Sea Limited

Good morning and good evening. Welcome to the C-Limited First Quarter 2021 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I'd now like to turn the conference over to Ms. Minju Song. Please go ahead.

Hello, everyone, and welcome to CEE's 2021 First Quarter Earnings Conference Call. I am Minju Song from CEE's Group 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 and net loss excluding share-based compensation. 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 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. I have with me C's Chairman and Group Chief Executive Officer, Forrest Lee, Group Chief Financial Officer, Tony Ho, and Group Chief Corporate Officer, Yanjun Wang. Our management will share strategy and business updates, operating highlights, and financial performance for the first quarter of 2021. 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 Forest.

Thank you, Mingzhu. Hello, everyone, and thank you, as always, for joining today's call. We are pleased to start 2021 on a strong note. with our results for the first quarter showing continued high growth across all our businesses. Even with the gradual recovery in offline activities in our region since the second half of 2020, our strong performance in terms of user growth and engagement shows that digital adoption is still rising healthily as the communities we serve continue to embrace the benefits of online lifestyles At the group level, for the first quarter of 2021, we are happy to report gas revenue of $1.8 billion, which represents 147% year-on-year growth. We recorded particularly strong growth in gross profit, which reached $645.4 million, up 212% year-on-year. Wealth adjusted EBITDA was $88.1 million, compared to a loss of $69.9 million a year ago. This strong performance on both the top and the bottom lines, once again, demonstrates C's ability to capture the high growth potential of the industries and regions we operate in, while deploying capital and resources effectively and efficiently across our businesses. Before we discuss our business performance in detail, it is important to note that many of the communities, consumers, and small businesses we serve continue to face significant challenges as a result of the ongoing impact of the pandemic, including recent increases in cases in some countries. At sea, We are committed to play our part in helping our communities navigate these ongoing challenges. This includes support to address the most pressing near-term needs of our communities, as well as our sustained focus on helping more people to benefit from the growth of the digital economy. Our global teams are working hard to identify ways in which we can offer tangible near-term support to our communities. For example, in Badong, Indonesia, we recently set up a vaccination center in collaboration with the West Java Health Office to deliver 20,000 doses of vaccine. In the Philippines, we launched a second series of our frontline package for healthcare workers, delivery and logistics providers, and other personnel who contribute in the fight against the pandemic. We have offered them an exclusive package of discount and mobile vouchers and prepaid Wi-Fi devices from Shopee and its partners. Meanwhile, We are mindful that many small businesses around the region are still recovering from the shock of the last year, and we continue to invest in initiatives to help them successfully adjust to the digital economy, scale their businesses, and generate more income to provide for their families. As an example, In March, Shopee announced that it will work with the School of Export in Indonesia to help 500,000 small and medium enterprises export their products by 2030. In April, Shopee Pay announced that it will be offering training programs for female entrepreneurs in Indonesia to digitalize their businesses and expand their customer reach. In Malaysia, Shopee worked with the Federal Agriculture Marketing Authority to teach local farmers on how to effectively move their businesses online and adapt to the effects of the pandemic. We also continue to groom talent during this difficult period. We are clearly aware that many people in our key markets, both young and old, may need to cultivate new skill sets to benefit from the rapidly growing digital economy. We want to do our part to bring positive impact to our communities by helping to nurture these new skill sets. In February, we announced the second season of our Shopee Code League, the largest online code league in Southeast Asia and Taiwan. attended by 15,000 participants from eight countries. In addition, as an ongoing initiative, our Green Academy in Thailand helps guide and educate young people on how to develop a career in the gaming and esports industry. Most importantly, we are proud to serve the underserved with our businesses by connecting communities, enabling consumers, and empowering small businesses, especially those who traditionally like access to tech platforms and the opportunities they bring. With that, let me now discuss each business individually, starting with digital entertainment. Garena delivered another quarter of outstanding performance. Bookings were $1.1 billion, up 117% year on year. while adjusted EBITDA reached $717.3 million, up 140% year on year. In the quarter, quarterly active users reached 648.8 million, up 61% year on year, while quarterly paying users hit 79.8 million, up 124% year on year. our paying user ratio rose to reach 12.3% compared to 8.9% a year ago, showing that we can grow our user base while also deepening monetization. Once again, Free Fire had a standout quarter as our focus on building out the platform with more creative and engaging content and user engagement activities continued to resonate with gamers around the world. Indeed, Free Fire remains highest-grossing mobile game in Latin America, Southeast Asia, and India for the quarter, according to FNE, maintaining its top rank for Latin America and Southeast Asia for seven consecutive quarters and achieving the same in India for two consecutive quarters. A key success factor is our ability to keep our strong global community deeply engaged with our platform by constantly delivering fresh, high-quality and locally relevant content. In the first quarter, we rolled out partnerships with popular Japanese manga titles like One Punch Man and Attack on Titan to create memorable crossover events and content experiences for our users. We also received very positive feedback when we introduced the in-game characters based on popular local celebrities. For example, in V9 and in Mina, we collaborated with the popular V-pop prince, SungTong MTP, who has more than 9 million followers and nearly 2 billion views on YouTube, and the famous Egyptian singer and actor Mohamed Redman, who had a top hit song last year that has since generated over 225 million views on YouTube to create in-game characters. Our community engagement and esports efforts are key drivers of success. In the first quarter, we introduced the highly popular community content around India's Holi Festival, a special Free Fire music video for the festival draw 15 million views. We also organized esports tournaments like the Free Fire League Latino America 2021. In April, our flagship Green Award event generated an online audience of 1.2 million and more than 40 million online views across Facebook, YouTube, and other social media channels. During the fully virtual two-day event, that was hosted in Thailand. We used a combination of augmented reality, visual effects, animation, and other technologies to provide our fans with an interactive and immersive experience. For example, we hosted a dedicated live streaming platform where viewers can customize their avatars and express their views through chats. We also welcomed 39 teams from nine regions to compete in our online game tournament. This event demonstrated our ability to adapt to fast-changing environments and to successfully deepen engagement with our users through technology. We also received a number of awards at the Pocket Gamer Awards 2021, with Garena winning the Best Mobile Publisher Award and Free Fire named as the best battle royale game. These efforts to grow and strengthen the Free Fire platform through continuous content rollout and emphasis on community building activities have delivered clear results not only in terms of strong user metrics and financial performance, but also in user stickiness. Our Free Fire cohort analysis shows that even as strict lockdowns in our core markets have been gradually eased since the second quarter of 2020, time spent per daily active user on Free Fire remains far higher than pre-pandemic levels. We are encouraged to see that for older cohorts. The time spent per active user and especially paying user ratio are still rising even though these users have been playing Free Fire since its early days. New cohorts also start off stronger than older cohorts, displaying a higher and faster growing paying user ratio than older cohorts over time. Looking ahead, we continue to plan for a deep pipeline of innovative content fresh partnerships, and exciting esports activities to further and better engage with our ever-growing global communities of users. We are also working to ensure that our long-term games portfolio pipeline remains strong. A significant number of our more than 1,000 in-house game developers globally are constantly working on new ideas, while we continue to engage with third-party game studios for collaborations on promising and complementary game development and publishing opportunities. Let us turn to e-commerce. Shopee delivered exceptional results for the first quarter, building on its stellar performance in 2020, as it continues to gain momentum and attract more buyers and sellers. In the first quarter, Shopee recorded $1.1 billion worth orders, up 153% year-on-year, and GMV of $12.6 billion, an increase of 103% year-on-year. Gap revenue grew 250% year-on-year to $922.3 million. Our year-on-year order growth rate Her growth rate continued to accelerate in the quarter, underscoring our strengthening market leadership. We are pleased to note that adjusted EBITDA loss per order fell once again. It declined 38% year-on-year to $0.38 during the quarter, demonstrating the growing efficiencies of our core e-commerce operations, even as we continue to invest in growth. According to App Annie, Shopee continued to rank first across Southeast Asia and Taiwan by average monthly active users and the total time spent in app on Android in the shopping category for a quarter. In Indonesia, Shopee's largest market, we continued to rank first across those same metrics while our year-on-year force order growth further accelerated in the quarter. We also saw growing user reception to our platform in Brazil. We will continue to assess the trends and opportunities there carefully and invest with efficiency to continually enhance our platform offerings to the users. Our focus on executional excellence remains the key factor driving Shopee's sustained success. In everything we do, we are relentless about optimizing our performance and maximizing the output. In the first quarter, we rolled out more initiatives to support our regional seller base and brands. As an example, for small-medium sellers, we worked with SkillsFuture Singapore in March to offer a step-by-step program to successfully help them to transition online. For brands, We launched new programs like our regional champion brand program and our $100 million club to help them maximize their online growth potential. We also gave out awards like Best Product Launch or Best Tech Innovation to reward brands who have appreciated themselves on our platform like P&G, Disney, L'Oreal, Samsung, and Unilever. We are happy to share that the number of brands working with Shopping Mall has grown to more than 25,000. To conclude, we believe that e-commerce penetration remains low across all our markets in spite of the step change in digitalization since the onset of the pandemic. Against this backdrop, we remain committed to investing with efficiency to capture the attractive potential over the long run. We believe our hyper-local and highly targeted approach, alongside our commitment to focus and invest with efficiency for the long term, will allow us to build a healthy and sustainable ecosystem that can offer the best long-term value for buyers and sellers, and in turn, our other stakeholders. Turning now to digital financial services, C-Money continued to see very high growth in the quarter, building upon its excellent performance last year. For the first quarter, C-Money's mobile wallet services recorded a total payment volume of $3.4 billion, which more than tripled compared to the $1.1 billion a year ago. Quarterly paying users surpassed 26.1 million in the quarter. We are pleased that Shopee Pay continues to gain traction as a quick and convenient online and contactless payment option. Indeed, according to Snapcard Indonesia's survey in March, Shopee Pay was the most used, the most remembered, and the most liked mobile wallet by Indonesian consumers during the fourth quarter. In addition to leveraging the strong and growing on-platform use cases on Shopee, we continue to expand our range of off-platform use cases. For example, Shopee Pay is now available as a payment option at Indomart, one of Indonesia's leading convenience store chains, as well as various popular F&B chains such as Wendy's and Domino's Pizza. The reception so far has been strong. In the first week of our partnership with Indomart, more than 1 million transactions were paid using Shopee Pay. We also added new features to the Shopee Pay experience to enhance its utility for both consumers and Shopee Pay merchants. In April, we launched a new feature called Mall Around Your Promote. or Dear Deals Near Me, which shows the user's attractive deals in their immediate vicinity. Users can then purchase the relevant vouchers on the app and redeem them immediately at the physical outlet. This has been highly successful in driving significant actual football for onboarded offline merchants. We believe the digital financial services sector in our region is still in the early stages and expect it to develop significantly more use cases, features, and opportunities in due course. As we scale this business, we will apply the same rigor and discipline in efficiency as we have achieved across our businesses so far. To conclude, Our first quarter result is a great start to the year. Each of our businesses has performed impressively and is well positioned to benefit from attractive long-term industry potential. Even when offline activity continues to resume, we expect rising digital adoption to be a tailwind for seed sustained growth. We will also keep investing prudently and efficiently to strengthen our competitive mode and to position ourselves for new opportunities. Our commitment to serve consumers and small-medium businesses with technology is stronger than ever and we are determined to enable more people across our communities to benefit from the digital economy. With that, I will invite Tony to discuss our financials.

Thank you, Boris, and thanks to everyone for joining the call. We have included detailed financial schedules together with the corresponding national analysis in today's press release, and Boris has discussed some of our financial highlights, so I will focus my comments on the other relevant metrics. For SEA overall, total guest revenue increased 147% year-on-year to $1.8 billion. This was mainly driven by strong performance in our e-commerce business as we continue to roll out tools to better serve our users' needs, as well as growth of our digital entertainment business, especially our self-developed games, Free Fire. Digital entertainment bookings grew 117% year-on-year to $1.1 billion. Gap revenue was up 111% year-on-year to $781.3 million. The growth was primarily driven by the increase of our active user base and deepening user penetration as we continue to engage the community through new content and partnerships, rollouts, and esports events. Digital Entertainment of Jesse Ibiza was $717.3 million. This represents year-on-year growth of 140%. This was mainly due to strong top-line growth and an increased share of our self-developed gain among our total bookings. On e-commerce, our first quarter gap revenue of $922.3 million included gap marketplace revenue of $715.9 million, up 285% year-on-year, and gap product revenue of $206.4 million, up 167% year-on-year. The strong results demonstrated the deepening penetration of e-commerce and our ability to capture these accelerated growth opportunities as we continuously enhance our offerings to create greater value for our platform users. E-commerce adjusted EBITDA loss was $412.9 million as we continued our investments to fully capture the opportunities in our markets. We remain committed to efficiently investing in and growing the ecosystem to serve our users better. Digital financial services gap revenue was $51.3 million. an increase of 396% year-on-year from $10.3 million in the first quarter of 2020. The growth was primarily due to increasing traction as we continue to expand our suite of service offerings. Adjusted EBITDA loss was $153.1 million compared to a loss of $93.1 million in the same period of 2020. This was primarily due to our continued efforts to drive mobile wallet adoption. Returning to our consolidated numbers, we recognized a net non-operating loss of $23.3 million in the first quarter of 2021, compared to a net non-operating income of $11.2 million in the first quarter of 2020. Our non-operating loss in the first quarter of 2021 was primarily due to increased interest expense on convertible notes. We had a net income tax expense of $51 million in the first quarter of 2021, which was primarily due to corporate income tax and withholding tax recognized in our digital entertainment business. As a result, net loss excluding share-based compensation was $320 million in the first quarter of 2021 as compared to $239.5 million for the same period in 2020. With that, let me turn the call to Yanjun.

Thank you, Forrest and Tony. We are now ready to open the call for questions. Operator?

We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. In the interest of time, we will take a maximum of two questions at a time from each caller. If you wish to ask more questions, please request to join the question queue again after your first question has been addressed. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Thomas Chong from Jefferies. Please go ahead. Hello, Thomas. Is your line muted?

of a free fire, as well as the pool drivers. It comes from our MAU. They use it in our pool. Should we expect the growth is more coming from the LATAM going forward? Thank you.

Thanks, Thomas. Regarding your question, sorry, your line isn't super clear. I understand your question is regarding the life cycle of free fire. as well as the growth drivers of the users and ARPPU, and whether the growth is coming from Latin region. Are these correct? I'll answer these questions first. Regarding the three fire, I think as we can observe from our disclosure of a quarterly active user, quarterly paying user, and book games, as well as the bottom line of adjusted EBITDA, which is largely also attributable to Free Fire being a global game and growing at a very healthy rate globally. We see it still at its early stage of the life cycle, and in fact, we see it increasingly as a platform and a major IT franchise we are focusing on continuing to grow our user base. The driver of the growth comes from both Southeast Asia, LATAM, as well as India and the rest of the world. And that's the same for both the user base as well as pay user base. So we're still at an early stage of driving growth on the user base as well as pay user base for this game and developing it into a increasing a social platform where people not only come to play the core gameplay, but also enjoy other modes, hang out, listen to music, socialize. The time spent in the game continues to be very high, two to three hours per daily active user. And as we discussed in the earlier comments, that we observed very encouraging trends on the cohort analysis as well, where the older cohorts who have been with us since the early days of this game have shown stronger trends in time play as well as pay ratio. And we also see younger cohorts coming in more recently showing even faster growth of pay user ratio as well as stickiness. And there is also, as we mentioned, positive feedback loop between pay user as well as stickiness of the game. As users pay and pay more, they tend to play the game more and be with the game for longer. We've also been focused on building our ecosystem on esports, the communities, as well as collaborations with third-party IP. As we mentioned before, we have collaborated with, for example, One Punch Man, which is a very successful campaign to promote further engagement in our game. I think this is a very much a broad-based user growth as well as pay user growth, and we'll continue to focus on growing this game globally.

The next question comes from Piyush Mubai from Goldman Sachs. Please go ahead.

Thank you, Forrest, Tony, and Jim. When I look at the e-commerce business, I was hoping you could shed some light on where you are in Brazil and also help us understand the drivers of the improvement that we saw in the take rate and related to e-commerce in better understanding the spend that is taking place. Would you be able to tell us or give us a feel for how much the investment is that's the drag on the EBITDA for the e-commerce side at this stage in the 1Q period? Thank you.

Thanks, Piyush. As we mentioned earlier, we continue to see positive user reception in Brazil, and we'll continue to invest to enhance our offerings to our sellers and growing user base there. At this stage, it's still very early for us, and we'll continue to observe the trends locally and focus on efficient investments there.

Could you shed some light on whether there is a drag on the overall EBITDA because of investments outside this region as far as e-commerce is concerned?

Given that it's still very early stage, I think it's still too early to talk about the market separately. Overall, I think the contribution in terms of the margin we're seeing from an e-commerce perspective is still very positive. Our EBITDA loss per order continues to fall. And in terms of top line growth, at 250%, which is very, very strong on all funds. So I think that it's still a very early stage for Brazil for us to discuss it even as a separate market.

The next question comes from Alicia Yap from Citigroup. Please go ahead.

Hi. Good evening, management. Thanks for taking my questions. Congratulations on the solid results. I have two quick questions. Number one, just wondering if management can share the conditions in India given the free fire attractions there. given the lockdown, do you actually see the time span increasing or you're actually seeing some negative impact because of the illness and the instability? So any colors on the game performance in India? And then second question is on the food delivery business. If you can share your plans and ambitions, will that be more accomplished complementary or is it a need to win basis that you wanted to challenge the market leader? Thank you.

Thank you, Alicia. Regarding India, we also observed the local situation closely. India has, as we mentioned, earnings continue to be a top-grossing market and we're Our game performed very strongly. Time spent per user continued to be very high. We see rising pay user ratio there. We see it as a highly promising market and will continue to contribute meaningfully to our growth in the game with a very long runway. And we'll focus on promoting our game and user engagement in India. And in terms of food delivery, We see it as a category on Shopee and we see very strong user reception naturally and similar to how we're able to grow all these other categories on Shopee through strong execution, right business model and user engagement. As we mentioned before, for food, we see it as more of a complementary to our other e-commerce offerings. We do become a market leader naturally, like what happened in Vietnam. We're happy to see that, but we see it as a focus on healthy growth and sustainable growth as part of the overall e-commerce ecosystem.

The next question comes from Ranjan Sharma from JP Morgan. Please go ahead.

Hi, it's Ranjan Sharma from JP Morgan. Thank you for the presentation. Two questions from my side. Firstly, on Shopee in Latin, you have seen success in driving adoption in Brazil. You are in Mexico. If you could also share how you see the rest of Latin America as an opportunity for e-commerce. And secondly, on food delivery, you're in Vietnam, you're in Indonesia. How should we think about Shopee food expanding throughout ASEAN?

Thank you. In terms of Latin market, again, you know, even Brazil is very, very early stage for us, not to mention the others. We don't have much to update at this point. If there's any development, then we will update the market. Same thing for food. You know, we've been doing food in Vietnam and has been the market leader there. And in Indonesia, we very recently rolled out first in Jakarta. graduating, expanding to other markets over time. But, you know, we have not announced any plan for any other markets. If there's any update, we'll also let the market know.

The next question comes from John Blackledge from Cowan. Please go ahead.

Great. Thanks. Two questions. First, could you just give us an update on Choppy's competitive positioning in the core markets in greater Southeast Asia? And then this is kind of an ask I'm going to ask again. Sales and marketing spend was higher than expected. Could you just provide some further color on the sales and marketing spend? And was Brazil expansion a key driver of the sales and marketing spend? Thank you.

Thank you. In terms of competitive landscape, it continued to improve for us as we continue to extend our market leadership in the markets across all fronts. And as evidenced by our improving top line GMO order growth at a very high rate, more than 150% in Southeast Asia plus Taiwan. And also our increasing take rate over time and monetization. In terms of sales and marketing spend, I think our top line growth also probably in a way exceeded the consensus. So sales and marketing spent as a percentage of GMB actually dropped quarter on quarter. So I think we'll continue to observe the trends. Now it's very important to note that this is really a managed outcome for us as we look at all the opportunities. As a company that we have, this is actually the 11th quarter that we've shown triple-digit growth at the top line. Any other company of our scale and size and speed of growth, there might not be many other large-cap Internet companies that have shown this level of sustained very high growth. And our growth is carefully managed to result through prudent, efficient spending and investment in the long-term you know, development of the business model. And we are in high growth regions whereby the penetration of digital economy is still very low. So the runway is very, very high. The competition landscape is not a kind of red ocean, zero-sum game situation. Instead, we actually continue to see, you know, our market leadership extending as we While we are bigger, we are also growing, we believe, at a faster rate than many other players. So that actually bodes very well for our growth opportunities, and we want to continue to invest in the long-term business model, which we believe can maximize profitability down the road for us and our shareholders in the long run.

The next question comes from Josh Levin from Autonomous Research. Please go ahead.

Hi. Good afternoon. I have two questions. First of all, in the e-com business, as you think about the future, how are you thinking about the mix of in-house versus 3P logistics? And then second, what are the implications of Gojek and Tokopedia merging for your business? And do you see any disadvantage to not having a ride-hailing business? Thank you.

In terms of logistics, our approach has been quite consistent, where we primarily work with third-party logistics services providers in our region, and who've been also focused on investing in growth with us. And we further more deeply integrated with them, helped them to improve their efficiency and quality of services to our users. As we continue to see delivery time being shortened, efficiency improved and cost lowered over time. Our own express delivery services are complementary to the third-party logistics services in this market. And of course, we will continue to have the first-party capabilities to make sure our users are well-served, especially during peak seasons or sometimes during the lockdowns when there could be constraints in capacity. In terms of the implications of the merger, first, we'd like to congratulate our friends on their successful merger, and we think that, as I mentioned, it's a huge opportunity in our region. There's a very long runway, and we should all collectively focused on expanding the pie and growing the digital economy in our region and investing a long run to serve our users and communities better. In terms of the disadvantage of not having any particular business, we don't really see that. We think that we are very fortunate to have three of the largest consumer internet opportunities in the high-growth region that we are in, and we're able to manage it across so many complex and different markets. And with the three growth engines, and also especially a high-profitable game business, the fund helped to largely fund our growth in e-commerce and digital financial services. We think we stand in the best opportunity, in the best position, to really capitalize the opportunity to build the largest consumer Internet ecosystem in this region. And we'll continue to focus on executing our core businesses as well as building those ecosystems.

The next question comes from Piyush Chaudhari from HSBC. Please go ahead.

Good evening. Thanks a lot and congratulations for solid results. Two questions. Firstly, for Free Fire, could you share your thoughts on where do you see opportunity to expand user base further and where time spent per user can potentially expand? Secondly, on your digital financial services strategy, Beyond wallets, can you talk about, you know, your consumer lending and merchant lending products? How has been the response to buy now, pay later, and merchant lending and outlook for regional expansion? Thank you.

Yeah, I think we continue to see opportunity to expand our user base in, you know, across all markets in Southeast Asia, Latin America, as well as, of course, India and the rest of the world. And, in fact, there has been a consistent trend historically. We see the penetration rate is still deepening over time, so has pay use penetration rate. And as we continue to roll out more IP and engagement and different game modes, and engage with our users online and offline through different activities, community engagement. We think there are definitely opportunities to further grow the user base as well as user time spent on the platform. We have seen users can spend, for some of the top users, who can spend multiple hours a day on the platform. And we are focused on, of course, more of a broad base time spent as opposed to top time spent by a small group of users. Of course, with 100 million data active users, we're talking about a much larger community over time. So our focus is continuing to promote a massive-based online platform and an online community and provide them with content and opportunities for socializing engagement, trial different modes of games, trial different characters, avatars, or having different ways of playing. For example, we recently are launching more of a mystery-solving game mode, something like Among Us, with pets that players own in the game. So we're continuing to innovate to bring more content to them. And that's what we focus on in growing the user base, as well as time spent per user and engagement in the game. In terms of the final simulator program, we see it as an integral part of our C-Money services to our one-listed shopping users. And as we continue to improve our model and understand our user behavior better, we might gradually roll out the program across a larger user base as well as across more markets. But we continue to focus on efficiency, high-quality lending, and management of user experience in that respect. I think this is a program that facilitates wallet usage as well as further facilitate growth of our e-commerce platform. At the same time, allow us to provide better services and have better models on top of which we can build other digital financial services such as intratech and wealth management technology services. Again, we'll continue to focus on using technology to power delivery of financial services to underserved communities, and we're focused on collaborating with other financial institutions in growing the pie together collectively.

The next question comes from Varun Auha from Credit Suisse. Please go ahead.

Yeah, hi. Good evening, management, and thanks for the opportunity. Three questions. First, on the e-commerce side, I think 1Q is supposed to be relatively weaker given it's coming out of a strong 4Q, but this quarter it's again a 6% quarter-on-quarter growth on GMB, so a strong growth. Can you just give some colors in terms of which segments and which countries it's doing well? And obviously, you have not given the number of orders by Indonesia. If you can give some color on that front, that will be helpful. On the gaming side, can you provide a little bit more color on have you launched Free Fire Max? And anything about any game launches, anything color, that will be helpful. And if yes on Free Fire Max, any color, how is it trending in the developed market? Thirdly, on the digital financial services side, if you can share how much of this $3.4 billion of TPV is related to the e-commerce, your platform versus how much our third party, any breakup, that would be helpful. Thank you.

Thank you, Varo. In terms of the e-commerce business, yes, it continues to experience growth. hypercharge growth across all markets and in categories. So our category composition really hasn't shifted much and we continue to see growth across all major categories. And the same for the market, different markets. In Indonesia, We mentioned that our young year growth rate actually further accelerated. In fact, this is the highest young year growth rate we've seen in recent times. In terms of Free Fire Max, we continue to improve on the game and in terms of understanding our user preference and behavior. We've been testing it in control environment in select market to work on this version. I think our goal is to have different offerings for users with different preferences and to have an integrated and seamless user experience on our game. In terms of new game launch pipeline, I think we previously announced Omdom, which is an open world survivor game, and we believe it will also offer fresh content to communities in our game world. And then also the Moonlight Blade, which is an MLRPG game, and based on a more well-known IP in parts of Asia. So I think these are some of the examples that we have mentioned in our pipeline. But again, as you know, practice, while we do have a long pipeline of potential IP, we don't pre-announce those earnings. We really would like our gamer community to hear directly from our game unit first. And in terms of the TPV, Most of it still are related to Shopee as well as our self-owned services. As I mentioned before, we believe the most efficient way of growing our Sea Money business or in particular the eWater business is through growing our own ecosystem of the owned use case, which also happen to be the largest and some of the highest quality online use cases that allow us to grow the wallet efficiently, and on top of which, to have high-quality user analysis and understanding to be able to build comprehensive digital financial services on top of it. So this will continue to be our strategy.

Again, if you have a question, please press star, then 1. Our next question comes from Pang Vit from Goldman Sachs. Please go ahead.

Thank you very much for the opportunity. Just two questions for me. Firstly, on Govina, can I understand why the margins decline quarter on quarter, given that Free Fire continues to expand its base? And second question is related to COVID impact. We've seen a worsening in COVID situation around the world, namely maybe in Singapore, in Thailand, and also in India. How prepared is it this time, and if situation continues to worsen, Should we expect another round of server support program as we've seen last year? Thank you.

Thank you, Tan. In terms of the EBITDA margin, we mentioned before that we believe our EBITDA margin might fluctuate from time to time, but remain at a high rate compared to the industry average. So, more related to the first quarter, as I mentioned, we have IP collaborations such as One Punch Man, and this might also contribute to additional payouts we need to make to third-party IP owners. But overall, we think it is very helpful in further engagement with our users and in promoting our games to a broader base and in promoting the pay user as well. So we will continue to focus on growing the user base and pay user base and user engagement. We have proven our ability to commercialize any, whether it's self-developed or third-party IT incorporated in our being broadly across many markets. In terms of our corporate impact, you're right that we have seen resurgence of cases and restart of some form of lockdown or restriction of social movements in our region, such as Taiwan, Singapore, Thailand, Vietnam, of course, India being also, we also see very large number of cases. And for other countries like Indonesia, Malaysia, Philippines, we continue to see a large number of cases. So I think we're still very much in the COVID situation and we are well prepared. We believe to handle that since early last year, even when the pandemic first hit, I think our team have shown resilience and adaptability to be able to manage the strictest form of lockdown to deliver the well-needed services to our communities. And with specs in service levels, and we continue to fulfill those services and demands with quality. I think we're also well prepared for any new surges in cases, and we continue to be vigilant. I think regardless of COVID, The step up in digitalization, we believe, is here to stay, and there has been evidence in our numbers. Of course, if there are further lockdown and restrictions on movement, we think there will be even greater need for our online services to reach broader communities, and we are ready to deliver that.

Our next question is a follow-up from Ranjan. Sharana from J.P. Morgan, please go ahead.

Hi, thank you. Can I just have a quick follow-up on Free Fire in the U.S.? There seems to be a vast improvement in popularity in the U.S. If you can share any color what's driving this, and if the engagement remains where it is, how do you feel about the giving guidance for this year? Thank you.

Yeah, we continue to see positive reception and growth of Free Fire in developed markets in North America, and we think it's a highly encouraging sign and will continue to serve the users there. I think not all Federal Royal Games are the same. Each top hit game has its own appeal to its own audience, And I think our game differentiates itself in terms of the appeal to broad-based, not necessarily action-focused audience, but with a lot of broad-based appeal with fantasy elements, social elements, and various forms of engagement and game modes and user-friendliness. to broad-based communities across gender, age, and level of experience with Battle Royale or action games in general. I think this helps in promoting our game to different types of audiences and they will one way or the other find us and we see strong organic growth in the game community. I will continue to focus on reaching the right communities with our game and serving them well in the developed market as well. In terms of gaming guidance, of course, we see very strong results this quarter. We'll continue to observe. And if we need to update the guidance, we'll let people know. But at this point, we'll continue to observe the trends.

This concludes our question and answer session. I would like to turn the conference back over to Minju Song for any closing remarks.

Thank you all for joining today's call. We look forward to speaking to all of you again next quarter. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.