms.
On E Commerce, our first quarter GAAP revenue of $1 5 billion.
Included cap marketplace revenue of $1 3 billion.
75% year on year, and GAAP product revenue of <unk> 3 billion.
Up 27% year on year.
E Commerce adjusted EBITDA loss was $743 million as we continued to deepen e-commerce penetration in our core markets and also gained positive traction in newer markets.
Digital Entertainment bookings were zero point $8 billion.
Compared to $1 $1 billion for the first quarter of 2021.
<unk> revenue was up 45% year on year to $1 1 billion.
The increase in GAAP revenue was primarily due to recognition of accumulated deferred revenue from previous quarters.
Digital entertainment adjusted EBITDA was $431 million compared.
Compared to 717 minutes for the first quarter of 2021.
Digital financial services GAAP revenue was $236 million, an increase of 360% year on year from $51 million in the first quarter of 2021.
The growth was primarily due to the growing adoption of our financial products and services.
Adjusted EBITDA loss was $125 million as we continued our efforts to drive mobile wallet adoption.
Returning to our consolidated numbers, we recognized a net nonoperating loss of $6 million in the first quarter of 2022 compared to a net nonoperating loss of $23 million in the first quarter of 2021.
We had a net income tax expense of $82 million in the first quarter of 2022, which was primarily due to a corporate income tax and withholding tax recognized in our digital entertainment business.
As a result net loss excluding share based compensation was $445 million in the first quarter of 2022.
As compared to $320 million for the same period in 2021.
Net cash used in investing activities amounted to $1 1 billion for the first quarter of 2022.
This was primarily attributable to an increase in loans and receivables of $410 million to support the growth of digital financial service businesses.
As well as net placement of $333 million into time deposits and liquid investment products for better cash yield management.
At the end of the first quarter of $2 22, we had around $8 8 billion of cash cash equivalents and short term investments on our balance sheet.
With that let me turn the call to me Andrew.
Thank you for it and Tony we are now ready to open the call for a question a question will be addressed by Forrest Tony and Jeff.
Operator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
In the interest of time, 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 queue again. After your first questions have been addressed at this time, we will pause momentarily to assemble our roster.
Our first question comes from Alicia Yapp from Citigroup. Please go ahead.
Thank you.
Good evening management, Thanks for taking my questions I have two questions. The first one is.
In light after very C D under the lockdown conditions in China.
Can management share any impact from the lockout in China for your cross border.
One of the reasons that cost huge wide I E.
Items.
White sack any other macro conditions that continue to become a bit more cautious before I go shopping.
The second question is on your team in Pittsburgh Management mentioned on the prepared remarks.
Improvement in the user engagement refi.
Can you share, which countries that youre actually seeing the improving user trend do you think these user trends Ah metrics could further improve or you think this is Paul that's not just stabilizing.
User matrix.
Any updates on new games in the pipeline.
That you can share thank you.
Thank you Alicia regarding the first question on CB. So.
So far we haven't seen major impact and cross border is also not a very significant part of our business. Our business is primarily local to local.
And the reason to broadened the guidance range for sharpie as we shared in the earnings and that shall we see macro trends.
Such as our increasing inflation.
Increasing.
Some disruptions in the supply chain and also a rising interest rates across the various markets and the and the world. Yeah. I think we want to be prudent in looking at it but I also had shared we still think the original guidance is achievable for us.
However, given the uncertainties, we do want to be able to manage the situation closely and and also track that the market dynamics more closely as well.
We progress so while there are challenges we also see some bright spots in particular in our region for example.
Most of our markets so far has it.
Relatively resilient out of Covid.
And inflation.
In many of the markets is still a relatively in check.
And also some of our markets are net exporters of commodities.
And Ah or have been benefited from the shift in global supply chain are in terms of our investment foreign direct investment in manufacturing.
So relatively speaking we think there are while there are challenges and uncertainty there also opportunities in the region that we could look to capture again I think the key is just like when we entered COVID-19.
There are huge uncertainties and challenges.
But in the end, we emerge as a much bigger and stronger business much more diversified and close to approaching long term profitable growth in our key markets.
So all of these helped us a lot.
Managing and navigating the new challenges and uncertainties that may face us and as a business I think we continue to focus on being humble agile and pragmatic and and focus on strong execution.
Our track record shows that we almost to excel, even what clearly in tough situations and I think we're also in a relatively stronger position compared to many of our peers in navigating that.
So in terms of the game business.
We see that there are close to the end of the quarter Theres some.
Stabilization in that user trends in South East Asia and in some other parts of the World. However, this remains to be seen in terms of the long term trends are post COVID-19 and it's still early stage. So we want to caution. This is some preliminary a sign.
However, I think we will continue to make efforts in terms of deepening user engagement.
And therefore, we also are shared and put things in perspective, and sharing our two year CAGR to show that the significant user base that we gained during the cold it for some of them who have been able to retain and we continued to make effort to retain.
As we continue to build our game into a long term platform and we are very.
Focused on the longevity of the familiar longevity also free fire as a.
Increasing our game platform by introducing more diversified content and game modes and.
I'll play in including UGC tools.
Into the game at the same time also trying to further to diversify our game pipeline.
<unk> Ah publishing games in more markets such as that.
As far as mentioned unlike Blake to be offered in Thailand. Shortly so that had been our effort ongoing alpha on the game side as well.
Our next question comes from <unk> from Goldman Sachs. Please go ahead.
Thank you very much for the opportunity.
Two question for me Yeah can we go back to the guidance again.
Maybe can you also walk us through the rationale behind that and tell them off like it did last week due to lowering Dow does T. M. D. Assumptions are these also have taken into account.
The take rate side, as well and that's me and with this new guidance. What is that imply you haven't seen the growth expectation that we tend to think off and what should we think of.
Sequential quarterly trend going forward. So that's question number one and secondly in terms of cash burn that you need to call them at capacity.
And that's what we see healthy improvement in our take rate as well.
I'll walk us through the steps that you have taken to achieve that is it mainly through these higher take rate, although less subsidies and how should we think about balancing between growth and profitability, especially.
With the macro uncertainty like ourself with we also have a better understanding on how your what headquarter cost will trend going forward, but I suppose that's already rising quite significantly into playa. Thank you.
Thank you Pat in terms of the <unk>.
<unk> guidance I think I'd say, just now we're not necessarily not necessarily lowering it we are widening the range. We still think the original guidance is potentially achievable for us, but given the economic.
Trends, we wanted to be cautious and also.
And face as we face uncertainties, we do want to preserve our maximum flexibility in managing our business in line with underlying market dynamics.
That could be basically a combination of all things in terms of underlying volume growth and commercialization.
Specific guide on T N V in take rate, but overall.
If you look at Telework.
GAAP revenue trends.
Even at a wider range, it's still growing at a more than 70% a year.
Yes, which is.
I believe are quite high compared to global industry peers.
And it appears the home market.
So again I think this is something that we're getting in abundance of caution and.
Regarding the unit economics improvement.
Think this is a.
Both in terms of sulfur better commercialization as well as efficiency gain on the cost side as we scale and further strengthen our market leadership as we shared are just now.
And in terms of our.
Thinking about unit economics, we think the best way to maximize long term profitability at scale and defensibility and the overall value of our ecosystem to our communities and our stakeholders, including our shareholders.
Is by growing the order volume and order density and through that we're able to achieve better unit economics over time with scale and of course during the process. We focus very much on the efficiency of our investments.
Effectively capturing users.
There were various social entertainment.
Tools and marketplaces assortment that our services et cetera are effectively convert them retain them.
And may improve the frequency purchase frequency over time.
So that we can maximize the return on our investment in growing and scaling the business with increasing efficiency and eventually if we're able to.
Breakeven and enjoy long term profitable growth at relatively low order value in terms of average basket size that makes the platform highly defensible and able to address the largest range of consumers and the largest.
Range of categories of goods.
Also allows us to effectively cross sell many different products and services.
That makes the platform highly efficient and also improved profitability down the road.
Now also allow us so far has allow us to built the largest consumer internet ecosystem in southeast Asia, and Taiwan, and also approaching a stage of long term profitable growth.
This is basically the consistent approach that we have been executing towards and we have been explaining to the market about.
Again, if you'd like a cancer.
And regarding the cost trend going forward.
As we shared in the earnings that are in.
In terms of the most recent quarter, our HQ costs contributed to about half of the increase in the EBITDA.
Lost in Sharpie and most of that is R&D headcount driven as we also previously shared that we focus on building out.
Knowledge and capability and our product suite to offer more services and products and more efficiently and effectively to our large community of users.
In the long run this will turn into very strong competitive edge for us and and also it.
It makes the platform even more efficient in solving the users in catering to their needs and offering more products and services to them.
So that is a long term investment objectives. However, again as we shared we will continue to be very focused and our efficiency and being highly pragmatic as we observe the market trends and dynamics and measured in our investment to make sure.
We focus on long term balanced growth.
Yeah.
Again, if you have a question. Please press Star then one.
Our next question comes from Piyush Choudhary from HSBC, Singapore. Please go ahead.
Hi, Good evening management and thanks for the opportunity two questions firstly in the gaming business.
Can you talk about our progress to expand your portfolio of self developed games.
And we we noted that your game developer team has in house game development team has expanded to more than 2000 could you tell how many developers are engaged on on <unk> and <unk>.
And second question for choppy can you talk a little bit about.
Mint on EBITDA loss per order quarter on quarter is company cautious consciously kind of reading out in unprofitable ordered.
Or reducing investment in new market or are you know this is kind of more of a scale effect.
And a housekeeping on driving a number of other than you would see the venue.
Thank you.
Yeah, so regarding the self development pipeline.
As we.
Sure before we always have different types of games.
At different stages of testing.
Some are being tested anonymously in various markets not under the garena named to avoid the Halo effect of the garena brand to give us better data and summit at our earlier a closed beta testing stage within a small circle of selected users.
And some at earlier stage of being Oh, yeah.
Within the in house testing stage. So at any point of time, we do have things being tested and as we grow the self development pipeline.
As usual, we don't announce that came until we formally launched our public hitting the market under the arena a name.
But however, this has been a focus of the development team.
And I think we have about half of our team focused on new games are at different stages.
The rest is still continued to focus on putting more content and AR and also.
Game modes, and UGC tools into refi and refi Max again. This is a highly dynamic process Oh, we can't and anytime we may adjust the team set up and Oh allocation of human and other resources depending on the.
The demands and needs of our game.
Game content pipeline as well as L. A user community.
In terms of the EBITDA lost Florida, we're not.
This is not driven by.
Cutting our loss, making so called loss, making orders.
If you look at our basket size as being relatively stable quarter on quarter and our all in terms of competition for categories have been relatively stable as well and Oh, well, it's been very balanced growth across all categories of consumption and Oh.
Costs are different types of orders now.
Now, we do see increasing orders coming from the mall side, which is also a <unk>.
Positive sign as we have more brands global including some of the global brands, We mentioned like Keyless K state.
Joining our platform yen, but at the same time and contributing more to <unk>.
At the same time I think.
The bigger picture is that a S R.
The largest marketplace AR in a region and I think overall competition all of the categories generally reflect the broadest communities. We're solving and this is also not driven by our market exits a primary either but as that those are.
Very nascent stage to the market that we exited any waiting and contribute to significantly to the cost side either.
The next question himself.
Brazil, we we looked we did provide our.
EBITDA loss per order.
As well and so as we understand the market.
They're also very focused on understanding how the efficiency gain.
It's progressing in Brazil in terms of overall growth it remains to be very robust and you know we our order growth continued to be a very high triple digit.
Close to 200% year on year. So it's continued to be very high growth rate and at the same time. We are also very pleased to to them.
Sure that.
Not only were the number one in downloads and total time spent most recently will also ranked number one in monthly active user Hum for March and April , but did I I and that shows that we are.
Fast closing and.
Increasingly becoming a market leader in terms of our user base and also in terms of the orders.
In a market that we entered in just two years ago, all while continue to enjoy efficiency gain of market.
Okay.
The next question comes from John Choi from Daiwa. Please go ahead.
Well good evening. Thank you for taking my question I have two questions first of all on your digital Finance services.
Strong growth.
Management provide some color on you did say that Indonesia, you've got about 30% of that.
They use multiple products.
So in terms of our profitability or that's what you do each day and economics can you kind of share all Indonesia stands out and how this war on you know how this is gonna be.
You talked with your other markets on the second question is on Sharpie.
As mentioned.
Brazil has seen very strong growth of close to 20%, but if you look into like no actual user engagement on the categories or the actual products. You know that you know the consumers are purchasing how does that compare to ourselves.
Our Taiwan I mean, you know where do you see you know that's something that's more in Brazil or Latin America.
Yeah.
Okay.
Thank you John .
Indonesia Ah, Yes, you are right that Oh, let's see money.
<unk> business has grown well and and we also offered the most comprehensive suite of products are in the market yet.
And which is also the largest market in southeast Asia and Taiwan.
And so.
So we saw very strong traction and strong.
<unk> with our shopping ecosystem are in growing the business both in scale commercialization and also as we shared before we believe it will be a cash.
Cash flow.
Will contribute positive cash flow to the group business.
In the short.
Short to medium term.
And in other markets. We are also rolling out a increasing number of our.
See many products, including contagious.
Continue to strengthen our market leadership on that site and leveraging that offer more products across credit to both consumers and our SMB merchants.
And also on the insurance part of Intertek products and potentially.
Potentially down the road a wealth management products of course in collaboration with financial institutions, and our digital banking products also being rolled out not only in Indonesia, but as we shared before we are we have Bob Tenda also a license might recently in Singapore, the Philippines and now <unk>.
Malaysia, So we wont be also looking to sell the large base of our communities are in various countries. So we do believe that there is a very significant opportunity to be captured and our ability to leverage our you know.
Our large cap.
My Internet ecosystem understanding deep understanding of the user base and our easy access to them and our ability to serve them with technologies are who are underserved because of the limitation on physical infrastructure and other reasons.
So this is a significant and highly profitable opportunity that we're looking at and we'll continue to manage the growth of the sea money business across our various regions.
Now over time and in terms of Oh.
Our Brazil business.
The categories that are we're focused on for the goods sold on the platform by our local.
Local Brazilian SME merchants are largely similar to those we have in southeast Asia and also the basket size. So far is quite similar.
In line with the group average basket size. So we continue also to target the under.
<unk> mass market in Brazil, as we gain efficiency.
In terms of the areas of investment I think Charlie also similar to how we scale our business in southeast Asia and Taiwan.
User growth investing and building the platform and a broader range of.
Services and offerings to our users and at the same time continue to improve the user experience through integrated.
Infrastructure logistics as well as payments if you know that we previously also announced that we recently obtained a.
Our financial institution license.
And in Brazil.
All of us to better serve our users in terms of our E wallet and payment side.
So I think this is some sustained that's very similar to what we have done in southeast Asia and Taiwan before seven times. So we are replicating that in Brazil of course, each market that we entered into including or the southern markets in southeast Asia, and Taiwan, I highly distinct and.
You acquire deep localization.
<unk> approaches execution and and also the management of the business are down to every level of detail and that is where I think we excel in managing.
How do you divest markets our cost.
Rent stages of development and a.
Across different cultures, and regulatory regimes and this is something that they will keep doing.
Thank you.
Yeah.
The next question comes from John Zhao from Barclays. Please go ahead.
Okay.
Good evening. Thank you very much for taking my questions.
My first question is a follow up question on your guidance and you all for your <unk> business.
<unk> growth.
Slow down a bit in December quarter in the March quarter, largely because of the tough comp last year I was wondering.
Just for your current outlook.
Is Q2 sort of the potentially the bottom in terms of the.
That year over year growth for your for your G N V.
And then we start to see recovery in Q3 or the bottom is going to be sometime later this year related to that previously you talked about.
Take rate maybe up.
Less than 200 basis points. This year I'm, sorry, if I missed you reiterated I earlier, but if you haven't I was wondering if you have a new source about that my second question is on competition.
I was wondering.
Given some of the news reports about tick tock monetizing E Commerce in Southeast Asia, and Tocopilla went public in Indonesia, I raised a few billion dollars are you seeing any changes in the competitive landscape in southeast Asia plus Taiwan.
If you haven't could you highlight some of the competitive mode, you're seeing you have to keep us in a leading position if not expand your lead over some of your competitors.
Thank you.
Thank you Joe.
Regarding the <unk> growth rate are we don't provide guidance on that.
But as you correctly pointed out.
Q1, and Q2 last year.
We're good.
At the height of Covid Lockdowns in our region.
Does it also translated into some of the highest growth rate.
During that time.
Last year. So we are facing a tougher comp in the first half of the year and.
In our hands, we don't provide specific guidance on the numbers on <unk> or the take rate.
And in terms of a competitive landscape I think we always take.
Take competition very seriously and are but at the same time I think we.
We came pharma and for each of our businesses and in particular E Commerce.
He came from the underdog position visa very well established incumbents, who also are much better funded than we were.
And so we rose to the strong market leadership and become multiple times their size overtime in our region and at the same time, improving our efficiency and are now approaching profitability.
I think eventually it is about our ability to serve our own users and much including our merchants and consumers well.
And leaves no large segment of our communities and in consumption categories that could have been served by us also.
This is so we don't see it as a zero sum game, we see yes and marathon.
Where it by our success is dependent on our ability to execute continue to pace ourselves well and run well and be ahead of the pack. So this is our consistent approach on competition.
Again, if you have a question.
Please press Star then one next question comes from.
Shan Wong girl from C. ICC. Please go ahead.
Yeah, Hi.
Thank you for taking my question.
It's really got to take rates, while we've noted that Oh take rates for commercial market places have actually increased in April and May.
Is it a reflection of our strength in each country given debt techniques.
<unk> baby levels are down.
That's all of South East Asia market I'll, just my first question and the second one that you forgot to.
Buy now pay later when do we think we'll be able to replicate the function. That's all I'll buy now pay later.
Uh huh.
In our countries and countries of operations like all Philippine.
Even Brazil.
No.
Yeah.
Thank you chenille.
Regarding the.
Take rate.
I think again.
We've been gradually raising take rate.
Currently I think the we started introducing a take rate across various types of merchants and categories of goods many years ago and were pioneers.
Pioneers in fact, many of the markets and introducing a take rate and gradually increasing that we've been gradually increasing the take rate over time across multiple types of.
Uh huh.
Streams of revenue and as we shared in earnings for the most recent quarter.
The increase.
Also by taking from the high margin take rate in terms of transaction.
Transaction based fees as well as advertisement.
A lot of that is actually.
Optional for our merchants and these involving opt in program set of merchants can choose to pay us a high take rate for more and better services and or better deals for their consumers. So eventually this is at the merchant basically investing in their own business on our marketplace.
To grow their business and as a result, we benefit from that.
I think eventually this is because our ability to deliver a better result, more sales volume and attract more users to our merchants their businesses are growing fast and as a result theyre also.
Willing to and happy to invest more in our platform.
That allows them to sell their business to grow even better and faster on our platform.
Most of the vinyl pay later.
So we will Oh, we have been introduced saying the bundled payment programs.
Across our various markets.
And my also introduced in Brazil.
That Ah <unk>.
Demanded by our users we will be also collaborating with other financial institutions.
Two to.
To help grow the program, but we will continue to remain very prudent and.
To manage a highly sustainable eh and.
In terms of the sustainable long term growth of the program, we think it helps.
Growth of e-commerce business and but at the same time, we are also cautious about extending credit to only white listed consumers with.
With whom we can.
Have significant sufficient data and we continue to focus on improving our underwriting capabilities across the board. So this is been a something that we focus on are in various markets.
Okay.
Due to time constraints. This concludes our question and answer session I would like to turn the conference back over to MS. Zhu song for any closing remarks.
Thank you again for joining the call today, we look forward to speaking to all of you again next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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