Q4 2022 Sea Ltd Earnings Call
Speaker 2: Good morning and good evening. Welcome to the C-limited fourth quarter and full year 2022 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker 2: Please note this event is being recorded. I would now like to turn the conference over to Miss Minju Song. Please go ahead.
Speaker 3: Hello everyone and welcome to SEAS 2022 Fourth Quarter and Full Year Earnings Conference Call. My name is Yousong from SEAS Group Chief Corporate Officer's Office.
Speaker 3: 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.
Speaker 3: Also, this call includes the discussion of certain non-GAAP financial measures, such as adjusted EBITDA. This call includes the discussion of certain non-GAAP financial measures, such as adjusted
Speaker 3: 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.
Speaker 3: For a discussion of the use of non- GAAP financial measures and reconciliation with the closest GAAP measures , please report to the section on non- GAAP financial measures in our press release.
Speaker 3: I have with me C's Chairman and Group Chief Executive Officer, Forrest Lee, Group Chief Financial Officer, Tony Ho, and Group Chief Corporate Officer, Yanzhu Wang.
Speaker 3: Our Master of World Shares Strategy and Business updates, operating highlights and financial performance for the fourth quarter and four year of 2022.
Speaker 3: This will be followed by a Q&A session in which we welcome any questions you have.
Speaker 3: With that, let me turn the call over to forest.
Speaker 4: Hello everyone and thank you for joining today's call. 2022 was another year of evolution for us.
Speaker 4: given the micro uncertainties, we pivoted the size of the base late last year to focus on efficiency and profitability.
Speaker 4: As a result, we began to see meaningful improvements in the bottom line.
Speaker 4: For the fourth quarter, our ninth income and the total adjusted EBDA both turn positive.
Speaker 4: Moreover, we generated $320 million of cash from operations in the quarter.
Speaker 4: It has not been an easy journey.
Speaker 4: We could make this significant shift within such a short period of time only because of the collective efforts of our CTs at the hall.
Speaker 4: and very strong determination and resilience that our team has demonstrated.
Speaker 4: We took the hard path, but we believe this is the right path to achieve non-term success.
Speaker 4: As we continue this transition and manage sustainable growth going forward, we have adopted the approach of doing less but doing it better.
Speaker 4: First, we sharpen our focus on areas with the greatest potential across our businesses.
Speaker 4: We exited or downside operations in non-core markets, streamlined our game pipeline with developments and project closures.
Speaker 4: and deprioritize non-core initiatives.
Speaker 4: These measures brought immediate cost improvements.
Speaker 4: More importantly, they allowed us to focus our managerial, operational, and financial resources on doing the core things better.
Speaker 4: Meanwhile, we focused on doing better for our users across our digital ecosystem.
Speaker 4: At Shopee, we continue to optimize customer services, seller management and logistics.
Speaker 4: At Garena, we work to improve the accessibility and content quality of our core game.
Speaker 4: We have also been leveraging the money drop synergy with the rest of our ecosystem to better serve the under-adgressive financial aid in our market.
Speaker 4: I will elaborate more in detail during the segment discussion.
Speaker 4: Given the micro uncertainty and our recent strong pivot, we continue to closely monitor the market environment and adjust our pace and fine tune our operations accordingly.
Speaker 4: As a result, there may be near-term fluctuations in our results and performance.
Speaker 4: However, we remain highly confident in the long-term growth potential of our market and highly focused on capturing this opportunity.
Speaker 4: More importantly, our determination and ability to execute towards profitability enabled us to start 2023 on a much stronger footing.
Speaker 4: Let's now discuss each business segment in detail.
Speaker 4: Starting with e-commerce, I am pleased to share that Shafi's adjusted EBITDA turned positive for the first time in the fourth quarter of 2022.
Speaker 4: The improvements we achieved in core marketplace revenue and operating costs were key factors driving fourth-quarter profitability. In the fourth quarter, GAAP revenue was $2.1 billion, up 32% year-by-year. This was mainly due to strong growth in core marketplace revenue.
Speaker 4: Clear performance generally mirrors the trends of the fourth quarter, with gap revenue growing 42% from 2021.
Speaker 4: In terms of operating costs, we made improvements across each of the major expenses in the fourth quarter.
Speaker 4: gas fields and marketing expenses improved by 34% quarter to 55% year-on-year, proven by more targeted investments across sheepings incentives and the bread marketing.
Speaker 4: Here are also official improvements in RMB and GSA expenses.
Speaker 4: Now looking at each region.
Speaker 4: In our Asian market, we reported a positive adjustment to give it up of $320 million in the fourth quarter.
Speaker 4: This represents a significant improvement from the previous quarter, which had a suggested EBITDA loss of $217 million.
Speaker 4: In our other markets, the justice EBITDA loss also decreased by more than 50% quarter on quarter to $124 million.
Speaker 4: In Brazil, we continue to enjoy drug improvement in unique economies.
Speaker 4: Our contribution margin loss for order increased by 50th workers from the previous quarter to 47 cents.
Speaker 4: During 2022, we have been able to drive meaningful improvements in logistics costs to our ecosystem. This will remain an important area of focus going forward.
Speaker 4: We believe that lowering the cost to third will be key to our long-term growth by unlocking large underserved user segments across our market.
Speaker 4: While we have already seen earlier results from these efforts, there is still greater room for improvement.
Speaker 4: In addition to cost management.
Speaker 4: We remain highly focused on improving user experience.
Speaker 4: For example, we have been systematically reviewing and optimizing our process management for customer services.
Speaker 4: We focus not only on setting key metrics and targets for general user experience, but also on more proactive management of tail cases.
Speaker 4: Now logistics
Speaker 4: We have been working to provide a more efficient and reliable experience to our users.
Speaker 4: This includes reducing wait time, minimizing delivery losses, and providing a more seamless in-app experience to both sellers and buyers in managing logistics.
Speaker 4: The macro environment remains uncertain and there is still headwind on consumption in our markets.
Speaker 4: With our recent pivot, we are showing a positive bottom line for the time.
Speaker 4: As such, our focus this year will be to continue to solidify the efficiency gains and optimize the cost structure across our market.
Speaker 4: In our Asian market, we will work to further strengthen our leading position and profitability.
Speaker 4: In Brazil, we will focus on driving the business towards profitability to capture the significant opportunity in this new market.
Speaker 4: GMB will largely remain an output for us in the near term.
Speaker 4: It is important to recapitize our long-term focus on sustainable growth for shopping.
Speaker 4: In our view, e-commerce penetration in our market remains low as compared to its full potential relative to offline retail.
Speaker 4: Our market also enjoys highly favorable demographical trends in terms of their large and growing digital population.
Speaker 4: This is further supported by long-term economic growth potential across our market.
Speaker 4: The key question presented to us at this stage is how much of these underserved needs for online consumption we can successfully address.
Speaker 4: This determines the size of the profitable time we will be able to capture.
Speaker 4: We believe a large part of the answer lies in our ability to continue to improve the cost structure of our ecosystem through creativity, technology, operational excellence, and most importantly,
Speaker 4: an unwavering commitment to serve our users.
Speaker 4: We believe everything we are doing now is to best position us to achieve sustainable growth, profitability and the defensibility of our ecosystem in the long run.
Speaker 4: Now, let's turn to digital entertainment.
Speaker 4: In 2022, online games at the market were broadly impacted by ongoing moderation in user engagement and monetization.
Speaker 4: Our game is serious and similar trends.
Speaker 4: During the fourth quarter, the recent gap revenue was $949 million and the bookings were $544 million.
Speaker 4: Quarterly active users reached 486 million, which were in 4 million quarterly paying users. The paying user ratio and average revenue per user reminds the Medicaid stable quarter or quarter.
Speaker 4: For the full year of 2022, gas revenue was $3.9 billion with bookings at $2.8 billion.
Speaker 4: Despite the ongoing moderation, we remain highly focused on sustaining our current core game.
Speaker 4: We prioritize user engagement by offering better and more enjoyable experiences in our games.
Speaker 4: We have targeted initiatives for existing and returning users.
Speaker 4: We have also been streaming online game content to improve accessibility and gameplay for all users across diverse markets.
Speaker 4: In managing cost efficiency, we have comprehensively reviewed our publishing and self-development pipeline in line with our principle of doing that but doing it better.
Speaker 4: As a result, we have evapts and closed 30 projects and remain elected about high potential projects to better direct our resources.
Speaker 4: This year, we will focus on solidifying our strengths in core games and communities, while continuing to position ourselves to pursue long-term growth opportunities as they arise.
Speaker 4: Lastly, our digital financial services business.
Speaker 4: Simanis got revenue of $318 million in the fourth quarter of 2022.
Speaker 4: up 92% year on year. But the Justice EBITDA also turned positive for the fourth time at $76 million for the fourth quarter.
Speaker 4: The improvement in profitability was driven by both strong top-line growth and optimization of sales and marketing specs.
Speaker 4: For the full year of 2022, gap revenue was $1.2 billion, growing 160% year-on-year, and adjusted EBITDA loss was $229 million.
Speaker 4: As of the end of the fourth quarter, the total loans receivable on our balance sheet was $2.1 billion, net of allowance for credit losses of $239 million. Our C-Money business is a highly synergistic part.
Speaker 4: of our digital ecosystem.
Speaker 4: For example, our mobile release has resulted in lower transaction costs and more seamless transaction periods on Shaoki.
Speaker 4: Shopping, in turn, has allowed the mobile wallet to grow its user base and build user habits more efficiently.
Speaker 4: With Shopee, our private business is able to leverage a large captive user base, a highly relevant use case with significant scale.
Speaker 4: and the wealth of user insights for more effective underwriting.
Speaker 4: At the same time, Shockey benefits as consumers enjoy more flexible payment options, a successful credit, and greater affordability.
Speaker 4: We expect our digital insurance, wealth management and the best businesses to enjoy similar synergies with our e-commerce platform to serve the large, underserved communities in our market.
Speaker 4: We see the money as an important long-term growth engine for us.
Speaker 4: We will continue to prioritize the ecosystem strategy in pursuing this significant opportunity with efficiency and profitability.
Speaker 4: To conclude, our performance in the fourth quarter was an important demonstration of our ability to focus on profitability and deliver meaningful results.
This is a testament to the strength and resilience of our underlying business model and the execution capabilities of our team.
Although it is best microconcertion to continue to cloud the service in the near future.
the long-term potential of our businesses and the market remains vast. We plan to capture these opportunities while delivering strong and sustained shareholder returns over time.
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 the corresponding national analysis in today's press release.
and Boris has discussed some of our financial highlights.
So I will focus my comments on the other relevant metrics.
Overall, the total gap revenue increased 7% year-by-year to $3.5 billion in the first quarter and 25% year-by-year to $12.4 billion for the full year of 2022.
This was primary driven by the H.F.R.U. My education in Archaeomas and Digital Financial Services in N.A.
Partially offset by lower gas revenue in our digital entertainment system.
On e-commerce, our fourth-folder gap revenue of $2.1 billion included the gap market-place revenue of $1.8 billion, up 43% here and get a product revenue of $0.3 billion.
For the full year of 2022, GAAP revenue of $7.3 billion included GAAP Marketplace revenue of $6.2 billion.
up 52% year on year and get product revenue of $1.1 billion.
E-commerce adjusted if it got sent positive for the first time in the fourth quarter at $196 million.
The improvements were mainly from more targeted investments in our sales and marketing spending.
defense monetization and other optimization of cost structure. Adjusted IPVTA for the post-quarter was also positively impacted by approximately $80 million of approvals reversal.
resulting from changes in previous estimations of certain expenses as we make the management decision to strongly focus on cost efficiency.
2022 full year adjusted EBITDA loss improved by 34% year-to-year to $1.7 billion.
Digital entertainment bookings were $544 million in the fourth quarter and $2.8 billion for the full year of 2022.
Gap revenue was $949 in the fourth quarter and $3.90 for the full year of 2002.
Digital Entertainment adjusted Ibitao was $258 million in the fourth quarter and $1.3 million for the full year of 2022.
In the post quarter of 2022, we also recognized an impairment of goodwill charge of $178 million, pertaining to certain historical investments for the digital entertainment business.
Impairments of Google are excluded from segment-adjusted without calculation, as it is not reflective of the underlying trends in our current quarter operating performance.
Digital Financial Services gap revenue was up by 92% year-on-year to $380 million in the post quarter and up by 160% year-on-year to $1.2 billion for the full year of 2022.
This was mainly driven by the growth in our credit sentences.
Adjusted EBITDA turned positive for the first time at $76 million in the post-quoted, and adjusted EBITDA loss was $229 million for the full year of 2022. Improvement in the bottom line was driven by both strong top-line growth and strong top-line growth.
and optimization of sales and marketing spend.
As of end of the fourth quarter, total loans receivables was $2.1 billion. Net off allows for credit losses of $239.
Non-performing loans passed due by more than 90 days as a percentage of our total gross loans receivable declined from less than 4% in the third quarter to less than 2%, mainly due to the short-turning of loan write-off periods in a certain market from 180 days later.
to 120 days in the post-project.
based on our assessment of historical credit losses.
Without this change in right off-tiered, the ratio would be around 5%.
Returning to our consolidated numbers,
We recognize the net non-opening income of $35 million in the post quarter of 2022.
compared to a net non-altering loss of $71 million in the post quarter of 2021.
Our non-operating income for the post-quotient was primarily due to our $200 net gain from 2022 convertible form repurchase.
partially offset by investment losses recognized amidst lower valuation in broader markets.
For the full year, our net non-opting loss was $13 million compared to loss of $132 million for the full year of the other 2021.
We had net income tax credit of $43 million in the fourth quarter of 2022, compared to the net income tax expense of $106 million in the quarter of 2021.
The income tax credit was primarily due to recognition of deferred tax assets from certain tax losses carried forward from our e-commerce business.
partially offset by income tax incurred by our digital entertainment business.
We recognize the deferred tax asset as we assess that it is more likely than not that our future tax or income will be sufficient to allow the deferred tax asset to be utilized.
For the full year, our net income tax expense was $168 million compared to $333 million for the full year of 2021.
As a result, net income was $423 million in the fourth quarter of 2022 as compared to net loss of $616 million in the fourth quarter of 2021.
This included negative impacts of $178 million in payment of goodwill related to certain historical investments for the digital entertainment business, and a positive impact of $200 million in the scheme of that extinguishment.
as well as positive impact of approximately $130 million in approved reversal.
For the full year, net loss was $1.7 billion. With that, let me turn the call to Ming-Ju.
Thank you for that Tony. We are now ready to open the call for questions. As usual, our Group Chief Corporate Officer Yanjun Wang will lead this talk. Operator.
Thank you. We will now begin the question and answer session. To ask a question you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
To withdraw your question, please press star then 2. 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 question has been addressed.
At this time we'll pause momentarily to assemble our roster. Our first question comes from Pang Vit from Goldman Sachs. Please go ahead. Thank you very much for the opportunity and congratulations management team on
Two questions from me, please, on Shopee. Number one, can you please explain to us on the major drivers that led to this really fast turnaround in Shopee earnings this quarter? How did you manage to achieve this? Is it by way of the take rate increase and big cost cutting, or is there a deliberate attempt to cut off unprofitable GMV in order to achieve this?
especially threat from your social commerce player, will you make sure that you maintain your market share? And is there any color or soft guidance that you can provide us when it comes to growth? Thank you, Pan. In terms of the drivers for our quick turnaround,
For Shopee, I think as we shared in the earnings and forest message earlier on that it's on all fronts. In terms of top line, we managed to increase our tick rate and demand monetization across various types of revenue including the core marketplace revenue which are relative tomediaries by margin.
As well as other types of revenue and as our sellers investor more in the platform to grow with us and Also on the cost front and expense front We reduced sales marketing expense. If you noticed our sales marketing for Shopee
dropped more than 50% year on year, while GMB sustained and grew around seven percent on the constant currency basis year on year. That shows the resilience of our ecosystem and strong leadership and execution excellence.
of our team in managing this fast transition over a few months time to turn the platform into a positive bottom line, while still sustaining a strong leadership of the platform. At the same time, we also enjoyed...
savings in our R&D and G&A expenses, quarter on quarter. So on all funds we've been improving and also is well aligned with our previous...
target to turn quickly and decisively as we see macro-assertions in our markets. And that has always been our ability to execute on what we promise to the market and to our own teams.
As we shared, there has not been an easy quarter. There's a lot of hard work and we make sacrifices. We exit markets, we downsize operations. We walk through all these initiatives to decide which is core, which is less core, what we need to prioritize and what we need to deprioritize. There's a lot of work condensed in a few months time.
with a tremendous effort by the entire CTE and therefore we managed to achieve this. And I think this also gives us much better confidence to navigate whatever challenges that might come our way in the future.
Now in terms of outlook and balancing growth and profitability, as we shared also, our outlook for markets in the long run remains very strong.
because of its demographic features, the young growing population, deepen digital penetration,
visa v. offline retail, and also the economic growth potential of our region.
At the same time, we believe that all these efforts we are making in reducing the cost structure of our ecosystem and strengthening our ability to serve our users with better user experience will allow us to capture a larger share of the pie.
in the long run and further strengthen our market leadership, which is a dual goal in addition to profitability we have for all Asian markets.
So there is not a shift in our view about the long-term growth potential and focus of our business to capture this opportunity. In the near term, of course, we continue to see macro uncertainty headwinds to consumption.
So we will be adjusting and fine-tuning our tastes and operations carefully in a highly dynamic manner observe our markets from period to period and adjust accordingly
And therefore we also share that we may expect fluctuations in our performance and results in the near term from period to period. On the other hand, I think we have demonstrated clearly our ability to execute both growth and profitability. So in the long run, we are very focused on sustainable growth.
and further defending is solidifying our ecosystem.
Now in terms of a competitive landscape,
Our view is that in the long run, investment in the ecosystem is important, but investment is not just solely in the shape of financial investment, but more importantly in terms of operational capabilities, deep local operational capabilities. This is still a heavy operational...
system that we need to build for our online retail marketplace.
Therefore, there will always become competitors or other entrants into the market with different angles, different positioning, different advantages, etc.
But the beauty of e-commerce is that it requires a comprehensive set of skills and capabilities that need to be built over a relatively long period of time, especially in our markets where infrastructure are still very underdeveloped.
and especially in Southeast Asia where the markets are diverse.
and there are many individual markets. Collectively, these are large opportunities, but you have to conquer them one by one. And every market has its own environment, its own setting, its own requirements.
Therefore, we believe that we are unique in the sense that we are able to achieve strong market leadership, market by market across so many markets in Southeast Asia. And at the same time, quick turnaround on profitability, and that gives us confidence.
that we have more resources and capability, not just financially, but also operationally and managerially to defend our ecosystem against any future competition. I will remain humble and remain vigilant on competition.
Our next question comes from Alicia Yap from Citigroup. Please go ahead. Hi, thank you. Good evening, management. Congrats on the strong results and also thanks for taking my questions. I have two questions. First is I wanted to follow up on the previous questions.
For example, if there's any incremental margin improvement that you can achieve, then you would reinvest those incremental back to the business to drive faster growth because you already turned profitable on both, for example, the Shopee and the DFS. So I'm just wondering, is there a short-term margin target that you wanted to maintain?
and then any incremental that you can reinvest back to the business to drive faster growth. Second is on your digital finance services given you will be rolling out the digit banks initiatives soon will that affect your EBITDA.
profitability trends for 2023. Thank you. Thank you, Alicia. In terms of short-term margin targets,
So different business units are different. Of course, for Garena, our focus now is continuing to stabilize our user base and providing better experience to our users on our core games. At the same time, continuing to improve our profit margin.
I mean, at the more than 47%, even the margin, we believe we are still very high compared to the industry average. And we have shown ability to achieve very high margins for the business before and we'll continue to be very watching on margin closely.
to improve on efficiency. In terms of just your financial services, I think we, so it's very early stage, we just turn the profit bowl in the first quarter and we will continue to expand the overall, you know, the service offerings to our users.
so that we can reach a broader user base and offer more diversified services. But the focus on that business is more on the quality, long-term sustainability and trust building with our users. It's not to us at this stage a speed driven.
business. We believe building a solid foundation, leveraging the ecosystem it manages, it has being part of a sea ecosystem with strong synergies with Sharpie in particular is the most important thing at this stage. And for Sharpie, we believe building a solid foundation
It's going to be a market by market dynamic assessment. All Asian markets are currently even positive.
Now Brazil market, which is relatively new, we've seen significant profitability improvement while we continue to see growth, relatively stronger growth there compared to our Asia market. So I think it's going to be a highly dynamic process.
For each market at any period of time, we will assess the market condition, the natural user growth rate, the competitive landscape, our operational cost structure in that market and then we will assess what would be a reasonable profit margin we could achieve in that market versus the growth we want to achieve in a market.
As I said before, it's not necessarily a trade-off. If a business's growth is driven only by investment in sales marketing, it's not a good business we want to be in to begin with. And the fact that we're able to cut sales marketing by more than 50% while sustaining GMB.
already itself a strong testament of our ecosystem capability. So it doesn't necessarily go against each other. We don't necessarily think that growth and profitability need to be a trade-off. We do think that while some of our measures that we're focused on, such as cost structure improvement,
logistics, improvement, seller management, better consumer services, better buyer experience, all will improve the efficiency of any investment made into our ecosystem and also improve the profitability as well as growth. So a lot of it depends on the natural growth, the macro environment, the competitive landscape.
and our operational stage and views at any period of time in a market by market assessment. We don't have a single number for Shopee as a whole, but it's going to be a lot of bottom-up and dynamic assessments and a fun-tuned operation.
So that's the trick of the business, but also I think our range of strength in operating highly diversified markets and with different development strategies. I think overall we, in the long run of course, we believe in sustainable growth, which also makes profitable growth for the business. And we still see this as our strong growth engine.
Our next question comes from Piyush Chaudhry from HSBC. Please go ahead. Yeah, hi. Thanks for the opportunity and congratulations to the management on a strong set of results. Two questions. Firstly on Shopee.
Can you discuss GMV growth trends quarter on quarter in local currency, which markets are doing better?
and any color on the outlook for 23. How is customer behavior shaping with Shopee reducing promotions and shipping subsidy? I observed that your AOV has increased by around 22% in local currency terms. So what is driving that? Can you give some insights on your...
for 2023, which segments would you be investing, and what kind of investments we should expect in 2023 to strengthen your ecosystem. Thank you.
Thank you, Peeyush. In terms of GME growth trends, as we previously shared, that GME remains output for us. It's not the key KPI as we continue to focus on tightening our efficiency and... you
profitability as I seem to experience. We think it would generally naturally calm down the road. And in terms of a different market, generally speaking, Asia markets performed within our expectations. And Q4 remained a relatively strong market in terms of the...
the demand by our buyers and consumption patterns. However, we are aware of weakness, continued weakness in online physical consumption by users across various markets. And in particular, some of the markets like Malaysia.
also happen to enjoy the strongest and the most spectacular growth during the COVID. So this remains tough comparison. I think starting from 2093, we'll generally see some...
We'll see some natural goals hopefully, but on the other hand this is not something that we focus on. The macro uncertainty remains and there are too many factors affecting the underlying consumption pattern that as a market leader we will face and therefore it's not a target that we focus on.
Most of the KPACs in terms of the biggest ticket items are servers and then followed by some of the logistics related machinery such as sorting machines.
and then office, data analysis, et cetera. Now, as we pivot to a strong focus on efficiency, we also have been significantly reduced and tightening our KPACs investments. So you still...
We saw some KPAC spending in Q4 and may continue to see in Q1 early this year. But going forward, we expect at least in the immediate future, KPAC spending shouldn't be a significant part of our overall expenses. The reason that we might still have some...
higher number in Q4 and Q1 is because the earlier commitments as we shared in the previous quarter's earnings, some of the earlier commitments might arrive at a Q4 or Q1 timetable.
and that is not entirely within our control and that might affect our financials. So it's a timing factor. The next question comes from Thomas Chong from Jefferies. Please go ahead.
Hi, good evening. Now, thanks management for giving my questions. I have a question on the arena. Can you comment about the near term trend and the whole year outlook for the gaming business? Let's just look at some color about where do we have?
any new games that we should be anticipating for this year. And my second question is about the total headcounts. Can you make comments about the number of headcounts in 2022, and how we should think about 2023 if we would do the hiring? Thank you.
that we should be anticipating for this year. My second question is about the total headcounts. Can management comment about the number of headcounts in 2022, and how we should think about 2023 if we would do the hiring? Thank you. Thank you, Thomas. In terms of…
Now, if you're familiar with us, we don't discuss games that have not been publicly launched. And previously, we mentioned that we have some games such as On Dawn.
is being tested and might get released this year. And then also there are always games in the pipeline we are focused on. But also more importantly, the key focus in the near term, still on the core games and in particular Free Fire, that we want to...
turned into a strong evergreen franchise. Although we continue to see some weakening in-user trends in comparison to the significant growth achieved during the COVID time, we do believe that there is a core defensible user base we can achieve and it is a long-lasting franchise.
So there are a lot of things the team are currently doing and focusing on with the best talent and some of the top creative people we have to deliver better user experience, more accessible game package, more efficient downloading and also in terms of the...
the content that is more suitable for our users and more interesting to them even despite their many years of experience of playing this game So we think that's still the focus in the immediate future at the same time...
core competency across some of the core genres that we have strong experience in and continue to observe any opportunities that might arise in the market and pick up new skills and new trends along the way. So while game is from a financial perspective, we saw some with trends immediately.
We are from an organizational perspective as a whole team. We are very focused on game in the long run because it is the closest to the younger generation. And we already have a very strong and big platform, pre- CPUs to four cycles and DVDS which combine multiple device components.
It's a recent weakening. It's still one of the largest mobile games in the world. It was very large user base and highly active, spending a lot of time daily with us. We can do a lot of things with them and engage them much better and also deliver new and more content to them down the road.
So this is something that we are very much focused on and will not give up on. In terms of head-count management, we had some head-count exercises as we shared before. These are in relation to the operational changes we made.
such as market exits, project closures, dep prioritizing of initiatives, etc. We didn't have any particular target of a X percentage to cut for a wide number of teams. That's not how we do headcount exercises.
So I think we also believe that with the successful completion of the major changes that we undertook in the past few months, we believe under the current environment, absent any major shifts in our external conditions.
that our major changes are completed and we do not foresee major changes, more major changes in this year and in the foreseeable future.
Our next question comes from Zhang Xiao from Barclays. Please go ahead.
Thank you very much for taking my questions. I have two as well.
The first is about Brazil. Would you be able to talk about the auto growth year over year or quarter over quarter for Brazil and also you cut the per order loss pretty drastically which is great from like two bucks a year ago to now less than 50 cents. Could you talk about the drivers behind that and do you have any?
expectation for breakeven in Brazil. My second question is about take rate. Again, my calculation shows the take rate is now above 10% and you have made progress and take rate every single quarter over the last.
few years. I was wondering, do you have a target for continuing improvement for TEGER this year? Thank you very much.
Thank you, Zhang. In terms of the Brazil market, we managed to make significant gains in efficiency in our operations and also partly as a result of our scaling that there's a significant
efficiency gain naturally from scale. The drivers behind the fast reduction in order loss per order, similar to our other Asian markets came from both top line growth as well as cost improvements, in particular logistics costs that we are very focused operationally on reducing for our users.
so that we can solve more under-addressed segments profitably and sustainably down the road. This will be our focus in the near term. And while we don't give any projection or guidance on break-even time, we also do think our market in Brazil can also grow profitably.
over the long run will be another significant opportunity that we should be able to capture. And another thing is as we shared before, the reason we are very focused on cost structure in particular logistics is because we are trying to expand the profitable tent.
player in the market, capturing it in the vacant share of the pie in our view.
Now in terms of the take rate, we do believe there is still room for expansion on the take rate. Just like our view about every market, we'll do it in a measured, paced way, and with strong communication to our sellers as our platform grows.
and there are of course more services being provided to the Brazilian sellers and buyers in view of some of the infrastructural differences in the market. Therefore, we believe this is a strong market and we do focus on growing the market. The next question comes from Varun Ahuja from Credit Suisse. Please go ahead.
Thank you for the opportunity and congrats on turning profitable. I've got a few questions. First on the gaming side, if you look at your revenues right now adjusted for the bookings, it's just 6% above pre-pandemic level. And if you look at the user base, it's around 20%. So how should we think like most of the book?
Benefits from the pandemic seems to be have been down by the fourth quarter. Do you see more stabilization now on the gaming side? Or are you still more headwind in front of that? Second, sticking to the gaming side, if you can give some colors on the team strength on the R&D side, how many people are there on R&D side between new game development and versus on free fire?
And thirdly, again, on the gaming, any update on the right or first diffuser that you have with Tencent coming in this year. Lastly, on e-commerce, if you give some color, qualitative, or some numbers on HQ cost quarter-on-quarter, because we have been historically giving some commentary on the HQ cost for the e-commerce while this quarter there isn't much commentary.
how that cost has turned into the squad. Thank you. Thank you, Ron. In terms of gaming, I think it's still truly to tell. The trends, obviously, COVID is such an unprecedented event. Nobody has any data on it and also reopening together with inflation that had double headwinds, people's discretionary consumption power.
also further compounding the effects that we are seeing. And therefore, it's premature for us to project where the game trends are going to land. But we have seen mobile games with long shelf life, have seen also revival, and when they have the right content release.
and relationship with 10 cents are in the wild at the same time we have been focusing on concentrating on resources and shared earlier and the divesting projects and the prioritizing.
less promising initiatives. At the same time, we are moving people towards more focus on the core project and more promising ones down the road. Therefore, there are shifts in the staffing, but overall, we maintain a very strong R&D team. In terms of relationship with Tencent, also, there has not been...
Ram Ranjan Sharma from JP Morgan. Please go ahead.
Hi, good evening and thank you for the presentation. Two questions from my side. Firstly, on the cost side on Adis Adibida, have there been any severance costs accounted for in this period?
And with the cost optimization initiatives that you have done, how should we think of R&D and G&E costs in 2023 vs 2022?
Secondly, on the fintech side, the loan book is down from third quarter to fourth quarter.
Considering your comments around macro headwinds and which cloud's outlook, how should we think of the loan book growth going forward? Thank you.
Thank you, Rajan. Now, in terms of severance, the impact has not been very significant and I think it's comparable to the previous quarter and we don't deem it to be material. So there was no separate disclosure. We don't think it will also have any material impact on our WWE financial-
In terms of R&D and J&A costs in this year, we continue to focus on efficiency improvement and tightening and also make sure that our costs are efficient relative to the size of our platform and our business.
that we're not going to invest significantly to drive rapid growth and land grabbing. We're more focused on building a solid business with strong underwriting and a strong user base. We build them well and also diversify our offerings and also diversify our funds.
think that growth is a KPI for our team in terms of the loan book. Our KPI is more in terms of quality of the loan book and profitability of the business.
This concludes our question and answer session. I would like to turn the conference back over to Minju Song for any closing remarks. Thank you, operator, and thank you all for joining today's call. We very much look forward to speaking to all of you again next quarter. Thank you. The conference is now concluded.
Thank you for attending today's presentation. You may now disconnect.
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