Q3 2023 Sea Ltd Earnings Call

<unk> focus on one concrete tradeoffs for another.

As business conditions change, sometimes rapidly we need to decide which factor to prioritize for that period.

During the pandemic, we are focused on growth first ramping up rapidly to meet surging demand for E Commerce.

Despite the great operational difficulties created by Lockdowns.

This allowed us to achieve significant scale and a strong market leadership when growth was very efficient.

Subsequently capital became very expensive and less available.

So we made a rapid turn to achieve immediate profitability for sharpie as a first priority.

While sustaining the platform scale and market leadership.

In both cases, we believe we made the right decisions in response to the shifting business environment.

As we focus on long term profitability and adapt to changes in the business environment.

Some short term fluctuations in our results is inevitable.

However, our demonstrated ability to adapt quickly and execute major transitions effectively is a core strength for the long term success of our business.

We are now deploying these strengths to realize the next achieved in our operational focus in e-commerce.

In this period, we will prioritize investing in the business to increase our market share and further strengthening our market leadership.

We made this decision in view of three recent developments.

Yes.

First.

Our move towards self sufficiency in the profitability has significantly improved both our cash reserve and operational efficiency.

Our group cash position has increased by around $600 million from a year ago to more than seven 9 billion.

At the end of the third quarter.

This puts us in a strong position to pursue more competitive and the growth focused strategies.

While maintaining financial discipline, and a strong balance sheet over the long run.

Second.

The entrance of new players has intensified competition in our markets.

Competition may accelerate market share consolidation.

And when the market stabilize each remaining player will have sustainable profitability.

Investing in market share gain now will position us better with even stronger market leadership when that happens.

We thrive in a competitive environment.

We competed aggressively and effectively in our markets for years.

To emerge as the clear market leader from an underdog position.

We now have scale, a deep understanding of our markets and the strong localized execution across diverse geographies.

This gives us a wide competitive moat and we intend to grow it further.

Third.

Live streaming has become increasingly popular amongst seller buyer and the creator and our market.

This tailwind gives us a very good opportunity to build our e-commerce content ecosystem efficiently.

We believe live streaming e-commerce will become a sizable and appropriate the bulk part of our platform and extend our long term growth potential.

I want to emphasize that in making investment decisions, we are committed to maintaining a strong cash position.

Relying on external funding and investing within our means at a time and the pace of our choosing.

At the same time, given that e-commerce penetration remains low in most of our markets.

We as the market leader Hepa recent possibility to help grow the whole e-commerce ecosystem.

Shelby will remain committed to doing so in a healthy and sustainable way and driving value creation for all stakeholders.

I hope that this brief sharing on the thinking behind our decision has been helpful.

Being nimble and therefore are able to do the right thing at the right time remains a core strength and competitive advantage for our business.

With that I will you might be engine to discuss each business segment in more detail.

Thank you.

Let me now share more details on the recent performance of each business segments, beginning with <unk>.

<unk> discussed our long term objectives of our investments in E Commerce.

Mediate puny.

Secondly, our investment in looking at our market leadership as well as the scale and strength of our E Commerce comprehensive testing.

Testing.

France, we made strong progress in the past quarter.

In the third quarter growth in shopping users gross orders and GNP accelerated sequentially.

Average monthly active buyers growing 11% quarter on quarter.

<unk> increased order frequency and introduced by our retention.

As a result, our gross orders and GMB achieved 24% and 11% sequential growth respectively.

Further increasing our market share.

We also saw a material improvement in NPS scores broadly across the market quarter on quarter and year on year.

We believe this to be a good early indication of the effectiveness of our investments.

Another key driver of our solid growth during the third quarter with the ramp up of shopping light <unk>.

During this period, we have made a strong push into e-commerce live streaming and increased collaboration with a growing ecosystem of content creators and live streaming sellers.

We have also successfully acquired many new buyers and deepen our engagement with existing base.

For example in Indonesia, one out of five daily active users launched nice Jami in October on average.

With our efforts to help our sellers increase we saw a significant increase in their participation in shopping light.

Our number of average daily unique streamers total daily our street and the number of daily streams session for October all grew by more than three times compared to June.

The streamers are also becoming more engaged with the average stream duration per streamer, increasing by more than during the same period.

In Southeast Asia.

Steady orders from live streaming already reached more than 10% of the total order volume for October.

For our investments in life, Jamie we have a targeted focus on key categories, such as fashion and health and beauty.

These categories tend to benefit more from this format of user engagement and tend to enjoy higher margins.

This further strengthened our overall market leadership in these key marketplace categories.

Moreover, we have been focused on investment efficiency and driven fast improvement in unit economics.

This is well in line with our long term view the last Jimmy ecommerce Cannibal meaningful part of our platform and profitable.

As shared before we are consistently focused on reducing cost to serve for our e-commerce ecosystem.

We made strong progress in continuing to drive down logistics costs, while improving user experience.

Our platform logistic cost per order for our Asia market decreased by 17% year on year in the third quarter.

Decreases in logistics costs also contributed to the year on year decline in our value added services revenue.

We believe this to be an example of scale economics shared.

Where we drive down logistics cost with scale and pass the benefit of reduced shipping cost to our sellers and buyers.

This business model also serve to strengthen the competitive modes of our platform.

As we scale the <unk> platform. We also continue to expand the coverage of our logistics network across our markets to reach more sellers and buyers.

This will be done through better routing for more efficient and faster delivery further expanding our network of sorting centers and improving our last mile coverage.

During the third quarter, Brazil continued to enjoy strong growth at.

At the same time, our unit economics in Brazil improved.

We will continue to invest in category expansion and user acquisition in this market.

And we will take a balanced approach of investing in growth, while driving improvements in operational efficiency, especially in logistics.

Our results in Brazil for the quarter speak to our success on both fronts.

While we believe we already achieved sufficient scale and cost efficiency to be profitable in Brazil.

Our focus remains on capturing the growth opportunity there.

Looking to the fourth quarter, we will continue to invest in the holiday shopping season, which we believe is a good time to acquire users and gain market share and strengthen our content ecosystem.

Moving on to digital entertainment.

Third quarter <unk> bookings grew sequentially, while quarterly active user and adjusted EBITDA remained stable quarter on quarter. We view. These results positively and this was achieved despite schools reopening across a number of our key markets during the quarter.

We're happy to see that free fire maintained stable trends across both user and monetization metrics.

Many of our initiatives around improving the user experience this year such as reducing loading time have shown continued success. We have also further deepen user engagement. For example, we recently revamped <unk> Guild system to enhance the social experience for players with all of these efforts.

We saw a higher revival of churn to users and better user retention indeed.

Indeed, <unk> was the most downloaded mobile game in the third quarter globally. According to census Keller.

We're also pleased to see healthy trend for our portfolio of published games.

<unk> added fresh exciting content and enhanced the user experience for these games.

New content arena of Valor received very positive user feedback, resulting in a new peak of quarterly active users for the game and.

Another of our published games call of duty mobile achieved its highest quarterly bookings. This was a result of both our continued efforts to improve the game experience with players through better optimization and successful content collaboration.

We will continue to assess new development and publishing opportunities for garena.

Lastly, our digital financial services business.

In the third quarter see money deliver strong revenue and profit growth, mainly driven by our credit business, which grew steadily quarter on quarter.

As of the end of the third quarter, we had a total credit portfolio of two.

Two $9 billion growing 5% sequentially.

The portfolio included $2 $4 billion of gross loans receivable on our balance sheet.

The remaining approximately $5 billion principle amount of loan outstanding will from channeling arrangements.

Which is lending, but other financial institutions on our platform.

In terms of credit product type.

One $4 billion in a total credit portfolio or S. Pay later consumption loans, which are used to pay for transaction off the shopping platform.

The remaining balance mostly consisted of cash flows to shopping buyers and sellers.

The quality of our loan book stayed healthy.

Past due by more than 30 days and 90 days as a percentage of gross notes receivable on our balance sheet was five 2% at one 6% respectively.

Moving quarter on quarter.

We also continued to expand the funding sources.

In fact, the majority of the gross loan receivable on our balance sheet well funded by sources such as deposits in our banks and asset backed lending from third party financial institutions.

We will continue to further diversify our credit portfolio across markets and products, both on and off shopping platform and optimize our sources of funding to input costs and diversify risk.

How would you show bank offerings have made good progress during the quarter for example, our banks in Indonesia, the Philippines, and Singapore have seen strong user adoption of the direct debit services, where buyers can make payments on sharpie directly from their accounts with our banks.

The service has driven an acceleration in user acquisition for our banks and improved transactional experience shopping.

<unk> is also another example of our strong ecosystem synergies.

To sum up see money has become increasingly important pillar of our core businesses. It is contributing meaningfully towards both our topline and bottom line. It has enjoyed a healthy and improving risk profile and strong ecosystem synergies.

Undersea money, we will continue to strive to develop a more comprehensive products and services to meet the financial needs of our users across the markets.

With that I will invite Tony to discuss our financials.

Thank you Lee and thanks to everyone for joining the call.

Included detailed financial schedules together with the responding management analysis in today's press release.

I will focus my comments on the key metrics.

We'll see overall total GAAP revenue increased 5% year on year to $3 $2 billion.

This was primarily driven by the improved monetization in our E Commerce and digital financial services businesses.

Our group total adjusted EBITDA was $35 million compared to an adjusted EBITDA loss of $358 million in the third quarter of 2022.

Okay.

On E Commerce, our third quarter GAAP revenue of $2 $2 billion included GAAP marketplace revenue of $1 $9 million up 18% year on year.

<unk> product revenue of <unk> $3 billion.

Within the <unk> marketplace revenue core marketplace revenue, mainly consisting of transaction based fees and advertising revenues was $1 $3 billion.

Up 32% year on year as a result of both increases in advertisements uptake by sellers on our platform.

And commission rate.

Value added services revenue, mainly consisting of revenues related to logistics services with zero, plus $6 billion down 4% year on year.

E Commerce adjusted EBITDA loss was $346 million in the third quarter of 2023 compared to an adjusted EBITDA loss of $496 million in the third quarter of 2022.

Our Asia markets, we had an adjusted EBITDA loss of $306 million during the quarter.

Third to an adjusted EBITDA loss of $217 million in the third quarter of $2 22.

Our other markets.

Adjusted EBITDA loss was $40 million narrowing meaningfully from last year when losses were $279 million.

Contribution margin loss per order in Brazil improved by 91% year on year to reach 10%, reflecting better amortization and higher efficiency in our ecosystem.

Okay.

So entertainment bookings were $448 million and GAAP revenue was $592 million.

Adjusted EBITDA was $234 million compared to $239 million in the second quarter of 2023.

Digital financial services GAAP revenue was up by 37% year on year to $446 million.

Adjusted EBITDA was $166 million.

In the third quarter of 2000.

Q3, compared to an adjusted EBITDA loss of $68 million in the third quarter of 2022.

We recognized a net nonoperating income of $46 million in the third quarter of 2023.

Paired to a net nonoperating loss of $900 in the third quarter of 2010.

<unk> two.

The year on year improvement was mainly due to higher interest income in the third quarter of 2023.

We had a net income tax expense of $62 million in the third quarter of $2 23, compared to a net income tax expense of $65 million in the third quarter of 2022.

As a result net loss was $144 million in the third quarter of 2023 as compared to a net loss of $569 million in the third quarter of 2022.

With that let me turn the call to <unk>.

Thank you.

We're now ready to open the call for questions.

Okay.

Ladies and gentlemen, we are now opening.

Now opening the floor to <unk>.

<unk> and answer session, if you'd like to ask a question. Please press star and number one on your telephone keypad.

First question comes from <unk> <unk> from HSBC. Your line is now open.

Yeah, Hi.

Good evening management team and thanks for the opportunity three questions. Firstly in E. Commerce can you discuss how long we may continue to be loss, making for sharpie.

And what is the specific market share level or what are the kpis shopping may be aiming to achieve before spending starts to normalize.

In the digital Entertainment second segment.

Two quarter on quarter softness and their users.

Despite a new game launch and any insights on the outlook for the paid user base.

And lastly in the defense segment can you talk about the outlook for the lending growth.

Is there a scope for increasing lending user penetration or will it grow in line with trophy Jamie.

Thank you.

Thanks, Chris I think it's Chris here I'll take the.

E Commerce question first.

Regarding the.

Profitability for ecommerce as.

As we have demonstrated in the past few quarters, we have the capability to 10 businesses to breakeven quickly anytime if.

If we want to however, as far as ship tool to maximize our long term profitability, we will keep our organizational nimble and flexible and Jeff how are patients based on a dynamic market conditions. For example, if we look at.

Both the growth of the market, we look at the profitability for the current.

At Cortez, we also look at your market share dynamics in the market.

In terms of an investment plan, we look at both the general investment efficiencies and also the specific growth opportunities.

In each of our markets for example, if we look at the general investment emergency we look at will.

When we put some investment to market, we see the returns we wanted.

Do we see a market share gain for example, with a better unit economics compared to other competitors in the market.

For this specific opportunity.

It is our market one of the example, we mentioned earlier in the call was that the content that goes on building the lifetime opportunity.

In particular.

Where we see a very good time for us to invest to grow this part of the businesses at this particular time.

We targeted investment within <unk> just to.

Emphasize on that again.

We would like to maintain a strong cash positions at all time and not rely on external funding.

Also important to note that if we look at our reimbursement agencies.

In the past few months.

I think we have the corporate number as we shed, but I gave you and Tony earlier, but if you look at multiple months.

We do see the it is improving.

Month to month.

If you look at the trend, we see a clear trend for shopping to breakeven, while achieving our market share and content ecosystem building goals.

There are many keeps I would look at right.

Market share as well as the case Guy of course, but there.

There are many other things for example wholesale growth.

Our user base has the growth of our time spend although apps, our <unk> and also of course how much.

Profitability that we achieved during the months.

All of these are important kpis to look at rather than looking at market share only thank you.

Regarding the question on <unk>.

Yeah, Q on Q as something as he uses.

This is actually to us.

It's not the only indication.

<unk> seasonality are we starting to see in the team's performance.

And when we start to see seasonality is offer usually are not an indication of the stability in.

And the team performance and that's why we do not see it as a negative.

Mentioned on the call that in Q3, we saw a lot of school the opening and they're also not holidays, but that does affect the user engagement, but overall, we are very happy to see.

<unk> being user retention and also E.

The engagement of change to use it.

Mentioned earlier.

On the last question on the <unk>.

Credit for that.

In general we do see both.

Possibility that didnt grow on the <unk> and the penetration of credit in sharpie.

Of course that depends on quarter on quarter. It depends on the risk profile wanted to achieve and the growth that we want to control, but in general with growth on.

Both the shopping DNV and penetration on top of that just want to emphasize that our credit not only.

Two shopping ecosystem, we do have a good growth on the credit portfolio offset a softer ecosystem for example, the self pay channels offline.

We do see a good penetration for credit on the.

Offline Unfortunately pay channel as well, we do also have other scenario where developing over time.

Okay.

Our next question comes from Tom <unk> from Goldman Sachs.

Okay.

Okay.

Hi, Good evening management team and thank you very much for the opportunity three questions from me number one for E. Commerce can you discuss ways have been zachman went into in third quarter and what are you a heats. The outcome. You wanted what are your considerations on spending and GMB growth pocket for fourth quarter, especially with <unk>.

Considering some of the reasons that's when they told me that we see in Indonesia. That's question number one question number two regarding gaming can you discuss the latest.

We got to write off first with King agreement with Samsung.

Expire this month.

Domestically with new and how would that impact your pipeline that's cool.

<unk> for the Fintech segment can you discuss about the credit quality of your loan book, we continue to see credit loss provisioning training better every quarter will this be a new run rate or how should we think of this margin of this business.

And the long term.

Okay.

For the first question about the Q3 our investment.

There are two main areas that we're investing on number one to grow our market share is.

Especially in the core categories like fashion and health and beauty.

Second area, we are investing on into capture the market opportunity to grow the content ecosystem.

Specially with the last one first.

As far as share earlier, you know.

We always balance between the gross profitability and market share.

We believe that this is a right time to invest in term of looking at the market share growth.

We do see a good traction how investments reflected from the market share gains, even with a better economic compared to.

Our original competitors.

On the content side.

We believe this can be a profitable and also a very cyclone businesses for us.

Overtime.

If you look at the timing.

As shared in the previous answers, but we do see this is a good opportunity in terms of time window of opportunity to capture.

The market.

As has been a lot more educated.

Having investment from various parties in the past year.

For example, the the viewers who.

Who understand the concept of the sellers, who are who have the capability to offer the content and also the ecosystem players like the Mcs et cetera.

In the past few months.

Since we started.

Invest more into the area western very good growth in term of the adoption of our Latin services, both on the demand side on the supply side not only from the creators, but also from the sellers.

We also see on top of that.

Which is also important to highlight we.

We see a significant improvement on the economics of our lifetimes.

Of course, when we first started.

Building the ecosystem it takes a big cost to the buildup that we quickly see the the economics improve month to month.

Actually much better than we thought it before we started the program.

Overall I guess to answer your question, we are very happy with what we have achieved.

Essentially we achieve the market share again, as we wanted with much better.

Gnomic than we thought.

We also have seen good traction election.

The take rate has been faster than we thought.

For the <unk> services.

Hum.

To your question on the Q4 outlook.

We will continue to invest into the shopping season is a holiday shopping season as we all know Q4 in our market.

Generally the best time to to the best time of the year to acquire new users and gain market share and strengthen our content ecosystem.

If we look at in the past one half months, we have seen very good traction for example, I think we said today that.

By yesterday, especially Oh definitely love and we have achieved more than lumpy <unk>.

Which is a very good.

As a result.

<unk>.

Our better than our estimated especially it's over the weekend as well.

Yes, I think that's the question.

Our E Commerce site.

Regarding that question regarding right of first refusal with Qantas.

The agreement has been auto renewed on its existing terms.

Sure before we will continue to.

Work on strengthening our deep pipeline, both with our self developed games and publishing and at same time, we saw the strong trends.

We far and will continue to focus on making it a strong evergreen franchise.

I think for the credit quality.

We do see the credit quality of actually getting a bit better over the year.

However, I think we stay we still stay quite vigilant in terms of how the market will evolve and think in general we.

We are more on the conservative side in terms of matching our credit businesses to make sure that we always protect the oh.

Manta NPL well, while we're growing the portfolios.

We if you look forward.

We don't anticipate that the big fluctuation in terms of the credit quality in the short term, but of course, if you look longer term.

You know there are many macro condition will impact how the.

The credit quality and the MPR looks like but generally.

Generally we do believe that our current level is sustainable and our credit businesses will continue to grow well without sacrificing the quality.

In terms of our long term margins for credit business.

Of course this is still early stage for us as we mentioned before we continue to extend.

Credit portfolio costs upon us and across market and we also continue to expand our funding sources.

To reduce this.

Moshe a two hour.

Cash so overall I think it's a little that's got to continue to maintain a very healthy profit level.

I'll also.

Making sure that we have a healthy and consistent growth in our portfolio as well as.

That diversification of our product and funding sources.

Thank you.

Our next question comes from Alicia Yapp from Citigroup. Your line is now open.

Yeah.

Hi, Thank you good evening management. Thanks for taking my questions I have two questions first on E. Commerce I was hoping management group profile, you'll view as we look beyond <unk>.

<unk> and sort out what is the long term G M equal we could achieve.

And I think management would have previously shared our potential steady state off the long term EBITDA to the G N D margin guidance.

That change given the live streaming now being an increasing part of shopping is G. M B E.

Second question is on your sales and marketing spend.

I'm just wondering are you know the timeline or the inflection point that we are looking for or is that any sensitivity scenario that we will be a SaaS or the stickiness of the user engagement and purchasing behavior as related to the subsidy spend so any color you could provide.

You know on the sales and marketing spend outlook would be helpful. Thank you.

Hum.

For the long term GSV grows.

Generally we believe that we can continue to outgrow the market.

Given our competitive advantage.

Uh huh.

We see it from the Q3, we still see we still see quite a lot of new users being acquired we also see a more or less active users become more active and we also see that the.

Existing users increasing there.

What is sure our platform both shifting from other platform of course, but also shifting from the off line that the offline behaviors.

In the opening I think Floris mentioned that.

E Commerce penetration our market are still low.

We are still far away from the market saturation. So we believe that's still a sizable runway to go in terms of the long term <unk> growth there.

They're comparing to many developed market on ecommerce I think in South Asia. We're still are under developed in our Latin American market for example in Brazil.

I think the runway even further.

If you look at Intel, Brazil incoming order is still a lot less penetrated compared to anybody else has the Asia market.

Regarding the question on the long term possibilities there's.

There's no change to our previous abuse I think thank you mentioned lifetime if.

If you look at last year in particular.

We believe this is a public this overtime.

I think we have already explained the economics improve a lot in the past few months in my shedding the the last remark Oh, it's true that there is a higher content creation cost associated with this business.

However, there.

There is another aspect of this as well number one the product categories that does well on livestream tends to be high margin categories typically.

The room of the margin.

Still a bit better for those categories. So we have better monetization capabilities from the platform. That's one second one is typically livestream is also a good tool for us to drive more engagement with their buyers or potential buyers.

<unk> conversions and also drive more cells do.

During a particular product or testing, a new product or for the left overstock et cetera.

So it generally is a good channel for the seller to invest himself.

To to market that businesses I think all of them. All if you put everything together, we do believe that.

The e-commerce EBITDA potential that.

That we shared before our real estate for the sales and marketing spend.

Some of the timelines and inflection point and sickness amputations.

There are many aspects we look at the spend that we have and and of course, we look at the year retention. We look at the order growth we look at it again.

The the new year, when we look at the new acquisition, we look at D. C. L. Knees in term of the each new user bring their minute aspect. We're looking at regarding the timeline as Chad and the purpose answers we access when we look at the long term.

Investment on both what's the return on investment.

In general, but also on a particular opportunity that we would like to invest on.

And.

We evaluate both.

They did that.

Rose and profitability and market share in totality.

Rather than looking at one aspect of it.

I also want to add to that Chris mentioned is that Oh.

As we shared on the call here.

We looked at our current cohort of our new hires. We also you see he was very encouraging signs in terms of colonial for buyers and overall, we see better retention and higher order frequency I'll hop off.

During this period, we have demonstrated a very strong track record previously with.

During the past few years at least scale with the shopping platform when we do tend to profitability.

We were able to.

Is it has a very healthy profit novel.

Our platform, while maintaining the size of the platform and maintaining a user fee and that shows how do we have a very clear and strong competitive edge and capability in managing user growth and spending efficiency, yeah, just to add a little bit color on this so typically when we look at the users.

Each user we assess on orders.

<unk> on the profitability of the order and also we look at users on the totality of the pump itself the users.

And we look at not only now.

Behavior, but we also look at our past behavior. We also have a model to predict the future behaviors.

So at the order level all the user level we.

And we have the capability to be able to predict.

The potential margins, we can make from this BRCA user which user to drop with user to take and all of those will come together.

We try to monetize.

Our platform and this is.

Why has the Andrew mentioned last year, when we try to drive the top up liquidity. We can do it very quickly we know exactly what they'll pull the lever. It also helps us when we try to grow the platform again, which kind of user we want to bring to the platforms from the acquisition channel from from the early acquisition to the.

The early adoption, which one we want to drive them to to early adoption stage to the.

So the mature user stage and to the later stage.

And in all of those were a very detailed work that will put we're putting into the platform.

To make sure we manage our subsidies matched our.

Youth acquisition managed our C I and all of these things very carefully to maximize our efficiency of spending.

Thank you.

Our next question comes from <unk> Kalia from UBS. Your line is now open.

Alright, thank you for the opportunity.

Actually I have three questions. The first one is a bit more long term.

I guess you know looking at all the new entrants across several of your markets. How would you describe shop is competitive advantage against them and why do you think that advantage is sustainable in the long term.

The second question I had was with regards to the comments that you made about investments in logistics.

How should we think about the quantum of those investments I guess booked as it goes into your Capex, but presumably also I guess as you lease payments.

So I guess gershon for below EBITDA.

The last quick question.

I'd like to post infusion with Tencent.

New new one how long does this.

Before the next renewal comes in.

Yeah.

Let me start with the first question you mentioned in our businesses. There's always competition, it's very hard to you know it may be the only one of e-commerce.

Our solution in the market. However, we do see the intensive competition might vary across our market varies across the times.

The but as we share in the year.

Q3.

Observe that even with even in the market with the higher competition, we're able to gain market shares.

The key is investment efficiencies.

And this is what allowed us to gain market share why having better economics unit economics.

Our core competitive market they the.

The key for that is our competitive advantage are.

We have built over the past.

Many years.

Number one if you think about this would be.

Our scale as a clear market leader, we have a bigger scale.

That translates to a much better monetization capabilities and also better cost efficiencies of course.

Number two is the local leadership and operations teams.

We have a deep understanding of our market with a strong localized execution across a very diverse.

Market in our region.

Our core teams.

Many of the local talent, mostly homegrown with us in the past many years.

Compared to our original competitor with many extending their ships.

And almost all of the market.

It doesn't make a huge difference when we're coming to the nuanced decisions.

We are making to the market on the for example, the.

In my previous answers on the very detailed because youre, making on where to invest exactly which user to de prioritize with you that's part heights, which have already prioritize which kind of audit to de prioritize.

These are all details that says you have to make by our local.

<unk> team.

And the quality it doesn't make a difference of time goes.

Which translates to a better efficiencies of the investment.

The third thing is.

The E Commerce infrastructure, we have built over time in the past many years, it's not a one year what we've been doing this for many years I think Walt this is what he mentioned on the logistics.

We have seen very meaningful improvement in the cost per order.

In the past year are on logistics.

Drive the cost to serve down for our users. So we can translate we can translate the savings to our by Astellas.

Not only that if you look at our payment shopping pay has been.

Able to reduce the friction of payment in all market.

Hum.

Besides that shall be paid later.

Which is a great offerings that we offer to our bias in the platform. This is between the purchase conversions.

But as we observed like for example, I met some buyers are lost wags.

The week before actually.

That's who used to have the problem of not having enough cash.

Cash to pay for Cod's et cetera, all pay for the services.

Survey says they want to the product they want to buy on time.

As pay later will offer them to buy things on time, rather than missing it if they're not able to two two to use pay later, they will not be able to file on time.

And all those things helped us to build a competitive advantage for long terms and I and all of the three elements are not easily build is something that had been done in the park almost 10 years not only for Shelby before our entire citigroup.

The 222 to help us to have a better efficiencies.

On the investment compared to our.

Competitors.

The logic and logistic investments I think the.

It is not a short term I guess investment we're taking it if it's something I've been investing over the years for quite a long time.

But the degree of investment, it's probably not as huge as most people things I think it's it's a.

A lot of this is investing the networks of the people that we have built over time, a part of the Capex you can imagine is it again the hubs were put into place, but this is a general kind of improvement of the rent that we put it where we don't have we didn't buy the land, we typically random land, but we need to just converted to the.

Top of the hub and this is relatively small investments in total capex.

Another type of investment is.

The the sorting centers, we do have.

Fueling investment put into play to a two for the automatic sorting machines. So we can automate the sorting and rather than do it manually.

Other part of the investment would be that.

The trucks, but we weren't most of trucks. So it's a.

Rather kind of like a.

Less both on the Capex.

For this they also to clarify that the model logistics that we have it's not me.

When a capex heavy model, we're not looking to build mega warehouses.

Magnum machinery type of.

Logistics.

And that model our model is more the ability on large networks of a small sorting center small hubs into many many neighborhoods and snow.

The team's capability to extend on last mile coverage across a wider.

Network area covered by so much.

It's more Oh pet and for the past few years, who have already been consistently investing in logistics, which is a lot of the key reasons that.

Huh.

Up to the current position of the country to Houston logistics should be heat and also a key competitive advantage that we have.

Just onto just want to add on this a little bit.

Actually compared to many other lodges.

<unk> provide us if you look at the three parallel region.

Our capex being lower if you compare and there's a reason for that actually because we are able to predict our volume.

More accurate ways.

Imagine if you are a third party logistics.

Yeah, you have to forecast, what's your volume be in the next year.

Yeah or next two to three years in order to invest in.

Capex, it's extremely hot especially in our market.

For our own logistics, we have.

A good way, let's say to predict whats the demand.

You know a market not only for the next months not for next quarter, but in the next two to three years most likely.

As a consequence of that we're able to.

Capex things.

And not only capex actually it starts on the designing of our networks as Jeremy mentioned to design our network in a very flexible way to design a network a very optimized way after design that we're in a good way then you can.

Manage all capex and a much more efficient ways and every cut back can be put it to use right. After you personalize.

Rather than sometimes gets a rush, but all you have to capitalize on things. If there was something that you wish to be used I think in this aspect, but we have a.

A good advantage compared to the other offerings in the market. That's also why.

The the we can manage our cost down compared to the other offerings.

Regarding a question.

No firm agreement with Tencent It is automatically renewed every year unless terminated.

Arnie.

We may also publicly available.

Okay.

Yeah.

Okay.

Okay.

Our next question comes from the young I show from Barclays. Your line is now open.

Great. Thank you for taking my questions I have two questions and a follow up.

First question is since you pivoted a full growth a few months back it's great to see the G. N V. Now is growing year over year I was wondering could you talk about the linearity as you went through the quarter I suspect the momentum picked up during the quarter and could you talk about.

So far in Q4, how that JV growth momentum.

Has been that's any any comment on FX impact that'd be great. Second question is I think you had talked about live streaming obviously is a key focus for growth you mentioned, 10% G. N V. I wasn't sure is that for Indonesia is that for the whole region My.

My question is about your long term expectation as you know in countries like China Livestream means quite a 20% to 25% of total JV for the industry. What do you think the number could.

Could be or should it be for southeast Asia.

I don't know in a few years and where you are currently for the region and it related to that since the tick tock sort of shut down in Indonesia, what have you seen if anything the impact for your growth for your market share and lastly for the follow up I had is that you you meant.

And a couple of times that you had.

Committed to investing within your means.

And we're not raise any financing going forward.

And in Q3, you did a great job you grew your JV rodeo revenue, while making some profits for the group I was wondering is that sort of a breakeven.

Breakeven or a small profit is sort of the guardrail you men by.

Investing within your means thank you.

Yeah.

Let me start for us.

The in terms of the growth over the quarter.

I think.

Well, we don't have a detail.

Month to month, but the number of shares that are in general if you look at it year to year growth.

We do see a better year to year growth over the months of it.

That are for Q4, we do see the trend continues so.

So Paul.

We are right now we see they're broadly similar trend in terms of the you know.

The gross levels floating from.

Q3, two to Q4.

And the impact from Forex.

The generally I think the number we shared is India U S times, but if you take the.

The constant currencies, we actually grow better.

In quite a bit of market actually that is.

As a depreciating against U S dollar.

Operationally, if we take the constant currency, we grew better than the U S dollar.

Basis.

The in term of the license expenses.

Essentially I think mentioned in the earlier comments was for the region.

If you look forward I think the percentage of the penetration might be country by country. So if you put everything together it might not be fact, let's take a look if you think the biggest market like Indonesia or the way we look at things as we look at the content ecommerce as a cool content, including last.

Including videos actually.

Which is another part of the important part of the content.

The if you look at everything together.

The in Indonesia is a market, we do believe let's say some a range around 20% to 30% is a reasonable range we look at.

The public is still a little bit tough.

Lower than where you can see from China, but that has a reasonable reasonable side.

In the other market, maybe it's slightly lower than that but you don't know.

The it wouldn't be too too far but again you know this is a very early time.

That we are worried about the market and we see how it develops.

Generally where are more on the more positive side than the inactive sites in some of the potential for this.

Isn't it.

There are four.

For Indonesia.

Of course mathematically after diktat close the shop at all.

The market sure everybody's market share have grown at a bit of course, and we do see.

The good.

Good traction on the.

The sellers and.

Creators.

Who will join our platform I do believe they joined some other platform as well as.

They are looking for the growth opportunities.

So generally has been.

We have seen the behaviors.

The.

In terms of the breakeven.

Breakeven level I think we are happy.

Happy with.

With the fact that we bring about the group, but that are I think as far as far as mentioned very early.

We would like to balance between the growth market share and profitability and that's my.

We will have to make decisions based on how the market might condition moves.

Yeah.

Yeah.

You can't just do that time, we will be concluding our question and answer session. I would now like to turn the conference back over to Mr. Min Yu sung for any closing remarks.

Thank you all for joining today's call.

And speaking to all of you again next quarter. Thank you.

The conference has now concluded. Thank you for attending today's session. You may now disconnect.

[laughter].

Yeah.

Okay.

Yeah.

Yeah.

Thank you for attending today's session you may now disconnect.