Sea Limited

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.

Thank you. Hello, everyone, and welcome to CEE's 2025 Third Quarter Earnings Conference Call. I am Rebecca from CEE's 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 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 SEAS Chairman and Chief Executive Officer Forrest Lee, President Chris Fung, and Chief Financial Officer Tony Holt. Our management will share strategy and business updates, operating highlights, and financial performance for the third quarter of 2025. This will be followed by a Q&A session in which we welcome any questions you have. With that, let me turn the call over to Boris.

Hello everyone, and thank you for joining today's call. After a very strong first half of the year, our momentum has continued into the third quarter. We achieved a total revenue of $6 billion and adjusted EBITDA of $874 million, representing 38% and 68% year-on-year growth, respectively. Shortage GMV grew by over 28% year-on-year. Money's loan book expanded 70% year-on-year while maintaining a stable risk profile. And Garena delivered its best quarter since 2021. with quarterly bookings up over 50% year-on-year. Our focus remains the same, continuing to deliver high and profitable growth across all three of our businesses. With e-commerce and digital finance penetration in our market still low but increasing, strong growth lays the best foundation to maximize our long-term profitability. I'm very pleased with the profitable growth we have consistently delivered, and we will keep on this path. With that, let me take you through each business' performance. Starting with e-commerce, Shopee delivered another record-setting quarter, achieving new highs in quarterly GMV, gross order volume, and revenue. We have now achieved five consecutive quarters of sequential GMV growth driven by more active buyers and a higher purchase frequency. And we have improved our year-on-year profitability across Asia and Brazil. Our monetization continues its upward trend into the third quarter. Take rates increased both year-on-year and quarter-on-quarter. As for a big contributor, Our efforts to make ad services both simpler and smarter drove broader adoption and higher ad spend by our sellers. Ad revenue increased over 70%, and ad take rate rose by more than 80 basis points year-on-year. The number of sellers using our ad products increased by more than 25%, and their average ad spend increased by over 40% year-on-year. Our monetization gains, strong growth momentum, and healthy balance sheets have positioned us well to capture even more growth opportunities. Our three operational priorities, enhancing price competitiveness, improving service quality, and strengthening our content ecosystem have proven to be a winning formula, and they remain consistent. Within these priorities, Let me highlight some of the areas we have been investing into that we believe are critical for our long-term competitiveness and profitability. First, we continue to improve our logistics capability, a highly strategic competitive mode that has appreciated us from our peers. We launched XPX Express in 2018 when we recognized that reliable and cost-effective delivery was the most urgent logistics demand in our market due to wide differences in geography and infrastructure. Over the years, we have learned how to deliver packages by truck, plane, boat, motorbike, and more. We deliver well in dense, congested, and high-rise cities. We also deliver well in rural areas where we need to cross rivers, navigate rice fields, and locate homes without formal addresses or postal codes. This experience has given us a very deep understanding of every region in our market. Our delivery capability has now developed to the point where we can identify and deploy service quality improvements addressing specific user needs in different markets. This helps us to serve more users better while improving our operational efficiency even further. For example, in Indonesia, we saw growing demand from urban buyers for very fast deliveries and the willingness to pay a premium for it. So we rolled out same-day and instant delivery with delivery times as fast as under two hours. The response was excellent. Orders using these faster options in the greater Jakarta area increased by more than 35% year-on-year in the third quarter. But for rural regions, we saw a preference for economical delivery, so we came up with a delivery solution that reduced the cost per order by 20% compared to our standard delivery, allowing rural buyers to enjoy free shipping with much lower minimum spend. This boosted shopping's popularity among rural buyers. Orders delivered outside of Java increased by more than 45% year-on-year in the third quarter. In Taiwan, we noticed a very different customer demand. Many buyers preferred self-pickup options. So we expanded our automated locker store network to over 2,500 locations in less than three years making us the only e-commerce player in Taiwan with a locker network at such scale. Today, it is a key logistics channel accounting for more than 70% of all our deliveries in Taiwan. This move has paid off in more than one way. The lockers run at over 30% lower cost per order than traditional pickup locations. On top of that, the locker locations double up as last mile hubs for home delivery at a lower cost compared to traditional last mile models. In other words, we are making our buyers happier while reducing our cost. In the third quarter, our GMV in Taiwan showed double digit growth year on year, and we still see a lot of room to deepen our penetration further in this highly attractive market. Today, we have to build XPX Express into a clear leader in scale, coverage, and cost in our Asian market. Our deep local insights have enabled us to customize ground strategies to create the most efficient and effective solutions in every market, reinforcing our cost advantage. Our logistics capability underpins the strong growth we have seen from Shopee this year. playing a big role in making us the platform of choice for both buyers and sellers. With our delivery capability well scaled, our next goal to further deepen our logistics competitive mode is to enhance our fulfillment capability. This addresses a more upstream need for our sellers, ensuring fast, accurate order handling in addition to speedy and reliable delivery. We aim to make fulfillment a second core pillar of our overall logistics capability, another way for us to strengthen our reputation among buyers and sellers and ensure high levels of customer satisfaction, just as we did with delivery. These efforts are already underway. In previous course, I have shared updates on initiatives such as intelligent demand forecasting, where we pre-ship commonly ordered products closer to where we anticipate buyer demand will be. This helps us reduce buyer waiting time and fulfill orders more cost efficiently. For instance, in Indonesia, if we wait until an order comes in from a remote island before shipping the item out from Java, We must rely on more expensive forms of transport, such as airplanes, to get it there quickly. But if we have already anticipated this demand, we can use cheaper forms of transport to pre-ship it to the area, letting us deliver it quickly and cost effectively once the order is placed. We have made further headway in fulfillment by starting to offer warehouse solutions in some of our markets. Offering fulfillment services benefits everyone. It takes the burden of packaging and the shipment of sellers. It gives the buyers more consistent service and it allows Shopee to better optimize end-to-end logistics while serving more buyers and sellers. We are investing in this capability in a capital efficient way. For instance, by mostly leasing rather than buying land and warehouses. The most intense investment comes not in the form of money, but in time and effort. It would be very difficult to build a fulfillment capability without a deep understanding of logistics needs in our market and a tightly integrated delivery network to pair it with. After seven years of experience with XPS Express, we have both. Second, we continue to find new and exciting ways to deepen user engagement. Our subscription-based Shopee VIP membership program is a great example, and it has continued to gain strong traction. By the end of September, VIP members across Indonesia, Thailand, Vietnam surpassed 3.5 million, up more than 75% from the previous quarter. Given the price sensitivity of many customers in our market, the success of our VIP program shows the high value we are delivering to our customers. VIP members are demonstrating higher engagement. In Indonesia, these members spent around 40% more after subscribing to the program. Shopee VIP members also bought three times more frequently and it spans five times more than non-subscribers in the third quarter, accounting for about 10% of total GMB in Indonesia. We have also deepened user engagement by enhancing Shopee's content ecosystem. Our partnership with YouTube continues to gain strong traction. In the third quarter, Shopee orders driven by YouTube content across our Southeast Asian markets grew by more than 30% quarter on quarter. With these strong results, we are now extending this partnership to Brazil. Late last month, we also announced a collaboration with Meta to launch new tools allowing seamless product promotion and checkouts between Facebook and Shopee accounts. We are excited to see how this partnership will enrich our buyer community further. Third, We are committed to embracing AI as a powerful way to improve the whole consumer retail experience. Our AI efforts have already began to bear fruit, contributing meaningfully to our monetization gains in the third quarter. Smarter search, better recommendations, and more personalized content have made Shopee easier and more enjoyable to shop on. We have also used the AI to enhance product discovery beyond search, helping buyers find relevant and interesting items even when they arrive without a specific purchase in mind. We empowered sellers with AI tools, enabling them to generate images, videos, text descriptions, and virtual showrooms to make their product listings more appealing. These initiatives have increased buyer engagement improving our purchase conversion rate by 10% year-on-year in the third quarter. Taken together, all these efforts have resonated with our customers. Buyer purchase frequency across our market continues to improve, going up a further 12% year-on-year in the third quarter. Average monthly active buyers also increased 15% year-on-year in the third quarter. And Shopee remains consistently regarded as the e-commerce platform offering the most price competitiveness product in both our Asian market and Brazil, based on Qualtrics survey. I would also like to highlight our progress in Brazil, where Shopee continued to deliver exceptional growth while maintaining positive adjusted EBITDA. Our GMV growth there has been outpacing the market, driven by sustained increases in monthly active buyers, purchase frequency, and average basket sizes over the past several quarters. Our wide product assortment, highly competitive pricing, and structural cost leadership are enabling us to scale rapidly and profitably. Our continuous improvements in delivery speed and reliability have enabled us to expand into more upmarket product categories. Delivery speed improved sequentially in the third quarter, with average delivery time improving by about two days compared to a year ago. In the greater Sao Paulo area, one in three parcels were delivered the next day and nearly half within two days. With these improvements, we are seeing more merchants listing higher value products and the new buyer cohorts showing higher spending patterns. In the third quarter, GMB for Shopee More, our premium shopping section, more than doubled year on year in Brazil. In conclusion, Shopee has delivered another quarter of strong and profitable growth. With our strong performance year to date, We now expect Shopee's full-year 2025 GMB growth to be more than 25%. Next, moving to digital financial services. Money has delivered another very strong quarter, with revenue growing by 61% and adjusted EBITDA growing more than 35% year-on-year. while our 90-day NPL ratio remained stable at 1.1%. This strong growth was broad-based, driven by both user growth and the product expansion across multiple markets. Our loan book expanded by around $1 billion during the quarter to reach $7.9 billion at the end of September. solidifying our position as one of the largest unsecured consumer lenders in Southeast Asia. Thailand has reached another major milestone, surpassing $2 billion in loans outstanding at the end of September. In Brazil, our loan book more than tripled year on year in the third quarter, with improving portfolio quality and a stronger user performance. Our significant credit history with a very large base of users across many markets allows us to roll out products more widely while maintaining the health of our portfolio. We used to take a whitelist approach to onboarding new users. Now, any Shopee user in most of our markets can apply for S-Pay later credit and we can make credit approval decisions very quickly. in many cases almost instantly. Moving to this all-comes-applied approach enabled us to add more than 5 million first-time borrowers in the third quarter. New user cohorts scaled well with generally positive unit economics, a testament to our increasingly advanced risk underwriting capability. At the end of the quarter, Active users across our consumer and SME loan products reached 34 million, up nearly 45% year on year. Meanwhile, loan disbursement to new users still accounted for less than 10% of total disbursement in the third quarter, as we continue to assess credit quality before cross-selling more products. We are also making our credit products on-Shopee as pay later, off-Shopee as pay later, and the personal cash loan easier to use in a wider set of use cases. In many of our markets where credit card penetration remains low, we are steadily establishing as pay later as a trusted and a convenient payment method of choice for all kinds of purchases, both online and offline. On-Shopee as pay later has grown steadily as penetration continues to deepen across all our markets. GMV penetration now ranges from single digits in early markets to over 30% in more mature ones, reflecting our discipline in scaling only when incremental disbursements are profitable. We see meaningful room to continue increasing escalators on Shopee penetration across our markets. Off-shopping SP later showed strong traction this quarter, growing over 300% year-on-year and over 40% quarter-on-quarter. It still only accounts for less than 10% of our total loan boost as of the end of September, so large upside remains for future growth. This product segment represents a significant opportunity to unlock success to offline spend. a very large part of consumer expenditure in many of our markets. The standalone Shopee Pay app, supporting both online and offline payments across a wide range of merchants, is a key pillar of our strategy to grow our money businesses off Shopee. In payments, it offers users a faster and more seamless experience, giving them direct access without having to go through the Shopee app. Beyond payments, it helps us unlock more use cases, positioning Shopee Pay as a one-stop platform for users' broader financial needs of Shopee credit, insurance, wealth management, and more. The app has launched in Indonesia, Thailand, Vietnam, and Malaysia, and it's showing strong traction More than 20% of our Shopee Pay monthly transaction users are using the standalone app. Personal cash loans also grew strongly this quarter. In Indonesia, we have been offering higher limits and longer tenures to attract more prime users who demonstrate strong repayment behavior. Loan sizes can typically range from a few hundred dollars to over a thousand dollars allowing us to serve users with larger financial needs. Building on this success, we have similarly expanded access to prime users in Thailand and Malaysia, where user adoption is going up quickly. In Brazil, personal cash loans grew close to 50% quarter-on-quarter, driven by the continued popularity of the combined credit limit we offer to SPLater users. In conclusion, money has delivered another excellent quarter, building well while diversifying our credit portfolio across markets, users, and products. Our portfolio quality and our unit economics have remained healthy. And we are standing at PayLater's reach beyond e-commerce and embedding it into users' everyday financial user use cases. This will build a pathway for strong offshore key growth for many years to come. Finally, moving to digital entertainment. Garena has delivered another stellar quarter. Bookings were up 51% and adjusted EBITDA grew 48% year-on-year, making it our best quarter since 2021. Free Fire Anchor is a strong performance with two high-impact campaigns, Squid Game and Naruto Shippuden Chapter 2. The campaigns received a huge positive response, accelerating our growth momentum from the previous quarter. Our Squid Game collaboration incorporated iconic challenges from the blockbuster Netflix TV series such as Red Light, Green Light and The Glass Bridge. The event draws strong participation, with the Rhinelite Greenlight Challenge being played more than 300 million times in the quarter. Our Naruto Shibuten Chapter 2 event expanded on the resounding success of Chapter 1 in the first quarter of this year. Based on gamer feedback and performance insights, we identified new fun favorite ninja characters, new attack mechanics, highly sought-after collectible items, and a new one-on-one mode, letting players use signature abilities from the series. Chapter 2 went on to surpass Chapter 1 in both engagement and revenue. We saw an extremely high social media share rate for Chapter 2, double the already high bar set by our eighth anniversary event. Both Naruto chapters have achieved the highest satisfaction scores of any campaign launched over the past two years. Our Naruto content was very successful because it focused on what players value most, authenticity through attention to detail. This strong focus underpins how we take IP collaborations to the next level, and it is driven by Garena's core creative culture. First, we require every major IP partnership to be led by a team of genuine superfans of that IP within Garena to ensure authenticity and respect for the original work. Naruto fans loved how closely the gameplay mirrors small but important details from the anime. For instance, one key storyline from the original anime was about rogue ninja returning to destroy the ninja village they had been exiled from. In Chapter 1, we had built this ninja village into our map and introduced iconic attack skills from the main anime characters. In Chapter 2, we introduced attack skills that were specifically from the rogue ninja characters, like fireballs, black fire, and exploding birds. and redesigned the map to feature a desertoid version of the Ninja Village. Continuing the narrative between the chapters in a way that was true to the original anime created a highly immersive experience and brought fans' excitement to the next level. These are details only super fans would care about and understand how to incorporate into gameplay. Second, We take a global yet local approach, bringing global IPs to our market in highly localized ways. For instance, we took advantage of the huge traction of our Naruto campaign to host Ninja themed offline events in eight markets across Asia and the Americas, attracting tens of thousands of fans. The largest of these events was a two-day international All-Star Ninja Clash esports tournament in Bangkok, with teams of Free Fire players flying in from across Asia and Latin America to compete. The Bangkok tournament was a huge success, becoming a top-trending event on YouTube Gaming and on social media across key markets. In addition to such events, our teams stay closely connected to players through creators' programs and fan groups, tapping into a constant stream of feedback and ideas that shape game design decisions. These efforts build very strong community connection and loyalty across our market. Beyond Free Fire, we continue to expand our publishing portfolio with the launch of EA Sports FD Mobile in Vienna last month. strengthening our long-standing partnership with Electronic Arts. The game quickly became the country's most downloaded mobile game in October based on Center Tower. By combining EA's world-class football franchise with Garena's local know-how, we are deepening our expertise in sports games and reinforcing our position as a trusted publishing partner for global titles. With this very strong quarter, Garena remains on track to achieve more than 30% year-on-year growth in bookings for 2025. Our creative steps, disciplined execution, and a close connection with players will continue to drive Garena's growth. In conclusion, all three businesses have built on the strong momentum from the first half of the year and delivered another quarter of exceptional growth. We will continue to make our digital ecosystem even more vibrant, strengthen our leadership position, and deliver sustainable and profitable growth to our shareholders. With that, I invite Tony to discuss our financials.

Thank you, Forrest, and thanks to everyone for joining the call. For fee overall, total GAAP revenue increased 38% year on year to $6 billion in the third quarter of 2025. 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 $874 million in the third quarter of 2025. compared to an adjusted EBITDA of $521 million in the third quarter of 2024. On e-commerce, Shopee's gross orders increased 28% year on year to 3.6 billion in the third quarter of 2025. And GMV increased by 28% year on year to $32.2 billion in the third quarter of 2025. Our third quarter gap revenue of $4.3 billion included GAAP marketplace revenue of $3.8 billion, up 37% year on year, and GAAP product revenue of $0.5 billion. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $3.1 billion, up 53% year on year. Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.7 billion, down 6% year on year due to increased shipping subsidies. E-commerce adjusted EBITDA was $186 million in the third quarter of 2025, compared to an adjusted EBITDA of $34 million in the third quarter of 2024. Digital financial services gap revenue was up by 61% year on year to $990 million, Adjusted EBITDA was up by 37% year-on-year to $258 million. As of the end of September, our consumer and SME loans principal outstanding reached $7.9 billion, up 70% year-on-year. This consists of $6.9 billion on-book and $0.9 billion off-book loan principal outstanding. Non-performing loans passed due by more than 90 days as a percentage of total consumer and SME loans was 1.1% at the end of the quarter. Digital entertainment bookings grew 51% year-on-year to $841 million. Gap revenue was up 31% year-on-year to $653 million. The growth was primarily due to the increase in our active user base as well as the deepened paying user penetration. Digital entertainment adjusted bid was $466 million, up 48% year-on-year. Returning to our consolidated numbers, we recognized a net non-operating income of $61 million in the third quarter of 2025 compared to a net non-operating income of $50 million in the third quarter of 2024. We had a net income tax expense of $161 million in the third quarter of 2025 compared to net income tax expense of $93 million in the third quarter of 2024. As a result, net income was $375 million in third quarter of 2025 as compared to a net income of $153 million in the third quarter of 2024.

Thank you, Forrest 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'll 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 questions have been addressed. At this time, we'll pause momentarily to assemble our roster. Your first question comes from Peng Vit with Goldman Sachs.

Hi, management. Thank you very much for the opportunity. Congrats for the great set of results. Two questions for me, both on the e-commerce side. Number one, on your growth guidance of more than 25% year-on-year for 2025, what do you bake in in terms of the driver and competitive landscape? What will it mean for your margin trend, and how should we think about these trends carried into 2026? That's question number one. Question number two, just to have a good understanding of the margins, So margin trend for e-commerce came down to 0.6% in the quarter, despite higher take rate. Can you help us understand where is the investment area, whether this is in the fulfillment, as you mentioned, or is there also something else that we should be aware of? Are these more fixed or variable? And how long and how much should we expect this investment cycle to be?

Yeah, in terms of the growth assumption of more than 25%, I think we are kind of half into the quarter already. It's basically based on what we see so far in the market on the momentums and competitive landscapes. It's pretty much reflective of what we see so far as we come into the quarter. And regarding the margin questions, If you look at the previous year versus this year, we do see consistent improvement of margin if you look at year-to-year basis as we shared before. We will obviously see quarter-to-quarter fluctuations sometimes for some of the investment cycle of the initiatives. and could also be a particular market status in terms of where we are pushing some of these initiatives. So I think if you look at a bit sort of year-to-year trend, even going forward, I think we believe that we're able to deliver the 2% to 3% EBITDA margin as we shared before, and also have improvement year-to-year if you look at the yearly basis. In terms of where we are investing, one thing is what we mentioned in the opening, further investment into the logistics capabilities and fulfillment capabilities. And beyond that, we are also deepening our buy engagement and wanted shares through, for example, our Shopify VIP program that we shared in the opening as well. And all those efforts have been showing pretty good results. Our buy frequency improved 12% year-to-year, and average monthly active buyers increased 15% year-to-year as well, which contributes to our great growth this quarter, which is way above the guidance we gave in the early of the year, which is 20%. Most of these investments are less fixed per se, We take a relatively asset-light approach, even coming to our logistics and fulfillment businesses. We don't own land. Most of our CapEx is just improvement of building the warehouses or sorting facilities, et cetera. For our buy engagement, our WallyShare program, our shop with VIP, is also less fixed. Obviously, you will see a little bit of investment in the early days to get everybody to understand the program and join the program. But as time goes, it should be a quite profitable program as you probably have seen in other e-commerce platforms across the globe.

Your next question comes from Divya Kuldayal with Morgan Stanley.

Thank you very much. My first question is on your new market entry strategy and framework. Could you explain the rationale behind closing some of the cross border operations in LATAM and the reentry into Argentina? What milestones would you monitor for Argentina before making it a localized business? And is this part of your 2026 priorities? My second question is on market shares. If you can comment on the market shares in ASEAN, how are they? How have they moved in the third quarter? And also, if you could comment on Taiwan, do you foresee increasing marketing spends and investments in Taiwan next year? We're also seeing a bigger contribution from cross-border with Taobao getting more popular there. So if you can comment on the market shares on ASEAN and Taiwan, that would be helpful. Thank you.

Yeah, I think regarding the new market, we take a very highly selective approach on any new geographic expansions. Many of the initiatives will be very early stage, testing the market in nature. The reason we look at Argentina is it's essentially an expansion of our capability that's built in Brazil, leveraging on our existing cross-border infrastructure and the operational experiences we had already built in Brazil. The objective is more to capture the operational synergies across the adjacent regions and open additional channels for our sellers with a minimal increased mental investment. I think we will take some time to learn about the market without having investment into the market at this point in time. For Chile and Colombia, we decided to wind down our cross-border operations in Chile and Colombia as part of our ongoing review of our global business priorities to ensure our resources are focused on the key business priorities in line with our long-term strategy in the region. Latin America is still an important market for us. We will continue to explore the opportunities to serve the consumers and business world there. If you look at the absolute size in Latin America, obviously Brazil is the largest one where we are have a very large present there. Argentina, as we mentioned, and Colombia and Chile are relatively smaller market and also relatively more distant from Brazil. I guess that's thinking around the first questions. Regarding the market share in South Asia in quarter three, as we shared, our growth has been above kind of the expectations we shared before. And across the region, we actually do believe that we are gaining market shares in South Asia, growing faster than the market in South Asia. For Taiwan in particular, the cross-border to Taiwan has been, in general, a smaller part of the businesses, giving the complexity for the buyer experience on cross-border side. So we are less concerned about the cross-border players selling from overseas to Taiwan as a potential impact to our businesses. Actually, if you look at the recent quarters, we grow very well in Taiwan. We grow double-digit, which is faster than the overall market in Taiwan. So we are pretty confident that even we are the largest e-commerce platform with the largest assortment, with the best pricing, and also we have the best delivery infrastructure, which is much lower shipping and fulfillment cost compared to anyone in the market. We are able to defend our market share well. We are able to grow even faster in Taiwan with our infrastructure much better built than previous years.

Your next question comes from Alicia Yap with Citigroup.

Hi. Good evening, management. Thanks for taking my questions and congrats on the solid results. Two questions. One is if you can elaborate a little bit more overall competitive landscape in Southeast Asia. So are there any countries that we are seeing more intense competition lately? And also, you know, any countries that where you see peers are going faster than Shopee. And do you anticipate the live streaming peers to start shift more of the traffic and also the purchase frequency to the shelf-based marketplace model in addition to the live streaming? If that is happening, you know, what could be the potential threat to Shopee? And then second question is, should we assume the investment cycle this time around similar to maybe like a couple of years ago where there could be some step up investment that are more front end loaded with GMV growth and my share growth to follow through later, especially for example, like you need to ramp up your fulfillment capability in some of the markets. which will yield better results later on. So could you clarify if this time the investment cycle could be similar to what we saw two years ago? Thank you.

On the competitive landscapes, what we see is relatively stable competitive landscapes. I think, as you can probably observe as well from your own sources, We didn't see any particular market different from another. I think there's been a general trend across the South Asia market in terms of the intensities or the behavior of the competitors. Regarding whether the live stream peers focus more on shelf-based model, I think it's not something new. I think it's something we try to do quite a long time. As you probably see from China as well, etc. But we do see that the nature of the platform is different. I think the percentage of share of commerce is relatively consistent, let's say, from what we observed. Also, if there are much more traffic pushing towards that, there is a potential of impacting how the overall app behavior and the user retention as well. But anyway, I think that's kind of similar behavior you will see in China and South Asia. We wouldn't see that's a new thing impacting the competitor in a meaningful way. On the investment cycles, I think the short answer is probably not. It's probably quite different from what you see two years ago in terms of the investment to the content ecosystem, if you remember that. I think what we are doing now is more as a continuous investment to our business to strengthen our competitive mode, pretty aligned with what we shared continuously every quarter, we would like to invest into our infrastructure to have better logistics. And now we are extending logistics for human networks as well. It's actually, in a way, it's not completely new. It's a capability we've been trying to build for a period of time. And now we felt it's a good time to scale it even more. But as I shared just now, it's less a capex intensive businesses, as you probably imagine. And also, as we grow the businesses, it will help our growth as well because this will help us to lower down the overall cost to serve as ecosystem and also reduce the delivery time to the user, so help us to penetrate the user more. And many of this contributes to our growth faster than we expected early in the year as well. If you take a look at the VIP programs, yes, it's a little bit sort of investment in the early days, but we also see that with the investment, the users are willing to spend more with the platform as well. I think Forrest shared that the users purchase 40% more than before they joined the VIP program. So in a way, it's less a big front-load investment than the return time later. I think this time you will see it's more an ongoing investment program to strengthen our competitive mode, as I shared earlier. And this will impact on the general growth as we invest.

Your next question comes from Pius Chowdhury with HSBC.

Yeah, hi. Thanks for the opportunity. Congratulations for a great set of numbers. Two questions. Firstly, for Shopee logistics, what percentage of orders are now fulfilled by XPX within Asia and Brazil? How has it changed over the last one year or so? How much of increase in your cost of services is driven by this logistics investment and the outlook for this cost item? That is first. Secondly, on Garena, can you share the outlook for Free Fire for 2026 after, you know, successful 2025? Any planned IP collaborations? Any new game launches? Thanks a lot.

On the SPX, I do believe we shared before more than half our order delivered through our SPX and the percentage has been increasing, let's say, overall over the last year as we scale our networks. On our cost per order, it has been continuously improving year to year. I think that's part of that contributes to our growth as well because this lower down the cost buyer have to pay to receive the orders. But on top of that, I also want to highlight not only we reduce the cost of our SPX delivery cost, but we also increase the speed for our SPX cost. Forrest mentioned that in Brazil, we reduce the buy waiting time by two days if you look at the year-to-year. In Asia, we also reduce the delivery time quite meaningfully year-to-year and quarter-to-quarter as well by both introducing the faster shipping channel. If you look at many countries, we have the instant delivery now. We also have same-day deliveries, but also reducing the normal delivery channel speed. I think this all helps to contribute to our growth, as you see.

For the green outlook, well, we are very excited to observe the momentum. I think this is extremely valuable, like I think the turn around like two years after the post-COVID headwind. And in 2024, we have a very, very high growth, and that is the strong momentum continuing to 2005. Actually, the growth is... It's even accelerated this year compared to last year. So the momentum is still very, very strong. So we remain very optimistic and positive for the 2006. We believe the user base will continue to grow. The content, the offerings will be more like the user experience will be more immersive. And I think like specifically this year, through the very, very successful IP collaborations, and I think Garena as an organization, we unlocked a very important capability. So how to continually work with the global IPs and deliver the best content, very unique experience to our large user base, right? Whatever we put on the platform, put into the game, like on a single day, more than $100 million. gamers from all over the world will be able to experience that. It's a very, very powerful distribution platform, distribution channels. So we'll continue to work with more IPs, but of course, we'll be also very, very selective as well. And we're also quite excited to see what the AI can do in terms of boosting both the creative side, production side, and also the user experience side. We think that is the potential boost for the future growth as well. At this moment, we are in the process of, like, for the detailed planning of next year. I think probably we'll have a better sense. We're ready to share to the market what will be the specific outlook we see for Garena in 2026, next quarter. We always have some new games in our pipeline. We have a very, very strong and dedicated experience, the developers, to especially focus on the new games. And we have several games already in the pipeline or in the summer market already live in the trial period where learning experiences. And at this moment, I think it would be premature to project what is the impact. I think considering the size of the scale of Free Fire in terms of the user base and revenue and perfect, I don't think at this moment, even if we have any new games, at an early stage will make significant impact in terms of the user numbers and the revenue and the financial side. But we're going to continue to put a lot of effort and I think through the new game development we also learn about different genres and we also learn the difference about some new markets we haven't been to. I think this will remain as a very, very good opportunity for future growth. So when we have like the right time to share, so we'll also keep all our shareholders and investors informed.

Your next question comes from with Barclays.

Thank you very much for taking my questions. My first question is on the VIP membership. I'm trying to get a better understanding of that program. That's clearly a great thing to do longer term. I suspect in the near term I was wondering what's the unit economics look like for the members and what do you think the eventual VIP member penetration should be in the region? So the reason I obviously ask that is because your gross margins for e-commerce came down a bit, quarter of a quarter. So I suspect it's kind of negative initially. And is that a timeframe to kind of reach breakeven for the members? Second question is about AI. I think Forrest recently did some media interviews talking about AI may power the company to be one of the first trillion dollar company in the region. I was hoping you can talk about what are some of the things potentially you may do or you won't do because some investors are worried about some massive AI cat packs that may be associated with any kind of new venture. Thank you.

On the VIP program, we are still in a very early stage of rolling out the program. As you probably can see, it's only a few months. But we see a very good growth on the users signing up. If you look at sort of quarter to quarter, we see a 75% growth on the members. In terms of the GMV penetrations, we're seeing the early stage, we're seeing the teens, and we believe this can be a lot higher, probably similar to the percentage you observe in other parts of the world in terms of the penetrations. I think the important thing for us to look at the Unignomics is that we would like to make sure the VIP members not only receive better benefit from the platform because they are paid members and they are the important core users. We also want to make sure that we work with our partners to bring the benefit to them as well. If you look at Indonesia with videos, In VN, we work with FTP Blaze. We also work with Chechi BT as well, offer a free program to the VIP members. I think all those will help us to have a good eugenomics for this program. But you are right, in the early days, it does require some sort of investment to bring the user over. One thing that we monitor very closely is the retention rate. We would like to make sure that the user we bring to the program has good retention. And in our early market, we see the retention improve almost doubled from the last quarter to this quarter period time, which is a big breakthrough for us, given that in our market, Credit card is not a common payment method in many other markets. People use credit card to make sure that it's a continuous payment. We are working on multiple ways to ensure that the retention goes well with the program well, especially together with our digital finance side through SPLIT as well.

Sure. John, on the AI question, yeah, I mean, as I shared during the interview, you mentioned we're deeply excited about this new technology. I think it represents a fundamental technological revolution which will create massive new opportunities and supercharge technology's ability to unlock values for people everywhere. I think it's extremely exciting for the market where in which still like millions of, hundreds of millions of people is underserved, right? And we have seen that uplift in the past 10 years through the mobile internet revolution and we have observed and how that much the smartphone, the mobile internet transfer and the people's lives help bring how much joy and convenience to people's lives. And of course, we are part of this transformation and that is what we are really, as a company, it's about our mission. We try to focus on the applications and how to connect those fantastic technologies to people's daily lives from every corner of the world. and we believe we'll see some similar pattern of AI revolution. Probably, we believe this impact and the value creation will be much, much bigger. At this moment, like the things you mentioned, we probably were not going to do what the big tech is going to do. We're not going to develop, trying to make some fundamental large language model breakthrough. We're not going to build data centers. I think for that part, We are very much open to work with all the big techs. We have a lot of admiration, respect to how much effort and how much they can do to continually have the breakthrough of the technology and make technology more powerful and more useful. And what we are going to more focus on applications and how that technology build in Silicon Valley or anywhere in the world, transform to a consumer's daily life, a small business like in Indonesia, in Vietnam, in Brazil. So that is actually what we're good at. And we have a lot of practice that we learned in the past decade. And I think that is also kind of like make us really, really excited. So we're going to have a very, very practical and bottom-up approach. We are very much focused on seeing the immediate return, the result. As I shared in my opening, we are very excited to see some very practical use in Shopee and how much this can help on the advertising conversion, how to make the product discovery easier and more discovery beyond traditional search, how to help sellers improve the product listing quality, and how to improve the virus retention and the conversion rate. And I think I probably shared in the previous order like a quarter, and also we see the improvement in terms of the customer service capability, and now majority of our customer service is handled by AI like a chatbot, and the satisfaction rate is very, very high. All the things like we have seen the result and the progress of bottom-up, and we believe with the continuing improvement of capability built, enabled by the more advanced large language model and other part of the AI development, and that there will be more and more things we can apply into the day-to-day business and which make a positive impact into people's daily life.

This concludes our question and answer session. 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.

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