Sea Limited

I would now like to turn the conference over to Ms. Mi-Jun Song, Please go ahead.

Thank you, Kate. Good evening and good morning, everyone, and welcome to SEAS 2020 Third Quarter Earnings Conference Call. I am Minju Song from SEAS Group'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 discussion of certain non-GAAP financial measures such as adjusted EBITDA and net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes. 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 disclosure. 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 here with me Chief Chairman and Group Chief Executive Officer Forrest Li, Group Chief Financial Officer Tony Hou, and Group Chief Corporate Officer Yanjun Wang. Our management will share strategy and business updates, operating highlights, and financial performance for the quarter. 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 Boris.

Hello everyone and thank you as always for joining today's call. We are very happy to report another quarter of strong performance across our business. We continue to see robust user growth and deepening of user engagement on each of our platforms during the quarter. We believe accelerating shift to digitalization in our global market is a sustaining trend. As the market leader in our core segments, we are well positioned to capture the growth opportunities presented by this acceleration. Our strong financial and operational results for the quarter once again underline our ability to execute well and seize a disproportionate share of the fast-growing markets. On the group level, our quarterly gas revenue grew 99% year-on-year to reach $1.2 billion. Gross profit grew 101% year-on-year to reach $407.6 million. We also recorded very strong bottom-line results, with adjusted EBITDA reaching $120.4 million. This further demonstrates the strength and efficiency of our business model. We will continue to drive rapid growth with efficiency as we further extend our market leadership. In line with our strong results, we are raising our guidance for both digital entertainment and ecommerce for the full year of 2020. In digital entertainment, We believe our very strong performance in the third quarter will sustain through the fourth quarter. As a result, we now expect bookings for digital entertainment to exceed $3.1 billion, representing over 75% growth from 2019. This revised guidance represents an increase of more than 59% from the midpoint of the previously disclosed guidance. We also expect gap revenue plus sales incentive net-off for e-commerce to exceed $2.3 billion. The revised guidance represents a more than 144% increase from 2019 and a more than 31% increase from the midpoint of the previously disclosed guidance. These revisions reflect both the strong historical performance we have achieved so far this year and our continued positive outlook moving into the fourth quarter. Let me start with the digital entertainment. The third quarter was another standout quarter for Garena with strong performance across all our key metrics. Bookings worth $944.7 million of 110% year-on-year. Adjusted EBITDA was $584.5 million of 120% year-on-year, representing 62% of booking. The strong performance was driven by robust active and paying user growth. Quarterly active users reached 572.4 million, an increase of 78% year-on-year. Quarterly paying users reached 65.3 million, up 124% year-on-year, and represented over 11% of quarterly active users. We are particularly encouraged by the strong active and paying user growth for the quarter. This reflects our ability to continually deliver high-quality content that attracts and engages users. Free Fire sustains its strong performance. According to FNE, it continues to be the highest-grossing mobile game in Latin America and Southeast Asia in the third quarter. A key factor in Free Fire's continued success is our ability to constantly deliver high-quality content tailored for the taste and preferences of our huge global user base. In recent months, Free Fire partnered with celebrities such as Bollywood actors and global artists to create playable characters and other in-game content inspired by these celebrities. For example, in September, we released a playable character of a Bollywood star who was the lead actor in the highest-grossing Indian film in 2019. We have also worked with a popular global artist to create another song exclusively for Free Fire, which is a play inside the game. Within two weeks of being launched, the song was streamed more than 25 million times across various online platforms. We introduced more social and community features into the game. For example, the new training ground feature has been highly popular with our users. This is an area within the game where players can meet and hang out socially. So far, about 1 in 4 of our players spend time there every day on average. These and other social features further strengthen the network effect and stickiness of the game. On the same note, our esports community continues to thrive. Three or five tournaments held during the quarter have accumulated over 150 million online views to date. In August, we hosted a national tournament for Brazil spanning two months. This tournament has recorded over 47 million online views to date. We are also extending the reach of our esports events beyond our strong online audience. For example, the Grand Finals for Free Fire Indonesia Masters 2024 were broadcasted on national TV reaching an even broader fan base, online and offline. Our highly local and interactive content and community activities increase the affinity of our users with Free Fire. These efforts also ensure that the game stays fresh and relevant for our users over time. This in turn grows our user base and improves engagement. As we move into the fourth quarter and look to 2021, we will continue to focus on providing the global Free Fire community with captivating content and fresh and engaging experiences, both within the game and through our social and community features. We are confident that there is a very long runway ahead for this franchise. Turning to e-commerce, Sheltie had another great quarter. Building on our momentum and leadership, we continued to capture more shares of our region's rapidly expanding e-commerce segment. We also continued to deliver more value to our sellers and buyers while deepening monetization and driving efficient growth. shall be reported 741.6 million gross orders, up 131% year-on-year, and GMV of $9.3 billion, an increase of 103% year-on-year. Gap revenue for the third quarter was $618.7 million, up 173% year-on-year. We also continue to to drive efficiencies across the business with adjusted EBITDA loss per order decreasing by 48% year-on-year to $0.41 during the quarter. In the third quarter, Shopee continued to rank as the number one in the shopping category across Southeast Asia and Taiwan by downloads, average monthly active users, and the total time spent in-app on Android, based on F&E. On a global level, Shopee was also the second most downloaded app in the shopping category according to F&E. In our largest market, Indonesia, Shopee continues to further extend its market leadership. It registered over 310 million orders at a daily average of around 3.4 million orders, an increase of over 124% year-on-year. It was also ranked first In Indonesia, we have average monthly active users, downloads, and total time spent in apps on Android in the shopping category in the third quarter, according to FNE. As e-commerce grows in importance across the region, we have been focused on delivering more value for our merchants across the Shopee ecosystem. For example, in addition to the Google partnership announced last quarter, Shopee launched a new strategic partnership with five leading global media agencies. This program is designed to equip these agencies with in-depth e-commerce knowledge, tools, and skills so they can help more brands and retail merchants scale and succeed on Shopee. Further, we help merchants create better Shopee experiences to engage consumers. Shopee Live is one example. Sellers have found this feature helpful in driving user engagement and retention with memorable results. Shopee Live recorded over 48 million hours watched in the third quarter. Our momentum has carried forward into a record-breaking Double 11 Big Sale shopping festival. We were heartened to see our SME sellers recording an incredibly successful sales event through the Shopee platform. In particular, the newer sellers who joined the Double 11 Big Sale for the first time sold 10 times more orders than an average day. We have built powerful bonds of affinity with our users, and today Shopee is one of the most recognized and best-loved brands across our community. In YouGov's recently published 2020 Global Best Brand Ranking, Shopee was the number 8 ranked brand globally, and together with Amazon, represents the two e-commerce brands in the world's top 10 ranking. As we continue to solidify and extend our market leadership in e-commerce, we will stay focused on providing the best long-term value for our users and building a healthy and sustainable ecosystem for our region. Moving on to C-Money, we saw the same strong growth momentum observed across Garena and Shopee during the quarter. Our mobile wallet's total payment volume for the quarter exceeded $2.1 billion, with quarterly paying users surpassing 17.8 million. BitMoney continued to deepen its integration with Shopee, leveraging Shopee's rapid growth and extensive reach to scale efficiently and effectively. In October, more than 30% of Shopee's total gross orders across our market combined were paid using our mobile wallet. We also continued to expand our suite of online and offline third-party use cases and partnerships in the third quarter. This has further increased the usage and brand awareness of C-Money across our community. We see a significant opportunity ahead of C-Money and believe that we can capture it in a highly efficient manner by building on our core use cases. Our focus remains on scaling the business to enable more consumers and merchants to benefit from the ease and convenience of our digital solution. In closing, the strong momentum from the first half of the year has carried on into the third quarter and beyond. Our third quarter performance is a testament to our ability to quickly adapt to the rapidly evolving needs and preferences of our community. While we are benefiting from secular tailwinds and the rapid push towards digitalization, we remain very focused on strong execution to capture the growth opportunity. From highly local and deeply engaging content on Garena Games to Shopee's new partnerships, we will continue to listen to and innovate around our users. As we move towards the end of 2020 and into 2021, we are further extending and solidifying our market leadership position across all the key segments of the digital economy in our region. Our conviction in the scale of the opportunities ahead for SEA over the long term is growing even stronger. We remain committed to serving our communities with technology. and enabling them to benefit from the growth of the digital economy in the long run. With that, I will invite Tony to discuss our financials.