Sea(SE) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total GAAP revenue increased by 5% year-on-year to $3.3 billion, driven by improved monetization in e-commerce and digital financial services [24][52] - Adjusted EBITDA was$35 million, compared to an adjusted EBITDA loss of $358 million in Q3 2022 [49] - Net loss was$144 million in Q3 2023, significantly improved from a net loss of $569 million in Q3 2022 [27] Business Line Data and Key Metrics Changes - E-commerce GAAP revenue was$2.2 billion, with marketplace revenue of $1.9 billion, up 18$448 million, with GAAP revenue at $592 million [52] - Digital financial services GAAP revenue increased by 37$446 million, with adjusted EBITDA at $166 million, compared to an adjusted EBITDA loss of$68 million in Q3 2022 [52] Market Data and Key Metrics Changes - Average monthly active buyers in Shopee grew by 11% quarter-on-quarter, with increased order frequency and improved buyer retention [15] - In Southeast Asia, average daily orders on live streaming reached over 10% of total order volume for October [17] - Contribution margin loss per order in Brazil improved by 91% year-on-year to $0.10, reflecting better monetization and higher efficiency [26] Company Strategy and Development Direction - The company aims to prioritize investing in market share gain and strengthening market leadership, especially in light of increased competition and the rise of live streaming e-commerce [10][11] - The strategy focuses on maximizing long-term profitability through scale and strong market leadership, while being flexible to adapt to changing market conditions [33][35] - The company is committed to maintaining a strong cash position and investing within its means, avoiding reliance on external funding [37][61] Management's Comments on Operating Environment and Future Outlook - Management noted that competition has intensified, but the company has successfully gained market share through investment efficiencies [61][62] - The company sees significant growth potential in e-commerce, particularly in underpenetrated markets like Brazil and Southeast Asia [125] - Management expressed confidence in the sustainability of credit quality and the growth of the credit portfolio, while remaining vigilant about market conditions [95][114] Other Important Information - The company has seen strong user adoption of direct debit services in its banking operations, enhancing the transactional experience on Shopee [23] - The logistics model focuses on building a network of small sorting centers rather than large warehouses, allowing for more efficient capital expenditure [68][70] Q&A Session All Questions and Answers Question: Can you discuss the linearity of GMV growth through the quarter and the impact of FX? - Management indicated that GMV growth momentum has continued into Q4, with better growth observed in constant currency terms despite some depreciation against the U.S. dollar [73][54] Question: What is the long-term expectation for live streaming's contribution to GMV? - Management believes that live streaming could reach 20-25% of total GMV in the future, similar to trends seen in China, with current contributions around 10% in Indonesia [74][11] Question: How does the company view its competitive advantage against new entrants? - Management highlighted scale, localized operations, and a well-developed logistics infrastructure as key competitive advantages that are sustainable in the long term [79][62] Question: What are the investment plans for logistics and their impact on CapEx? - Management clarified that logistics investments are ongoing but not as capital-intensive as perceived, focusing on network improvements and operational efficiencies [80][82] Question: Can you discuss the credit quality of the loan book and its long-term outlook? - Management reported an improving credit quality with a focus on maintaining healthy profit levels while expanding the credit portfolio [95][114]