Q2 2024 Sea Ltd Earnings Call

Operator: Good morning and good evening to all and welcome to the Sea Limited second quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. For operator assistance throughout the call, please press star zero.

Good morning, and good evening to you all and welcome to the Sea Limited second quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad if.

Speaker Change: If you would like to withdraw your question Press Star one again.

Speaker Change: For operator assistance throughout the call. Please press star Zero, and finally, I would like to advise all participants that this call is being recorded thank you.

Operator: And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Mr. M. C. Koh to begin the conference. Please go ahead.

Speaker Change: I'd now like to welcome Mr. M. C code to begin the conference. Please go ahead.

Speaker Change: Okay.

Miang Koh: Hello everyone, and welcome to SEAS Tool 24 Second Quarter Earnings Conference Call. I am MC, SEAS Investor Relations Director. On this call, we may make forward-looking statements, are inherently subject to risk and uncertainties and may not be realised in the future for various reasons, as 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 of our major businesses when used as a complement to our GAAP disclosures. For a discussion of the use of non-GAAP financial measures and reconciliation of the closest GAAP measures, please refer to the section on non-GAAP financial measures in our press.

Speaker Change: Hello, everyone and welcome to <unk>, two or 24 second quarter earnings Conference call.

M. C: M C.

M. C: Investor Relations director.

Speaker Change: On this call we may make forward looking statements, which are inherently subject to risks and uncertainties and may not be realized in the future for privacy reasons as stated in our.

M. C: Our press release.

Also this call includes a discussion of certain non-GAAP financial measures such as adjusted EBITDA.

M. C: 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.

M. C: For a discussion of the use of non-GAAP financial measures and reconciliations to the closest GAAP measures. Please refer to the section non-GAAP financial measures.

M. C: Press released.

Miang Koh: I have with me, CE's Chairman and Chief Executive Officer, Forrest Lee. President Chris Feng, and Chief Financial Officer Tony Ho. Our Mashroom will share strategy and business updates. Operating highlights and financial performance for the second quarter of 2024. This will be followed by a Q&A session in which we welcome any questions you have. With that, let me turn the call over to Forest.

Forrest Li: I have with me Sea's, Chairman and Chief Executive Officer fall asleep.

Christopher: Precedent Christopher.

Christopher: And Chief Financial Officer, Tony.

Christopher: All national with share strategy and business updates.

Christopher: Operating highlights and financial performance for the second quarter of 224.

Christopher: This will be followed by a Q&A session in which we would welcome any questions you have with.

Christopher: With that let me turn the call over to force.

Forrest Lee: Hello everyone, and thank you for joining today's call. I'm happy to report that it has been a solid quarter for us, with our strong momentum from Q1 continuing into Q2. All three of our businesses have shown both strong growth and higher profitability. Before I dive into each business results, I wanted to share some observations about our Southeast Asia market. Generally, retail and consumer spending trends in the region have remained healthy, with domestic consumption continuing to be a main driver of economic performance in many markets.

Tony: Hello, everyone and thank you for joining today's call.

Speaker Change: I'm happy to report that it has been a solid quarter for us with our strong momentum from Q1 continuing into Q2.

Speaker Change: All three of our businesses have shown both strong growth and higher profitability.

Speaker Change: Before I dive into each business results I wanted to share some observations of our South East Asia market.

Speaker Change: January retail and consumer spending trends in the region have remained healthy.

Speaker Change: With domestic consumption continuing to be a main driver of the economy. The economy performance in many markets.

Forrest Lee: This sets a very strong micro foundation for our e-commerce business. We are happy with Shopee's market share in Southeast Asia and our sizable lead over our peers in the region. We are seeing more market share consolidation and an industry-wide take rate increase. We believe this will move the industry toward profitability and sustainability, and we welcome this trend. With the strong results delivered in the first half and our outlook for the rest of the year, we expect that Shopee will become an adjusted EBITDA positive from the third quarter. We are also revising up our guidance for Shopee's 2024 full-year GMV growth rate to the mid-20s. With that, let me take you through each business's performance in more detail. Starting with e-commerce.

That's a very strong <unk> core foundation for our E Commerce business.

Speaker Change: We are happy with chocolate market share in southeast Asia, and our sizable lead over our peers in the region.

Operator: Good morning and good evening to all and welcome to the Sea Limited 2nd quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: We're seeing more market share consolidation.

Speaker Change: The industry wide take rate increase.

Speaker Change: We believe this will move the industry towards profitability and the sustainability.

Operator: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. For operator assistance throughout the call, please press star zero.

Speaker Change: We welcome this trend.

Speaker Change: With the strong results delivered in the first half and our outlook for the rest of the year, we expect that shockey will become at adjusted EBITDA positive from the third quarter.

Speaker Change: We are also revising our.

Operator: And finally, I would like to advise all participants that this call is being recorded. Thank you.

Speaker Change: Our guidance for 2020 for full year <unk> growth rate to the mid <unk>.

MC Koh: I'd now like to welcome Mr. MC Koh to begin the conference. Please go ahead. Hello, everyone, and welcome to Sea's 2-24-second quarter earnings conference call. I am MC, Sea's investor relations director. On this call, we may make forward-looking statements. We are inherently subject to risk and uncertainties and may not be realized in the future for serious reasons as stated in our press release. Also, this call includes the discussion of certain non-gap financial measures such as the Jester Yibita.

Speaker Change: With that let me take you through each businesses' performance in more detail.

Starting with e-commerce.

Speaker Change: As we have shared before shop is operational priorities are to deepen our competitive moats are three fronts.

Forrest Lee: As we have shared before, Shopee's operational priorities are to deepen our competitive moat on three fronts. Enhancing our price competitiveness, improving service quality to customers and strengthening our content ecosystem. This strategy is paying off.

Speaker Change: It has been our price competitiveness.

Speaker Change: Improving service quality to customers.

Speaker Change: Strengthening our content ecosystem.

Speaker Change: This strategy is paying off.

Forrest Lee: Over the past two quarters, Shopee has been able to post healthy, sustainable growth, while also improving its profit profile. One area we are placing greater focus on is improving our ad kick rate. Currently, our ad take rate is lower than the industry average we observe in more mature e-commerce markets.

Speaker Change: Over the past two quarters choppy has been able to post healthy sustainable growth, while also improving its profit profile.

MC Koh: We believe these measures can enhance our investor's understanding of the actual cash flows of our major businesses when used as a compliment to our gap disclosures. For discussion of the use of non-gap financial measures and reconciliation, the closest gap measures, please refer to the section on non-gap financial measures in our press release.

Speaker Change: One area, we are placing greater for costar is improving our take rate.

Speaker Change: Currently however, as take rate is lower than the industry average we observed in the more mature e-commerce market.

Speaker Change: To us this represents a good opportunity to improve our monetization.

Forrest Lee: To us, this represents a good opportunity to improve our monetization. During the quarter, we have made it easier and more attractive for sellers to join our ad platform. We also have a dedicated tech team working on improving our ad feeding algorithm to help sellers achieve higher returns from their advertising spending. So far, the results have been encouraging. The number of sellers who pay for ads has increased by more than 20% year-on-year this quarter.

Speaker Change: Over the quarter, we have made it easier and more attractive, but better to join our AD platform.

Speaker Change: We also have a dedicated team working on improving our app, beating algorithms to help center achieve higher returns from advertising spend.

Speaker Change: Yeah.

Forest Li: With that, let me turn the call over to first. Hello, everyone, and thank you for joining today's call. I'm happy to report that it has been a solid quarter for us with our strong momentum from Q1 continuing into Q2. Both three of our businesses have shown both strong growth and higher profitability.

Speaker Change: So far the results have been encouraging.

Speaker Change: The number of et cetera will pay for us has increased by more than 20% year on year this quarter.

Forrest Lee: We believe there is still plenty of upside and we will continue to push on this front. We have also launched lab ads across our Asian market. Allowing streamers, including both merchants and creators, to insert ads into shopping lives. This feature has been very well received, in Indonesia in June, one in four active streamers paid for a live ad. This feature helps streamers boost their sales efficiency while increasing our ad take rate, enhancing our content ecosystem, and improving our live streaming unique economics, on improving our service quality to customers. Our logistics capabilities continue to depreciate us.

Speaker Change: We believe there is still plenty of plenty of upside and we will continue to push on this front.

Speaker Change: We have also launched love us across our Asia market.

Speaker Change: Allowing streamer, including both merchants and a creator to insert <unk> into shockey lives.

Forest Li: Before I dive into each business result, I wanted to share some observations of our Southeast Asian market. Generally, retail and consumer spending trends in the region have remained healthy with domestic consumption continuing to be a main driver of economic performance in many markets. This sets a very strong micro-pondation for our e-commerce business. We are happy with shopping market share in Southeast Asia and our sizable leads over our peers in the region. We are seeing more market share consolidation and an industry-wide take rate increase. We believe this will move the industry toward profitability and sustainability and we welcome this trend.

Speaker Change: This feature has been very well received.

Speaker Change: Indonesia in June one in four active streamers paid for a lifetime.

Speaker Change: This feature helps dreamers boost their sales efficiency, well, increasing our take rate and enhancing our content ecosystem and improving our live streaming unique economics.

Speaker Change: Okay.

Speaker Change: Improving our service quality to customers.

Speaker Change: Our logistics capabilities continue to differentiate us.

Speaker Change: In this way 15% of buyers in Java, Indonesia cited faster delivery as their reason for choosing sharpie.

Forrest Lee: In a survey, 50% of buyers in Java, Indonesia cited fast delivery as their reason for choosing Shopee. We have continued to integrate more closely with our many logistics partners to widen our coverage and deliver packages faster. XPS Express, in particular, has managed to improve delivery speed while also reducing its cost. In the second quarter, more than 70% of XPX Express orders in Asia would be delivered within three days of order placement, with cost per order declining 8% year-on-year.

We have continued to integrate more closely with our money logistics partners to widen our coverage and deliver packages faster.

Forest Li: With the strong results delivered in the first half and our outlook for the rest of the year, we expect that Shopee will become an adjusted EBITDA positive from the third quarter. We are also revising up our guidance for Shopee's 2020 or three-year DME growth rate to the mid-20s.

Speaker Change: SPX Express in particular has managed to improve delivery speed, while also reducing costs.

Speaker Change: In the second quarter more than 70% of <unk> Express orders in Asia would be levered within three days of order placement.

Forest Li: With that, let me take you through each business's performance in more detail.

Speaker Change: With cost per order declining 8% year on year.

Forest Li: Starting with e-commerce. As we have shared before, Shopee's operational priorities are to deepen our competitive months on three from enhancing our price competitiveness, improving service quality to customers, and strengthening our content ecosystem. This strategy is paying off.

Forrest Lee: Another initiative to enhance customer service quality has been improving the buyer return refund process. A common pain point in e-commerce, Earlier this year, we launched a change-of-mind returns feature in our Asian market. Lighting fires initiate no-questions-asked returns within 15 days.

Speaker Change: Another initiative to enhance customer service quality has been improving the buyer return response process.

Oh come on pinpoint e-commerce.

Speaker Change: Earlier this year, we launched a change of mind return feature in our Asian markets liking.

Speaker Change: Lighting fires initiated no question asked return, we think fixing base.

Forest Li: Over the past two quarters, Shopee has been able to post healthy, sustainable growth while also improving its perfect profile. One area we are placing greater focus on is improving our ad cake rate. Currently, our ad cake rate is lower than the industry average we observe in more mature e-commerce markets. To us, this represents a good opportunity to improve our monetization. Over the quarter, we have made it easier and more attractive for sellers to join our ad platform.

Forrest Lee: We paired this with data-driven tech improvements to make the overall return refund process highly predictive and efficient. As a result, in the second quarter, more than half of our return and refund cases in Asia were resolved within one day. Making this process fast-free makes buyers more willing to complete purchase. Driving Up User's Dignity and Repurchase Frequency, In Malaysia, we saw a more than 10% increase in average basket size among buyers who raised change-of-mind return requests, compared to before the feature was launched.

Speaker Change: We paired this with data driven tech improvements to make the overall return refund process highly predictive and efficient.

Speaker Change: As a result in the second quarter, where the heart of our return on the reform cases in Asia, what we saw within one day.

Speaker Change: Making this process fast free mixed buyers, who are willing to complete purchase driving up user thickness and the repurchase of frequency.

Speaker Change: In Malaysia, we sold more than 10% increase in average basket size among buyers who raised change of mind return requests.

Forest Li: We also have a dedicated tech team working on improving our ad feeding algorithms to help sellers achieve higher returns from their advertising spend. So far, the results have been encouraging. The number of sellers who pay for ads has increased by more than 20% year-on-year this quarter. We believe there is still plenty of sites and we will continue to push on this front. We have also launched lab ads across our Asia markets, allowing streamers, including both merchants and creators, to insert ads into Shopee life.

Speaker Change: <unk> two before to feature was launched.

Speaker Change: Yeah.

Forrest Lee: I share these examples to demonstrate how we consistently execute on our operational priorities every quarter. We believe this approach will strengthen our market leadership in the long term. Next, turning to digital financial services, Sea Money has continued its strong momentum in growing its loan book and profit while remaining prudent on risk management.

I share. These examples to demonstrate how we consistently execute on our operational priorities every quarter.

Speaker Change: We believe this approach will strengthen our market leadership in the long term.

Speaker Change: Yeah.

Speaker Change: Next turning to digital financial services.

Speaker Change: See money has continued its strong momentum in growing its loan book and the perfect while remaining prudent on risk management.

Forrest Lee: Both revenue and adjusted EBITDA have grown very well year on year. Consumer and SME credit business continues to be the primary driver of Siemeni's revenue and profit growth. We are making good progress on deepening our credit product penetration both on Shopee and off Shopee. Our large shopping user base is a unique advantage. It enables us to acquire new customers very cost-efficiently, by promoting the right product at the right time to the right users. In the second quarter, we registered over 4 million first-time borrowers of our credit products, a figure that has more than doubled compared to one year ago.

Speaker Change: Both revenue and adjusted EBITDA has grown very well year on year.

Speaker Change: Consumer and SME credit business continues to be the primary driver of <unk> revenue and profit growth.

Forest Li: This feature has been very well received in Indonesia in June, one in four active streamers paid for live ads. This feature helps streamers boost their sales efficiency while increasing our ad cake rate, enhancing our content ecosystem and improving our live streaming unique economics.

Speaker Change: We are making good progress on deepening our credit product penetration, both onshore and offshore.

Speaker Change: Our large chunky user base is a unique advantage and enables us to acquire new customers very cost efficiently by promoting the right product at the right time to the right users.

Forest Li: Now, improving our service quality to customers, our logistics capabilities continue to depreciate us. In a survey, 50% of buyers in Java, Indonesia cited fast delivery as their reason for choosing Shopee. We have continued to integrate more closely with our many logistics partners to widen our coverage as the deliver packages faster. XPx Express, in particular, has managed to improve delivery speed while also reducing its cost. In the second quarter, more than 70% of XPx Express orders in Asia were delivered within three days of order placement with cost for order declining 8% year on year.

Speaker Change: In the second quarter registered over 4 million first time borrowers of our credit products, a figure that has more than doubled compared to one year ago.

Speaker Change: Yeah.

Forrest Lee: We have also expanded our off-shopee credit use case. In Indonesia, we partnered with over 1,000 electronic stores to introduce customer minds as pay-later loans for mobile phone sales. We were the first player in the market to provide instant credit approval for this category at scale.

Speaker Change: We have also expanded our offshore keep credit use cases.

Speaker Change: In Indonesia, we partnered with over 1000 electronic stores to introduce customer minds as pay later loan for mobile phone sales.

Speaker Change: We were the first player in the market to provide instant credit approval for this category at scale.

Forrest Lee: We will continue to explore more credit use cases in our market. With all these efforts, we have grown our loan book size to $3.5 billion at the end of June, up almost 40% year-on-year. Notably, our non-performing loans metric held steady at the end of the quarter.

Speaker Change: We will continue to explore more credit use cases in our markets.

Speaker Change: With all these efforts we have grown our loan book side to three and a half billion dollars at the end of June.

Forest Li: Another initiative to enhance customer service quality has been improving the buyer return response purchase. A common pain point in e-commerce. Earlier this year, we launched a change of mind return speeder in our Asia market. Lightning buyers initiated no questions asked return within 15 days. We paired this with data driven test improvements to make the overall return refund process highly predictive and efficient. As a result, in the second quarter, more than half of our return and the refund cases in Asia were resolved within one day.

Speaker Change: Almost 40% year on year.

Speaker Change: Notably our nonperforming loans metrics held.

Speaker Change: The study at the end of the quarter in fact, it improved slightly from the previous quarter.

Forrest Lee: In fact, it improved slightly from the previous quarter. We now have 21 million consumers and SME loans active users. Up almost 60% year on year. [inaudible] Looking forward, we will continue to invest in growing our user base efficiently and effectively, as our markets are still under-penetrated and present sizable opportunities. A large user base will be a cornerstone of future growth for Simanyi, especially as we introduce more product offerings. Finally, turning to our digital entertainment business.

Speaker Change: Yeah.

Speaker Change: We now have 21 million consumer and SME loans active users up almost 60% year on year.

Speaker Change: Looking forward, we will continue to invest in growing our user base efficiently and effectively.

Speaker Change: As our markets are still underpenetrated as it presents sizable opportunities.

Speaker Change: Our large user base will be a cornerstone of future growth for key money, especially as we introduce more product offerings.

Forest Li: Making this process fast-free, makes buyers more willing to complete purchase, driving up user sickness and repurchase frequency. In Malaysia, we saw a more than 10% increase in average basket size among buyers who risked change of mind return requests compared to before the feature was launched.

Speaker Change: Yeah.

Speaker Change: Finally, turning to our digital entertainment business.

Speaker Change: [noise] Arena two years of hard work undertaken a user centric approach are paying off.

Forrest Lee: Garena's two years of hard work and taking a user-centric approach are paying off. We have delivered a strong quarter with more than 20% year-on-year growth in bookings mainly contributed by Free Fire. At the end of June, Free Fire released a 7th Anniversary version update, our largest in-game event of the year. We brought back classic weapons, made a documentary on Free Fire's history, and hosted a story war where users could share their past experiences with the game. The campaign was very successful. Our players really enjoyed revisiting their fond memories of the game's early years.

Speaker Change: We have delivered a strong quarter with more than 20% year on year growth in bookings.

Forest Li: I shared this example to demonstrate how we consistently execute on our operational priorities every quarter. We believe this approach will strengthen our market leadership in the long term.

Speaker Change: <unk> contributed by free power.

And at the end of June free fire released a seventh anniversary version update.

Our largest the in game event of the year.

Forest Li: Next, turning to digital financial services. Simony has continued its strong momentum in growing its long-book and the profit while remaining prudent on risk management. Both revenue and adjusted EBITDA has grown very well throughout year and year. Consumer and SMB credit business continues to be the primary driver of Simony's revenue and the profit growth. We are making good progress on deepening our credit product penetration both on-shoppy and off-shoppy. Our large-shoppy user base is a unique advantage of the bondage.

Speaker Change: We brought back classics weapon may.

A documentary on three Forks history, and hosted a story of war, where users could shared their past experiences with the game.

Speaker Change: The campaign was very successful.

Speaker Change: Our players really enjoined revisiting their fond memories of the game's early years.

Speaker Change: <unk> unique strengths.

Forrest Lee: Free Fire's unique strength is its large, highly engaged, and loyal gamer base. I'm very proud to share that, every single day throughout Q2. Free Fire has more than 100 million daily active players. This reinforces our conviction that Free Fire is an evergreen franchise. Free Fire also managed to keep growing thanks to the strong word-of-mouth effect we see from our large user base. According to Sensor Tower, Free Fire was the most downloaded mobile game globally in the second quarter.

Speaker Change: It's large highly engaged and loyal Gamer base.

Speaker Change: I'm very proud to share that.

Every single days throughout Q2.

Speaker Change: <unk> had more than 100 million daily active players.

Speaker Change: This reinforces our conviction that <unk> is that every grain franchise.

Forest Li: It enables us to acquire new customers very cost-efficiently by promoting the right products at the right time to the right users. In the second quarter, we registered over 4 million first-time borrowers of our credit products, a figure that has more than doubled compared to one year ago. We have also expanded our off-shoppy credit use case. Indonesia, we partnered with over 1,000 electronic stores to introduce customers' minds as pay later loans for mobile phone sales.

Speaker Change: Yeah.

Speaker Change: <unk> also managed to keep growing sector with a strong word of mouth effect, we see from our large user base.

Speaker Change: According to sensor tower three.

Speaker Change: Free fire was the most downloaded mobile game globally in the second quarter.

Forrest Lee: Free Fire's organic social pool is highly valuable, especially in today's world, where getting users to download and try new content can be hard and costly. We are also excited about launching Need for Speed Mobile in Taiwan, Hong Kong, and Macau later this year in partnership with Tencent and Electronic Arts. We are pleased to be able to bring this high-quality game with a classic IP to our gamer community.

Speaker Change: <unk> organic social pool is highly valuable, especially in today's world, we're getting users to download and try new content can be hard and costly.

Speaker Change: We are also excited about launching need for speed mobile in Taiwan, Hong Kong and Macau later this year in partnership with Tencent and electronic Arts.

Forest Li: We were the first player in the market to provide instant credit approval for this category at scale. We will continue to explore more credit use cases in our markets. With all these efforts, we have grown our loan book size to $3.5 billion at the end of June, have almost 40% year-on-year. Notably, our non-performing loans metric held steady at the end of the quarter. In fact, it improved slightly from the previous quarter.

Speaker Change: We are pleased to be able to bring these high quality games with a classic IP to our Gamer community.

Speaker Change: Yeah.

Speaker Change: To conclude we.

Forrest Lee: To conclude, We are happy with the strong results the three businesses have achieved in the first half. Thank you, as always, for your support. Before I hand over the call, I am pleased to announce that two new independent directors have joined our board. Dr. Silvio Savarese is a leading expert in AI, and Ms. Jessica Tan is a highly accomplished leader in financial services. I'm glad that Syobo and Jessica are willing to lend us their deep expertise and guidance on these two areas which will be critical in shaping the future. In addition, Tony will be stepping down from our board and will continue to serve as our CFO. With these changes, our seven-member board has a majority of independent directors. Thank you very much.

Speaker Change: We're happy with the strong results the three businesses have achieved in the first half.

Speaker Change: Thank you as always for your support.

Speaker Change: Before I hand over to Paul I'm pleased to announce that two new independent directors have joined our board.

Speaker Change: Doctor Sue will suffer RSV is the leading expert in AI.

Forest Li: We now have 21 million consumers and SME loans active users, have almost 60% year-on-year. Looking forward, we will continue to invest in growing our user base efficiently and effectively, as our markets are still under penetrated and present sizeable opportunities.

Speaker Change: And the Miss Jessica Tan is a highly accomplished a leader in financial services.

Paul: I'm glad that's doable and Jessica awaiting to lend us their deep expertise and guidance on these two areas, which will be critical is shaping the future.

Paul: In addition, <unk> will be stepping down from our board and will continue to serve as our CFO.

Forest Li: A large user base will be a cornerstone of future growth for SEMA-NEE, especially as we introduce more product offerings.

Paul: These changes.

Paul: Our seven member Board has some majority of independent directors.

Paul: Thank you very much.

Forest Li: Finally, turning to our digital entertainment business. Governance two years of hard work with more than 20% year-on-year growth in bookings mainly contributed by FreeFar. At the end of June, FreeFar released a seventh and a third version update, our largest in-game event of the year. We brought back classic weapons, made a documentary on FreeFar's history and hosted a story war where users could share their past experiences with the game. The campaign was very successful.

Tony Ho: With that, I invite Tony to discuss our financial, Thank you for it, and thanks to everyone for joining the call. For Sea overall, total gap revenue increased 23% year-on-year to $3.8 billion in the second quarter of 2024. This was primarily driven by GME growth of our e-commerce business and the growth of our digital financial services business. Our total adjusted EBITDA was $448 million in the second quarter of 2024 compared to an adjusted EBITDA of $510 million in the second quarter of 2023.

Paul: With that I invite Tony to discuss our financials.

Tony: Thank you Forrest and thanks to everyone for joining the call.

Tony: Well see overall total GAAP revenue increased 23% year on year to $3 $8 billion in the second quarter of 2024.

Tony: This was primarily driven by <unk> growth of our e-commerce business and the growth of our digital financial services business.

Tony: Our total adjusted EBITDA was $448 million in the second quarter of 2024 compared to an adjusted EBITDA of $510 million in the second quarter of 2023.

Tony Ho: On e-commerce, Shopee's gross orders grew 40% and GMV increased by 29% year-on-year. Our second quarter GAP revenue of $2.8 billion included GAP marketplace revenue of $2.5 billion, up 33% year-on-year, and GAP product revenue of $0.3 billion. Within Gap Marketplace, Core Marketplace Revenue, mainly consisting of transaction-based fees and advertising revenues, was $1.8 billion, up 41% year-

Tony: On E Commerce Sharpies gross orders grew 40% and <unk> increased by 29% year on year.

Forest Li: Our players really enjoyed revisiting their fund memories of the games early years. FreeFar's unique strength is its large, highly engaged and loyal gamer base. I'm very proud to share that every single day throughout Q2. FreeFar had more than 100 million daily active players. This reinforces our conviction that FreeFar is an every-green franchise. FreeFar also managed to keep growing thanks to the strong word of mouse impact we see from our large user base.

Tony: Our second quarter GAAP revenue of $2 $8 billion included GAAP marketplace revenue of $2 $5 billion.

Tony: 33% year on year.

Tony: Product revenue of zero point $3 billion.

Within gas marketplace revenue core marketplace revenue, mainly consisting of transaction based fees and advertising revenues was $1 $8 billion.

Tony: 41% year on year.

Tony Ho: Value-added services revenue, mainly consisting of revenues related to logistic services, was $0.7 billion, up 16% year on year. E-commerce adjusted EBITDA improves quarter on quarter, with losses narrowing to $9 million in the second quarter of 2024. Compared to an adjusted EBITDA loss of $22 million in the first quarter of 2024 and an adjusted EBITDA of $150 million in the second quarter of 2023, for our Asia market. We continued to achieve positive adjusted IPDA following our first quarter of 2024 results, recording $4 million during the quarter compared to an adjusted EBITDA of $204 million in the second quarter of 2023. In our other markets, the adjusted EBITDA loss was $13 million, narrowing meaningfully from last year when losses were $54 million.

Tony: Value added services revenue, mainly consisting of revenues related to logistics services.

Forest Li: According to sensor tower, FreeFar was the most downloaded mobile game globally in the second quarter. FreeFar's organic social pool is highly valuable, especially in today's world where getting users to download and try new content can be hard and costly.

Tony: Europe was $7 billion.

Tony: Up 16% year on year.

Tony: E Commerce, adjusted EBITDA improved quarter on quarter.

Tony: With losses narrowing to a $9 million in the second quarter of 2024.

Compared to an adjusted EBITDA loss of $22 million in the first quarter of 2024, and adjusted EBITDA of $150 million in the second quarter of 2023.

Forest Li: We are also excited about launching We are pleased to be able to bring this high-quality game with a classic IP to our gamer community.

Tony: Yeah.

Tony: For our Asia markets, we continued to achieve positive adjusted EBITDA following our first quarter of 2024 three thoughts.

Forest Li: To conclude, we are happy with the strong results the three businesses have achieved in the first half. Thank you as always for your support.

Tony: Recording $4 million during the quarter compared to an adjusted EBITDA of $204 million in the second quarter of 2023.

Forest Li: Before I hand over the call, I'm pleased to announce that two new independent directors have joined our board. Dr. Ziu will separately be the leading expert in AI, and Ms. Jessica Ten is a highly accomplished leader in financial services. I'm glad that Ziu and Jessica are waiting to lend us their deep expertise and guidance on these two areas which will be critical in shaping this future.

Tony: Or are there markets. The adjusted EBITDA loss was $13 million narrowing meaningfully from last year when losses were $54 million.

Tony Ho: In Brazil, unit economics continued to improve as we achieved a positive contribution margin per order of $0.09 for the quarter as compared to a loss of $0.24 in the second quarter of 2023. Digital financial services gap revenue was up by 21% year on year to $519 million. Adjusted EBITDA was up by 20% year-on-year to $165 million. As of the end of June, our consumer and SME loans' principal outstanding reached $3.5 billion. Ah, almost 40% year-on-year and 8% quarter-on-quarter. Non-performing loans were passed due by more than 90 days, as the percentage of total consumer and SME loans was 1.3% at the end of the quarter.

Tony: In Brazil.

Unit economics continue to improve as we achieved a positive contribution margin per order of <unk> for the quarter as compared to a loss of 24 in.

Tony: In the second quarter of 2023.

Tony: Digital financial services revenue was up by 21% year on year to $519 million.

Tony: In addition, Tony will be stepping down from our board and will continue to serve as our CFO. With these changes, our seven member board has a majority of independent directors.

Tony: Adjusted EBITDA was up by 20% year on year to $165 million.

Tony: As of the end of June our consumer and SME loans principal outstanding reached $3 $5 billion.

Tony: Thank you very much.

Tony: With that, I invite Tony to discuss our financials. Thank you, Forest, and thanks to everyone for joining the call. We'll see overall total gap revenue increased 23% year-on-year to $3.8 billion in the second quarter of 2024. This was primarily driven by GME growth of our e-commerce business and the growth of our digital financial service business. Our total adjusted EBITDA was $448 million in the second quarter of 2024 compared to an adjusted EBITDA of $510 million in the second quarter of 2023.

Tony: Almost 40% year on year, and 8% quarter on quarter.

Tony: Nonperforming loans past due by more than 90 days as a percentage of total consumer and SME loans was one 3% at the end of the quarter.

Tony Ho: Digital entertainment bookings were $537 million, up 21% year-on-year, and 5% quarter-on-quarter. Gap revenue was $436 million. Adjusted EBITDA was $303 million.

Tony: Digital entertainment bookings were $537 million up 21% year on year, and 5% quarter on quarter.

Tony: GAAP revenue was $436 million.

Tony: EBITDA was $303 million.

Tony: Returning to our consolidated numbers.

Tony Ho: Returning to our consolidated numbers. We recognize a net non-operating income of $56 million in the second quarter of 2024 compared to a net non-operating income of $108 million in the second quarter of 2023. We had a net income tax expense of $61 million in the second quarter of 2024 compared to net income tax expense of $62 million in the second quarter of 2023. As a result, Net income was $80 million in the second quarter of 2024 as compared to net income of $331 million in the second quarter of 2023. With that, let me turn the call to... Thank you, Forrest and Tony.

Tony: We recognized a net nonoperating income of $66 million in the second quarter of 2024.

Tony: On e-commerce, shoppiece growth orders grew 40% and GME increased by 29% year-on-year. Our second quarter gap revenue of $2.8 billion included gap marketplace revenue of $2.5 billion. Up 33% year-on-year and gap product revenue of $0.3 billion. Within gap marketplace revenue, core marketplace revenue mainly consisting of transaction-based fees and advertising revenues was $1.8 billion. Up 41% year-on-year. Value-added services revenue mainly consisting of revenues related to logistic services was $0.7 billion. Up 16% year-on-year.

Tony: Compared to a net nonoperating income of <unk>.

Tony: $108 million in the second quarter of 2023.

Tony: We had a net income tax expense of $61 million in the second quarter of $2 24, compared to net income tax expense of $62 million in the second quarter of 2023.

Tony: As a result.

Tony: Net income was $80 million in the second quarter of $2 24, as compared to net income of $331 million in the second quarter of 2023.

Tony: With that let me turn the call to M C.

Operator: We are now ready to open the call to questions. Operator. Thank you. We will now begin the question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad.

M C: Thank you Forrest and Tony we're now ready to open the call to questions operator.

Operator: If you would like to withdraw your question, press the star one again. 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 will pause momentarily to assemble our roster. Your first question comes from the line of Pang Vittayaamnuaykoon with Goldman Sachs. Your line is open.

Tony: E-commerce adjusted EBITDA improves quarter-on-quarter. With losses narrowing to $9 million in the second quarter of 2024 compared to an adjusted EBITDA loss of $22 million in the first quarter of 2024 and an adjusted EBITDA of $150 million in the second quarter of 2023. For our Asia markets, we continued to achieve positive adjusted EBITDA following our first quarter of 2024 results. Q&A Margin, per order of 9 cents for the quota, as compared to a loss of 24 cents in the second quarter of 2023.

Speaker Change: Thank you we will now begin the question and answer session.

Speaker Change: Like to ask a question during this time simply press star.

Speaker Change: I'll, let by the number one on your telephone keypad, if you would like to withdraw your question press the star one again.

Speaker Change: 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.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Pain: Your first question comes from the line of pain.

Speaker Change: Yeah, No Acorn with Goldman Sachs. Your line is open.

Pang Vittayaamnuaykoon: Good afternoon, management. Thank you very much for the opportunity. Two questions from my side, both on e-commerce. Number one, could you please comment on the latest competitive landscape you have observed? We are seeing all players, including yourself, push for further rationalization into third quarter, especially on the merchant front. How should this translate into your results and your updated guidance? In another word, what factors do you include in your revised guidance? Question number one. Question number two, specifically on margins, what type of near and medium term margins can we expect Shopee to deliver? And how do you plan to achieve that?

Peter Oppenheimer: Good morning, good afternoon, and thank you very much quality opportunities two question from my side on ecommerce number one could you. Please comment on the competitive landscape, you'll have pockets where we.

Speaker Change: We have seen all players, including yourself pushing for further rationalization into backwater, especially onto the motion funds. How soon these translate into your b cells.

Tony: Digital financial services gap revenue was up by 21% here and here to $590 million. Adjust the EBDA was up by 20% here and here to $165 million. As of the end of 2021, our consumer and FME loans principal outstanding reached $3.5 billion, up almost 40% here and 8% quota and quota. Non-performing loans passed due by more than 90 days as a percentage of total consumer and FME loans was 1.3% at the end of the quarter.

Speaker Change: Update that guidance in another words what factors do you include in your revised guidance. That's question number one question number two specifically on Martinez what type of medium term margin is kind of weird.

Speaker Change: Choppy to deliver and how do you plan to I think Scott any update on long term margin expectation as well.

Speaker Change: Yeah.

Unknown Executive: Any update on long-term margin expectations? On the competitive landscape, I think, as Floris mentioned in the opening, we do see a more stable competitive environment in the past few months. As you mentioned, we are a positive movement in terms of the take rate from various players in our market, and I think we welcome that as a signal of a more stable environment for competition. And our longer-term view on the profitability target stays unchanged as 2-3% of EBITDA, as we shared before.

Speaker Change: Yes.

Speaker Change: On the competitive landscape I think as far as mentioned in the opening we do see a more stable competitive environment.

The past few months.

Speaker Change: You mentioned they are a positive movement in terms of the take rate.

Tony: Digital entertainment bookings were $537 million, up 21% year on year and 5% quota on quota. Gap revenue was $436 million. Adjust the EBDA was $303 million. Returning to our consolidated numbers, we recognize a net non-operating income of $56 million in the second quarter of 2024 compared to a net non-operating income of $108 million in the second quarter of 2023. We had a net income tax expense of $61 million in the second quarter of 2024 compared to net income tax expense of $62 million in the second quarter of 2023.

Speaker Change: From various players in our market and I think we welcome that.

Speaker Change: A more stable environment.

Speaker Change: A full compensation perspective.

Speaker Change: I would love to talk to you on the profitability target.

Speaker Change: Unchanged.

Paul: 3% of the EBITDA as we shape Paul.

Unknown Executive: However, we believe the market is still quite dynamic, and in the short term, we will likely number one, focusing on the profitability of the businesses. We were, as we shared in our guidance, in Q3, will be profitable as the shopping businesses. But at the same time, we also like to grow, as there's still a good potential in the market to be offered in, we would like to make sure that as businesses, we can outgrow the market as well in the short term, rather than maximizing the profit in the near term.

Speaker Change: Hum however.

Speaker Change: We believe the markets are quite dynamic.

Speaker Change: And industrial in the short term, we will likely number one focusing on a public of the job the businesses.

Speaker Change: We were.

Speaker Change: As we shared in our guidance in Q3 will be profitable shopping businesses.

Speaker Change: Same time, we are also allowed to grow.

Speaker Change: That's still a good potential in the year.

Speaker Change: Market, we operate in we would like to make sure that our business is we can outgrow.

Tony: As a result, net income was $80 million in the second quarter of 2024 as compared to net income of $331 million in the second quarter of 2023.

Speaker Change: The market as well in the short term rather than maximizing the profit.

Speaker Change: In the near term.

Unknown Executive: If we look a little bit to the medium terms, we do expect the overall content landscape in our market, to everybody on the Internet. If you look at the overall market, as we mentioned, it's still rather dynamic, with a more stable competitive environment. But there are things we can control that we cannot control.

Speaker Change: If we look a little bit to the medium terms.

MC Koh: With that, let me turn the call to MC. Thank you, Forest and Tony.

We do expect the overall competitive landscape in our market to continue to evolve and it could be due to coming to a more rational stage.

MC Koh: We are now ready to open the call to questions.

Operator: Operator? Thank you.

Speaker Change: Compared to where we are right now.

Operator: We will now begin the question and answer session. If you would like to ask the question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. 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 me with questions you again after your first question has been addressed.

Speaker Change: Which would drive the overall industrial profitability to improve.

Speaker Change: The AR.

Speaker Change: If you look at him.

Speaker Change: The overall market as.

Speaker Change: As we mentioned, it's still rather dynamic.

Speaker Change: With the a more stable competitive environment.

Speaker Change: They are things, we can control that we cannot control we would rather focusing on other things. We can control for example, the thing that we shared in the opening we want to have better pricing, we would like to have better user experience.

Operator: At this time, we will pause momentarily to assemble our roster.

Unknown Executive: We were rather focusing on the thing we can control. For example, the thing that we shared in the opening. We want to have better pricing. We would like to have better user experience. We would like to have a better content supply to our.., together with the largest scale of what we are right now, professional competitors, we will, all those things will help us to always be better positioned to deliver better value to our consumers and ultimately have better unicnomics, which will translate to the market share gain over time as well. I think that's kind of like how we probably see the market in the near-term, mid-term and the long-term. Your next question comes from the line of Piyush Choudhary with HSBC. Your line is open.

Unknown Executive: Your first question comes Good afternoon, management. Thank you very much for the opportunity. Two questions from my side, both on e-commerce. Number one, could you please comment on the latest competitive landscape you have observed. We are seeing all players, including yourself, push forward further rationalization into bird quarter, especially on the motion front. How should this translate into your resolve and your updated guidance? In another word, what factors do you include in your revised guidance?

Speaker Change: We would like to have a better content to supply two hours of new series.

Speaker Change: Got there with the largest scale of where we are right now compared to our competitors.

Speaker Change: We will all those things will help us to always be better positioned to deliver better value to our consumers and ultimately have better economics.

Speaker Change: Which would translate to the market share gains over time as well.

Speaker Change: I think that's kind of like how we probably see that the market in the near to midterm MTR cuts.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Pearce tells me with HSBC. Your line is open.

Unknown Executive: That's question number one. Question number two, specifically on margins, what type of near and medium-term margins can we expect? Shoppy tool deliver, and how do you plan to achieve that? Any update on long-term margin expectation as well? Yes, on the competitive landscape, I think Swords mentioned in the opening, we do see a more stable competitive environment in the past few months. As you mentioned, we are a positive movement in terms of the take rate from various players in our market, and I think we welcome that as a signal of more stable environment.

Piyush Choudhary: Yeah, hi, thanks for the opportunity and congrats to the management team on good sales results. Two questions again, both on e-commerce. As you mentioned earlier, you know, you have been increasing take rates and then industry has also increased take rates during One Edge. Is it possible to further increase the take rates? And are you able to reduce the shipping subsidies? That's the first question.

Speaker Change: Yeah, Hi, thanks for the opportunity and congrats to the management team on good set of results two questions again bolt on E. Commerce. As you mentioned earlier you have been increasing take rates in the industry is also increased recruits during one edge is it possible to further increase.

Speaker Change: These are the peak rates and are you able to reduce the shipping subsidies.

Unknown Executive: Secondly, can you talk about the unit economics of live streaming business? Has it turned profitable now in some countries? How is the contribution margin for live streaming segment? For the tick rate, we do believe there are opportunities to further increase the tick rate. I think part of that comes from a commission.

Speaker Change: That's the first question secondly, can you talk about the unit economics of light streaming business has it turned profitable now in some countries how does the contribution margin for lakes.

Speaker Change: Thank you.

Speaker Change: For the take rate.

Unknown Executive: For competition perspective, I will longer term view on the probability target, stay unchanged to 2-3% of the EBITDA, as we shared for. However, we believe the market is quite dynamic. In the short term, we were likely number one focusing on the probability of the distances. We were, as we shared in our guidance in Q3, will be possible as a shoppy businesses. By the same time, we also like to grow. There's still a good potential in the market we offered in.

Speaker Change: We do believe the opportunity to further increase the take rate I think part of that comes from our commissions and fees.

Unknown Executive: As you probably observed, we do increase meaningfully in the past few quarters. I think there are still opportunities to further increase that, although probably not in the magnitude that we see in the early part of the year. There's another policy break which we think that is also having a sizable opportunity is on the ad side. As we shared in the opening, we do focus a lot on the ad side. We spent a lot of effort on building the infrastructure to the ad side in the past few quarters.

Speaker Change: As you've probably observed we do increase meaningfully in the past few quarters.

Speaker Change: I think they are still opportunity because I think that although probably not in the magnitude that we see in the early part of it yet.

Greg: There's another part of it Greg.

Greg: We think that is a.

Also having a sizeable opportunity is on the ACH side.

Greg: There are as we said in the opening we do focus on the ACH side, we spent calling effort on building infrastructure.

Unknown Executive: We would like to make sure that as a business, we can outgrow the market as well in the short term, rather than maximizing the profit in the near term. If we look a little bit to the medium terms, we do expect the overall competitive landscape in our market to continue to evolve and continue to come into a more rational stage, even compared to where we are right now, which will drive the overall industry from the ability to improve.

Speaker Change: Two to the <unk> side in the past few quarters like for example, we a rebuild of the standard platform for a recommendation that search. We also are good our standard I wish them a platform for analog X system and organic traffic applications. All of those will help us to be able to allocate traffic.

Unknown Executive: For example, we built a standard platform for our recommendation and search. We also built a standard algorithm and platform for our ad system and organic traffic allocations. All those will help us to be able to allocate traffic more agile and more flexible. This enable us to also add product to the salad salad as well, which we are voting out in the next few quarters.

Speaker Change: More agile and more flexible and.

Marisa Putri: We believe all those efforts will help us on the intake rate improvement in the coming quarters. On the UEE pool for live stream, we do see UEE improvement quarter and quarter. Actually, if you look at all markets, some markets are profitable, some markets are still improving, but I think generally we believe the trend will continue in terms of the UEE improvement for our live stream. Your next question comes from the line of Marisa Putri with UBS. Your line is open.

Speaker Change: This enable us to also better AD product to the setup as well, which we're putting out in the next few quarters. We believe all of those efforts will help us on the at take rate improvement in the coming quarters.

Unknown Executive: If you look at the overall market, as we mentioned, is still rather dynamic, with the more stable competitive environment. But the art things we can control, we can not control. We will rather focus on the thing we can control. For example, the things that we shared in the opening, we won't have better pricing. We would like to have better yield experience. We would like to have a better content supply to our industries.

Speaker Change: The.

Speaker Change: On the UE pool for lifetime, we do see.

Speaker Change: The improvement quarter on quarter.

Speaker Change: Actually if you look at all market.

Speaker Change: Some market are profitable some market.

Speaker Change: Still improving.

Speaker Change: But I think generally we believe the trend will continue in terms of the improvement for our lifestyle businesses.

Speaker Change: Okay.

Unknown Executive: Together with the largest scale of what we are right now, compared to competitors, we will although things will help us to always be better positioned, to deliver better value to our consumers, and ultimately have better yield economics, which will translate to the market shake and over time as well. I think that's kind of like how we probably see the market in the near term and near the market.

Marisa: Your next question comes from the line of Marisa, who treat <unk> with UBS. Your line is open.

Unknown Executive: Hi, management. So I have two questions. Firstly, on e-commerce. So you've just reported your first CM positive from Brazil, and I think still with ambitions to kind of be number two in the market. How do you plan in achieving this? Should we think of the improved profitability as sustainable? And number two is kind of just to make sure that I'm getting your guidance correctly. So the positive will be just for standalone Q3 EBITDA, but not overall nine months EBITDA positive in Q3. Thanks.

Marisa: Management, So I have two questions. Firstly on E. Commerce. So you just reported your first Sam Boston from Brazil, and thankful with ambitions to kind of be number two in the market. How do you play in achieving this should we think of the improved profitability sustainable and number.

Speaker Change: To me, it's kind of just.

Speaker Change: To make sure that I'm getting your guidance correctly I'm, sorry, adjusted EBITDA positive will be just for Standalone Q3, EBITDA, but not all grown nine months EBITDA positive in Q3.

Piyush Choudhary: Your next question comes from the line of Piyush Choudhary with HSBC. Your line is open. How do you feel to further increase the take rates and are you able to reduce the shipping subsidies?

Speaker Change: Okay.

Unknown Executive: For the Brazil businesses, we're very happy about the improvement on the margins in the market. As we share in the earning, the contribution margin for the Brazil market is positive already. And we also see there is a good potential in Brazil market. The core for us in Brazil is, I think, number one, we are able to consistently reduce our shipping cost in the market through our own margin network. Number two is we're also improving the user experience in the market, thankfully, over the past quarter.

For the Brazil business says, we're very happy about.

Speaker Change: Improvement on our margins in the market.

As we shared in the earning.

Speaker Change: The contribution margin.

Speaker Change: For the rescue market is positive already and Oh, we also see days, though.

Unknown Executive: That's the first question. Secondly, can you talk about the unit economics of light streaming business? Has it turned profitable now in some countries? How is the contribution margin for light streaming segment?

Speaker Change: Potential in Brazil market.

Speaker Change: Fifth Copa in Brazil is I think number one we are able to.

Speaker Change: Certainly reduce our shipping costs are in the market through our own lotteries network number two is we're also improving the user.

Unknown Executive: Thank you. For the take rate, we do believe that our alternative further increase the take rate. I think part of that comes from commissions and fees. You probably observed that we do increase meaningfully in the past few quarters. I think there are two alternative to further increase that although probably not in the magnitude that we see in the early parts of the year. There is another part of take rate, which we think that is also having a sizable opportunity is on the ad side.

Speaker Change: You would experience in the market are finally over the past quarters.

Unknown Executive: I think in combination, it drives better user retention and also better user economics to our market. The other thing that's important for our Brazil market, besides the user experience and the economic improvement, is the ability for us to increase our penetration of the higher basket categories over time. We do believe that we have a sizeable potential there to further increase our market share penetrations to those categories. Traditionally, we are not as strong as compared to some of other players in the market.

Speaker Change: And in combination.

Speaker Change: It drives better user retention and also better economics.

Speaker Change: Two out of the market. The other thing that's important for a rescue market. Besides the user experience and.

Speaker Change: Then you've got mix improvement is the ability for us to increase our penetration of the higher basket categories. All the times and we do believe that we have a sizable potential path to further increase.

Unknown Executive: As we share in the opening, we do focus on the ad side. We spend quite a lot of effort on green infrastructure to the ad side in the past few quarters. For example, we build the standard platform for our recommendation and search. We also build a standard algorithm and platform for our system and organic traffic allocations. All those will help us to be able to allocate traffic more agile and more flexible.

Speaker Change: Our market share penetration to those categories traditionally we are not as strong.

Speaker Change: As compared to some of other players in the market so with all that we do.

Unknown Executive: So with all that, we do feel that there's a meaningful potential for us to grow further in Brazil market, and we can see the levers that we have, and we are working on those levers. In terms of the Ibiza guidance, I think what we refer to is the third quarter Ibiza posture.

Speaker Change: Feel that there's a meaningful potential for us to grow further.

Speaker Change: In present market and we can see the lever that we.

Speaker Change: We have and we're working on those levers.

Speaker Change:

Unknown Executive: This enable us to also add product to the seller as well, which we are voting out in the next few quarters, which will leave all those efforts, will help us on the ad take rate improvement in the coming quarters. On the UE pool for livestream, we do see UE improvement quarter. Actually, if you look at all market, some market are possible, some market are still improving.

Speaker Change: The in terms of the.

Speaker Change: I think where we are.

Speaker Change: Refer to the third quarter EBITDA positive.

Unknown Executive: I think your understanding is correct on that. Your next question comes from the line of Alicia Yap with Citigroup. Your line is open. Hi, thank you.

Speaker Change: I think that's the understanding is correct on that.

Speaker Change: Your next question comes from the line of Alicia Yap with Citigroup. Your line is open.

Alicia Yap: Good evening, management. Thanks for taking my questions. Two questions. First, can management share the update on the progress of acquiring users on the non-Shopee platform user for the DFS business and the GTV growth for the non-Shopee platform? Were these more from offline transactions like those offline retailers, the restaurant partners, or, you know, see actually will be open to work with any online partners, including, for example, online travel agents? So this is for the DFS question.

Alicia Yap: Hi, Thank you good evening management, Thanks for taking my questions two.

Alicia Yap: Two questions first can management share the update on.

Marissa Putri: I think generally we believe the trend will continue in terms of the UE improvement for our livestream businesses. Your next question comes from the line of Marissa Putri with UBS. Your line is open.

Speaker Change: The progress of acquiring <unk>.

Speaker Change: On shopping platform huge for the DFS business.

Speaker Change: And the GTD growth for the non shopping platform.

Small.

Speaker Change: Offline transactions like those offline retailers to restaurant partners or you know she actually hit will be open to what we have any online partners, including for example, the online travel agents.

Marissa Putri: Hi, management. So I have two questions. Firstly, on e-commerce. So you've just reported your first CM positive from Brazil. And I think still with ambitions to kind of be number two in the market. How do you plan in achieving this? Should we think of the improved profitability as sustainable? And number three is kind of just to make sure that I'm getting your guidance correctly. So the adjusted beta positive will be just for standalone Q3 beta, but not overall nine months a beta positive in Q3.

Speaker Change: Yeah first question second question since meeting him too Shabby Express.

Alicia Yap: So how are we going to further optimize operation efficiency and also further improve the cost structure for the logistics business in the coming quarters? Thank you.

Speaker Change: So how are we going to further optimize the operation efficiency and also slightly improved our cost structure.

Speaker Change: For the logistics business in the coming quarters. Thank you.

Speaker Change: Okay.

Unknown Executive: On the first question, if you look at our credit loan portfolio, there are a few components of that. We have Shopee Pay Later, which is very much quite connected to Shopee, the S-Pay Later, as we call it. It's used as part of Shopee transactions. Besides that, we have Buy Cash Loan, which is a cash loan that's not related to Shopee. Anyone can take a loan from it

Speaker Change: On the first questions.

Speaker Change: If you look at all of our credit loan portfolio. There are a few components of that we have shopping data which is.

Marissa Putri: Thanks. For the Brazil businesses, we are very happy about the improvement on the margins in the market. As we share in the earnings, the contribution margin for the Brazil market is possible already. And we also see there is a good potential in Brazil market. The core for us in Brazil is in number one, we are able to consistently reduce our shipping cost in the market through our own margin network. Number two is we are also employing the yield experience in the market, effectively over the past quarter.

Speaker Change: Biomass quite connected to shocking that the pain, because we call it.

Speaker Change: Its use as part of shopping transactions besides that we have by castle.

Speaker Change: Which is the cash flow and debt nominated two shockey anyone can learn from it and on top of that we also have.

Unknown Executive: And on top of that, we also have the offline payment through SPay later. And the same SPay later that can be used offline can also be used online through a Shopee Pay acquiring network. Besides that, we are also developing different kind of use cases for offline usage, for example, the headphone purchase, as we shared in the open discussion. So if you, and similar type of specialized services can be deployed in the future as well that we're working on. For example, the potential home appliance purchase offline, it can be online as well. For example, the other type of.

Speaker Change: Yeah offline payment too.

Speaker Change: S trade later and Ah the same escalator that can be used offline can also be used online to actually pay acquiring network.

Speaker Change: Besides that we're also developing.

Speaker Change: A different kind of use cases are.

Marissa Putri: In combination, it drives better yield retention and also better economics to our market. The other thing that is important for our Brazil market besides the yield experience and the economic improvement is the ability for us to increase our penetration of the higher market categories over time. We do believe that we have a considerable potential there to further increase our market share penetration to those categories, traditionally we are not as strong as compared to some of other players in the market.

Speaker Change: For offline usage for example of the the.

Speaker Change: Headphone purchase as we shared in the opening.

Speaker Change: And.

Speaker Change: And a similar type of specialized services can be deployed in future as well that we're working on for example, the potential of home appliance purchase offline. It can be online as well for example, the other type of.

Unknown Executive: So I think to the question whether it's mainly offline or it's online as well, I think the answer is probably a combination of both. If you are in some of market, I mean in Asia, the user can use our Shopee Pay Later, As Pay Later solutions to pay in an online trouble website already. So we do work with various both online and offline partners to enable As Pay Later for that transaction.

Speaker Change: So the I think to the question of whether its many offline or online.

Speaker Change: Online as well I think the answer is probably a combination of both of them in fact.

Marissa Putri: So with all that, we do feel that there is a meaningful potential for us to grow further in Brazil market. And we can see the leaders that we have, and we are working on those leaders. In terms of the EBITDA alliance, I think will be referred to as the third quarter EBITDA posture. I think that's the understanding is correct on that.

Michelle: If you are in some of the market because I mean Michelle.

Speaker Change: The user can use our self isolated assay later solutions to pay are in the online travel website already so we do work with <unk>.

Speaker Change: Various both online and offline our partners.

To enable as pay rates for that transaction.

Unknown Executive: And we expect the partner will grow over time for both online and offline, so it wouldn't be only offline. Aung, For the second question regarding SPX, we have probably further improved the efficiency of SPX. For example, number one is the scale.

Speaker Change: And we expect the partner.

Speaker Change: Will grow over time.

Alicia Yap: Your next question comes from the line of Alicia Lap, Yap with city group. Your line is open. Hi, thank you. Good evening management. Thanks for taking my questions. Two questions. First, can management share the update on the progress of acquiring on the non shoppy platform user for the DFS business? And the GTV grow for the non shoppy platform with these more from the offline transactions like those offline retailers, the restaurant partners, or you know see actually will be open to work with any online partners, including for example the online travel agents. So this is for the DFS question.

Speaker Change: For both online and offline is so you wouldn't be on the Oh sorry.

Speaker Change:

Speaker Change: The second question regarding <unk>.

Speaker Change: We actually have probably there to further improve.

Speaker Change: Improve the efficiency of SPX.

Speaker Change: For example, number one its a scale they still sizeable rooms for us to grow our scale saga, which.

Unknown Executive: There is still a sizable room for us to grow our scale further, which in our stage still can reduce the cost and improve efficiency, number two is more coverage and more density of the coverage. For example, more hubs. Some of the hubs can be traditional hubs, as you see.

Speaker Change: Our space to kind of reduce.

Speaker Change: The cost and efficiencies.

Speaker Change: Number two is more coverage and more density of coverage for example, more hubs some of the hubs can be a traditional hubs as you see some of the top 10 mobile hubs.

Unknown Executive: Some of the hubs can be mobile hubs through our innovative way of deploying the hubs with low cost. And if you look at Q2, we actually have about 900 hubs in Q2, and five of them are mobile hubs with low-cost operations. Number three is we're also doing more automation through our network. For example, in our SOCs, we are adding more automation solutions. Either it's for ASM, automatic sorting machines, or it's a hybrid solution when there is a smaller SOC, which will further improve our productivity.

Speaker Change: Through our innovative way of deploying the hubs with a low cost and if you look at.

Alicia Yap: Second question is related to shoppy express. So how are we going to further optimize the operation efficiency and also further improve the cost structure for the logistics business in the coming quarters. Thank you.

Speaker Change: If you look at Q2.

Speaker Change: We actually are at about a 900 clubs in Q2.

Speaker Change: And sites that are mobile house.

Speaker Change: With our low cost operations.

Speaker Change: The deal we are number three is we're also doing more automation through our network. For example in our Soc, we are adding more automation solutions, either it's a full as an automatic sorting machines or into a hybrid solution win.

Unknown Executive: On the first question, if you look at our credit loan portfolio, there are a few component of that. We have shoppy data which is very much quite connected to shoppy, the estate data as we call it. It's used as part of shoppy transactions besides that we have buy cash loan, which is a cash loan that not related to Shopee. Anyone can take loan from it. And on top of that, we also have the offline payment to estate later.

Speaker Change: He is a smaller associates, which will further improve our productivity.

Unknown Executive: We're adding similar solutions not only to SLCs but also to some of our first mile and last mile hubs when the scale enables it. And number four is better technology supporting our businesses. For example, better sorting for our last mile drivers; we're deploying a solution that can also suggest routing and sequencing. We have done this in some markets, for example, in Brazil, but in some of the Asian markets, that's not easy to do because of the complexity of the maps.

Speaker Change: We're adding some of the solution not only to <unk>, but also to some of our first mile and last mile hubs when does scale.

Enable it.

Speaker Change: And number four is a better technology supporting our businesses.

Speaker Change: For example, a better sourcing for our last mile dry foods were deploying a solution that we can also suggest the routing of sequencing Oh.

Unknown Executive: And the same as the later that can be used, offline can also be used online through Shopee Pay acquiring network. Besides that, we are also developing different kind of use cases for offline usage, for example, the handphone purchase as we shared in the opening. And similar type of specialized services can be deployed in English as well, that we are working on, for example, the potential home appliance purchase offline. It can be online as well.

Unknown Executive: For example, the other type of handphone purchase. So I think to the question whether it's many offline or it's online as well. I think the answer is probably a combination of both. In fact, if you are in some of large, I mean vision, the user can use our Shopee Pay later app pay later solutions to pay in an online travel website already. So we do work with various both online and offline partners to enable us pay later for that transactions. And we expect the partner will grow over time for both online and offline. So it wouldn't be only offline.

Speaker Change: We have done some market for some in Brazil, but are in some of the Asia market is actually not easy to do because of the complexity of the Max.

Speaker Change: We are rolling out more and more of our solutions in different countries, because we need to customize the solution for different market.

Unknown Executive: We are rolling out more and more of a solution in different countries because we need to customize all the solutions for different markets. And the last thing, just to share, is the off-clock, which is very important for us. The off-clock, starting from picking up from the seller side to the first mile, half, to the sorting centers, to the line hall, to the last mile, to delivery.

Speaker Change: And the last thing just to share it is the off clock, which is very important for us.

Speaker Change: Starting from the picking up from the seller side to the first first mile hub to the sortation centers onto the line haul to the last mile deliveries.

Unknown Executive: And it sounds simple, but it's actually quite complex, because there are so many handovers along the way, and there are so many choices we have to make, like for example, when do you sell the line hall, when do you pick up, and whether you send to the hub directly or you send to a secondary sorting center. So optimizing the off-clock, yes, will enable us to further improve our efficiencies in general. And of course, there are many other things we're working on, but just sharing some of the examples for the improvement opportunity we have on the logistics side. Your next question comes from the line of Ellie Jiang with Macquarie. Your line is open.

Speaker Change: And it sounds simple, but it's actually quite complex because there's so many handle but along the way and you have so many choices we have to make a like for example, when do you start line haul or when do you pick up and and whether you sent to the hub directly all you have to seconds.

Speaker Change: Secondary sorting center, so optimizing the clock, yes will enable us to further improve our efficiencies in general and of course I mean, the other thing about working on but just sharing some examples.

Speaker Change: For the improvement opportunity, we have on the Oh I'll just cite.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Elite Yang with Macquarie. Your line is open.

Unknown Executive: For the second question, we are going to look at number one is the scale. There are still sizable rooms for us to grow our scale further, which in our stage still can reduce the cost and pre-efficiencies. Number two is more coverage, and more density of the coverage. For example, more hubs. Some of the hubs can be traditional hubs. As you see, some of the hubs can move all hubs through our innovative way of deploying the hubs with low cost.

Elite Yang: Hi, good evening.

Ellie Jiang: Good evening, thank you management for taking my question. I have two, number one is a follow-up on e-commerce. Just wanted to ask about the ad take rate, the management commented. We talked about the sizable opportunities ahead, but if we look in the next several years, what kind of timeline do we really anticipate to ramp up this ad kind of revenue and potentially get to a level that's similar to the natural market players?

Elite Yang: Management for taking my question I have two number one is a follow up on E. Commerce I just wanted to ask about the take.

Speaker Change: Take rate the management commentary.

Speaker Change: We talked about the sizable opportunities ahead.

Speaker Change: But if we look in the next several years, what kind of timeline, we really anticipate.

Speaker Change: To wrap up.

Speaker Change: AD.

Speaker Change: Revenue and potentially get to a level, that's similar to the mature market players.

Ellie Jiang: So, for example, how does it take for us to stimulate more ad spending from the merchants? Would it be more efficient marketing tools or coming from higher TSI item sales? And the second question is about the gaming segment.

Speaker Change: So for example, how does it take to you.

Speaker Change: Like more.

Speaker Change: Pending on the merchant would it be more efficient marketing tools or coming from more of a higher ticket items now.

Unknown Executive: And if you look at Q2, we actually add about 900 hubs in Q2. And size of them are mobile hubs with low cost operations. Number three is we're also doing more automation through our network. For example, in our SOCs, we are adding more automation solutions. Either it's a full ASM automatically machines or into hybrid solution when there is a smaller SOCs which will further improve our productivity. We're adding similar solutions, not only to SOCs, but also to some of our first mile and last mile hubs when the scale enabled. And number four is better technologies supporting our businesses. For example, a better sorting for our last mile drivers where deploying a solution that we can also suggest the routing and sequencing.

Speaker Change: The second question is.

On the gaming segment, so it seems like refineries I really.

Ellie Jiang: So it seems like Free Fire is really generating momentum and according to some third-party trackers, the momentum remains quite strong quarter to date. So can you comment on the visibility or the sustainability for the second half outlook and for the potential kind of meat for speed distribution that we partner with Tencent, what kind of financial kind of contribution would that be coming from the second half as well? Thank you.

Speaker Change: It is generating momentum and according to some third party trackers are at the moment remain quite strong quarter to date. So can you comment on the visibility or the sustainability or the second half outlook.

Speaker Change: And you know for the potential of course need distribution that we partner with Tencent, what kind of financial kind of contribution would that be coming from.

Thank you.

Speaker Change: Yeah.

Unknown Executive: On the ad tick rate, I think given the foundation we have built, as I shared earlier, we do believe that we will start to gain a benefit in the next few quarters, probably wouldn't take, you know, a few years. I think the basic product there, I think it will take some time for the sellers to adopt it.

Speaker Change: On the take rate I think giving the foundation, we have built as I said earlier, we do believe that we will start to gain a benefit in the next few quarters, probably wouldn't take it off here, yes, I think it's what comes up all the quarters I think the basic product that I think it will take some time for that.

Speaker Change: So let's adopt to it and also why there's different style adopt to it we have to optimize it for.

Speaker Change: If a market.

Unknown Executive: I think it comes in both in terms of the improved efficiency on how the seller use the ad product and also from our side as a platform, how we can allocate the traffic in a more efficient way, giving a seller more upside without sacrificing the overall platform conversion rate. I think that's essentially the technology we've built in the past few quarters and we're trying to roll out and optimize in the next few quarters.

Speaker Change: I think come in both in terms of the improve the efficiency of how the seller.

Unknown Executive: We have died in some markets for some in Brazil, but in some of Asian markets, that's not easy to do because of the complexity of the maps where we are running out more and more of a solution in different countries because we need to customize our solution for different markets, and the last thing just to share is the off-clock, which is very important for us. The off-clock starting from the picking up from the cellar side to the first mouth, to the sorting sensors, to the line-hole, to the last mouth, to the delivery.

Speaker Change: Use the ads product and also from our side as a platform how we can allocate the traffic.

Speaker Change: In a more efficient way.

Speaker Change: Giving a seller more upside without sacrificing the overall AR platform conversion rate I think that's essentially the.

Speaker Change: Not a built in the past few quarters, and we're trying to do rather than optimizing next few quarters.

Speaker Change: Okay.

Speaker Change: For.

Unknown Executive: On the game side, as you mentioned, we are very happy and we are very motivated by the trend we have observed on Free Fire. This is across pretty much all the metrics in terms of new users, in terms of existing user retention, and also some monetization metrics as well, like paying ratios and overall growth rate. This is a demonstration of what we have done in the past.

Speaker Change: On the game side.

Speaker Change #100: You mentioned, we are very.

Speaker Change #100: Happy and we are very very motivated by the trend we have observed on <unk>. This.

Unknown Executive: And it sounds simple but it's actually quite complex because there's so many handover along the way. And there are so many choices to make. For example, when do you set a line-hole, when do you pick up, and whether you send to the hub directly or you send to a secondary sorting center. So optimizing the off-clock here will enable us to further improve our efficiencies in general.

Speaker Change #100: This is across pretty much all the metrics.

Speaker Change #100: In terms of the new users in terms of the likelihood of a user to existing user retention and oh, so such as someone like a like a monetization.

Speaker Change #100: Metrics as well like paying ratios right under under an order or the growth rate.

Speaker Change #100: This is kind of like this is a demonstration of what we have done in the past is a is that right is the right decision, we've made and it's the right focus we.

Unknown Executive: And of course, I mean other things we're working on by just sharing some examples for the improvement opportunity we have on the logic side.

Unknown Executive: It's the right decision we made and it's the right focus we have, and we will continue to do that. We will be very, very focused on the content update. In the past two quarters, we have had some very, very successful new content releases around some vegetable campaigns and some unique gameplay, new gameplay experiences.

Speaker Change #100: We have and we will continue to do that and so we'll be very very focused on the content update right under our in.

Unknown Executive: Your next question comes from the line of LEDN with McClarry. Your line is open. Good evening, and can I answer for taking my question? I have two. Number one is a follow-up on e-commerce. I just wanted to ask about the at take rate, the management commented. We talked about the sizable opportunities ahead, but if we look in the next several years, what kind of prime lines do we really anticipate to ramp up this ad revenue and potentially get to a level that's similar to the actual market players.

Speaker Change #100: In the past two quarters and we have some very very successful new content release under around some out of the.

The table campaigns and some like a unique.

Speaker Change #100: Gameplay.

Speaker Change #100: New nucleic new gameplay experience. So we're continuing to do that they're worried that there'll be several big.

Unknown Executive: We will continue to do that. There will be several big updates already in the pipeline, and we have a pretty strong confidence on the result of those new updates. And on top of that, we are continually seeing Free Fire as a platform. It's not just an evergreen franchise. It's more like a platform. The way we think about it, as we shared, on every single day, Free Fire can reach more than 100 million users globally.

Speaker Change #100: Big update already in the pipeline and we have a pretty a kind of a strong confidence on the on the on the result of those are on the dosing you update.

Speaker Change #100: And.

Speaker Change #100: On top of that and we are continually seeing free fire.

Unknown Executive: So, for example, how does it take for us to simulate more ascending from the merchants? Could it be more efficient marketing tools or coming from more higher TSI items? And the second question is on the gaming segments. So it seems like pre-fire is a really react to generating momentum and according to some third party trackers, the momentum remains quite strong. So can you comment on the visibility or the sustainability for the second half outlook? And you know, for the potential kind of meet or speed distribution that we partner with Tencent, what kind of financial kind of contribution would that be coming from the second half as well.

Speaker Change #100: Platform and it is not just the every like evergreen franchise, it's more like a platform. The way we think about it this is a.

Speaker Change #101: As we short like home every single day like free fire can reach more than 100 million users globally. So lucky. So that is a very very sizable what that is is that these are very very large scale I think like although you may consider it a game. It's a coal is always that the name is always called free bar, but.

Unknown Executive: That is very, very sizable. That is on a very, very large scale. I think, although you may think the game is always called Free Fire, but in Free Fire, if you log into the game and you start to experience all different types of game experiences and different game modes, it's kind of like a combination of the different gameplay experiences within one platform under one Free Fire umbrella.

Speaker Change #101: In free fire, so if you're logged into the game and you will start to experience or different type of a game experience and like a different game mode. So it's kind of like a combination of the different game play experience.

Unknown Executive: Thank you. On the at take rate, I think giving the foundation we have built as I shared earlier, we do believe that we will start to gain a benefit in the next few quarters, probably wouldn't take, you know, three years, I think it's one of our public quarters. I think the basic product there, I think it will take some time for the sellers to adopt it and also why there's different sellers adopted, we have to optimize it for different markets.

Speaker Change #101: Everything one platform under one free fire umbrella, so we will continually explore that as well and.

Unknown Executive: We'll continually explore that as well. Some other longer-term initiatives we have been very, very focused on, and I personally feel very excited, is about how to use the AI tools, both on the production side, the game development side, how to make the production more cost-efficient, like how to improve the speed and the quality of the production. At the same time, we continually explore what is the type of new game experience for gamers enabled by AI.

Some other like a longer term our initiatives, we're being very very focused on and I personally feel very excited he is about how to how to use the AI tools right and both on the like a production site that the game development Ah Ah side right how to how to make.

Unknown Executive: I think it comes in both in terms of the improve the efficiency on how the seller used as product and also from our side as a platform, how we can allocate the traffic in a more efficient way. Giving a seller more upside without sacrificing the overall platform conversion rate, I think that's essentially the technology that built in the past few quarters and we trying to throughout and optimize in the next few quarters.

Speaker Change #101: The production more cost.

Speaker Change #101: Cost efficient like a how to how to.

Speaker Change #101: Improved.

Speaker Change #101: Feed under under the quality of the production at the same time, we continue to explore what is the type of new gaming experience for gamers enabled by AI. So this is has been a four course after after <unk> of the team and on the other end is a is it related to the platform perspective, we have nightclub.

Unknown Executive: This has been a focus of the team. On the other hand, it's related to the platform perspective we have. We are not only building the game content, and we are continually focused on building the game creation tools within the Free Fire ecosystem, within the Free Fire universe.

Speaker Change #101: We're not building only building the game content and we are continually focused on building on the game creation tools within the free fire ecosystem within the <unk> universe and have gradually we are going to a lack of work with a third party content creates our game developers to create.

Unknown Executive: For on-game side, as you mentioned, we are very happy and we are very motivated by the trend we have observed on FreeFar. This is, of course, pretty much all the metrics in terms of the new users, in terms of the existing user retention and also such as some like monetization metrics as well, like paying ratios and overall the growth rate. This is kind of like, this is a demonstrate what we have done in the past, it's a right decision, we made and it's a right focus we have and we will continue to do that and so we will be very, very focused on the content update right and in the past two quarters and we have some very, very successful new content release and around some vegetable campaigns and some like a unique gameplay, new gameplay experience.

Unknown Executive: Gradually, we are going to work with third-party content creators, game developers, to create a different, varied experience within the Free Fire platform to reach our 100 million daily active user base. So I think that will not only make the Free Fire offer a more complete gamer experience, at the same time, this will continue to help us on the user engagement and the monetization. We remain very, very confident for the rest of the year, the momentum, but as we all know, game businesses sometimes have the impact of the seasonality. This is related to the school holidays, related to certain festivals in certain markets, but it looks a little bit like a longer term from the four-year perspective, as you asked.

Michael Barrett: Different Michael Barrett the experience, we think the free fire platform to two.

Michael Barrett: To reach to like a smaller 100 million daily active user base.

Speaker Change #103: This is a the other I think that will not only make the free fire kind of Oh for a more complete a gamer experience at the same time like this will continue to help us tool on the user engagement and monetization.

Speaker Change #103: So we remain very very confident for the rest of the year the momentum, but like Oh.

We all know like a game business game have so theres, some sometimes have to impact off the seasonality right. This is related to the school holidays related to the certainly like the fact that you're avoiding certain market.

Speaker Change #103: <unk> look like a little bit like a longer term right under from the full year perspective, as you asked and we remain confident to deliver the double digit growth for <unk> for both the monetization side and also on the on the user growth side and we.

Unknown Executive: So we will continue to do that, there will be several big updates already in the pipeline and we have a pretty kind of strong confidence on the on the result of those, on the loss of new updates and on top of that and we are continually seeing FreeFar as a platform and it's not just every, like every green franchise, it's more like a platform. So the way we think about it is as we shared, like on every single day, like FreeFar can reach more than 100 million users globally.

Unknown Executive: We remain confident to deliver the double-digit growth for Free Fire, for both the monetization side and also on the user growth side. And we are very excited. We work very, very closely with our partners like EA and Tencent to work on the new game in our pipeline, but I would say it's still early to comment on what in terms of the revenue contribution. Internally, we have been tremendously focused on Free Fire, and we'll let the market know and give the more detailed update when we get the new game launched.

Speaker Change #104: We are very excited we work very very closely with our partners like E. On the Tencent two we're calling the new games in our pipeline.

But I would say like are you just still early.

Speaker Change #105: Two comments right on what is what in terms of the revenue revenue contribution and the internally like Oh, we have been tremendously steels, the polka sounds pretty far and will lead the market.

Unknown Executive: So that is a very, very sizable, that is a very, very large skill. I think like although you may consider the game is always called FreeFar but in FreeFar, so if you log into the game and you start to experience all different types of game experience and like different game mode, so it's kind of like a combination of the different gameplay experience. We think one platform under one FreeFar umbrella, so we will continually explore that as well.

Speaker Change #106: No and keep them more kind of a detailed update when we got the new game launched I think when we get user feedback on where sito stats will have a better a better sense of how big the potential those new games.

Unknown Executive: I think when we get the user feedback and we see the stats, we'll have a better sense of how big the potential of those new games could be. Your next question comes from the line of Divya Kothiyal with Morgan Stanley. Your line is open. Yeah, thank you very much.

Speaker Change #105: Yeah.

Speaker Change #107: Your next question comes from the line of <unk>.

Speaker Change #107: Yeah of course I am.

Speaker Change #109: <unk> with Morgan Stanley Your line is open.

Speaker Change #110: Yeah. Thank you very much. My first question is just on your views on the higher risk from competition from cross border E. Commerce in ASEAN I mean, given the traction that team with being in recent months in Philippines, Indonesia and their recent entry in Thailand are do you think that this could also become a credible.

Divya Kothiyal: My first question is just on your views on the higher risk from competition from cross-border e-commerce in ASEAN. I mean, given the traction that Timo is seeing in recent months in Philippines and Malaysia, and their recent entry in Thailand, do you think that this could also become a credible competitor, the way TikTok kind of came to this geography? And how are we planning to respond to this, especially in relation to our positive adjusted EBITDA guidance for the third quarter?

Unknown Executive: And some other, like a longer term, initiative web being very, very focused on and I personally feel very excited. It's about how to use the AI tools, right? And both on the, like a production side, the game development side, right? How to make the production more cost-efficient, like how to improve the speed and the quality of the production. At the same time, we continually explore what is the type of a new game experience for gamers enabled by AI.

Speaker Change #111: Editor do we picked all kind of came to this geography and how are we planning to respond to this especially in relation to our positive adjusted EBITDA guidance for.

Speaker Change #112: For the third quarter and my second question is on E Commerce CMV.

Divya Kothiyal: And my second question is on e-commerce GMV. Is the higher guidance coming more from the surprises in Brazil, or is it from ASEAN? And if you can comment on the trends that you're seeing in July and August, given that second half is slightly tougher based than the first half, and are we seeing any sort of, you know, tapering there? Thank you.

Speaker Change #113: Is the high end guidance coming more from the surprises in Brazil or is it from ASEAN and if you can comment on the trends that youre seeing in July and August are given that second half is slightly tougher in the first half and have you seen any sort of tapering back. Thank you.

Unknown Executive: So this has been a focus of the team. And on the other end, it's related to the platform perspective we have, like we are not building only building the game content and we are continually focused on building on the game creation tools. Within the FreeFar ecosystem, within the FreeFar universe, and gradually we are going to work with the third-party content creator game developers to create a different like a various experience. We think the FreeFar platform to reach to like a 100 million daily active user base.

Speaker Change #112: Okay.

Unknown Executive: For the CB players, I think you will probably refer to Timo's businesses coming to Asia. I mean, generally, we have a lot of respect for what Pinduoduo and Timo has achieved in the past years. However, I think for our market, we'll probably monitor, from OEC so far. I think the impact to our business is probably rather limited from OEC. I think for two reasons.

Speaker Change #114: For the CB players I think you probably referred to T malls businesses coming to Asia.

Generally we have not respectful west.

Speaker Change #115: And seamless achieved in the past.

Speaker Change #116: However, I think if all of the market will probably monitor but from.

Speaker Change #116: So I'm always useful Bob I think the impact to our business as positive about the limited.

Speaker Change #116: But we see I think for two reasons one is CPE by nature is a smaller part of our businesses in our market.

Unknown Executive: One is CP, which by nature is a smaller part of our businesses in our market. If you look at the market like the Philippines, Thailand, or Malaysia mentioned, the majority of the e-commerce transactions happen to be domestic sales rather than cross-border sales. There are many reasons to contribute to that, of course, but as a fact, that's how the market landscape has evolved to for the better efficiency and cost structure that the domestic e-commerce market is. Thank you.

Unknown Executive: So this is the other thing that will not only make the FreeFar kind of more complete gamer experience at the same time, like this will continually help us to on the user engagement and the monetization. So we remember very confident for the rest of the year, the momentum, but like as you all know, like a game business, some time have the impact of the seasonality, right? This is related to the school holidays related to the certain like a vegetable in certain markets, but looks like a little bit like a longer term right and from the full year perspective as you asked.

Speaker Change #116: If you look at the market like Philippines, Thailand, Malaysia mentioned.

Speaker Change #117: Georgia up their e-commerce transaction happened to be a domestic.

Speaker Change #117: Selling rather than a cross border or something right. There are many reasons some countries without yeah of course.

Speaker Change #117: And in fact, that's how the market a mask.

Speaker Change #118: Manscape evolved to for the better.

Speaker Change #119: Efficiency and cost structure that the domestic ecommerce losses.

Unknown Executive: Next one. Second one is the great strength for T-Mobile, other cross-border players entering to U.S. or European market is their pricing, they typically carry a significant price advantage compared to the existing players. However, if you compare our pricing to their pricing in the market that you mentioned, Philippines, Thailand, or Malaysia, we actually have a much better pricing advantage compared to them. It was mainly because we actually operate in a very competitive environment for quite a long time, and we have been essentially having a very competitive seller landscape domestically for quite a while.

Speaker Change #120: One second one gig.

Speaker Change #121: The great strengths for our T Mall after you cross border players entering too.

Unknown Executive: And we remain confident to deliver the double digit growth for FreeFar for both the monetization side and also on the user growth side. And we are very excited. We work very, very closely with our partners like EA and the Tencent to work on the new game in our pipeline. But I would say like it's still early to comment right and what is what in terms of the revenue contribution. And internally like we have been tremendously still supporting FreeFar.

Speaker Change #122: U S European market is it pricing.

Speaker Change #123: They're typically carries a significant price advantage compared to the existing plaid.

Speaker Change #123: However, if you compare our pricing to their pricing.

In the market that you mentioned, Philippines, Thailand or Malaysia.

Speaker Change #123: We actually have a much better pricing advantage compared to them.

Speaker Change #123: It was mainly because we actually operating at a very competitive environment for quite a long time.

Unknown Executive: And we will let the market know and give the more kind of a detailed update when we get the new game launched. I think when we get a user feedback and we see the stats, we'll have a better sense of how big potential those new games could be.

Speaker Change #123: And webbing, it's actually are having a very competitive a fellow landscape domestically for quite a while.

Unknown Executive: And also, compared to a more developed market where the operating cost is much higher compared to the operating cost in China, the operating cost for our sellers in our market is much higher, is probably cheaper than opening costs in China. If you take a person in the Philippines to open a warehouse or open a shop, they are probably cheaper than a Chinese person. So many different reasons contribute to the fact that our pricing in our marketplace, which you can benchmark externally. It's very competitive compared to even the cross-border players.

Speaker Change #123: And also compared to a more developed market, where the operating cost is much higher compared to our plant in China, the opening cost for ourselves in our market domestically.

Divya Castillo: Your next question comes from the line of Divya Castillo with Morgan Stanley. Your line is open. Yes, thank you very much. My first question is just on your views on the higher risk from competition from cross-border e-commerce in ASEAN. I mean given the traction that Timo is seeing in recent months and Philippines in Malaysia and their recent entry in Thailand, do you think that this could also become a credible competitor, the way TikTok kind of came to this geography?

Speaker Change #123: It's probably cheaper than opening costs in China, if you take a pass and internet of things too.

Speaker Change #124: Too often the warehouses I'll take a shot they are probably cheaper than a Chinese person.

Speaker Change #124: So many different reasons contribute to the fact that our pricing you know marketplace, because you can benchmark externally actually.

Speaker Change #124: It's very competitive.

Prior to even the possibility as you mentioned.

Unknown Executive: To your second question around the GMB guidance, I think generally we see good growth, which are better than we thought before when we give out the private guidance in both Asian markets and Brazil markets. And just in the pure scale, Brazil market is, compared to Asia, is still relatively smaller as a total size, as where we are. So you know, the one market will not influence the number dramatically. So when we look at better growth guidance, I think it will imply that both markets, in Asia and Brazil, will have meaningful improvements from what we thought before. And as you mentioned that last year, our Q2 and Q4 does have a higher base compared to Q1, Q2. But still, I think that...

To your second question around the <unk> guidance.

Speaker Change #124: I think generally we see growth, which are better than we thought before we give that to keep out the perfect guidance.

Divya Castillo: And how are we planning to respond to this, especially in relation to our positive adjusted a bit of guidance for the third quarter? And my second question is on e-commerce GMV. Is the higher guidance coming more from the surprises in Brazil, or is it from ASEAN? And if you can comment on the trends that you're seeing in July and August, given that second half is slightly tougher based than the first half. And I'll be seeing any sort of you know tapering there.

Speaker Change #124: Impulse Asia market and brand new market.

Speaker Change #124: And just in the pure scale, our Brazil market is a comparative Asia is still massively smaller total size Ah Ah Ah Ah So oh.

The one market will not influence.

Unknown Executive: Thank you. For the CB players, I think you will probably refer to Timo's business as coming to Asia. I mean generally we have a lot of respect for what Timo has achieved in the past either. However, I think our market would probably monitor that from what we see so far. I think the impact to our business is probably rather limited from what we see I think for two reasons. One is CB by nature is a smaller part of our businesses in our market.

Speaker Change #124: The number domestically.

Speaker Change #124: So when we look at a faster growth.

Our guidance I think it will imply that both markets in Asia and Brazil.

Speaker Change #124: We will have a meaningful improvement from what.

Speaker Change #124: What we thought before.

Speaker Change #125: And Ah Ah you mentioned that last year, Oh excuse me in Q4 does have a higher base.

Speaker Change #125: Compared to Q on Q2, but still that are I think the the core thing is that there are many initiatives with them from a lost yeah from Q3 and Q2 Q.

Unknown Executive: The core thing is that there are many initiatives we did last year, in Q3 and Q4 on the content side improvement, and also the improvement in service quality, improvement in the cost structures, improvement in the pricing, all those contribute to better retention and new users coming to our platform, which drives better growth that we've seen so far, which leads to our race on the guidance. Your next question comes from the line of Sachin Salgaonkar with Bank of America. Your line is open.

Unknown Executive: If you look at the market like Philippine, Thailand or Malaysia mentioned majority of the e-commerce transaction happened to be a domestic selling rather than a cross-border selling. There are many reasons to consider that, of course. But as a fact, that's how the market landscape evolved to for the better efficiencies in the cost structure that the domestic e-commerce offers. The next one. The second one is the great strength for Timo and other cross-border players entering to the US or European market is that pricing.

Speaker Change #125: It's going to fall on the content side improvement.

Speaker Change #125: And also the improvement on the service qualities and Kumar on the cost structure.

Speaker Change #125: On the pricing of all.

Speaker Change #125: All of those countries.

Better retention and the new user coming to our platform, which drives a better growth that we're seeing so far which leads to our reis on the guidance.

Speaker Change #125: Yeah.

Speaker Change #125: Okay.

Speaker Change #126: Your next question comes from the line.

Speaker Change #126: So John Cai with Bank of America. Your line is open.

John Cai: Hi, Thank you for without pushing and again congrats on a good set of numbers I have two questions. So first one on gaming and second one on e-commerce on.

Sachin Salgaonkar: Hi, thank you for the opportunity and congrats on a good set of numbers. I have two questions, first one on gaming and second one on e-commerce. On gaming, again, when we look at your numbers, one gets a sense that your bookings are up, your users are up, but revenue is down. And we are seeing that trend for last couple of quarters where ARPU continues to go down. What happened this quarter is clearly, we could see margins almost being at an all-time high.

Unknown Executive: Typically, it carries a significant price advantage compared to the existing players. However, if you compare our pricing to their pricing in the market that you mentioned in Philippine, Thailand or Malaysia, we actually have a much better price advantage compared to them. It was many because we actually operate in a very competitive environment for quite a long time and we have been essentially having a very competitive selling landscape domestically for quite a while.

John Cai: When gaming again, when we look at your numbers when we get to a sense that your bookings are up your users that up but revenue was down and are you seeing that trend for the last couple of quarters about odd pool continues to go down what.

Speaker Change #128: What happened this quarter was clearly we could see much enjoy most being at an all time high. So wanted to understand is this a specific trend we should look at going I heard of Iraq continues to decline and margins continue to improve or at least stay at these pivots.

Sachin Salgaonkar: So I want to understand, is this a specific trend we should look at going ahead where ARPU continues to decline and margins continue to improve or at least stay at these levels? Second question, I understand your earlier comments on competition being irrational. I just want to double click on a couple of markets.

Unknown Executive: Also, compared to a more developed market, where the operating cost is much higher compared to the operating cost in China. The operating cost for our sellers in our market domestically is probably cheaper than the operating cost in China if you take a person's intelligence to offer the warehouse or a shop. The operating cost for our sellers in our market is much higher compared to the existing players in our market domestically.

Speaker Change #129: Second question I understand your earlier comments on competition being irrational, but just wanted to double click on a couple of my parents, one Taiwan, where we have a new competitor coupon, which is a good idea. So would love to know your thoughts on overall competitive intensity in that market and second in Indonesia, I read one of the players had increased subsidies in the market.

Sachin Salgaonkar: One, Taiwan, where we have a new competitor, Coupang, which is aggressive. So would love to know your thoughts on overall competitive intensity in that market. And second in Indonesia, where one of the players had increased subsidies in the market. So any specific response from you guys to that? And how are you guys looking at the increased subsidies? Thanks.

Speaker Change #130: So any specific response from you guys to that and how about you guys looking at the increased subsidies.

Unknown Executive: Thanks for the question. I think for the first question, you're talking about the gap revenue. So basically, the bookings actually improved both QOQ and year-over-year. And well, because of the gap treatment, we have to defer more revenues into the future quarters. So that's why we typically see, you know, the variations in the gap revenue side that is, you know, on the reverse side with the booking side. So, well, for our pool, what we see is average revenue per user is relatively stable.

Speaker Change #131: Thanks for the question I think for the first question you were talking about the GAAP revenue. So I'm basically the bookings actually improve the both heal Q and a year over year on well because of the GAAP treatment that we have to defer more revenues into the.

Unknown Executive: Zhang, Zhang Zhang, Zhang Zhang, Zhang Zhang[inaudible] Zhang Zhang Zhang Zhang Zhang Zhang[inaudible] Zhang Zhang Zhang Zhang[inaudible] Zhang Zhang Zhang Zhang[inaudible] Zhang Zhang Zhang Zhang[inaudible] Zhang Zhang Zhang Zhang Thank you for the question. I think for the first question, you are talking about the gap revenue. So basically, the bookings actually improved both QOQ and Year of a Year. Well, because of the gap treatment, we have to defer more revenue into the future quarters.

Speaker Change #131: Future quarters. So that's why we typically see you know the variations in the in the GAAP revenue side that is a you know on the on the reverse side, we still with the booking side. So.

Unknown Executive: While it might be fluctuating a little bit, but it's more coming from the market. We don't see a very big fluctuation in QOQ for this quarter. I think for your question on the competitive landscape in Taiwan and Indonesia, if you look at Taiwan, I think Taiwan, we still enjoy a rather dominant market position in the market.

Speaker Change #132: Well for our pool, what we see is our is our average revenue per user is relatively stable, while it might be fluctuate a little bit, but its more coming from the market mix.

Speaker Change #133: Don't see a no.

Speaker Change #133: Very big a.

Speaker Change #133: Fluctuation in Q O Q for this quarter.

Speaker Change #134: I think for your question on competitive landscape in our.

Speaker Change #134: Taiwan, Indonesia, because like Taiwan.

Speaker Change #134: Taiwan, I think Taiwan, we still enjoy a rather a dominant market position in the market. We do some we do see some new entrants it and we do look at it seriously, but I think the impact.

Unknown Executive: We do see some new entrances, and we do look at them seriously, but I think the impact on our business at this stage is relatively small. And the core thing for us, I mean, without commenting too much on specific competitors, of course, the core thing that we are doing in Taiwan is, number one, to shorten our delivery time through our own SBX network. We are covering a lot more next-stage deliveries through our own SBX network, which is typically done through a 3PL with much more expensive delivery systems.

Speaker Change #134: Our business at this stage.

Speaker Change #134: Relatively small.

Unknown Executive: The second one is to further increase the efficiency of the supply side, to work with our sellers to fulfill their orders, not only the delivery side, but also the warehousing side, the procurement side, to do it in a more cost-effective way. Number three is to work with more sellers to increase their assortment for those areas that we think can be further enhanced. I think all those things will help us to maintain our competitiveness in the market while maintaining the profitability in the market.

Speaker Change #134: And the core thing for us I mean without commenting too much on specific competitors of course.

Speaker Change #134: The core thing that we are doing in Taiwan.

Speaker Change #134: It is number one to a short time I worked at it big time through our own network.

Speaker Change #134: We're covering a lot more next day deliveries through our own aspect that work, which is typically done through a three PL was much more expensive deliveries our systems, we're able to do a negative delivery with much cheaper.

Speaker Change #134: Many cases, probably a 40% cheaper than the alternative solutions in the market.

Speaker Change #134: That's one second one is.

Speaker Change #134: Two to further increase.

Speaker Change #134: Increase the efficiency of the supply side.

Speaker Change #134: To work with our sellers to fulfill that order is not only the.

Speaker Change #134: Not only the delivery side, but also the warehousing side, putting aside.

Speaker Change #134: To do it in a more cost effective ways.

Speaker Change #134: And number three is to work with a more center.

Speaker Change #134: Two to increase.

Their assortment for those areas that we think can be further enhanced.

I think all of those things will help us to maintain our competitiveness in the market while maintaining.

Speaker Change #134: Maintaining the possibilities are in.

The market.

Unknown Executive: For Indonesia, I think there are, you know, different players doing different things in the market, and there will be seasonal fluctuations. We would pay less attention to sort of a short-term up and downs on the subsidies you mentioned.

Speaker Change #135: For Indonesia, I think they they are ill defined.

Speaker Change #136: Defense players doing the same thing in the market and Ah.

Speaker Change #137: One thing, it's getting a little fluctuations.

Speaker Change #138: We want to pay less attention to sort of a short term effect on the subsidized you mentioned.

Unknown Executive: I think we look at sort of a slightly longer-term, let's say medium-term trend, at least month-to-month or quarter-to-quarter trend. We didn't see any significant changes on that, if you look at it slightly longer-term, rather than focusing on specific campaigns or specific weeks or days. Your next question comes from the line of Thomas Chong with Jeffries. Your line is open. Hi, good evening.

Speaker Change #139: I think we look at sort of a slightly.

Speaker Change #139: Longer term, let's say medium term trend at least month to months or quarter to quarter trends.

Speaker Change #140: We didn't see any significant changes.

Speaker Change #140: That.

Speaker Change #140: If you look at slightly longer term rather than putting on a specific campaigns are specific weeks or days.

Speaker Change #140: Your next question comes from the line of Thomas Chong with Jefferies. Your line is open.

Unknown Executive: So that's why we typically see, you know, the variations in the gap revenue side that is, you know, on the reverse side, we still with the booking side. So, well, for our pool, what we see is the average revenue per user is relatively stable, while it might be fluctuating a little bit, but it's more coming from the market mix. We don't see, no, very big fluctuation QOQ for this quarter. I think for your question on the competitive landscape in Taiwan, Indonesia, if you like Taiwan, I think Taiwan, we still enjoy a rather dominant market position in the market.

Thomas Chong: Thanks, management, for taking my question. My first question is about our DFS business. Just now, I think our management comments a lot about BNPL, cash loan, and offshore repay later. I just want to get some color with regard to the margin trend for different categories. Any color above the margin profile would be great.

Thomas Chong: Hi, Good evening, Thanks management for taking my question.

Thomas Chong: My first question is about E F N b.

Speaker Change #142: And that's just not I think that management comment a lot about the NPL passed along and also hope you pay later.

Speaker Change #143: Wanted to get some color with regard to the margin trend.

Speaker Change #144: Four different categories.

Speaker Change #144: Any color about the market pulp out would be great and and on different than I'm skipping. The macro uncertainties. We are seeing globally, how should be think about management in particular have to decide and be and depend new if that's true and my second question is more about the.

Thomas Chong: And on the other hand, given the macro uncertainties we are seeing globally, how should we think about risk management? In particular, the ticket size and the tenure, et cetera. And my second question is more about the overall business. Given our different business segments are seeing very good growth momentum, how should we think about the longer-term revenue profile? Should we expect DFS to become more meaningful in the long term? Thank you.

Speaker Change #144: Oprah or a piece of it given our different pieces that I've seen a very good growth momentum how should we think about.

Unknown Executive: We do see some new entrances, and we do look at it seriously, but I think the impact to our business at this stage is relatively small. And the core thing for us, I mean, without coming too much on specific competitors, of course. The core thing that we are doing Taiwan is number one, to shorten our delivery time throughout our own aspect network. We are covering a lot more next-day deliveries through our own aspect network, which is typically done through a 3PL with much more expensive delivery systems.

But longer term our above the knee omics profile should we expect a DFS to become a more meaningful in the long term. Thank you.

Speaker Change #144: Hum.

Speaker Change #145: First one on the margin trends.

Unknown Executive: … … … … … … … … First one, on the margin trend, if you look at a particular market, or a particular product in our portfolio, our margin has been relatively stable. In fact, in some markets, we see better risk profiles for our product, which will, in turn, better our EBITDAs out. But one thing I do want to share on this topic is that given that we have many different markets and we do see that, you know, the newer market has probably a faster speed of growth. If you track our histories, we started our lending products in Indonesia first, then we expand to other markets like Philippines, Malaysia, Thailand, Vietnam, and Brazil.

Speaker Change #146: If you look at a particular market or particular products.

Speaker Change #146: Portfolio.

Our margin has been relatively stable.

Unknown Executive: We are able to do a next delivery with much cheaper, in many cases, probably 40% to 50% cheaper than the alternative solution in the market. That's one. The second one is to further increase the efficiency of the supply side to work with our sellers to fulfill their orders, not only the delivery side, but also the warehousing side, the procurement side, to do it in a more cost-effective way. Number three is to work with more sellers to increase their assortment for those areas that we think can be further enhanced.

Speaker Change #146: In fact in some market, we see a better risk profiles.

Speaker Change #146: For our product, which will in turn.

Speaker Change #147: Hotel EBITDA is ultimately Ah, but one thing I do want to share on this topic is that.

Speaker Change #147: Given that we have many different market and we do see that at all the newer market has probably a faster speed up growth.

Speaker Change #147: If you track our histories, we typically we started our lending products in Indonesia.

Speaker Change #147: Indonesia for US then we expand to other market like I said, other things, Malaysia, Thailand, Vietnam, and Brazil, So typically you.

Unknown Executive: So typically, you will see that given the smaller base, the latest market has a slightly faster growth than the early market. I think that's the natural trend. And in fact, we are very happy with the growth we see, in some of the new markets. For example, in Thailand, we see very good growth. In Brazil, we also saw quite good growth in the past quarters. On the macro uncertainties, generally, I think there are many macro factors impacting our market.

Speaker Change #147: You will see that getting the smaller base. So the latest market has a slightly faster growth than they are in the early market I think there's a natural trend and in fact, we are very happy with the growth we see.

Speaker Change #147: And some of the new market for example in Colorado with the bank grows in Brazil. We are also so are.

Unknown Executive: I think all the things will help us to maintain our competitors in the market while maintaining their affordability in the market. For Indonesia, I think we are different players doing different things in the market, and there will be a lot of fluctuations. We will pay that attention to a short term up and down on the Saturdays, you mentioned. I think we look at slightly longer term, let's say, medium trend, at least month to month, according to quarter trend. We didn't see any significant changes on that, if we look at slightly longer term, rather than focusing on specific campaigns or specific weeks or days.

Speaker Change #147: Quite a good growth in the past quarters.

Speaker Change #147: Then on the macro uncertainties.

Speaker Change #147: In generally I think that they are many macro factors impacting our market I think that was a big macro.

Unknown Executive: I think there was a big macro impact from the COVID time, the after-COVID time. I think since late last year, we've seen a more stable macro environment, in fact, of Lights. By short duration, we are talking about just a few months in average, right?

Speaker Change #147: Impacts from the Covid time thereafter, Covid time, I think the things late last year, where we're seeing a more stable macro environment inspect.

Speaker Change #147: For most of the market.

Speaker Change #148: They are two.

Speaker Change #149: Two things that is important for us in terms of managing the marketing partners. One is the duration of our lending products a second wave that ticket size you've mentioned so in general I like duration is rather short duration without that they have very long durations.

Speaker Change #150: By short duration, where you're talking about just a few months have seen an average right.

Thomas Chong: Your next question comes from the line of Thomas Chong with Jeffrey. Your line is open. Hi, good evening. Thanks management for taking my question. My first question is about our DFS business. Just now, I think our management comments a lot about BMPL cash long and offshore pay later. I just want to get some color with regard to the margin trend. For different categories, any color about the margin profile would be great. And on the other hand, my different macro uncertainties, we are seeing globally. How should we think about the risk management in particular the type of size and the and the tenure, etc.

Unknown Executive: And our ticket size, also, compared to many other lending products, our ticket size is more on the smaller side. So the combination of those will help us to be a lot more agile in terms of how we manage our portfolio. manage our portfolio in terms of how much lending we give out, how can we do risk-based pricing for different user bases, and also how we do collections, and how do we kind of fine-tune our portfolio based on the market environment?

Speaker Change #150: And Oh ticket size also compared to many other lending products like ticket size is more on the smaller side. So in the combination of all those will help us to be a lot more agile in terms of.

Unknown Executive: And my second question is more about the overall business. And given our different business statements are seeing a very good growth momentum, how should we think about the longer term revenue portfolio should be expect DFS to become more meaningful in the long term. Thank you. On the first one on the margin trend, if you look at a particular market or a particular product in our portfolio, our margin has been relatively stable.

Speaker Change #150: How we manage our portfolio.

Speaker Change #151: Metropolitan stomach, how much lending would give out how can we do risk based pricing for different user basis and also how we do collections in.

Speaker Change #151: Now how do we kind of fine tune our portfolio based on the macro environment. So in that sense I think we're quite comfortable with where we are and and.

Unknown Executive: So in that sense, I think we're quite comfortable with where we are. Even there is an unexpected market environment change, I think we are probably in a much better position than anyone else that we can see in the market with our science. Um, the, the, the, uh, um, yeah, for the long-term revenue mix of three businesses. If you look at each of the three businesses, I think each of them, at this moment, have some tailwind for our estimated e-commerce GME growth, and that will be the driver of the potential revenue growth as well.

Speaker Change #151: Even that is a I expect them often violent change I think we have probably a much better position than anyone else that we can see in the market with our site.

Speaker Change #151: The the Oh, yes.

Speaker Change #152: For the long term revenue mix offers three business.

Speaker Change #152: If you look at each of the three business I. Thank each of them some like a at this moment.

Speaker Change #153: And to have some tailwind right and for flower like our estimated ecommerce like a <unk> growth rate on the and then that will be the driver of the potential revenue growth as well and we continually work hung.

Unknown Executive: In fact, in some market, we see a better business profile. For our product, which will in turn benefit us ultimately. But one thing I want to share on this topic is that they are giving that we have many different markets. And we do see that the newer market has probably a faster speed of growth. If you track our history, we started our lending products in Indonesia. And we expand to other markets like Philippines, Malaysia, Thailand, Vietnam, in Brazil.

Unknown Executive: And if we continually work on the take rate, and not only on the commission side, but also on the ad take rate side, that could be a driver as well. And if you look at the financial services business, as we shared, and if we continually deepen the penetration of the Shopee ecosystem, at the same time, the total, like a long book size, will grow nicely with the overall Shopee GME growth as well.

Speaker Change #153: The take rate and not only on the on the on the commission side, but also on the take rate side right and that is a could be could be a driver as well and if you look at our financial services business as we shared and if we continue to deepen our depend to the penetration.

Unknown Executive: So typically, you will see that giving the smaller base so that the latest market has a slightly faster growth than the early market in the natural trend. And in fact, we are very happy with the growth we see in some of the new market. For example, in Thailand, with the very growth in Brazil, we are also quite good growth in the past quarters. On the macro uncertainties, generally, I think there are many macro factors in the market.

Speaker Change #153: Shockey ecosystem at the same time, the total loan book size loyalty I think grow nicely with our overall sharpie GMB growth, that's well for game business as we shared early right and we found the right formula for a four four grow the free fire again.

Unknown Executive: For game business, as we shared earlier, and we found the right formula for growth that we prefer, again, and we see a very, very strong momentum. So at this point, I think it's hard to come up with, we don't see certain businesses go up and certain businesses go down, and then it changes how the revenue mix looks like. I would say we'll be continually focused on growing each of the businesses as much as we can.

Speaker Change #154: We see a very very strong momentum. So at this point I think it's hard to comment we don't see like certain pieces of go off on the 30th beat go down at a dynasty is changed.

Speaker Change #155: How does the revenue mix to look like I would say like Oh, well, we'll be continuing to focus on grow each of businesses as much as we can but like I said 20, you just mentioned about the purity of from a GAAP revenue perspective, certainly our.

Unknown Executive: But as Tony just mentioned, but purely from a gap revenue perspective, certain growth of the game business, because of how the gap revenue works, there may be a certain delay in reacting to reflect that in the gap revenue. So that's why, in general, we use booking as the closer proxy, the benchmark, in terms of growth. From that perspective, maybe we can see a higher percentage of the revenue contribution from financial services.

Speaker Change #155: Gross after game business because of the how the GAAP revenue works. It made it made it to a certain delay how to react to reflect into the GAAP revenue right and so that's why you're generally use a booking.

Unknown Executive: I think there was a big macro impact from the COVID time, the after COVID time. I think the same late market, we have seen a more stable macro impact for one of the markets. There are two things that are important for us in terms of managing the macro impact. One is the duration of our lending products. Second one is the ticket size mentioned. So in general, our duration is rather a short duration rather than a very long duration.

Speaker Change #155: Like a closer proxy to benchmark in terms of the growth from that perspective, maybe we kind of like to.

See the higher percentage of the revenue contribution from financial services, but again this is a pure.

Unknown Executive: By short duration, we are talking about just a few months in average. And our ticket size also compared to many other lending products. Our ticket size is more on the smaller side. In the combination of those, it will help us to be a lot more agile in terms of how we manage our portfolio. How can we do this based pricing for different user basis and also how we do collections and how do we fine tune our portfolio based on the macro environment.

Unknown Executive: But again, this is purely, in our view, because of the gap revenue treatment for the game business, doesn't reflect, we don't have the confidence on the future growth of the game business. Your next question comes from the line of Jiong Shao with Barclays. Your line is open.

Speaker Change #156: Yeah, our view would be called off the camera revenue treatment for the game business doesn't reflect a we kind of our we don't have the confidence on the on the future growth of the team business Yeah.

Speaker Change #156: Yeah.

Speaker Change #156: Your next question comes from the line of Joan Chow with Barclays. Your line is open.

Jiong Shao: Thank you very much for taking my questions. I should have a couple of follow-ups. One is back on the take rate, you talked about increasing the advertising take rate to the global comps, global benchmark in a matter of quarters, not years. In your opening remarks, you also talked about your commission take rate, I think is below the global comps. Even it's good you guys and your peers are raising your take rate, but your commission take rate is still quite a bit below the Amazon, the Mellies, the Ebays. I was just wondering, are there structural reasons why you think a longer term? Your commission take rate won't be close to the global. Piers, and is there any timing to reach that sort of goal?

Joan Chow: Thank you very much for taking my questions.

Speaker Change #157: You should have a couple of follow ups.

He is back on the take rate you talked about.

Speaker Change #159: Increasing the advertising takeaway to the global comps global benchmark in a matter of quarters.

Speaker Change #160: Not years.

Speaker Change #160: Uh huh.

Speaker Change #162: Opening remarks, you also talked about your commission take rate asking is below the global comps even as good of you guys and your peers are raising a take rate, but your commission take rate.

Unknown Executive: So in that sense, I think we are quite comfortable with what we are. Even that is an unexpected market environment change, I think we are probably much better decisions than anyone else that we can see in the market with our science. For our estimated e-commerce, GME growth and that will be the driver of the potential revenue growth as well. If we continually work on the take rate and not only on the commission side but also on the at take rate side.

Speaker Change #163: It's still quite a bit below the amazons amenities to ebay's I was.

Just wondering are there structural reasons, why you're seeing the longer term.

Speaker Change #164: Your commission take rate wont be close to the global.

Speaker Change #165: Peers and is there any timing to reach that.

Speaker Change #166: Sort of a sort of go the second follow up is back to the gaming.

Jiong Shao: The second follow-up is back to the gaming booking. I know you talked quite a bit about the strong booking growth, which was amazing, second quarter in particular. Previously, you have talked about double-digit booking growth for this year for Free Fire. I think the assumption was sort of low teams, but given the particular strengths that you have seen last couple of quarters, the reason to expect, that implies the booking growth for Free Fire for 2024 should be going higher. If not, why not?

Speaker Change #167: Gaming booking I know you talked quite a bit about the strong.

Speaker Change #168: The strong booking growth, which was amazing second quarter. In particular previously you have talked about double digit bookings growth for this year for free fire I think the assumption was sort of low teens, but given the particular strength you have seen last couple of quarters.

Speaker Change #169: The reason to expect.

Unknown Executive: And that could be a driver as well. And if you look at the financial services business as we shared, and if we continually depend the penetration on Sharpie ecosystem at the same time, the total like a long book side will I think grow nicely with the overall Sharpie GME growth as well. For game business as we shared early and we found the right formula for growth and prefer again and we see a very strong momentum.

Speaker Change #170: The implied.

Speaker Change #171: The booking growth for free fire for 'twenty 'twenty four should be quoting higher if not why not what I'm, saying to you.

Jiong Shao: Thank you. For the tick rate question, I think for the ad tick rate, as I mentioned, I think we will see the potential growth in the next few quarters rather than years. And of course, the base is different in different markets, so ultimately, it might be different numbers in different markets. On the commissions, I think I would rather look at the totality, look at commissions and ads, et cetera. I don't think that is the reason they will be below the global peers in the market that you mentioned.

Speaker Change #172: For the take rate question I think for the antiquated as I mentioned I think.

Speaker Change #172: We'll see the potential growth in the next few quarters and years and of course.

Speaker Change #173: The the basic defined different market. So ultimately you know it's a.

Speaker Change #173: It might be different numbers and different market.

Unknown Executive: So at this point, I think it's hard to come out with, we do see like certain business go up and a certain big go down and then it's changed how the revenue mix will look like. I would say like we will be continually focused on growth each of businesses as much as we can. But like as Tony just mentioned, but you purely from a gap revenue perspective certain growth of the game business because of the how the gap revenue works.

Speaker Change #173: The other commissioners.

Speaker Change #174: I think I would rather look at the totality. If you look at the commission and et cetera.

Speaker Change #173: I don't think that is the reason.

Speaker Change #173: Basically blow that go global peers are.

Speaker Change #173: In a market that you mentioned.

Unknown Executive: I think this reflects to our long-term guidance on how the EBITDA will be at 2-3% of demand. In terms of the game booking, free fire booking guidance, right, for the rest of the year, yeah, I think you are right, we do see strong momentum and continuing, but at this moment we want to be cautious, right, and since we just have very, very strong momentum for the past two quarters, and we want to continually just focus on the effort what we have done, which proved to be productive, and if we continually seeing this trend, and we will update the market, like update our investors timely and accordingly.

Unknown Executive: This concludes the question and answer session. I would like to turn the conference back over to Mr. M. C. Koh for any closing remarks. Thank you all for joining today's call. We 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.

Speaker Change #175: Yeah, I think this reflects to our long term guidance on how the EBITDA will be up to the 3% of the market.

In terms of the gaming booking free fire booking.

Unknown Executive: It means it may be a certain delay how to react, reflect into the gap revenue right under. So that's why in general we use the booking as the closer proxy the benchmark in terms of the growth. So from that perspective, maybe we can like see the higher percentage of the revenue contribution from financial services. But again, this is a pure interview because of the gap revenue treatment for game business doesn't reflect we kind of our we don't have the confidence on the future growth of the game business. Yeah.

Speaker Change #176: Guidance right.

Speaker Change #176: For the rest of the year, Yeah I think.

Speaker Change #177: You are right. It's a we do see strong momentum and are continuing and but at this moment, we want to be.

The cautious right and since we just had but it's a very very strong momentum for our for the past two quarters and we want to continually just a focus on the effort of what we have done which proved to be a productive and if we continually see this sort of trend and.

Speaker Change #177: We.

John Chow: Your next question comes from the line of John Chow with Barclays. Your line is open. Thank you very much for taking my questions. I should have a couple of follow ups. One is the back on the take rate. You talked about increasing the advertising take rate to the global comps global benchmark in the matter of quarters. Not years. In your opening remarks, you also talked about your commission take rate asking is below the global comps.

Speaker Change #177: We are we will update the market.

Speaker Change #178: Date, our our investor timely under I know accordingly.

Speaker Change #178: Yeah.

Speaker Change #179: This concludes the question and answer session I would like to turn the conference back over to Mr. M. CECO for any closing remark.

Speaker Change #180: Thank you all for joining today's call and we look forward to speaking to all of you again next quarter.

Speaker Change #181: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change #180: Yeah.

John Chow: Even it's good you guys and your peers are raising your take rate, but your commission take rate is still quite a bit below. You know, the Amazon, the Mally is the e-base. I was just wondering are there structural reasons why you sing a longer term?

Speaker Change #180: Okay.

Speaker Change #180: Hum.

Speaker Change #180: Okay.

Speaker Change #180:

John Chow: Your commission take rate won't be close to the global peers and is there any timing to reach that sort of go.

John Chow: The second follow-up is back to the gaming booking. I know you talked quite a bit about the strong booking growth, which was amazing. Second quarter in particular. Previously you have talked about double digit booking growth for this year for free fire. I think the assumption was so low teams, but given the particular trends you have seen last couple quarters, they reason to expect the implies the booking growth for free fire for 2024 should be going higher if not why not.

Yeah.

Unknown Executive: Thank you. For the take rate question, I think for the potential growth in the next few quarters of the years, and of course the base is different in the market, so ultimately it might be different numbers in the market. On the commission, I think I will rather look at the totality, look at commission and access, etc. I don't think that in the reason we will be able to be below the global peers in the market that you mentioned.

Unknown Executive: This reflects to our long-term guidance on how the EBITDA will be to the 3% of the market. In terms of the game booking, free fire booking guidance for the rest of the year, I think you are right. We do see strong momentum and continuing. At this moment, we want to be cautious and think we just have a very strong momentum for the past two quarters, and we want to continually focus on the effort that we have done which proved to be productive. And if we continually see this trend, we will update the market, like I have updated our events as timely and accordingly.

MC Koh: This concludes the question and answer session.

MC Koh: I would like to turn the conference back over to Mr. MC, co-friendly closing remarks. Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.

Operator: The conference has now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect.