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.