Sea Limited

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. I'd now like to welcome Ms. Minju Song to begin the conference. Please go ahead.

Thank you. And hello, everyone, and welcome to CEE's 2023 fourth quarter and full year earnings conference call. I'm Minju Song from CEE's Chief Corporate Officer's Office. Before we continue, I would like to remind you that 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. 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 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. I have with me SEAS Chairman and Chief Executive Officer, Forrest Lee, President, Tress Wang, Chief Financial Officer, Tony Ho, and Chief Corporate Officer, Yanjun Wang. Our management will share strategy and business updates, operating highlights, and financial performance for the fourth quarter and full year of 2023. 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 Forrest.

Hello, everyone, and thank you for joining today's call. I'm happy to share that we have achieved our fourth full year of annual profit since our IPO. In 2023, we achieved profitability, strengthened our market leadership for our e-commerce business, grew our digital financial services business and stabilized the performance of our digital entertainment business. We have emerged with a much stronger balance sheet with our cash position increasing to $8.5 billion as of the end of 2023, demonstrating the discipline and the prudence we have applied in our investments over the past year. Looking ahead, We expect 2024 to be another profitable year. Let me recap our performance at the individual business level in 2023 and share the key strategic focus for each business in 2024, starting with Shopee. First, Shopee's investments since July last year have paid off. I'm pleased to report that despite an environment of intensified competition in Southeast Asia, we believe we had a meaningful gain in market share between the start and the end of 2023. We are happy to have solidified Shopee's market share in the region, and we intend to maintain our market share in 2024. We expect Shopee's full-year GMV growth to be in the high-teens range, and its adjusted EBITDA to turn positive in the second half of this year. To return and strengthen our competitive advantage, Shopee's three operational priorities in 2024 are improving service quality for buyers, enhancing the price competitiveness of our product listings, and strengthening our content ecosystem. On service quality for buyers, we'll do more to optimize key aspects of the buyer's experience such as delivery speed and consistency, return and refund processes, and customer service. These are areas we already excel in and will continue to improve on. On keeping our product listings price competitive, we will continue to work more with sellers who have more upstream supply chain access and provide more fulfillment marketing, and shop management services to our sellers. On content, we will deepen and broaden engagement with creators, sellers, and partners across the content ecosystem and better integrate live streaming and short-form video into the shopping experience. Let me now highlight some of the Shopee's achievements in the first quarter. During the quarter, Shopee delivered strong results with both top-line growth acceleration and bottom-line improvement. Shopee's GMB and orders grew 29% and 46% year-on-year and 15% and 13% quarter-on-quarter, respectively, resulting in solid market share gains across our markets. Meanwhile, Shopee's adjusted EBITDA loss improved by 35% sequentially. Adjusted EBITDA loss per order improved by 43% quarter on quarter. On logistics, we opened five new sorting centers and 385 new first and last mile hubs across our Asia markets and extended our logistics network further to improve our coverage. Through more automation, tighter planning, better routing, and other operational improvements, our platform logistics cost per order in Asia decreased by 12% year on year in the fourth quarter. This was partly driven by our own logistics network cost per order decreasing by 20% from the same period last year. We are also seeing good progress made on delivery speed. In Indonesia, in December 2023, more than half of the orders from buyers in Java were delivered within two days. We will continue to improve logistics service quality in terms of both speed and consistency. At the same time, we are also expanding premium services such as next-day delivery and introducing new features. For example, we commenced return on spot services in Indonesia and Vietnam. This initiative has resulted in higher trust and increased purchase frequency from our buyers, particularly those who are new to Shopee. Our e-commerce logistics network is now one of the most intensive and efficient in our market. and a strong competitive mode for us. We have rapidly ramped up live streaming e-commerce, which accounted for around 15% of our physical order volume in Southeast Asia last December. With the scale and the leadership achieved, unique economics of the segment also improved meaningfully quarter on quarter. Shopee Brazil continued its strong performance in the fourth quarter. Its contribution margin loss per order improved by nearly 90% year on year. This was driven by improvements in both user monetization and cost efficiency. We believe we have achieved cost leadership in logistics through scale and operational efficiencies, which have been and will be key to our success in the market. Turning to our digital financial services segment, C-Money has delivered a strong year in 2023, primarily attributed to our consumer and SME credit business. Our journey to build the credit business dates back to 2019. We initially started by introducing as pay later consumption loans in response to Shopee buyers' strong need for such services. Subsequently, we extended our offerings to cash loan services to both buyers and sellers on Shopee. This underscores our user-centric approach and the unique advantage offered by the Shopee ecosystem for C-Money to quickly achieve critical scale and profitability. 2023 was the first year of positive profit for C-Money, with full year adjusted EBITDA of $550 million. As of December 31, 2023, our consumer and SME loans principal outstanding was $3.1 billion. a 27% increase year on year. $2.5 billion of that was on the book. Consumer and SME loans active users for the fourth quarter defined as credit users with loans outstanding by the end of the quarter was over $16 million, a 28% increase year on year. In 2024, we will continue to invest in user acquisition for our credit business, both on and off Shopee platform as we see significant upside in our markets. As we scale, we will remain prudent on risk management. In addition to our credit business, Zmoney is also growing our digital banking and insurance services to capture future business opportunities in the digital financial services segment. We expect C-Money to continue its robust growth in 2024. In digital entertainment, Garena has done well in enhancing and optimizing game experiences for its players. For instance, we have continuously introduced fresh and highly localized content to Free Fire. In the fourth quarter, we collaborated with Lamborghini to allow players to drive their cars in-game. We also recently announced our collaboration with JKT48, an idol group from Jakarta, as our Indonesian brand ambassador. These partnerships excite and delight our players and enable us to nurture our local communities. I'm happy to share that we are seeing improved user acquisition and retention trends for Free Fire. In 2023, Free Fire was the most downloaded mobile game globally, according to Sensor Tower. We are pleased that these positive trends are continuing into 2024. In February, Free Fire achieved more than 100 million peak daily active users. it remains one of the largest mobile games in the world. With this positive momentum, we currently expect Free Fire to grow double digits year on year for both user base and bookings in 2024. To conclude, we are pleased to see positive trends in both growth and profitability for all three of our businesses. We will continue to invest for the future with discipline and focus. I would also like to take this opportunity to thank our employees, users, investors, and partners for your continued support throughout this journey. With that, I will invite Tony to discuss our financials.