Financial Data and Key Metrics - Total GAAP revenue increased 23% YoY to 448 million in Q2 2024, compared to 9 million in Q2 2024 from 519 million, with adjusted EBITDA up 20% YoY to 537 million, with adjusted EBITDA of 1.8 billion [15] - Value-added services revenue (logistics) grew 16% YoY to 3.5 billion at the end of June, up almost 40% YoY [11] - Non-performing loans (NPL) metric improved slightly to 1.3% at the end of Q2 [17] - Over 4 million first-time borrowers registered in Q2, more than double compared to a year ago [10] Digital Entertainment (Garena) - Free Fire contributed to over 20% YoY growth in bookings, with more than 100 million daily active players in Q2 [12] - Free Fire was the most downloaded mobile game globally in Q2, according to Sensor Tower [12] - Need for Speed: Mobile to be launched in Taiwan, Hong Kong, and Macau later in 2024 [13] Market Performance - In Asia, e-commerce adjusted EBITDA was 204 million in Q2 2023 [16] - In Brazil, unit economics improved, with a positive contribution margin per order of 0.24 in Q2 2023 [16] Strategic Direction and Industry Competition - Shopee's operational priorities include enhancing price competitiveness, improving service quality, and strengthening the content ecosystem [5] - The company expects Shopee to become adjusted EBITDA positive from Q3 2024 and revised full-year GMV growth guidance to mid-20s [5] - The company sees a more stable competitive environment in Southeast Asia, with industry-wide take rate increases [19] - The company is focused on deepening credit product penetration both on and off Shopee, with new use cases like SPayLater loans for mobile phone sales in Indonesia [10] Management Commentary on Operating Environment and Future Outlook - Retail and consumer spending trends in Southeast Asia remain healthy, supporting e-commerce growth [4] - The company is optimistic about the potential for further ad take rate improvements and expects to see benefits in the coming quarters [22] - Free Fire is seen as an evergreen franchise, with strong momentum expected to continue in H2 2024 [34] - The company is cautious about competition from cross-border e-commerce players like Temu but believes its pricing advantage and domestic seller base provide a strong competitive edge [37] Other Important Information - Two new Independent Directors joined the Board: Dr. Silvio Savarese (AI expert) and Ms. Jessica Tan (financial services leader) [14] - Tony Hou will step down from the Board but continue as CFO [14] Q&A Session Summary Question 1: Competitive Landscape and Margin Expectations for Shopee [19] - The company sees a more stable competitive environment and expects Shopee to achieve 2-3% EBITDA margin in the long term [19] - Near-term focus is on profitability and market growth, with medium-term expectations for further industry rationalization [19] Question 2: Ad Take Rate and Live Streaming Unit Economics [21] - Opportunities exist to further increase ad take rates, particularly through improved ad products and algorithms [22] - Live streaming unit economics are improving, with some markets already profitable [22] Question 3: Brazil Market and EBITDA Guidance [24] - Brazil's contribution margin turned positive, driven by reduced shipping costs and improved user experience [25] - Adjusted EBITDA positive guidance refers to Q3 standalone EBITDA [25] Question 4: DFS Growth and Logistics Optimization [27] - DFS is expanding both online and offline credit use cases, with partnerships in Indonesia for SPayLater loans [28] - SPX Express is optimizing operations through scale, automation, and technology improvements [28] Question 5: Ad Take Rate Timeline and Gaming Momentum [31] - Ad take rate improvements are expected in the coming quarters, not years [32] - Free Fire's momentum is strong, with double-digit growth expected for 2024 [34] Question 6: Competition in Taiwan and Indonesia [40] - In Taiwan, the company is focusing on delivery speed and seller efficiency to maintain competitiveness [42] - In Indonesia, the company is less concerned about short-term subsidy fluctuations and focuses on medium-term trends [42] Question 7: DFS Margin Trends and Revenue Mix [43] - DFS margins are stable, with newer markets showing faster growth [44] - Long-term revenue mix may see a higher contribution from DFS due to GAAP revenue treatment for gaming [45] Question 8: Commission Take Rate and Free Fire Booking Growth [46] - Commission take rates are expected to remain below global peers, but ad take rates will drive overall improvements [47] - Free Fire booking growth remains strong, but the company is cautious about updating guidance [48]
Sea(SE) - 2024 Q2 - Earnings Call Transcript