Sea Limited

good morning and good evening to all and welcome to the sea limited fourth quarter and full year 2024 results conference call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press star followed by the number one on your telephone keypad if you would like to withdraw your question press star one again 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 would now like to welcome Ms. Rebecca Lee to begin the conference. Please go ahead.

Hello, everyone, and welcome to SEAS 2024 Fourth Quarter and Fourth Year Earnings Conference Call. I am Rebecca Lee from SEAS Investor Relations Team. On this call, 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 main businesses even 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 Chris Fung, and Chief Financial Officer Tony Ho. Our management will share strategy and business updates, operating highlights, and financial performance for the fourth quarter and full year of 2024. 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. We delivered a great 2024 with all three businesses going back to strong double-digit growth, exceeding our original guidance. It was also our second consecutive year of annual positive profit with all three of our businesses recording positive adjusted EBITDA. We are very proud of achieving this milestone, and we expect each business to remain profitable and self-sufficient going forward. This strong set of results validates our strategies. We made the right decisions at the right time and executed very well on them. 2024 also marked our 15th anniversary. It is rewarding to look back and see how, over 15 years, we have created and excelled in three separate business verticals, improving the lives of hundreds of millions of people. Garena brings joy to over 100 million global gamers every day. Shopee is the clear e-commerce market leader in all seven of our Asian markets, with a sizable and growing presence in Brazil. Our e-commerce GMV exceeded $100 billion for the first time in 2024. And C-Money, with a loan book size of over $5 billion and over 26 million active borrowers, is already one of the largest consumer lending businesses in Southeast Asia. I'm very proud of the hard work from all our teams, which has made these incredible outcomes a reality. And I'm very grateful to all our investors for your support across this journey. With that, let me take you through each business' performance and strategic outlook. Starting with e-commerce, Shopee is celebrating its 10th year with a great set of results. GMV surpassed $100 billion with over 10 billion orders in 2024. It was our first full year of being adjusted EBITDA positive. We reinforced our market leadership by returning to high growth, with GMV growing 28% year-on-year, and we have become profitable in both Asia and Brazil. We improved our monetization significantly in 2024 through higher commission and advertising take rates. This was driven by market becoming more rational and increased adoption of our ad tech offerings among sellers. In the fourth quarter, our ad revenue increased by more than 50% year-on-year, and our ad take rate improved by more than 50 basis points compared to the same period last year. 2024 has been a strong demonstration that our e-commerce strategy works. Our results reflected solid execution across our three operational priorities, enhancing price competitiveness, improving service quality to customers, and strengthening our content ecosystem. I believe our ability to execute very efficiently and consistently across these priorities sets us apart and has made Shopee a beloved household name across our markets. Our end-to-end integration with our logistics partners has proven to be a key differentiator of Shopee's service quality. XPX Express, in particular, helped us reap many efficiencies due to its geographic reach, fast delivery speed, and cost leadership. After years of delivery network and logistics chain improvements, XPX Express is now able to consistently deliver industry-leading service standards for buyers and sellers, even during seasonal peaks. Almost half of XPX Express orders in Asia were delivered within two days of order placement in the fourth quarter, an improvement from the same period last year. At the same time, we reduced the shop's overall logistics cost per order by $0.05 year-on-year in the fourth quarter. The efficiencies we gained from this tight logistics integration allow us to pass on savings to buyers and sellers while giving them assurance of reliable and cost-effective logistics solutions. Beyond logistics, We continue to adopt AI to improve service quality in a practical and effective manner. By using large language models to understand queries, we have made search and discovery more accurate, helping users find relevant products faster. We provide our sellers with AI tools to enhance product listings by improving descriptions, images, and videos. These initiatives have improved purchase conversion rates while also making sellers more willing to spend on ads, boosting our ad revenue. We have also used AI to enhance our customer service capabilities. After upgrading our chatbots with AI, we saw a meaningful increase in our customer service satisfaction score over the past year. and a reduction in our customer service cost per contact by nearly 30% year on year. We also used the large language model capabilities to enhance our buyer return refund process, but addressing a key e-commerce pin point. In the fourth quarter, we improved resolution times in our Asia market by more than 40% year on year, with nearly six in 10 cases resolved within one day. We believe we are still early in the AI adoption curve and remain committed to exploring AI-driven innovations to improve efficiency and deliver better experiences for our users. We continue to strengthen our content ecosystem, which has become an integral part of our e-commerce ecosystem. In Southeast Asia, Live streaming now contributes around 15% of Shopee's overall order volume for physical goods. And in the fourth quarter, our average daily unique streamers and viewers grew strongly at over 40% and 30% respectively, year on year. In Indonesia, we have maintained our lead as the largest live streaming e-commerce platform throughout 2024. Our live streaming unit, Economics, also improved consistently across the year, driven by expanded scale, more optimized marketing spend, increased adoption of Shopee live ads, and higher average basket size. Continued improvements in live streaming unit economics will help to enhance Shopee's overall profitability in 2025. We continue to see positive momentum from our collaboration with YouTube which enabled video viewers to make seamless purchases from Shopee. It has also attracted many YouTube creators to Shopee's content ecosystem. In Indonesia, average daily orders attributed to YouTube content in January this year have grown more than six-fourths since the collaboration first launched in September last year. We are also seeing promising results since launching the collaboration in Thailand and Vietnam, and we look forward to expanding this partnership to more markets this year. Beyond Asia, I'm very proud of our strong performance in Brazil, both in terms of our market share gains and improving profitability. Our average monthly active buyers increased by more than 40% year-on-year in the fourth quarter, significantly outpacing the industry average. Our efforts to onboard more brands, diversify our product categories, and improve delivery speed have attracted more users to our platform and resulted in larger basket-sized purchases. This gave us a much better unique economics and allowed us to achieve positive adjusted EBITDA for the second consecutive quarter. Looking ahead, we remain excited about Shopee's growth potential in Brazil. In summary, I'm very pleased with Shopee's achievements in 2024. We delivered strong growth and became profitable in both Asia and Brazil. Our competitive modes are deepening, empowering us to maintain market share leadership in Asia. As market dynamics become more rational, Long-term success in e-commerce will hinge on structural cost advantages and operational excellence, both of which Shopee is extremely well positioned to leverage. With e-commerce penetration still low across many of our markets, we remain confident about our ability to continue delivering profitable growth in 2025. We expect Shopee's full-year 2025 GMV growth to be around 20% with improving profitability. Next, moving on to digital financial services. This segment is already a sizable and profitable business and a meaningful contributor to our overall growth and profitability with annual revenue of $2.4 billion and adjusted EBITDA of over $700 million. Both our top line and bottom line achieved over 30% year-on-year growth in 2024. While we have scaled fast, risk management remains our top operational priority for this segment. Today, our digital financial services business offers consumer and SME credit, digital payment, digital banking, and insure tech products in Southeast Asia and Brazil. Credit related business is currently the main driver of our digital financial services revenue. So let us focus on there. We delivered exceptional loan book growth of more than 60% year on year in the fourth quarter, surpassing $5 billion as of the end of 2024. making us one of the largest consumer lending businesses in Southeast Asia. In the fourth quarter, we added approximately 5 million first-time borrowers, and we saw 60% year-on-year growth in our active users, which have now grown to more than 26 million. Even with this strong growth, our risk exposure has remained stable, with 90-day NPL ratio at 1.2% in the first quarter. Our credit business strategy focuses on sustainable, healthy growth driven by a deep understanding of risk. We currently only operate this business in markets where we already have a strong e-commerce presence, giving us the ability to very deeply assess price and manage the risk in each market. As our large Shopee user base continues to grow in our market, we can take a prudent, progressive approach to user acquisition and product offerings, allowing us to scale up rapidly at low cost while also maintaining a very stable risk profile. Today, our credit business stands on two pillars, on Shopee as pay later loans, and off-Shopee cash and SP Later loans. In all our markets, on-Shopee SP Later purchases are the first and very natural touch point we have with most of our credit users. It allows them to build an initial credit track record and allows us to build out our credit model for the market. Once we understand the user's credit behavior, we give them access to other products with longer tenures and larger quantums. And when we have built a credit risk model for each market that we feel confident of, we then start to scale our loan book. Scaling our loan book includes diversifying into more off-shopping scenarios, giving us access to a much larger pool of consumer spend. Across our Asian markets, All Shopee loans now account for about half of our loan book. In most of our markets, credit card penetration is still very low. Our As Pay Later product acts almost as a virtual credit card for a massive addressable user base who have a huge underserved demand for credit. With rising digital adoption, we see great potential to tap into more off-shopping consumption use cases in our markets. In summary, 2024 was a very good year for our digital financial services business. We launched more products to serve more users, and we grew both our top line and the bottom line strongly and healthily. We expect this strong momentum to continue into this year. In 2025, we expect loan book size to grow meaningfully faster than Shopee's GMB annual growth rate, as we improve credit penetration both on and off Shopee. Finally, moving on to digital entertainment. 2024 was a great year for Garena, marking Free Fire's remarkable comeback. after the post-pandemic headwinds in 2022 and 2023. Free Fire rebounded with annual bookings growing at 34% year-on-year in 2024, and we expect continued growth in 2025. In 2024, Free Fire was the world's largest mobile game by average DAU. and the most downloaded title according to Sensor Tower. Despite its massive scale, FHD AU in 2024 grew 28% year on year, standing well above 100 million. With its high levels of engagement and retention, even in its eighth year, we believe Free Fire has secured its place as an evergreen franchise. Free Fire's comeback was the result of our continuous execution on constantly expanding our user base and relentlessly driving user engagement. We expanded our user base by prioritizing accessibility, ensuring that Free Fire remained lightweight enough to run smoothly on a wide range of devices. This gave us a competitive edge in high-growth emerging markets with significant untapped potential. As a result, in addition to our increasing presence in Asia and the Americas, Africa has become one of Free Fire's fastest growing regions. For instance, after we managed to improve connection speeds for players in Nigeria, active users there surged 90% year-on-year in December. We kept pushing ourselves to find ways to drive user engagement both within and beyond the game. We elevated gameplay with frequent content updates, high-profile collaborations, and immersive experiences that bridge the game and the real world. Major updates like the seventh anniversary event and collaborations with Demon Slayer and Blue Lock energized both new and existing users. and we started 2025 with the Free Fire and the Naruto Sleep Pardon IP collaboration. Our users have responded extremely positively to this collaboration, giving Free Fire a strong start to the year. While Free Fire is a global game played in more than 160 markets, our local teams put a lot of effort into bringing each market's local trends and elements into the game to make it feel hyper-local for gamers everywhere. We celebrated local festivals with dramatic in-game elements, from the Day of the Dead in Mexico to Tet in Vietnam. In Indonesia, we created a Ramadan campaign that allowed our users to donate in-game currency to renovate an open-edge investor Java. Such efforts have made Free Fire feel deeply local for players across different markets, creating a much richer sense of belonging for our gamers. Free Fire's popularity is also a result of having a strong presence beyond the game app itself. It has a powerful following on social media. On major social media platforms such as TikTok and YouTube, Free Fire has accumulated more than 1 trillion views to date. And our flagship annual esports event, the Free Fire World Series Global Finals, returned to Brazil last November and generated massive excitement. Viewership hours increased by 43% compared to the previous year, thanks to our partnerships with content creators and game streamers to build hype around the event. These large scale engagements fuel word-of-mouth organic growth, keeping Free Fire relevant and growing. We are incredibly proud of the sustained success of Free Fire and our very own self-developed game, and the solid performance of our longstanding published games. Looking ahead into 2025, we will continue scaling our user base and broadening our content offerings. We now expect Garena to grow double-digit year-on-year for both user base and bookings in 2025. In closing, we are proud of what we have achieved in 2024. Our strategies have proven effective and our businesses are on strong footing to continue growing strongly and improving profitability in 2025. We will continue to work hard and execute well. Our goal for the next phase is to pursue high-quality growth by driving both our top-line and bottom-line expansion in a healthy and sustainable manner. We are in a stronger financial position now than ever and we are a much more experienced company after going through multiple cycles. The fundamental growth opportunities in our market remain strong. 2024's success is just the start. 2025 will be another great year for us. Thank you, as always, for your trust and support. With that, I invite Tony to discuss our financials.