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.

Thank you, Forrest, and thanks to everyone for joining the call. For CE overall, total gap revenue increased 37% year-on-year to $5 billion in the fourth quarter of 2024, and 29% year-on-year to $16.8 billion for the full year of 2024. This was primarily driven by GMV growth of our e-commerce business and the growth of our digital financial services business. Our total adjusted EBITDA was $591 million in the fourth quarter of 2024, compared to an adjusted EBITDA of $127 million in the fourth quarter of 2023. For the full year of 2024, our total adjusted EBITDA was $2 billion compared to an adjusted EBITDA of $1.2 billion for the full year of 2023. On e-commerce, Shopee's gross orders grew 20% year on year to $3 billion in the fourth quarter of 2024, and GMV increased by 23% year on year to $28.6 billion in the fourth quarter of 2024. Our fourth quarter gap revenue of $3.7 billion included gap marketplace revenue of $3.2 billion, up 41% year-on-year, and gap product revenue of $0.5 billion. Within gap marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $2.4 billion, up 50% year-on-year. Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.8 billion, up 21% year-on-year. For the full year of 2024, GAAP revenue of $12.4 billion included GAAP marketplace revenue of $10.9 billion, up 38% year-on-year, and GAAP product revenue of $1.6 billion. E-commerce adjusted EBITDA was $152 million in the fourth quarter of 2024, compared to an adjusted EBITDA loss of $225 million in the fourth quarter of 2023. For 2024 full-year adjusted EBITDA, we achieved positive adjusted EBITDA of $156 million, compared to an adjusted EBITDA loss of $214 million. for the full year of 2023. Both Asia and other markets recorded positive adjusted EBITDA for the fourth quarter of 2024. Digital financial services gap revenue was up by 55% year-on-year to $733 million in the fourth quarter and up by 35% year-on-year to $2.4 billion for the full year of 2024. Adjusted EBITDA was up by 42% year-on-year to $211 million in the fourth quarter of 2024, and up by 29% year-on-year to $712 million for the full year of 2024. As of the end of December, our consumer and SME loans principal outstanding reached $5.1 billion, up 64% year-on-year. This consists of $4.2 billion on book and $0.9 billion off book loans principle outstanding. Non-performing loans passed due by more than 90 days as a percentage of total consumer and SME loans was 1.2% at the end of the quarter. Digital entertainment bookings were $543 million in the fourth quarter up 19% year on year and $2.1 billion for the full year of 2024, up 19% year on year. GAAP revenue was $519 million in the fourth quarter and $1.9 billion for the full year of 2024. Adjusted EBITDA was $290 million in the fourth quarter and $1.2 billion for the full year of 2024. Returning to our consolidated numbers, we recognized a net non-operating income of $28 million in the fourth quarter of 2024, compared to a net non-operating income of $32 million in the fourth quarter of 2023. For the full year, our non-operating income was $117 million, compared to an income of $208 million for the full year of 2023. we had a net income tax expense of $89 million in the fourth quarter of 2024, compared to net income tax expense of $77 million in the fourth quarter of 2023. For the full year, our net income tax expense was $321 million, compared to $263 million for the full year of 2023. As a result, net income was $238 million in the fourth quarter of 2024 as compared to net loss of $112 million in the fourth quarter of 2023. For the full year, net income was $448 million as compared to net income of $163 million for the full year of 2023.

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

We will now begin the 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. 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 will postpone entirely to assemble our roster. And your first question comes from the line of Bang Vit with Goldman Sachs. Bang, please go ahead.

Hi, and good evening, management. Congratulations for a solid performance. Two questions for me. Number one, on e-commerce, could you help us provide more colors on your 2025 20% GMV growth guidance? What is the underlying assumption you put in place in terms of competitive landscape marketing spending? service quality investment, and is this already a factor in the SX impact in the numbers? On top of this, could you help us understand how profitability will trend in the upcoming quarter as well? That's number one. Number two, on fintech, strong performance across the board, both on the top line and on the bottom line and on the user trend as well. Could you help explain the driver behind, especially on the country mix and product mix, And can you help us also contextualize what do you mean by loan book to grow meaningfully faster than Shopee GMV? Thank you.

Thank you. On the first one for Shopee, in 2025, as Forrest mentioned in the opening, we expect to grow around 20% on the GMV basis. We are assuming the Forex rate to be similar to the current rates. So we're not taking a position on the Forex forecast for now. If there's a big fluctuation on Forex, we will look at other situations. And in terms of the things we're doing to drive the growth, the growth is driven by both the user number growth and also the purchase frequencies as we are executing our key operational priorities. If we look at Asia and Brazil, we expect both markets will grow quite well, although as we have Brazil as a newer market, Brazil probably has a slightly faster growth pace than the Asian market. On the profitability side, we do expect the profitability for 2025 to be better than 2024 as a trend. However, as you might know, e-commerce does have some certain entities from time to time, so there might be some fluctuation due to certain entities. On the C-Money side of the businesses, the off-market grows very well in terms of the loan outstanding. on Shopee as pay later and the off-Shopee part of the businesses. In terms of the country mix, as you probably know, we grow the loan outstanding from countries like Indonesia, Philippines first, then other countries later. So in terms of the coming quarters, we will probably see the newer country has slightly faster growth pace than the older market. For the possibility of the loan book, we do believe that because of the country mix and as we expand to a more prime segment of user bases, there might be some impact to the return of return assets, our IOA rate, driven the country mix and some of the user mix that will come in. But overall, we do believe that the absolute EBITDA will grow well in 2025. Just now you mentioned that the outstanding grow meaningfully faster than the Shopee GMV. I think that's partially because we will expect our escalator penetration on Shopee will further expand. Even in the older country like Indonesia or Philippines, we will still expect the penetration of escalator to further expand. At the same time, the offshore P part of businesses, the cash flow, part and the escalator of Shopee were also going to further expand. So this work, adding together, makes our outstanding of the C-Money grow meaningfully faster than the Shopee GMB.

And your next question comes from the line of Alicia Yap with Citigroup. Alicia, please go ahead.

Hi, thank you. Good evening, management. Congrats on the strong results. Thanks for taking my questions. Two questions. First is that I wanted to follow up on the assumption behind the GNV guidance. So if management could provide a little bit like how much would be driven by the growth of the new users, the increase of the purchasing frequency, and also the wallet send by user. And if management can also comment if there's any change of the consumer behavior that you have observed and how will any change affect our marketing strategy and also the category mix. The second question very quickly on the gaming Garena guidance. When you mentioned you are expecting the active or the user base to also experience double digit growth. I'm just wondering because I think you already in 150 markets. So just wondering, are you. expecting more deepening penetration in the existing market? Or are you actually looking for some of the new markets like you mentioned, for example, the Nigeria where you saw some fast growth? So any colors in terms of the drivers for the bookings and also the active user growth for gaming would be appreciated.

Thank you. On the first question on the e-commerce side, our GMV grows driven both by the purchase frequencies and the new users. I don't think that's particular one thing dominate one another from what we see. On the consumer behaviors, we don't see any particular big shift on the consumer behaviors. There were meaningful shifts after the COVID, during COVID, etc. But if you compare 2024 versus next quarter, the current quarter, we don't see anything that stands out. Although, as we shared, that one of our priorities for Shopee is to improve our service qualities. By doing so, over time, we do observe that we attract more high quality buyers to our platform, which will help us to expand our categories coverage as well, not only in Asia but also in Brazil. If we take Brazil for example here, in Brazil we have been working very hard to not only lower down the cost of our delivery but also improve the delivery speed. We're seeing a meaningful reduction on delivery speed in Brazil, which will help us essentially be able to serve slightly high-end users and be able to serve the categories we historically had to penetrate. And all those things will help us essentially reach out to the better quality segment of users and serve them with a better retention over time. I think that's probably less the behavior change, more just as a consequence of we execute our strategy.

On the Garena guidance, let me start like, OK, the guidance we offer here is pretty much based on our existing portfolio. This is including our self-developed game Free Fire and our publishing game portfolio by working together with third-party game developers. At this moment, we don't count in too much in terms of the new games, although we do have the plan to launch new games this year, but the current guidance is more focused on the existing game, which we have a lot of historical data to project the forecast. And the growth, like, actually, probably we can, there's a zooming free file, which will play a very, very big role in the entire portfolio. And we have observed, actually, the growth is across all the markets, including both our existing market and some new market, which, say, for example, we talk about, we highlight some Africa-like countries, like, specifically, large market like Nigeria. So by adding in, putting some specific effort in that market, say for example, we set up a local server for Nigeria gamers to improve the connection qualities. And the result is very, very obvious. It's like in December, we see 90% growth in terms of the user base. So we see that similar trend in some other markets in a lot of parts of the world. I think overall, our guidance reflects our confidence of both the market. Throughout the entire 2024, we see after a few years kind of headwinds after COVID pandemic, and we see users like the gamers start to back to kind of like spend more time to play games, and it's kind of back to the normal time compared to during the post-COVID time. A lot of people kind of feel burnout during COVID, and they try to do other things instead of playing games. And I think this also reflects our confidence about what we have done with Free Fire in the past few years. We mentioned that before, we have been very focused on the market speed of the product, and specifically on the accessibility of the game. We want to make the game not just offer a great gaming experience, but it's more inclusive, it makes more gamers to play. And I think we're probably one of the best companies to focus on this and to execute this well. And this, to us, is a great formula. So we still see there is a lot of power in this world. And the gamers do now get a great game experience. And Free Fire will be a natural feed for them to offer them a wonderful experience. And another thing we see have been really helpful is considering the skill of Free Fire and continually, as I mentioned just now, we continually focus on to capture the local trends and capture the local kind of the hot topic and into the game and to make game more relevant both on the global level and on the local level. So Free Fire is not just a game anymore. It's become a phenomenon, like from a hot topic, trendy topic always across the social media. And this will help us continually adding, kind of attract more users to play the game and also keep our existing gamers very, very engaging for the content we offer through the game. I think I've put all those things together. That's give us the confidence into a continued growth of this year, and although we already have a pretty decent, very decent growth in 2024, and so far we have observed the momentum is continuing into Q1 this year, which give us a very good start of the year.

And your next question comes from the line of Divya Khatio with Morgan Stanley. Divya, please go ahead.

Thank you very much. Two questions from me, one on logistics and the other is on Brazil. On logistics, we're seeing that Shopee is selectively participating in fulfillment now in some countries like Brazil as well as Singapore. Can you elaborate more on the benefits of engaging this and does this require more capex or even subsidies, which would mean wider logistics losses in the near term? And do we plan to do fulfillment in more markets? That's the first question. And my second question is on Brazil. Could you talk about the profitability in this market, given the high growth we've seen? But last time you mentioned that the profitability could be choppy quarter to quarter. So I would be keen to know how profitability in this market, what the guidance for 2025 is. And also, if you could comment on the latest AOV in this market and the growth of the fintech business. Thanks.

On Brazil, for the fulfillment, we are in a very early stage of fulfillment businesses in Brazil. It's a proven model that some of our competitors have been engaging with in the market. The purpose of finding fulfillment is to serve sellers, and especially brand sellers, from the categories we were historically not very strong at. They are a group of sellers who prefer to be fulfilled by the platform rather than themselves. Without the capability, we're not able to serve them. This will also help us to improve the buyer experience with the shorter delivery times because this will shorten the fulfillment time from the seller side. We don't expect this will meaningfully impact our profitability too much, at least in the near term. Because, as I shared, it's still in the early stage, so it's a pretty small size. And number two is we don't own the fulfillment centers. We rent it and we operate in a pretty capex-like fashion. Regarding whether we will do fulfillment in other markets, actually we do have fulfillment in Asia for quite a while. We do serve the brand sellers especially in many of our markets for those sellers who prefer someone else to pursue for them and they cannot find anyone who can do it well for them. So we do have the fulfillment business for them. And again, we don't expect this will meaningfully impact our CapEx or possibilities in the foreseeable future for this. On the AOV trend in Brazil, we do see an increase in average order size in Brazil because of the effort we are taking. Part of that is we have a better delivery quality, delivery speed, so people are willing to buy a higher-basket item from us. Part of that comes from the expansion to new categories that I mentioned just now. In terms of the profitability in Brazil, I think for Q4, both Asia and Brazil are profitable. we are able to grow Brazil in a pretty good way with profitable EBITDA. And whether we would further invest to grow or not, I think is something we will observe and decide. But with the current profitability EBITDA for Brazil, we are able to grow in a pretty fast pace already. For the FinTech part of the businesses in Brazil, we do have quite good growth in Brazil in the past few quarters. Actually, two or three quarters ago, we were able to find a way to credit rate our users in Brazil in a pretty stable fashion. After that, we were able to increase the penetration of SPLater in Shopee quarter over quarter. At the same time, we also launched buyer cash loan in Brazil as well. Actually, we customized the product for Brazil in the way the cash loan user and SPLater user shared the same pool of limit, which is different from Asia. In Brazil, we also incorporate a lot more data. There are more data available in the market. And in Brazil, we also put in quite a lot of different way of engaging the users on the SPL and cash flow side. So all this helps us to grow the fintech businesses in Brazil quite well in the past few quarter. And we will expect Brazil will be one of our faster growing market as the overall C-Money businesses.

And your next question comes from the line of Piyush Sudari with HSBC. Piyush, please go ahead.

Yeah, hi. Thanks a lot, and congratulations to the team on a great set of results. Two questions, both on e-commerce. Firstly, as 50% of your orders are now delivered through Shopee Express in Asia in less than two days, are there any operational targets or priorities for delivery of orders in less than one day? And are you seeing any kind of meaningful increase in order frequency as delivery speed has been improving? If you can give some examples of, you know, any examples of the country where that material difference is coming. That's the first question. Secondly, on Shopee core marketplace take rate, which has increased to 8.5% now, what is the outlook on the take rate and any seasonality we should expect in take rate trend going forward as ad revenue has become larger portion? Thank you.

On the first question on the delivery, as you mentioned, we do have about half of our orders delivered for aspects within two days. Within that, there's a meaningful growth of same-day delivery as well. But it's a little bit sort of depends on different countries on the same-day deliveries. For example, in Indonesia, we have a sizeable same-day deliveries around the Jakarta regions, greater Jakarta regions. In Thailand and Malaysia as well, in Vietnam as well, we also started same-day delivery services. In countries like Singapore, same-day is still quite rare in the market due to the cost structure. I think it's going to be a country-by-country view for how much do we push the same day versus the next day deliveries. It correlates with the cost structure. It correlates with how the seller behaves in the market as well. But as a general direction, we do would like to improve the service qualities and the delivery speed is part of it. And part of the delivery speed to have more share of same day or next day where possible is something we would like to achieve and grow over time. As a consequence of that, I think you're absolutely right. We do see improvement on other frequencies for the user who enjoy the same-day or next-day delivery services. It's not only the speed, but also the cost as well. In many markets, while we are reducing delivery cost, this will also help the retention rate and will translate to the other frequencies as well. Regarding the take rate, the take rate has two main parts. One is the commission part. Another part is the ad-take rate. So, on the both front, we do see that the potential room to grow, and I think ads, as you pointed out, over time become a bigger part of the take rate, and probably the bigger part of the growth drivers. The artisanalities in this, like for example, in certain period of time, if the seller are on holiday for a long period of time, it does impact the ad take rate. But we do believe that there's still quite a large room to grow our ad take rate quarter to quarter or year to year. And the seasonality probably will not, the fluctuation of seasonality will not impact the trend so much. But it does impact. But, you know, it's just like we can still grow it even with the seasonality for the ad part.

And your next question comes from the line of Sachin Salgaonkar with BOFA. Sachin, please go ahead.

Thank you for the opportunity, and congrats on a great set of numbers. Two questions from my side. First question, we've seen your competitors in Southeast Asia increase take rates in last few quarters, and the gap between your and their take rate has narrowed. So I actually want to understand how do you think about slightly increasing take rates? And I know there are other levers like ad and others, but any thoughts on charging merchants slightly more? And second, given the fact that every business is now throwing good amount of cash, you also have a good amount of cash on the balance sheet. Any direction, thoughts on proceeds on uses of cash? Is there a thought aid to go internationally at some point in future? we give dividends apart from any debt repayment which is there out there. So we'd love to know your thoughts on this.

Thanks. On the first question, I think we talked a lot about this on the ad tick rate just now. On the commission side, the feedback from our ecosystem, our tick rate is still quite healthy. We review our commission tick rate from time to time, actually month to month, taking into account the factors, the seller house, how the seller margins, how the competition is, as you mentioned, and also the overall economical situations for the countries. So I think it's going to be a dynamic process. We still believe there's a potential to grow it over time, although probably in a slower speed as you probably observed in the last year on the commission side.

In terms of the usage and the deployment of our cash reserves, you are absolutely right. At this moment, we see our cash positions getting stronger quarter after quarter. I think that is a very good position to be. I think this instills some stability of our, not just on the financial side, but in terms of how we want to execute our day-to-day operations with enough resources and the financial resources on hand give us more levers, give us more room to execute our day-to-day operations. On top of operations, we remain open-minded. By the end of the day, we will see what is the best way, what is the best return we can generate through our cash. As for certain things, I think it's definitely on the table. As you mentioned, it could be the dividend, it could be the share buyback. We are actively reviewing all the possibilities. And at the same time, we are also, like, see how our financial resources can help us to serve our customers better, right, in terms of catching up and building up new capabilities. Say, for example, like, there's a lot of initiatives, there's a lot of thinking for us, it's like how we continually improve our services qualities and our efficiency through using the AI, right? And there is a certain requirement, capital requirement in terms of the deploy and develop the AI capabilities. But at this moment, it doesn't mean we're going to have a Big plan in terms of the capex investment, like some of our industry peers are doing. At this moment, we want to be in a practical and a cautious way, but I think with a certain level of cash on hand, it gives us more flexibility as well. And in terms of maybe some acquisition opportunity, in our history, we always focus on like a self kind of... like organic growth, right? And I think increasingly with our cash on hand, we are also remain open-minded to kind of continue to build up. Like by the end of the day, it's like it's a how, what is the way, inorganic way we can improve our capability and to serve our customers better. I think that will be a key consideration as well.

And your next question comes from the line of Thomas Chong with Jefferies. Thomas, please go ahead.

Hi, good evening. Thanks, management, for taking my question. My question is about AI. I think management talks quite a lot on how AI reshaping our business, of course, a different equipment. I just want to get some color with regard to the benefit from AI. Are we actually seeing cost efficiency, i.e., the use of AI actually save a lot of the manual labor cost, so that helps to achieve a lot of cost saving, or are we actually seeing the monetization is getting better coming from AI? Thanks.

Yeah, thanks for the questions. We have seen both, in fact. For example, in our search and recommendations, we actually use the large language model to better understand user queries, making search and discovery a lot more accurate, and helping users to find relevance faster. So essentially, when the user makes a query, the new technology can help us expand what it means from the query, not only just from the text, but also from the word knowledge. We are also using the AI to understand the product a lot better. Like for typically, historically, it was syntax matching, but now we can use existing pictures and the descriptions and the reviews to generate a lot more richer understanding of the products. And all those help us to essentially matching our product to users' intention a lot better. We're also having a lot of AIGC, AI-generated content in our platform. We provide that as a tool to our sellers to be able to produce an image, a description of the product, or the videos especially, a lot better compared to what they had before. And both of this increase our conversions meaningfully in our platform. On the other side, on the cost-saving side, I think in Freud's opening, we talked about the chatbot. If you look at our CS queries, about 80% of the queries are answered by the chatbot already, which is the meaningful cost-savings. for our operations. I think that's also why you can see that our cost management for e-commerce is doing quite well. Even for the 20% answered by the agent, we have an AI tool for the agent to be able to understand the context a lot better so it can help them to respond a lot faster to the customers which help us to manage the total population of our agent for customer service. Another example is we're using AI model to make better judgment on the return refund decisions. Typically, when there's a return refund happening, comes to the platform, sometimes the platform historically needs to use the people to make judgment, or when there's escalation or disagreement between the buyer and seller, they will come to us. We built an AI engine to be able to make a lot better judgment on this and make it a lot faster. This contributes to the resolution times reductions, as we mentioned earlier, and also reduces the number of agents required to intervene for our return refunds. I think there are many other things that we can talk about if we have time, but yeah, back to your question, we see the impact on businesses on both sides.

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

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