Q1 2023 Sea Limited Earnings Call
[music].
Good day and welcome to the <unk> Ltd first quarter 2023 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.
<unk> recorded I would now like to turn the conference over to MS. Menchu song. Please go ahead.
Hello, everyone and welcome to <unk> first quarter earnings Conference call I'm in your song from Pes Group, Chief Corporate Officer Office.
Before we continue I would like to remind you that we may make forward looking statements with Titan her company subject to risks and uncertainties and may not be realized in the future for various reasons I stated in our press release.
Also this call includes the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows pardon me chip.
We used as a complement to our GAAP disclosures.
For a discussion of the use of non-GAAP financial measures and a reconciliation with of course, it's got measures. Please refer to the section on non-GAAP financial measures in our press release.
I have with me Sea's, Chairman and group Chief Executive Officer, Fourthly Group, Chief Financial Officer, Tony Hull, Our group, Chief Corporate Officer, Andrew way or.
Marcia will share the strategy and business updates operating highlights and financial performance for the first quarter of 2023.
This will be followed by Q&A session in which we welcome any questions you have with that let me turn the call over to floor.
Hello, everyone and thank you for joining today's call.
On May eight we celebrated our 14th birthday. It is Uh huh remind ourself, our humble beginning ended the culture of entrepreneurship creativity and adaptability that has made what we are today.
Also gives us the opportunity to reflect on the year gone by.
The last year.
For our team and I want to take this opportunity to thank them all.
All of our employees for their dedication and determination. They haven't shown I'm proud of how our team pivoted rapidly in difficult circumstances to achieve our goal of self sufficiency.
The weighted to do more with fewer resources, while never losing sight of our commitment to our user and it never letting our silver standard for our results for the quarter, a testament to their commitment and creativity.
I also want to take this opportunity to thank all of our investors and a partner for your ongoing support over the last 14 years.
The first quarter of 2023 was another strong quarter for us across our businesses. We are focused on maximizing operational efficiency and improving user experiences we continued to make meaningful progress on both fronts.
We deepened our commitment towards achieving strong cost of leadership for our ecosystem. We believe this will reinforce our structural advantages in driving profitable long term growth in our market.
As a result, we continue to see significant year on year improvement in profitability of both sharpie and the money. We also achieved positive total cash flow for the quarter, our cash cash equivalents short term investments and the other trust REIT investment increased by 258.
Millions of dollars from the previous quarter.
In addition, we made solid progress in elevating user experiences across our businesses at choppy, we're driving improvement in both logistics service level and the speed well in hunting you rented at the key point of the customer journey as a result user engagement deepened.
At the arena, we are working to optimize borrower at the back of gameplay and the game mechanic based on user feedback in shoring up players continue to enjoying a highly engaging and highly social experiences. They are associated with our game in the quarter on into April we started to see some initial signs.
Recovery in the active user based off our largest the game free fire.
The money, we are expanding the product offering and the feature we think each product. So that our users can enjoy a more comprehensive suite of products and services that meet their under their financial needs.
We are pleased with the progress we have made so far to strengthen the fundamentals of our business as we continue to fine tune, our operation and to navigate the near term macro uncertainties. We remain highly confident in the long term opportunities in our markets and our ability to capture those perfect Bali.
Now, let's discuss each business segment in more detail.
Beginning with E. Commerce, we are very pleased to report that choppy has delivered another strong quarter.
Despite the macro volatility shopping business remained resilient and we have made significant progress in deepening our competitive moat by strengthening our cost leadership and uplifting the user experience.
In the fourth quarter of 2023, GAAP revenue was $2 $1 billion up 36% year on year driven by deeper monetization.
Marketplace revenue increased by 54% year over year to $1.2 billion due to an increase in transaction based fees and advertising revenue.
Adjusted EBITDA was $208 million improving from a loss of $743 million from last year. The improvement was driven by increased monetization and a greater operating cost efficiency.
For our eastern market, we achieved adjusted EBITDA of $276 million during the quarter improving substantially from a loss of $408 million in the same period last year, our other market. The adjusted EBITDA loss was 8 million dollar narrowing.
Meaningfully from last year, when losses were $335 million.
Contribution margin loss per order in Brazil improved by 77% year on year to reach 34, reflecting better monetization and higher efficiency in our sales and marketing spend as we see significant opportunities in the market. We plan to continue to invest in capturing more of these.
Opportunities in Brazil.
Let me talk through a few specific areas, we focused on during the quarter. Firstly, we continue to enhance our logistics cost the leadership and the delivery experience by improving the capacity and the integration of our in house logistics arm, while continuing to work closely with our third party logistics partner.
We introduced the more automation to our delivery services. Thanks to this effort, we have managed to bring down average delivery time by more than a half a day across our markets, we think the fourth quarter.
We are also expanding the buyer coverage of our logistics services across our markets.
Our largest market, Indonesia, which consists of more than 10000 islands, 95% of our buyer base is now covered by our delivery services in Brazil, we already have eight distribution and the sorting center with the most recent expansion in northeast, Brazil, We have also been working to.
Expand our first and last mile hubs in the market in recent months, we opened 15, new hub to further drive thing around logistics capabilities.
In addition, we're looking carefully at every stage of the customer journey in improving our processes policies and the services to enhance the user experience.
We started to pilot on the spot returns in some markets, but better services for our buyers. We have also started handling return on behalf of some centered with our teams directly engaging with the buyer instead of putting the burden on the stellar this improves the experience for our buyer what kind of deal.
With our <unk> team and free up our sellers to focus on growing their business.
We are deepening our AI capabilities to drive a better user experience and operational efficiency AI helps us recommend to more relevant and personalized the offering to our user base.
That's driven higher order conversion as users discover products more quickly and easily we have also adopted lodge language model to improve our AI powered chatbot ability to understand the users in different languages and a return to most of the relevant solution given the contest this improved resolute.
Right and to help reduce wait times on top of that AI is being leveraged to more comprehensively green and the future items to complying with our marketplace policies.
More recently, we have further stepped up consumer protection efforts to ensure our buyers enjoying a safe reliable and hassle free experience for example in Singapore, We launched the shop say with Sharpie initiative toward adoption of the Consumers' Association of Singapore Thunder.
Management framework among other initiatives.
These and other related initiatives are vital in ensuring that we offer all of our buyer and the seller the best possible experience on sharpie as we enhance these key depreciates hurt we are attracting more buyer and the seller strengthening our overall ecosystem and the widening our competitive.
Moat.
Indeed, despite the more uncertain macro environment, we continue to diversify our local seller base and strengthen our relationship with other ecosystem participants such as Influencers.
In Brazil, we have reached more than 3 million registered local Brazilian centers on our platform, who now account for around 85% of our Brazil order.
We have also things strong traction in our shop. Your affiliate program as we worked to empower influencer and content creators to be part of our ecosystem. This program in my social media Influencers to promote our product sold on sharpie across our markets, we have more of them.
4 million registered important third participating our affiliate program to date in our largest market, Indonesia alder generated by our affiliate partner more than tripled in 2022.
Across our markets, we continue to see growth in the number of brands joining shopping mall and in the percentage contribution of <unk> from our more seller as the leader in our market. We have remained focused on creating value for our brand partner through our technology called capabilities recently.
We are not enhancements to shop at seller tools that help Brent track and understand key trends and the buyer behavior enhance consumer loyalty and to protect their IP rights.
This effort has further strengthened our relationships with Brent in talent, we partnered with the embassy of Italy, The Italian commercial office to bring making Italy brands closer to tie consumer.
In Vietnam, we have become the exclusive partner of the government of Canada in launching a campaign to bring high quality Canadian food products to the local consumer.
Looking ahead, while there may be near term fluctuations driven by the underlying market environment and our fine tuning our operations. We continue to focus on building up our long term structural advantages in our E. Commerce ecosystem. We believe this strategy will be key in unlocking.
<unk> future growth opportunities and making sure that we have a growing and a wide reaching positive impact across our local communities.
Now, let's discuss digital entertainment.
As previously shared gorilla continued to focus on improving game play and are creating a stronger community for our games first and foremost while there was some weakening in monetization mainly as a result of lower paying user ratio. We saw some initial signs of improvement.
Our quarterly active user base, which increased from 485 million last quarter to $492 million in the fourth quarter.
In April we also observed a positive user trends with free fire, achieving a new peak in monthly active users in the last eight months period, while we are mindful of seasonality. In fact, we are pleased to see this as a positive sign for free fire, which remains one of the largest mobile games in the world.
We will continue to monitor closely for trend going forward.
As we strengthen our efforts in enhancing gameplay and the user engagement. We have received positive responses from our user community on a number of initiatives, we launched to make the game experience smoother. These initiatives include game packaged site optimization and the gameplay.
Like reduction with the emphasis on devices, commonly used in our markets.
Our users have indicated that these recent changes are highly responsive to their feedback and a shared that they are enjoying a better gameplay experience as a result.
Our second largest game arena of Valor showed strong performance, especially during the lunar new year period. The game once again achieved a new peak in quarterly active user and the bookings after more than six years since its launch. We believe this is a further indication of our.
<unk> to engage users for the long term with solid monetization.
At the same time, our pipeline remains healthy and we will be launching some new titles in the coming months, we have opened pre registration for Don and open word survival game, which we will publish across southeast Asia in the coming months, we will also be publishing black cloud or mobile.
Collection RPG mobile title based on the popular anime series, the black clower across a number of markets globally.
Registration I expected to open within the first half the year. Following the conclusion of a close to better task held last year.
As with the other business segments, we have been very focused on enhancing our operations at arena with AI, a recurrent and capabilities have allowed us to improve the overall efficiency of our game operations.
For example, we are exploring opportunities to leverage AI to localize some of our game content and to further advance our operational capabilities for higher efficiency. We are confident that these initiatives combined with our strong track record in execution and the localization will help.
Drive the long term success of <unk>.
Lastly, moving onto our digital financial services business, we are enhancing our operations and the risk management capabilities.
Improving the user experience for the money. We have also been working to diversify our fintech product offering both on and off the shop platform and across different market to enhance user stickiness.
GAAP revenue was $413 million in the fourth quarter of 2023 up 75% year on year and adjusted EBITDA was $99 million during the quarter, a substantial improvement from a loss of $125 million in the fourth quarter of two.
<unk> thousand 22, this was driven by both strong top line growth and our ongoing effort to optimize costs and improve efficiency, particularly around sales and marketing expenses.
On digital wallet, we've continued to expand choppy pace use cases for instance, it recently became a payment method for our post services, our South East Asian market.
On credit as of the end of the fourth quarter of 2023, the total loans receivable on our balance sheet was $2 billion net of allowance for credit loss of $281 million non.
Nonperforming loans past due by more than 90 days as a percentage of our total gross loans receivable remained stable at around 2% during the quarter. We continued to diversify the sources of funding for our credit business. In addition to funding through our own bank deposits we have thing.
Increased volume founded through channeling, a regimen or electoral asset backed facilities with local and regional banks. We are working to further diversify our funding sources to broader financial investors currently a large part of our loan book is already funded by alternative source.
As opposed to cash on our balance sheet.
To further strengthen our risk management capabilities, we're using AI to help us to assess the proud of risk and the credit risk of our users as well as to enhance the <unk> parts of our product. This enables us to offer our financial product to more users while tightly.
Controlling risk.
We are also diversifying and in reaching our product offerings at the money, we piloted new in shrimp packed products and expanded use cases features and services in our banking App. This has provided even greater convenience and necessity to financial product for our youth.
In addition, we have further integrated many of these products into our broader ecosystem, making the user experience seamless across sharpie and see money.
We remain focused on evaluating opportunities in digital financial services across our market and in reaching our product and our service offerings. We are confident in <unk> long term potential and are very carefully managing the business amidst the macro uncertainties, we believe we're well positioned to cap.
A significant and underserved opportunities available in our markets.
To conclude our results for the quarter once again demonstrates the fundamental strength and the resilience of our business model and our ability to drive efficiency improvements, while maintaining our leadership position. We are confident that we can continue to create value for our ecosystem part.
Discipline as well as delivering long term growth and a sustainable return to our shareholders.
Separately as we noted in our press release earlier today that'd be MA has joined our board of directors as of May 15, and will no longer serve as the chief investment officer of seed capital debit has played an invaluable role as a member of our leadership team I would like to express our.
Sincere thanks to him for his contributions in this position I'm very glad that will continue to benefit from his expertise and experience in his new role as a member of our board.
With that our invite Tony to discuss our financials.
Thank you for it and thanks to everyone for joining the call.
We have included detailed financial schedules together with the corresponding management analysis in today's press release and Forest has discussed some of our financial highlights.
So I will focus my comments on the <unk>.
They're relevant metrics.
We will see overall total GAAP revenue increased 5% year on year to $3 billion.
This was primarily driven by the improved monetization in our E Commerce and digital financial service businesses, partially offset by lower GAAP revenue in our digital entertainment business.
Our E Commerce, our first quarter GAAP revenue of $2 1 billion included got marketplace revenue of $1 8 billion.
Up 46% year on year.
Product revenue of <unk> 2 billion.
We didn't get marketplace revenue core marketplace revenue, mainly consisting of transaction based fees and advertising revenues was $1 2 billion, whereas value added services revenue, mainly consisting of revenues related to logistics services was zero point something billion.
Dollars.
E Commerce, adjusted EBITDA was $208 million in the first quarter of 2023.
Baird to an adjusted EBITDA loss of $743 million in the first quarter of 2022.
Digital entertainment bookings were $462 million and GAAP revenue was $540 million.
Adjusted EBITDA was $230 million.
Digital financial services revenue was up by 75% year on year to $413 million. This was mainly driven by the growth in our credit business.
Adjusted EBITDA was $99 million in the first quarter of 2023.
Hedged to an adjusted EBITDA loss of $125 million in the first quarter of 2022.
Improvements in the bottom line was driven by both strong top line growth and optimization of sales and marketing spend.
We recognized a net nonoperating income of $23 million in the first quarter of 2023 compared to a net nonoperating loss of $6 million in the first quarter of 2022.
The higher net nonoperating income was mainly due to higher interest income from higher yields.
We had a net income tax expense of $62 million in the first quarter of 2023% compared to a net income tax expense of $82 million in the first quarter or without in 'twenty two.
As a result, net income was $87 million in the first quarter helps with all of that in 'twenty three as compared to a net loss of $580 million in the first quarter of 2022.
With that that may tend to call to remain true.
Thank you Paul Eisman, Tony we are now ready to open the call for a question as usual our group Chief Corporate Officer.
Operator.
Thank you we will now begin the question and answer session.
You asked me 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.
Tom will pause momentarily to assemble our roster.
Our first question comes from from Goldman Sachs. Please go ahead.
Good afternoon, everyone and thank you very much for the opportunity for questions from my side number one on sharpie can you provide more color on the current trends that you see a V C.
So without.
In the quarter.
Okay, Great trained in D. C. Now number two also related to shop.
You come in on its climate strategy.
Going into the rest of the year should.
Should we expect to see choppy.
Thank you Pearl mall into the later part.
We'll focus on expanding margins what type of approach.
And if we if.
If you plan to reinvest where will you spend money on.
Number three there will be related to gaming cross bookings the photo pressure do you see margins continuing to expand nicely once the currency for the division with the recent peak Monday.
I'll keep you a sample free fire are we already seeing some satellites trained for that game, what should we expect bottom line to bottom out.
Top line to bottom out.
And lastly for you I see my knee business why revenue continued to increase despite.
The one book lost me a quote unquote ask why do we also see the provision for credit losses on seed money increase quarter on quarter as well.
Okay.
Thank you Angela and good question.
So shabby.
Well, we don't disclose <unk> quarter on quarter.
Generally overall the trend has been.
So in terms of seasonality trends, we're seeing quarter on quarter.
Last year.
Yeah.
And we looked at them more details.
Different markets are Indonesia.
Michele Congrats on a strong performance in Asia.
Thailand, and Malaysia also.
Quote unquote itself.
We also see contingency tough comps.
That's one of the markets and in the rest of them.
In line with the overall seasonality trends.
So Asia actually what we saw last year.
But your question me he loves market for us.
As we mentioned.
Yeah.
Michelle.
We see significant opportunities there and we only for four years that Jim mentioned the Iranian market.
For us however, we have achieved a very significant scale.
One of the leading e-commerce players, especially on the local to local.
E Commerce.
Marketplace.
Mass market segment in that country.
And given our scale.
Efficiency will make it achieve there.
We believe we can play even anytime, but we may continue to choose to invest.
In a market to capture the significant long term opportunities.
Okay.
So that's a quick to capture.
<unk> trends.
So the strategies are for.
For E Commerce.
As we shared before.
I think the long term opportunities for both our Asian market.
It sounds like an American markets they are significant given that.
Sure.
Demographic features.
She'll penetration.
Uh huh.
Infrastructure.
Oh, sorry offline retail.
It gives more opportunity for additional penetration to go even further beyond what we might have seen some uptick in that.
Market.
Early stage in terms of that.
E Commerce penetration in these markets.
Oh It was a lot more services that we can provide to especially the underserved mass market.
Our model has shown this strong and indeed advantageous E targeting so.
We continue to invest in the long term growth.
Yes.
And the investment discipline.
Both in terms of the quality of the.
User experiences and services.
We shared on the call here Olivier Superstore on.
I mean larger assortment.
Which in partnership with brand and Smes.
And we better search and discovery experience more personalized shopping experience and the customer services enabled by AI and other technologies.
We try and sand logistics experience.
To further bring a convenience to our buyers.
And now on the zinc at the same time they also fitness.
The ecosystem.
And we have many many times I've shared before that.
But they're much walking towards continue to bring down the cost of the trial.
Ecosystem in terms of logistics payments and other infrastructure and that has been a very clear focus for us.
In terms of the long term.
Ecosystem.
<unk> and we also believe that this will allow us to capture and strengthen our long term competitive moat.
In the immediate term, but in terms of our investment in a market and growth trends you might see a.
There's a lot will depend.
Market condition, a market by market and period to period, and we mean, we remain very nimble and very focused.
The bottom up perspective, looking at each market conditions.
Both maximal use of behavior competitive landscape.
And other trends and seasonality and holiday season et cetera, and also from a peer to peer in terms just a week by week day by day review of the markets to see well be the best.
Investment.
Oh, yes, we should be making.
So overall I think the long term execution direction. They are clear and short term. We also closely monitor the market I think our past track record has shown that we can execute well and are.
Managing bottom line at the same time as well so that our competitive strength.
We believe.
In terms of the trend.
We are very pleased to see that Oh, there's some initial sign.
Culturally app today use yet.
Increased quarter on quarter, Oh, Keene and get in particular for our fleet via our largest net gain.
And that increase was also partly across different markets and not specific to any particular single market.
This is oh.
They are not quite in line with our excellence and direction of our focus recently to cause you to improve and enhance our user experience to retain and attract users trucking and this had been also kristian talvitie.
In the past periods and we are pleased to see some initial results.
Continue to observe the trend going forward I'm over him. He also.
You mentioned that Oh, the second largest game arena Zeller.
Also enjoyed a very strong performance.
The past quarter.
That was a new high yeah, both in terms of quarterly active user base and bookings.
So all in all we are pleased with the results so far and we will continue to work towards that direction.
Improving user experience and monetization I think it's a it's not an immediate priority. However, our margin remained EBITDA margin remained high.
Pat to industry standards, and actually improved quarter on quarter, we will remain very disciplined.
In terms of the bottom line and efficiency of any investment into that.
The SEC settlement.
And we also mentioned.
Our new launches that may come up.
The coming months and we also will closely observe the trends in dosing beams.
In terms of IFC money.
As we shared on our call.
We have been.
Diversifying.
It's just about funding.
And in collaboration with third party financial institution to fund wells after the loan book and therefore, you're obsessed revenue increase and she exceed the loan book increased.
Okay.
In terms of the provisions increase.
I think the position.
Similar trends quarter on quarter.
If you look at young here does the product sets that extended in terms of the features.
Tenure.
Type stuff.
Loans, we offer so they're shifting E product as well as our loan book expansion. So there is some <expletive> kept but overall if you look at Oh, a M. P. L. A.
So it remains a very stable and general.
Yeah.
Our next question comes from payoffs Chowdhry from HSBC. Please go ahead.
Yeah.
Yeah, Hi, good evening and thanks for the call. Unfortunately to ask questions. Congratulations on good set of numbers.
Two questions Firstly on the E Commerce could you tell us on the industry GMB growth trends across your markets in Asia, and Brazil has it started to improve in Q2, so far.
If not then when do you expect acceleration in growth and App.
And just to get some color on the competitive environment.
What's the impact of pick talk and how youre trying to defend the market share there.
Secondly on the logistics.
What percentage of them. If you can talk about you'll start to deal with this.
What percentage of orders are fulfilled by shopping express and orders fulfilled within 24 hours is there a target that you have in mind.
And totally you know companies generating free cash flow now so what would be your capital allocation priorities for growth investments would you restart growth investment in Brazil and then.
I'm not in the medical market or what.
What level, we will make good that confidence to restart growth investments. Thank you.
Yeah. Thank you Piyush.
Tips of our industry trends given shoppe, he's got to that size.
We believe generally industry trends.
In line with our trends.
And we've been observing for our own E Commerce platform as I shared earlier and Oh, it's hard to say what.
We're gonna see immediately touched on the one hand, I think our economies in South East Asia.
Imagine a resilient so far yeah.
And Oh, we haven't seen a wilder inflation trends its still ongoing.
He hasn't caused major disruptions to the economy.
And and at the same time.
The reopening trends.
On the other hand, there is still a global macro uncertainty and many of our economies are export driven which may be exposed to a risk in global uncertainties in global economies as well.
<unk>.
We have to observe ongoing trends closely it's a market by market and appeal is that purely assessments.
I shared earlier some markets for example, Indonesia could you tell us which is also the largest market.
<unk> performed well.
Well I mean.
I read to the strong and some other markets it might be bouillon hit tough comps.
And then the other markets, where we saw some pick up.
The opening is that right now.
On the other hand, it's still early to tell so we'll again.
Again, our strategy is we remain very.
Nimble and flexible.
The market very closely and just that's been our strength being very close to each market and having operational strengths.
Across all.
Oh markets allow us to have much more flexibility.
To invest in peer to peer market.
And from market to market based.
Based on what makes the most sense at any particular point in time in that market and that will be our.
Immediate focus going forward.
But not too so kinds of investments and I shared that it's going to be in all the infrastructure as I mentioned when people think about investments sometimes people oversight.
Besides subsidies of shipping subsidies I don't think that's it.
Fair characterization of silicones of investment, but rather our focus will be on investing in the long term.
Our infrastructure that will provide.
Provide better services to our customers and the lower the cost of the ecosystem that will significantly expand the profitable Tam of ecommerce region and also built a much stronger competitive moat.
I'm sorry.
Yeah in terms of the sharpie.
<unk> Oh, we again did you say, hey, we adopt and their programmatic approach to it.
We looked at it based on the user experience and a cost of service to users. If we can do it in any market them more effectively efficiently and any point of time ourselves we.
We will allocate more to Oh logistics services don't get a hint in markets with a C. P. L which is being competitive we are happy very to allocate also watch a three P. L. A and it's a highly dynamic process, we don't have a particular.
K P. Idaho, we must target and it's all based upon the.
The quality of services and cost of services to our users and to continue to optimize over the long run.
They came to work with our audit partners.
Happy to work with us.
Pumps.
And in terms of a cease fire.
Free cash flow generation and allocation as I mentioned.
Investment across different markets are actually again, it's going to be a market by market assessment <unk> long term potential across different markets.
Oh quite strong and therefore.
We won't say Oh, we deploy try in any market and prioritize any other market, obviously short tons, Brazil intervention of younger market for us as I shared that we'd be in South East Asia for doing ecommerce will close to a decade and we only there for about four years, but even within four years, we achieved a strong.
Position and scale significant enough scale to allow us to break even.
We choose to do so that is a very good position to the ink, but you also want to continue to.
So cause on capturing loved and market opportunities, there, which has a very large underserved user shipment and is that even compared to south East Asia. We believe ecommerce, yes, that's underpenetrated our English.
And we have a unique advantage coming from serving underserved segments and mass market segments in southeast Asia dealing with highly complex infrastructure and regulatory.
You know challenges and we believe that gives us that's the past, but well also continue to focus on.
Similar sentiment in Brazil, and we shared on the earnings call that we opened in Boston tests, and sorting hubs as well as some other.
The last mile hubs closer to all bio communities, especially in some of the more underpenetrated regions our English.
So we believe there's significant opportunity there, but again early investment and cash flow.
In terms of investing the cash flow we will remain.
Vigilant and disciplined and highly focused on the cost efficiency because as I mentioned again again cost of the ecosystem and cost of some of our older consumers is a key focus of our operations and we will continue to improve on that.
Our next question comes from Alicia Yapp from Citigroup. Please go ahead.
Hello, Hi, Yeah. Good evening, thanks for taking my questions.
So I have a couple of quick ones. One is a follow up on the quarterly active user growth.
Do you think the trend that we saw this quarter will continue into the future quarter and if we can't get under debate.
You know qualitative comment in terms of the profile of these.
Sure and it's driven by our effective marketing campaign or is it more driven by your content update.
And then second question I think.
We still wanted to get more comfortable and defense about the sustainable EBITDA margin and also how you would balance between the invest strategically to drive top line growth. While also maintaining a certain you know expenses level and the module.
So what you do can you lap right now what's your strategy over that will be helpful. Thank you.
Yeah.
Yeah. Thank you Alicia.
In terms of the trends for free fire I think then and looking at the active user base Oh, Yeah. We saw some initial signs, but also as I mentioned, we continue to oculus.
<unk>, well, which we hope to stay.
Stabilize also the active user base and yet as soon as we can as long as that's the effort that the team.
Team is also focused on.
In terms of the monetization are again, just has not been our immediate focus but as I shared before that usually are awful large da you game. Once once you get a notch user base and monetization usually falls and in our past.
We have shown very strong capability in many monetizing.
No question, a different user segments and affiliates.
And then in terms of the.
User profile and whats driving but a decent initial positive signs. So I think they'll use of pools that hasnt really changed much.
The same target users. So we have originally because before it is a very massive P. A M. King it's involved us largest AR games and mobile games in the world.
The U S. So it's a very Bonnie talk any general population.
And enjoyed by the highly diverse communities.
And so in terms of the the way we target them as we should Oh, it's by focusing on better user engagement user experience community ability.
And response being responding to user feedback on features et cetera, as opposed to through marketing efforts as you can see all the EBITDA margin actually hasn't really changed that much and actually improved a little bit of quote unquote. It so well.
We're very careful about the sustainability of our long term engagement with users and all the efforts are being directed at.
Making free fire into a long term franchise and a large syndicate of can platform on which we can build on more new content and attract more users well. We think there's a very good chance. This can be made into a strong evergreen games in.
And in terms of the.
EBITDA margin for E Commerce, I think that you know.
As I shared them.
Why would not immediately targeting to push the envelope to maximize margin. We think there's a you know as a.
Leading marketplace player any so the.
The module you generally see in different markets, leading marketplace player can also be achievable, but by us and in different markets. We have seen you know even at this early stage, where we just tend to profitable Oh, yeah, a couple of quarters, we have seen there.
Healthy, but you know EBITDA or revenue margin now even to tourists like in more than a.
30, 40% in some of the market.
So that is oh, the market is not a the biggest concern for us and if we want to achieve high margin I think it's doable.
The question is how do we maximize the launch of profitability and maximize the opportunity we can capture in this region.
All markets, because we really country to see significant opportunity. So our focus is on the long term and not immediate in that margin expansion.
The the support US healthy margin also give us more resources to allocate across different markets and from period to period.
Into investing in different markets and to even further strengthen our ecosystem as I shared those for our long term goals of expanding the profitable 10 and build strengthening follow competitive volt and also in the near term to respond to market dynamics.
When in each market. So again, we're not particularly worried about the margin I think it's more about how are we building a healthy long term ecosystem and that will maximize the long term possible.
Our business.
Our next question comes from Jim Shaw from Barclays. Please go ahead.
Thank you very much for taking my questions.
First I want to make sure I heard you correctly I've seen earlier.
Are you measuring the G N V for Q1 this year.
Consistent with Q1 last year.
Did you mean by U S dollar terms or by constant currency could you also talk about the FX impact on your JV or revenue for this quarter.
And anything you can share about the nimble to orders for both Asia, and Brazil, and lastly income into loyal headquarter costs, both year over year or quarter over quarter anything even qualitatively would be great. Thank you.
Okay.
Thank you Joe.
In terms of a JV as I mentioned, though we don't discuss that.
Caught on Florida, Jimmy numbers, specifically and what I mentioned was that the.
Trend was observing the general trend.
Q U I obsess slide this quarter versus last quarter is in line.
What we observed.
In Q1 last year bushes.
Q4 2021.
And in terms of Forex impact, we disclosed that Oh, so all our guests wherever you are in e-commerce.
On the.
Constant currency basis, the revenue would be up a 41, 7% young here and all USD basis up 36, 3% yeah. Yeah. So I think that probably gives you a sense of what are the Forex impact is in terms about order number again, we don't just.
Got no specific order numbers quote on Florida.
But you can assume that our basket size doesn't change dramatically quarter on quarter anyway. So roughly in line with G. N V trends.
In terms of HQ costs for the quarter.
We continue to see improvement on the cost and of course adjusting for any one time accrual reversal that we had in the previous quarter.
Yeah.
Our next question comes from Varoom, Oh from Credit Suisse. Please go ahead.
Yeah, Hi management, thanks for the opportunity I've got a quick question first on the gaming side.
I didn't update on the.
So, let's just use them so it's coming up for that.
So how should we think about the Oh.
Agreement and its impact, but then too.
Currently.
The sticking to good even on the margin side, it looks like you're going to launch something.
Gains in the second half.
So how should we think about margins given you may need to invest on marketing of food feed.
So it should be 50% that conditions in the quarter.
Third on the ecommerce side Oh.
I kind of mentioned earlier that you are not doing free cash flow positive.
Overall, the company level, so what showed up.
[noise] aspiration on the overall Latin America markets I understand you're still operating in some of those countries.
Unexplored basis, we'll see.
How should we think about it are you going to reinvest in those boxes.
Got back, let's see I'm, sorry got Shmuel. So how should we think about the world that didn't have any confusion given all that you've done the free cash flow positive.
Lastly, I'm not too sure if you've given that number what is the total loan book size.
We did this on your own balance sheet, but what is the.
Thank you.
Yes.
Yeah. Thank you in Ireland and in terms of Ah I believe your first question is regarding all our agreement commercial agreement with Tencent, Florida game publishing.
And I think we mentioned before.
It's a oh total renewal unless either party terminates at our we are not aware of any changing circumstances and then three minutes a publicly filed since you can refer to the times there and in terms of the margin.
Florida, a new game launches.
No.
I think there will be some initial marketing spend yet, but again, we will remain a highly disciplined and Jeff will be commensurate with the performance of the game overall.
And given me a touch on that.
So we do not at this point anticipate a major impact Makati because after the marketing spend.
Related to the new game launch.
And in terms of the.
La Quinta plans for it choppy.
Our focus is still on Brazil, which is our largest market in the region and our where we already established a significant scale and leadership in the segment that we target and with respect to and then Brazil, obviously is.
Our local commerce market for us and it's predominantly local sellers selling to local buyers on our platform for the other.
Latam markets that do we still retain some presence we don't have an immediate app plant and to some degree.
Aggressively grow are those markets and two wheel remain efficient and about those market at this time.
I think all our loan book size.
Disclosed is that the amount on our balance sheet and therefore.
You know it doesn't receptor.
The entire notebook size, but you can refer to.
The pastor Scotia for reference.
And we don't we don't anticipate a significant increase.
The increase in loan book size.
But quarter on quarter immediately given as I shared before overall approach to the credit business is focused.
<unk> risk management.
Putting up high resilience underwriting capabilities and also better user experiences.
Our next question comes from Copel Gore from Bernstein. Please go ahead.
Hi, Thanks, a lot sort of opportunity are just very critical of three small questions on gaming you mentioned about some new games in the second half of the year.
Oh, I don't know whether I missed out on the command, but are you talking about self developed games or is it more related with publishing for others. That's the first question. The second thing is you know I'm sort of for whatever reason not very showed around the strategy for e-commerce and growth towards this profitability, but I do appreciate that a lot of plumbing.
<unk> had been made in this call.
But what I want what I wanted to understand is that.
The focus will be more centered around sustenance of market share.
And defending share or the focus would probably be.
At some stage about stimulating the market to deliver growth and deliver market share growth.
The third question for me is on Fintech, Oh, what do we see from here on the contribution from Singapore did your bank given that it's still in the early stages.
But as I understand a lot of your regulatory capital requirements would kick in at what time.
So is it something which is a priority in terms of the focus area.
Yeah.
Yeah. Thank you.
The new games. So we mentioned are in our pipeline are don't party published game for us and not soft enough.
In terms of the sharpie strategy, so close ferocious profitability.
As I mentioned earlier.
I think at this point and its longer term, we think we will continue to invest in the long term growth opportunities in a profitable and sustainable.
Oh wait that Oh, so hopefully we can extend a pocket with him.
And while all regions are focusing on user experience and cost to service.
It's a short time, but.
The in terms of the profitability versus growth again.
You already achieved profitability, we're not focused on trying to maximize profitably every market every period.
Hope to see all closely observing the market trends.
And allocates resources, and nimbly and adapt to the local comp market condition from period to period and from market to market, it's going to be a very bottom up decision making.
And we are doing so to.
Again, strengthen our market leadership and more importantly.
For the long run to the extent that total profitable 10 a M.
And you know market as well as a strong market leader and I think that's a that's a significant opportunity that we really see them.
And the terms of the Mary Bank.
Singapore, It's still very early stage and so one of them, having any material contribution to topline or bottom line.
In the interest of time. This concludes our question and answer session I would like to turn the conference back over to Mitch you saw for any closing remarks.
I think you and I. Thank you all for joining today's call I look forward to speaking to all of you again next quarter.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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