Q3 2024 Sea Ltd Earnings Call
Good morning, and good evening to all and welcome to the Sea limited third quarter. It went up 24 assault conference call. All lines have been placed on mute to prevent any background noise. 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 we got a question press Star one.
Yes, that's dropped the call. Please press star zero, and finally, I would like to advise all participants that this call is being recorded thank you I have not.
Speaker Change: Like to welcome Mr. M CCAR to begin the conference. Please go ahead.
Hello, everyone and welcome to <unk>, two O 24th quarter earnings Conference call.
Speaker Change: M C 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 various reasons as stated in our press release.
Speaker Change: Also this call includes a discussion of certain non-GAAP financial measures.
Speaker Change: Adjusted EBITDA.
Speaker Change: We believe these measures can enhance our investors' understanding of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures.
Speaker Change: For a discussion of the use of non-GAAP financial measures and reconciliation with the closest GAAP measures. Please refer to the section on non-GAAP financial measures in our press release.
Speaker Change: I have with me Sea's, Chairman and Chief Executive Officer.
Speaker Change: Firstly.
President Christopher.
Speaker Change: And Chief Financial Officer, Tony Hull.
Speaker Change: <unk> will share strategy and business updates operating.
Tony Hull: Operating highlights and financial performance for the third quarter of 234.
Tony Hull: This will be followed by a Q&A session in which we welcome any questions you have.
Speaker Change: With that let me turn the call over to force.
Speaker Change: Yeah.
Speaker Change: Hello, everyone and thank you for joining today's call.
Speaker Change: Happy to report that it has been another solid quarter.
Speaker Change: We're seeing high growth across our three businesses.
Speaker Change: Shopping is on track to deliver our full year guidance of mid 'twenty year on year <unk> growth.
Speaker Change: Jim on your loan book grew by over 70% year on year this quarter, while maintaining a stable NPL ratio.
Speaker Change: And for Garena, we now expect <unk> full year bookings to grow over 30% year on year.
Speaker Change: I'm very proud that the we also improved our profitability well getting back to high growth.
Speaker Change: This quarter sharply achieved positive adjusted EBITDA in both Asia and Brazil.
Speaker Change: As we continue to focus on delivering growth, we expect choppy to remain profitable going forward.
Speaker Change: With that let me take you through each even if this performance in more detail.
Speaker Change: Starting with e-commerce.
Speaker Change: Sure.
Speaker Change: Our strong <unk> and order volume growth this quarter.
Speaker Change: <unk> strong market leadership in our Asia market.
Speaker Change: User growth remains strong with average monthly active buyer in the third quarter growing by over 20% year on year.
Speaker Change: We have improved our monetization in both commission.
Speaker Change: We're tightening take rate this quarter.
On Commission.
Other market rationalization in southeast Asia has led to industry wide increases in commission take rate.
Speaker Change: I don't think of archiving, our AD tech improvements attracted more sellers to our paid at feature.
Speaker Change: We simplified seller onboarding optimize every done for traffic allocation and introduced a dashboard, making it easier for et cetera to set their AD spend and our ROI target.
This helps our sellers both see the benefit of their ad spend.
Speaker Change: Cheap better return on it.
Speaker Change: Driving adoption of our ad offerings.
Speaker Change: In the third quarter as paying seller increased by over 10%.
Speaker Change: <unk> revenue per seller increased by over 25% year on year.
Speaker Change: Compared to the same quarter last year sharply at take rate has improved by more than 30 basis points.
Speaker Change: And we see much more upset here.
Oh.
Speaker Change: On the operations front.
Speaker Change: We remain committed to the same three priorities to deepen our competitive moat.
Speaker Change: Enhancing our price competitiveness improve.
Speaker Change: Improving our service quality and strengthening our content ecosystem.
Speaker Change: Price competitiveness continues to be a key value proposition.
Speaker Change: We bring to shop user.
Speaker Change: It is a strong anchor of our Brent months share among buyers.
Speaker Change: In a recent survey conducted by <unk>.
Speaker Change: Shop unit received the highest score among e-commerce platforms for good product prices.
Speaker Change: Our Asia market and Brazil.
Speaker Change: On service quality investing you end to end logistics integrate integration.
Speaker Change: Our logistics partner.
Speaker Change: Has giving us a vital and structural advantage over our peers.
Speaker Change: Our buyers are happy with the cost savings, we passed down to better.
Speaker Change: And the better customer service, we are able to provide.
Speaker Change: Our seller also appreciate it.
Speaker Change: As we give them access to west stopped logistics solutions that are both reliable and cost effective efficient.
Speaker Change: <unk> Express in particular continues to be a key differentiating factor for us.
Speaker Change: It has become a leading logistics service provider in our market.
Expansive coverage faster delivery speed and cost leadership.
Speaker Change: In the third quarter half of X T X extract order in Asia were delivered within two days of order placement.
Speaker Change: Cost per order also continued to improve quarter on quarter in both Asia and Brazil.
Speaker Change: We have also made significant progress on our content ecosystem Franck <unk>.
Speaker Change: Live streaming continues to be a popular format.
Speaker Change: Both the supply and the demand side in our market.
Speaker Change: However conditions in the second half of last year to invest in building shop at live streaming capability has paid off.
Speaker Change: In the third quarter, our average daily unique streamer grew over 50% and the daily unique live streaming buyer grew over 15% both quarter on quarter.
Speaker Change: Average basket size on live streaming has consistently increased over the past few quarter driving improvements in its unique unit economics.
Speaker Change: Our content effort has been particularly successful in Indonesia, our largest market in Asia.
Speaker Change: We have been the largest the live streaming e-commerce platform Dear by both <unk> and order awards since the start of 2024.
Speaker Change: And our unit economics has improved steadily since then.
Speaker Change: While recent boosts to our content efforts has been a new collaboration between sharpie and Youtube in Indonesia.
Youtube creators can now embed clickable button in their video that allow viewers to buy items from sharpie directly.
We have Justin brought this collaboration to Thailand, and Vietnam, as well and look forward to extending this strategic partnership into more markets.
Speaker Change: Looking beyond Asia. We are also seeing good results coming out of Brazil.
Speaker Change: In the third quarter average monthly active buyers grew by close to 40% year on year.
Speaker Change: We are encouraged to see that this new user cohort are purchasing eager past decided that older cohort.
Speaker Change: Giving a better return on investment and improving our unit economics.
Speaker Change: This allowed us to breakeven in Brazil.
Adjusted EBITDA basis for the first time ever.
Despite only having been in the market for less than five year shopping recently received recognition as the best shopping site in the we are top of mind Award.
Speaker Change: We should wrap up at night, Brian with the best in my share among consumers in Brazil.
Speaker Change: We feel very excited about choppy further growth opportunities there.
Speaker Change: In summary.
Speaker Change: I'm very happy with the strength that Shockey continues to show in both Asia and Brazil.
Speaker Change: Many of our market still have very low e-commerce penetration rates.
Speaker Change: This puts us in a great position to continue to grow as e-commerce penetration improves.
Next <unk>.
Speaker Change: Turning to digital financial services.
Speaker Change: We continued our strong momentum this quarter delivering double digit year on year growth in both revenue and EBITDA.
Speaker Change: Our key driver of growth continue to be credit lending, which is being high demand, but still very underserved in our market.
Speaker Change: Okay.
Speaker Change: Sharp is large user base in our market.
Speaker Change: It highly efficient for us to acquire and third credit users.
Speaker Change: Proper risk data from shockey wholesale allow us to better underwrite risk.
Speaker Change: In addition, we have diversified funding sources.
Speaker Change: Such as innovative asset backed lending product and our digital bank in local market that give us access to retail deposits.
Speaker Change: All of this has led us to scale up our credit business very quickly and profitably.
Speaker Change: In the third quarter, our renewal book grew over 70% year on year, and we added 4 million first time borrower.
Speaker Change: Our consumer and SME loans active user reached about $24 million by the end of the quarter.
Speaker Change: Growing more than 50% year on year.
Speaker Change: Despite high growth.
Speaker Change: T. L 90 day ratio held stable in the third quarter at one 2%.
Speaker Change: One of our risk management practices is to gradually increased loan side and the tenure offering to users.
Speaker Change: We typically engage firsthand borrowers by offering as pay later product with more credit limit and the short tenure on their shockey purchases.
Speaker Change: If the user show a healthy repayments track record.
Speaker Change: We offered them a higher credit demand longer tenure option and other credit products such as cash loan.
Speaker Change: These practices underpins our sustainable healthy growth.
Speaker Change: Right now our average loans outstanding per user is less than $200.
Speaker Change: With 10 year period of just a few months.
Speaker Change: These loans are spread over a very large user base across different market.
Speaker Change: Recently, we have been pushing off sharply loan book growth more strongly.
Specially in Indonesia.
Speaker Change: Op Sharpie alone now accounts for more than half of our loan book there.
Speaker Change: One recent example of our offshore U K was to facilitate consumer large ticket purchases of mortgage loans.
Speaker Change: In offline retail stores.
Speaker Change: In this case, we offered select user pay later limit extra credit product with a higher credit limits.
Speaker Change: This initiative was very well received by our users.
Speaker Change: We will continue to explore further use cases, Indonesia.
Speaker Change: And to bring the success to our other markets.
Speaker Change: In summary, we see plenty of growth opportunity ahead in our market.
Speaker Change: Strong synergies with Shockey gives us a unique advantage.
Speaker Change: And the use cases beyond shockey are also very compelling.
Speaker Change: We are well positioned to grow our credit business and offer more financial services to address the huge underserved demand in our markets.
Speaker Change: Finally, turning to our digital entertainment business.
Speaker Change: We're in a strong growth has continued into the third quarter.
Speaker Change: Total bookings grew over 24% and adjusted EBITDA grew over 34% year on year.
Speaker Change: This good performance is driven by the strength of <unk>, which continues to be one of the largest mobile games in the world.
Speaker Change: <unk> consistently had over 100 million daily active users in the third quarter.
Speaker Change: Representing an impressive 25% year on year growth.
Speaker Change: In addition to Asia and the Americas.
Speaker Change: We're happy to see meaningful growth in other regions, such as North Africa over the past year.
Speaker Change: We view this region as the cycle untapped opportunity and has been ramping up both in game campaign and all top gaming events in this market.
Speaker Change: Recently, we held a major esports tournament in Morocco, where thousands of team participated.
Speaker Change: Attracting millions of views on social media.
Speaker Change: Believe it was the largest attended offline mobile game event ever held in North Africa.
Our top priorities for free fire continue to be attracting retaining and engaging our users.
In the third quarter sensor.
Speaker Change: Sensor tower once again ranked <unk> as the number one most downloaded mobile game in the world.
Speaker Change: The number of new users, who downloaded and played brief power in the third quarter was up 25% year on year.
Speaker Change: User engagement has also remained high.
Speaker Change: And the well, we always try to keep our pool at a healthy level. We saw an increase this quarter. Thanks to strong item sales.
Speaker Change: Our anniversary campaign update.
Speaker Change: It is quite remarkable that a game offer free fire's vintage is able to grow its user base. So Stephanie.
Speaker Change: Believe this has a lot to do with our relentlessly user centric approach.
Speaker Change: We make sure to release, new content updates and in game experiences very frequently.
Speaker Change: Keeping things fresh EBIT four seasons gamers.
Speaker Change: Yeah.
Speaker Change: Many of these updates are inspired by our local market and the social media trends.
Speaker Change: In October <unk> was the first online gaming and the work to collaborate with the two larger horsepower carbonization of Thailand to bring their hugely popular safety pygmy Hippo.
Speaker Change: King into the game.
Speaker Change: Our users love the heap hosting virtual items that we introduced <unk>.
Speaker Change: The sheriff user generated content on social media that went viral yielding more than 10 million views.
Speaker Change: This is just one example of how we leverage local trend to connect with users.
Speaker Change: Emotional level.
Speaker Change: In the field that free fire is relevant and interesting.
Speaker Change: It also keeps free fire highly visible on social media, helping to join new users.
Speaker Change: Beyond <unk>, the renal launched need for speed mobile in Taiwan, Hong Kong and Macau at the end of October.
Speaker Change: Since its launch it has ranked as the number one most downloaded racing game in all three market. According to sensor tower.
Speaker Change: We are also strengthening our partnership with Tencent to bring Delta force.
Speaker Change: First a person tactical shooting game for PC and mobile user in several markets across southeast Asia, Mena and Latin America.
Speaker Change: To conclude.
Speaker Change: I'm happy that we delivered a very strong quarter.
Speaker Change: All three of our businesses posting high profitable growth.
Speaker Change: We have done well and we will continue doing so.
Speaker Change: Thank you as always for your support.
Tony Hull: With that hanging by Tony to discuss our financials.
Speaker Change: Okay.
Tony Hull: Thank you for it and thanks to everyone for joining the call.
We will see overall total revenue increased 31% year on year to $4 3 billion in the third quarter of 2020 for.
Tony Hull: This was primarily driven by <unk> growth of our ecommerce business and the growth of our digital financial services business.
Our total adjusted EBITDA was $521 million.
Tony Hull: In the third quarter of 2024 compared to an adjusted EBITDA of $35 million in the third quarter of 2023.
Tony Hull: Our e-commerce.
Tony Hull: <unk> gross orders grew 24% and <unk> increased by 25% year on year.
Tony Hull: Our third quarter GAAP revenue of $3 2 billion.
Tony Hull: Included cap marketplace revenue of $2 8 billion.
Tony Hull: Up 43% year on year.
Tony Hull: And GAAP product revenue of <unk> 4 billion.
Tony Hull: Within that marketplace revenue core marketplace revenue, mainly consisting of transaction based fees and advertising revenues was $2 billion.
Tony Hull: Up 49% year on year.
Tony Hull: Value added services revenue.
Tony Hull: Mainly consisting of revenues related to logistic services.
Tony Hull: <unk> 8 billion.
Tony Hull: Up 29% year on year.
Tony Hull: E Commerce, adjusted EBITDA was $34 million in the third quarter of 2024.
Tony Hull: Impaired.
Tony Hull: Adjusted EBITDA loss of $346 million in the third quarter of 2023.
For our Asia market.
Tony Hull: We continued to achieve positive adjusted EBITDA following our second quarter of 2020 for Rudolf.
Tony Hull: We recorded $31 million during the quarter compared to an adjusted EBITDA loss of $306 million in the third quarter of 2023.
Tony Hull: Our other markets.
Tony Hull: We achieved positive adjusted EBITDA of $4 million.
Tony Hull: Compared to an adjusted EBITDA loss of $40 million in the third quarter of $2 23.
Tony Hull: Digital financial services GAAP revenue was up by 38% year on year to $616 million.
Tony Hull: Adjusted EBITDA was up by 13% year on year to $188 million.
Tony Hull: As of the end of September our consumer and SME loans principal outstanding reached $4 6 billion.
Up 73% year on year.
Tony Hull: This consists of $3 $8 billion encore and <unk> 8 billion of book loans principal outstanding.
Nonperforming loans past due by more than 90 days as a percentage of total consumer and SME loans was one 2% at the end of the quarter.
Tony Hull: Digital entertainment bookings were $557 million.
Tony Hull: Up 24% year on year.
Tony Hull: GAAP revenue was $498 million adjusted EBITDA was $314 million.
Tony Hull: Returning to our consolidated numbers, we recognized a net nonoperating income of $15 million in the third quarter of 2024.
Tony Hull: <unk> to a net nonoperating income of $46 million in the third quarter of 2023.
Tony Hull: We had a net income tax expense of $93 million in the third quarter of 2024 compared to net income tax expense of $62 million.
Tony Hull: In the third quarter of 2023.
As a result, net income was $153 million in the third quarter of $2 24, as compared to a net loss of $144 million in the third quarter of 2023.
Speaker Change: Thank you Forrest and Tony we're now ready to open the call to questions operator.
Speaker Change: We will now begin the <unk>.
Speaker Change: <unk> and answer session. If you would like to ask a question. During this time since the first half followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Speaker Change: The enduring so Simon will take a maximum of two questions at a time from each caller.
Speaker Change: If you wish to ask more questions. Please request to join the queue again. After your first questions have been addressed at this time, we will pause momentarily to assemble our roster.
Speaker Change: Okay.
Speaker Change: The first question comes from the line of Penguin with Goldman Sachs. Please go ahead.
Speaker Change: Hi, Thank you very much finding opportunities and congratulation for the solid set of results two questions from me will be on E. Commerce simple one could you provide us with more insight into the latest competitive landscape in the fourth quarter I think I can see currently we notice that utilize social commerce.
Speaker Change: <unk> has been increasing as take rate, while we also noticed that the cross border competitor expanded its presence in the regions. So could you provide some comments around how would this impact of growth projections on both top and bottom lines.
Speaker Change: How do you think about the overall strategy. That's question number one question number two there will be release exclude the advertisement can you provide you will notice that <unk> seen a nice uptick 30 basis point quarter on quarter in term of that advertisement take rate, but what have you done exactly in differently now.
Speaker Change: As you can see this program.
Speaker Change: Also Shannon insight on the potential ceiling funded at Patriot and the top line.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: I think on the competitive landscape.
As far as mentioned in the opening.
Speaker Change: We do see a staple.
Our competitive landscape.
Speaker Change: And in.
In fact, if you look at our growth our growth has been doing quite well.
Speaker Change: While we are improving our EBITDA to be possible in both Asia and Brazil.
Speaker Change: If you look at Q4, we.
Speaker Change: We do see.
Speaker Change: Our Q4 is doing quite well still.
Speaker Change: It's a competitive environment that we're in.
Speaker Change: And now we are maintaining our mid twenties GMB growth.
Our guidance for this year.
Speaker Change: As we shared before majority of our sellers local products selling our local market.
Speaker Change: As a consequence, the impacts from cross border competitor, probably relatively small to us at this stage.
Speaker Change: If we look at the year.
Speaker Change: As takeaways.
It is a meaningful improvement of uptake rate.
Speaker Change: If you compare to the last year the.
Speaker Change: Same quarter, we grow about three percentage based on the <unk> side.
Speaker Change: We have done many things actually over the past few quarters.
Speaker Change: We did.
Speaker Change: Sizable revamped to our AD systems from a technical perspective.
Speaker Change: Part of the take rates come from the algorithm improvement to improve.
Speaker Change: How well we can place as to a particular user's query.
Speaker Change: By doing that we have a better conversion rate for our AD as a consequence that we can deliver better return investment to the sellers.
Speaker Change: We also.
Speaker Change: Tried to improve our traffic utilization algorithm for the apps so that we can.
Speaker Change: <unk> more flexibility in terms of when to display organic ads versus display.
Speaker Change: At.
Speaker Change: Products to the buyers.
Speaker Change: On top of that we also.
Speaker Change: Improved the buyer sorry, the seller side.
Speaker Change: As product experience.
Speaker Change: To make the astellas easier to utilize etch products as a consequence.
Speaker Change: We can see that we have one more sellers are using our <unk> products.
Speaker Change: Which in turn increased the pool of SaaS products that we have in the apps.
Speaker Change: Which also help us in out of the day to improve our AD efficiencies because the bigger pool of that we have the easier we can match to our.
Speaker Change: Matched to our users queries.
Speaker Change: We believe that the potential of the ads product improvement.
Speaker Change: It's been a continuous in the next few quarters.
Speaker Change: It's I.
Speaker Change: I think it's too early to comment on what's the potential ceiling would be I think.
Speaker Change: The improvement will come in.
And we will see the impact.
Speaker Change: In the coming quarters.
Speaker Change: While we are improving our technology rolling out new product to our sellers and also getting out.
Speaker Change: The improvement to our market across our countries.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Alicia Yap with Citigroup Alicia. Please go ahead.
Alicia Yap: Hi, Good evening management. Thanks for taking my questions also congrats on the strong results.
Alicia Yap: I have follow up questions related to E. Commerce, So how should we be thinking about this choppy growth entering 2025, especially given a lower interest rate environment and also there'll be seen in <unk>.
Alicia Yap: Economy growth in Southeast Asia, and then related.
Related to that is that do you anticipate a more intensified competition in southeast Asia and also Brazil as we head into 2025, if so how would management balanced the market share growth worse off for sharpie West system profitability, if the company.
Alicia Yap: Hum.
Speaker Change: Competition picks up.
Speaker Change: Given we achieved recently.
Speaker Change: That symbol in Vietnam has seen gaining pretty good traction even though they just want to be sent me. So any color would be appreciated. Thank you.
Speaker Change: Okay.
Speaker Change: I think probably too early to comment on the 2020 fives I think western monitoring the trend in Q4, and we probably will provide.
Speaker Change: A better guidance in 2024.
Speaker Change: In the coming quarter.
Speaker Change: But in general the way we think about this is number one we would like to make sure we can grow in a profitable fashion.
Speaker Change: Number two is we think the possible a range, we would like to grow as much as possible I think that's kind of how we think about it in terms of when we're coming to the.
Speaker Change: Next few quarters.
Speaker Change: Competition as I mentioned earlier.
Speaker Change: We're staying in a relatively stable competitive environment in South Asia.
Speaker Change: Brazil.
Speaker Change: We didn't see any particular changes in the competitive environment either.
Speaker Change: As you mentioned, we do see a certain players coming to our market through our cross border.
This model, giving that a cross border has been a relatively small part of our businesses and we believe that cross border has been a small part of the overall market as well.
Speaker Change: So the impact to us will be lessened limited even.
Speaker Change: You look at those cross border products that those players offering if you compare the pricing for those products to our product in the platform, we still see a relatively good pricing competitive advantage in our platform.
Speaker Change: So in that sense that.
Speaker Change: Unless there's a dramatic change.
Speaker Change: Price competitors from the Fabless players, we don't see that.
Speaker Change: It will impact buyer's preference.
Speaker Change: Hum.
Speaker Change: How they purchase our.
Speaker Change: The platform too much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of John Choi with Daiwa John. Please go ahead.
Speaker Change: Okay. Thank you good evening and thank you very much for taking my question and congratulations on a solid set of results I have two questions here first of all on the first question is what is the latest percentage of our orders handled by SPX in Asia and Brazil.
Speaker Change: You've noticed that we have started to reduce the shipping subsidies and what is the near term key driver for reducing the logistics cost per order and what is our target going forward and my second question is about your unit economics.
Speaker Change: If you look at our live streaming.
Speaker Change: Economics for live stream versus our peers in the long term what is the merchant feedback after shop, you raised a take rate.
Speaker Change: The timeline of a further increase in this area. Thank you.
Speaker Change: On the SPX.
We mentioned.
Speaker Change: We are increasing the SPX coverage and also how much percentage that estates deliver to a choppy.
Speaker Change: Platform in.
Speaker Change: In General if you look at Asia, we have probably more than 50% and in Brazil more than 70% in pizza.
Speaker Change: To grow we believe in the next.
Speaker Change: A few quarters.
Speaker Change: And but.
Speaker Change: Not only.
Speaker Change: Increasing the coverage, we're also working hard on both reducing the cost and increasing.
Speaker Change: The qualities.
Speaker Change: More than half of audit delivered within two days now in Asia.
Speaker Change: The key thing that we're doing to reduce the cost.
Speaker Change: For SPX coming from all different part of the value chain. For example, if you look at the first miles.
Speaker Change: We are working hard to match the clubs between how well we can pick up the product from the sellers at how well <unk> can prepare for the products.
Speaker Change: And that involves part of the seller imagine part of their fleet management from our side. If you look at DM.
Speaker Change: Sorting centers, we're increasing the percentage of automation on our sorting centers.
Speaker Change: And also the way that we manage the.
Speaker Change: The workers in our sorting center to make sure that the compensation has a closer linkage to the activities. If you lay the lines for <unk>.
Speaker Change: Spending quality effort improving.
Well, we can't utilize the line card to make sure all the trucks.
Speaker Change: It utilized they are.
Speaker Change: What's before.
Another thing as you can imagine the last mile is very important for our.
Logistics management.
Speaker Change: We are innovating on defense format of last mile hubs that we have in the more remote area. We have more mobile last mile hubs than the more fixed last mile hubs that we usually have a we're also using technology to <unk>.
Speaker Change: Improve how many orders one radar can deliver the last mile by helping them too.
Speaker Change: Sequence the package.
Speaker Change: A lot more efficiently.
Speaker Change: And also helping them to go the route a lot more efficiently based on the traffic patterns and based on the user behaviors.
Speaker Change: Yes, so again, it's probably not only one thing.
Speaker Change: Across.
Speaker Change: And to embedding churn that we have for the logistic.
Speaker Change: In terms of yes, a lot.
Speaker Change: Our lifestream your economics.
Speaker Change: Our lifestream Oh, the percentage has if you look at the penetration to our platform as a percentage of orders has increased slightly quarter to quarter and I'll give economics has been improved meaningfully quarter to quarter.
Speaker Change: I should probably across all market.
Speaker Change: There too.
Speaker Change: As we shared before we do believe that lunchtime economics will continue to improve.
Speaker Change: Over the time and in the long term.
Speaker Change: We'll probably be similar to the platform economics.
Speaker Change: In terms of.
Speaker Change: If you come to.
Speaker Change: If you compare to our competitors for <unk>.
Speaker Change: We generally have a.
Relatively good in genomics.
Speaker Change: For the takeaways.
Speaker Change: Increased.
Speaker Change: We don't have a fixed timeline in term of the take rate increase I think we spent a lot of effort trying to.
Speaker Change: Balance our seller ecosystem.
Speaker Change: To make sure that you know.
Speaker Change: Whenever we increase the take rates, we are delivering more value to our ecosystem partners.
Speaker Change: So it's something we will continue to evaluate and hear the feedback from our ecosystem before.
Speaker Change: We conduct any adjustment.
Speaker Change: Our next question comes from the line of Thomas Chong with Jefferies. Thomas. Please go ahead.
Thomas Chong: Hi, Good evening, Thanks management for taking my questions.
Thomas Chong: I have two questions. My first question is about the payment piece of it.
Speaker Change: Just a comment about <unk> lifecycle.
Speaker Change: <unk> seems to be expected.
Okay.
Speaker Change: My second question is on the E Commerce site.
Glenn: Thanks Glenn.
Glenn: Some updates about the logistics investments spending and its impact on EBITA margin in coming quarters. Thank you.
Glenn: Yes.
Glenn: Sure.
Glenn: At <unk>, we are very excited to see the.
Glenn: The growth is likely especially after.
Like the challenge we faced.
Glenn: Some headwinds.
Glenn: The likelihood post the Covid situation.
Michael we have been trained very very funny deposit two years too.
Continually improve the product through the very user centric approach and we start to see the payoff we starts with a great result.
Glenn: At the beginning of this year and has been extending the trend for the quarter pretty.
Glenn: Pretty much for the whole year.
Glenn: And the <unk>.
Glenn: In terms of the lifecycle.
Glenn: We always believe Greenbrier is it's more like a service on these more like a platform to stand up a nickel products. So from that perspective, we do have the ambition and the.
Glenn: And.
Glenn: Conviction to build up.
Glenn: <unk> Evergreen game, an evergreen platform and this is the.
Glenn: We see a very encouraging sign and if you think about our free fire has been seven years old game and Endesa still like the growing under the new users coming into the game the new user growth is even a set of retail so.
Glenn: From all of those so we see the battery engagement and do we see the better retention so from all of those metrics.
It does very very strong sign up through this deal at the very very early stage of things.
Glenn: Give us the confidence to continually grow the game.
Glenn: Through the.
Glenn: Engagement through better intention and through making the game, it's a more friendly.
Glenn: Rents for the new users at the same time to keep always keep the content fresh local and it will have a better engagement with the existing gamers as well.
Glenn: Okay.
Speaker Change: Our next question comes from the line appreciable call Yeah.
Speaker Change: With HSBC sorry go.
Speaker Change: Go ahead, operator, operator, please possible amongst the second question has not been answered yet give us a moment here.
Speaker Change: Regarding the second question regarding the question on the <unk>.
Speaker Change: <unk> largest investment.
Speaker Change: For our logistic businesses is rather more opex, driven rather than capex hefei driven businesses.
Speaker Change: Core capital investment is centered around our sorting machines and part of the year.
Improvements to the hubs and to the sorting centers.
So in that.
Speaker Change: In that sense that it's relatively smaller part of our overall.
Speaker Change: Our spending to build our tech businesses and its content that's part of the overall EBITDA as well. So we don't see that there will be a significant impact to.
Speaker Change: The EBITDA margins are.
Speaker Change: From the from this perspective.
Speaker Change: Brian Let's proceed for the next question, we have reshaped the HSBC reshaped. Please go ahead.
Speaker Change: Okay.
Speaker Change: Rachel Please on mute your line.
Okay.
Speaker Change: Alright, So next receipts for the next question, we have DVA Katia all with Morgan Stanley. Please go ahead.
Speaker Change: Yes. Thank you very much. So my first question is just on the E Commerce business could you explain what's driven the 13% quarter on quarter growth in the sales and marketing expense.
Speaker Change: And if we look at it as a percentage of Dnb has been it's gone up slightly by about 10 basis points.
Speaker Change: Just if you can triangulate this with your comments on competition being Steven Lindsey.
When do we expect these sales and marketing expenses to start coming off.
Speaker Change: And any outlook for next year on how to think about this number.
Speaker Change: And the second question is on the DFS business.
Speaker Change: I mean did.
Speaker Change: The general sense that we got on the PFS business is that the growth what's been a more measured approach was being taken under growth, but in this quarter, we've seen the growth actually accelerated quite a bit.
Speaker Change: Could you talk beyond Indonesia, you know how the growth has really been panning out and what our specific company initiated have been taken to drive this growth.
Speaker Change: Yes.
Okay.
Speaker Change: For the first question.
So typically.
Speaker Change: They are.
Speaker Change: Two things.
Speaker Change: My impact the year sales and marketing growth, especially in Q3 I think one is if you look at our revenue growth.
Speaker Change: There is a meaningful growth on the revenue side as well so in the way that we take a bit more from the.
Speaker Change: Seller side on the take rate.
Speaker Change: So typically when we see that we will spend more to make sure that we compensate some of the.
Speaker Change: Take rate increase on our sales and marketing side I think that's one second one is Q.
Speaker Change: Q3, if you compared with Q2 Q3 is a relatively more promotional season for E Commerce, where Q2. This year is more our lowest season, if you come to date.
Speaker Change: There are two core drivers for the test marketing a movement.
Speaker Change: Rather than a reaction to the competition side.
Speaker Change: The onvia.
Speaker Change: Second question regarding the digital finance service businesses.
Speaker Change: The worst thing grows.
Speaker Change: Not only Indonesia, but also in the other markets for example, we see relatively good growth in Thailand.
Speaker Change: Thailand, Malaysia, and also we see early signs of a well tonnage.
Our level of penetration in the.
Speaker Change: The Brazil market, where we started very late we see.
A meaningful penetration on sharpie from our SBA laser products.
Speaker Change: So a part of the driver for the growth is that we penetrate more choppy users.
Speaker Change: Through various format. So we can take more users to our digital financial service.
Speaker Change: Right.
Speaker Change: That's one second one is with.
We optimize our existing products to the users for example, if you look at our both escalator and our cash loan products.
Speaker Change: We are doing a lot more risk based pricing we're also.
Speaker Change: Provide a new type of products to target a more prime users for example, we launched <unk>.
Speaker Change: Long Indonesia.
Speaker Change: To target a more prime users.
Speaker Change: To make sure that we can address that needs as well on top of that we also spend quite some effort to go.
Speaker Change: To build the user scenarios.
Speaker Change: Cases are beyond the shop platform.
Speaker Change: For example in Indonesia.
Speaker Change: We shared in the opening that we.
Roll out.
Speaker Change: The SBA later for the offline payment through the National QR code. The same initiative web rollout in Philippines in Malaysia, as well, we also roll out the year.
Speaker Change: Later for.
Speaker Change: The specific use cases offline like the cell phones are home appliance et cetera. Some of this will continue in the next few quarters.
Speaker Change: While we are expanding too.
Speaker Change: More countries for those products and expand to more user cases.
Speaker Change: All of those will help us to grow.
Speaker Change: The digital financial services to a broader segment of users at penetrate too.
Speaker Change: Two more use cases for those users.
Speaker Change: Okay.
Speaker Change: Our next question is again from reshaped and calia with HSBC reshaped. Please go ahead.
Speaker Change: Hi, I am I audible.
Speaker Change: Hello, Yes.
Speaker Change: Hello.
Speaker Change: Yes, we can hear you Bonnie. Thank you management. Thank you for the opportunity to ask questions. Please what are your key priorities across each segment for 2025, and secondly, what are the initiatives undertaken in BFS segment to drive user growth and deepen.
Speaker Change: <unk> of various products and outlook for growth and margins in this segment the BFS segment.
Speaker Change: Yeah.
What are the key priorities for 2025.
Speaker Change: So overall, we feel like that they in turn are marketing it.
Speaker Change: Uh huh.
Speaker Change: Strong tailwind from.
Speaker Change: From the macroeconomic perspective and.
Speaker Change: And are there is there is there is a very very strong growth potential so.
Speaker Change: Obviously results have jumped into very very expensive.
Speaker Change: Each business overall.
Speaker Change: We still maintain a very very strong growth mental mindset and so the growth will be the will be the focus that we have.
Speaker Change: So we have a very very.
Speaker Change: Strong momentum in its moment at <unk>, our three businesses on the very good growth.
Speaker Change: The trend at this moment, we hope black.
Speaker Change: This trend will continue into 2025, and Meanwhile, as we.
Speaker Change: <unk>.
Speaker Change: Mentioned, so we also.
Speaker Change: Our focus on the quality of the growth.
Speaker Change: I think like all of our three business.
Speaker Change: Getting to the stage and with the strong foundation to deliver not only the high growth rates, but still very profitable growth as well so that will be the in the in the very big picture the process in terms of the priority for 2025.
Speaker Change: Yeah, if you look at the PFS part of their businesses.
Speaker Change: As I said just now in the previous question.
Speaker Change: We are further penetrating to the shopping user base.
Speaker Change: Optimizing our products to cover more.
Speaker Change: Users.
Speaker Change: In our ecosystem and also.
Speaker Change: Building, a more use cases, all kind of choppy ecosystem to serve our users better.
Speaker Change: I think that's all will contribute to the growth over the next year not only for Indonesia, but also for many other countries.
Speaker Change: We have our financial services businesses.
Speaker Change: In.
Speaker Change: Well, we don't observe any particular trends in some of our module shipped in the year.
Speaker Change: In this quarter or in the next few quarters.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Brian John Sharma with Jpmorgan. John. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Hi, good afternoon, good evening and thank you for the presentation.
Speaker Change: Two questions from my side, Firstly on E Commerce.
Speaker Change: Can you share us your thoughts around how much profitable group is left in southeast Asia because we.
Speaker Change: We presume that the penetration of the major urban centers is already quite caught in southeast Asia.
Speaker Change: And accordingly to that.
Speaker Change: The pubic company that's profitable.
Speaker Change: Okay.
Speaker Change: Could shop your look at photonics.
Speaker Change: Before the expansion out of Asia.
Speaker Change: The second question is on your own.
Speaker Change: Cash and investments, which are close to $10 billion now.
Speaker Change: Much capital do you need to keep on the balance sheet.
Speaker Change: Syracuse for you to return some money back to the shareholders. Thank you.
Speaker Change: <unk>.
Speaker Change: In terms of the e-commerce penetration.
Speaker Change: If we look at the current ecommerce penetration in our major market.
Speaker Change: We still see there is quite a lot of rooms that we can grow if you benchmark that with.
Speaker Change: Under that e-commerce market.
Speaker Change: So overall, if you look at the.
Speaker Change: The market in a top down way, we do believe that there's still meaningful room to grow.
Speaker Change: Commerce penetrations.
Speaker Change: In the in the cities like for example, if you look at Indonesia, you look at the kind of area versus job address this outside Java.
Speaker Change: EBIT in the Java cities.
Speaker Change: In Jakarta around that kind of or other Java cities, we do see that as a meaningful penetration potential will be part of that will be driven by the cost of optimization that we're doing for example by further reducing the cost per hour SBA deliveries and part of that will come from the better experience of buying from E Commerce.
Speaker Change: Like you know the service improvement.
That we are working on.
Speaker Change: Part of that it will be driven by natural.
Speaker Change: Progressions after year population some of the younger population with getting a solid order. So they have a better purchasing power and some of the.
Speaker Change: The the other users who don't use e-commerce before they will try ecommerce and be more.
Speaker Change: Frequent purchases over time, so all in all we do believe that there are still meaningful rooms in terms of the penetration.
Speaker Change: For the year expansion outside of Asia.
Speaker Change: Our core market other Asia is Brazil, right, now, which we do believe that as a huge potential there.
In the near term.
Speaker Change: Let's say in the next it's very hard to predict anything to long term, but in the near term we don't have any particular plan.
Speaker Change: Besides what we have right now.
Speaker Change: In terms of the <unk>.
Speaker Change: Capital allocation to start with creating value and maximizing value for our shareholders as always the things on top of our mind. So we remain very open minded and actually we constantly.
Look at all opportunities then to reveal all the option.
How to create a better value how to make this Matthew mcclintock.
Speaker Change: Value for our shareholders and indefinitely.
Speaker Change: Buyback into one of the ways, whether it was the other there is other options as.
Speaker Change: Well I think when there are certain opportunity.
Speaker Change: Appears we will we will come out and we will communicate with the share holders.
Speaker Change: Timely and accordingly.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line obsession single car with both our <unk>.
Speaker Change: Please go ahead.
Speaker Change: Yeah.
Speaker Change: Alright. Thank you for that fortunate again, congrats on a good set of numbers first question is on Brazil.
Speaker Change: Clearly and congrats for achieving an EBIDTA margin breakeven out here, how should we think about the margins going I should it continue to hold around these levels given the investments youre looking to make out here.
We see an improvement in margin going out here.
Speaker Change: Related question that was of course is how do you look at that business evolving any publicity going ahead.
Speaker Change: And second question is when you think about incremental investments now that all your business insider picked up breakeven, but how do you see maximum amount of investment being made is it more towards logistics is it more towards a dear friend and sort of anything else. Thank you.
Speaker Change: Yeah.
Speaker Change: If you look at the Brazil market.
Speaker Change: It's our newest market and weapons.
Speaker Change: Weapons are happy that we achieved the EBITDA.
Speaker Change: But even in the market in this quarter.
Speaker Change: Do you feel about that market that are generally we are hoping that we can further grow in the market with a possible manner, although that might be some fluctuations from time to time, but generally I think.
Speaker Change: We would like to use a baseball fan king.
Speaker Change: The if you look at the credit businesses.
Speaker Change: In Brazil.
As I shared in the earlier.
Speaker Change: Questions.
We started.
Speaker Change: Few quarters ago and we.
Speaker Change: We see a vertical penetrations in shopping through our expert later.
Speaker Change: We also launched our cash loan product in Brazil, which are with a very low take rate that we observed.
Speaker Change: More importantly, we're fine tuning our.
Speaker Change: Risk modeling in Brazil, our toothpaste that we're a lot more comfortable with to grow for us in the market.
Speaker Change: So generally we are.
Speaker Change: Quite optimistic.
Speaker Change: Optimistic by the potentials of our digital finance service businesses in Brazil in the coming quarters.
Speaker Change: And if you look at.
Speaker Change: Our investment to various businesses.
Speaker Change: Take a very prudent approach.
Speaker Change: The investment for example, Ah.
Speaker Change: If you look at any.
Speaker Change: Investment to logistics, which typically have a payback period.
Speaker Change: Between nine months to two to 36 months the range. There. It does typically can contribute to our EBITDA quite quickly.
Speaker Change: Through.
Speaker Change: Two of those investment by optimizing our cost.
Speaker Change: Cost structure.
Speaker Change: If you look at them together.
Speaker Change: S side.
Speaker Change: This has generally been quite powerful businesses as you can see from the numbers.
Speaker Change: The core investment for that if at this property on the user acquisition side to.
Speaker Change: To make sure we are attracting the right user to the platform.
Speaker Change: The way we look at it is we measure the.
Speaker Change: Profitability for each users, we're bringing to make sure that each user with big ink has a meaningful profit.
Speaker Change: In the coming year.
Speaker Change: The other type of investment for example on the ecommerce side, we do invest in acquiring new users as well for that we also take a quite prudent approach.
Speaker Change: In terms of measuring issues as customer lifecycle value against the cost to acquire the users are in most cases via our unit economics are for those customer lifecycle value work.
Speaker Change: Breakeven in a year's time in general if you compare with the cost expense assign the users.
Speaker Change: For most of the market.
Speaker Change: Okay.
Speaker Change: Our final question comes from the line of Charles <unk> with Barclays. Please go ahead.
Speaker Change: Thank you very much for taking my questions. Congrats on the very strong results.
Speaker Change: My first question is.
Speaker Change: On the DFS business you have.
Speaker Change: Tremendous progress in this business over the last few quarters and your growth accelerated quite a bit this quarter.
Speaker Change: Both for revenue and for the loan book.
Speaker Change: Wonder if you can impact that I just talked about.
Speaker Change: One of the main drivers for the next couple of years.
Speaker Change: To grow this business is that regional expansion product expansion and key themes.
Speaker Change: We should look.
Speaker Change: <unk> for the continued sort of accelerated.
Speaker Change: Growth.
For this business and second question is on the leverage and your E Commerce business model.
Speaker Change: Again, congrats for being profitable in sharpie again and.
Speaker Change: And for this business.
Speaker Change: Is that sort of a gradual improvement.
Speaker Change: In profitability.
Once you reach students scale the leverage you would just play itself out and and the improvement in profit could be meaningful at times. Thank you.
Speaker Change: So in terms of the digital finance service businesses.
Speaker Change: You're absolutely right that.
Speaker Change: It's a business that <unk> been very happy with in terms of the growth.
Speaker Change: Look forward.
Speaker Change: The growth will essentially come from number one.
Speaker Change: User growth, we would like to convert more of our e-commerce user to Alex go faster as users and overtime attract our non e-commerce users to become our digital finance service user.
Speaker Change: In our platform.
Speaker Change: That's number one number two is of course too.
Speaker Change: Essentially get more users who use our products.
Speaker Change: Both from the existing product to optimize our offerings to defense segment of users with different risk profiles and also expanding our product.
Speaker Change: Assortment.
Speaker Change: To address more punishing needs that the user my house.
Speaker Change: Across their life cycles, I think it is going to be both approach that they use a gross plus.
Speaker Change: Product optimization, plus the product assortment.
Speaker Change: Additions.
Speaker Change: For all users.
Speaker Change: In terms of the car.
Speaker Change: Country mix for TFS, I think we start with Indonesia as I shared earlier, we see a very good growth in some other countries over there.
Cortes and I would expect that the trend going to continue that the newer countries will benefit from exchange we learned from the earlier countries. So that we're able to attract user more efficiently and also rollout.
Speaker Change: You got more targeted fashion.
On the e-commerce possibilities I think it's probably both.
Speaker Change: Leather is a slight improvement off potentially there is a big chunk of our profitability.
Speaker Change: The the natural environment in a more stable.
Speaker Change: The environment without an external shocks.
Speaker Change: We're likely to see a gradual improvement on the possibilities.
Speaker Change: As we grow our ecosystem.
Speaker Change: And as.
Speaker Change: As we reduce.
Speaker Change: The cost to serve our customers in our.
Speaker Change: Upstream dams trends.
Speaker Change: And we're also able to optimize our own operating expenses to serve the customers.
Speaker Change: For example, if you look at the year the customer service that we have we are having growing audits quite a lot in the last few quarters, but.
Speaker Change: You know we have manage it with the same amount of people or even a small amount of people to serve those customers from our platform perspective. So all of those will contribute to a gradual improvement in profitability.
Speaker Change: But.
Speaker Change: As the market.
<unk> become more stable over the years.
Speaker Change: There is a possibility that we see that as well.
Speaker Change: Relatively sizable driving profitability in future.
Speaker Change: I think yes to your question is.
Speaker Change: That those possibilities, but the base case, we're working out right now is that we're able to graduate and coolant Greg.
Speaker Change: To improve the profitability over the next few quarters.
Speaker Change: Okay.
Speaker Change: This concludes our question and answer session I will now turn the call back over to Mr. <unk> for closing remarks.
Speaker Change: Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.
Speaker Change: Yeah.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.