Sea Limited

Good morning and good evening to all and welcome to the Sea Limited first quarter 2026 results conference call. All lines have been placed on mute to prevent any background noise. After this figures 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 if you would like to advise all participants that this call is being recorded. Thank you. I'd like to now turn and welcome the call over to Ms. Rebecca Lee to begin the conference. Please go ahead.

Hello, everyone, and welcome to SEEDS 2026 First Quarter Earnings Conference Call. I am Rebecca from SEEDS 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 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 Chief 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 first quarter of 2026. 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 have had a strong start to the year. In the first quarter, we generated over $7 billion of revenue, representing 47% year-on-year growth. adjusted EBITDA exceeded $1 billion for the first time. As we have shared before, 2026 is a year where we are leaning into growth investments to deepen our competitive mode while maintaining financial discipline. Our strong revenue growth reflects the effectiveness of these investments, and we are already seeing unique economics start to improve for some of these initiatives. We believe this is the right approach to maximize long-term value, giving the significant runway for growth still ahead of us in our market. With that, let me take you through each business' performance, starting with Shopee. Shopee delivered another record-setting quarter, achieving new highs in GMV, gross order volume, and revenue. GMV grew 30% year-on-year in the first quarter. At the same time, we maintained financial discipline generating an adjusted EBITDA of over $220 million. Our monetization strengthened further in the first quarter. Ad revenue grew 80%, and ad take rate increased by more than 90 basis points year-on-year. Ad paying sellers and their average ad spend both increased by around 35% year-on-year, reflecting the strong value sellers see in our ad offerings. Our results validate the operational priorities we have laid out for Shopee, improving price competitiveness, service quality, and our content ecosystem. Our strong execution across these priorities drove user acquisition and engagement in the first quarter. Average monthly active buyers increased 16% year-on-year, and the buyer purchase frequency grew around 12% year-on-year. We continue to deepen our structural mode across logistics, Shopee VIP, and content. First, logistics continues to be one of our most important depreciators. XPX Express remains one of the largest e-commerce logistics solution providers in our market. We have developed strong capabilities to dynamically optimize for speed, cost, and user preference. In the first quarter, we continue to scale delivery options serving different consumer demands while maintaining cost leadership. We have seen strong adoption of our instant and same-day delivery services. With greater economics of scale, we are seeing lower delivery costs for order for these faster services compared to last year. For example, in Indonesia, Our instant delivery service can deliver orders in as little as two hours in urban areas. Order volumes for this service grew over 35% in the first quarter, with cost per order reducing by around 20% year-on-year. Building this service has enabled us to extend our product assortment into higher frequency categories. We expanded partnerships with major convenience stores and the pharmacy chain. such as Indomaret. At the end of March, we had around 7,000 offline stores available on our instant services. This has shifted more offline purchasing behavior online and into the Shopee ecosystem. Buyers using instant delivery enjoy greater convenience, and we are seeing such buyers spending more with better retention on Shopee. Beyond delivery, we are increasing our focus on fulfillment as a natural extension of our logistics capability. We are making good progress. In the first quarter, fulfillment order volumes grew by around 25% sequentially. Fulfillment allows for faster and more reliable delivery, while enabling sellers to operate and scale more efficiently on our platform. We already see this happening. with our fulfillment orders consistently delivering faster than the platform average. In Asia, over one-third of parcels fulfilled by us were delivered within the next day in March, much higher than the platform average. The combination of fulfillment with our extensive delivery network allows us to drive significant improvements in both service quality and cost efficiency. For example, In Taiwan, our collection point network expanded to over 3,100 locations at the end of the first quarter, nearly 50% more locations compared to just a year ago. We leveraged our growing fulfillment capability to scale initiatives such as shipping directly to lockers without additional packaging, improving speed while reducing cost. With this effort, Average buyer waiting time improved 12% in the first quarter year-on-year. We reported double-digit GMV growth year-on-year in the first quarter in Taiwan, deepening e-commerce penetration and strengthening our market leadership there. Second, our Shocking VIP program. This subscription-based membership program continues to gain strong traction and drive user engagement. By the end of March, Total subscribers across our Asian markets surpassed 10 million, up more than 40% from the previous quarter, with strong program retention averaging above 80%. Across all markets, our Shopping VIP members have consistently demonstrated double-digit spending uplift after subscribing by as much as 30% to 40% in some markets. Shopping VIP members now contributes around 20% of GMV across Asia. Building on this success, we have rolled out our Shopping VIP program in Brazil in April. Third, our content ecosystem continues to grow healthily. In the first quarter, orders from live streaming and short-form video grew more than 50% year-on-year. These orders accounted for more than 25% of total physical goods orders in Southeast Asia. To further strengthen our content ecosystem, we continue to deepen our content partnerships, orders driven by YouTube more than doubled year on year. Our collaboration with Meta is scaling well, with over 4.5 million affiliates across our market, up nearly 30% quarter on quarter. In Indonesia, we have extended our Meta collaboration to enable seamless product promotion and checkout not just on Facebook, but also on Instagram. I would also like to highlight our strong performance in Brazil and the growing role AI is playing in our business. Brazil was our fastest growing market in the first quarter while continuing to be profitable. We continue to outpace the market on GMB growth driven by increases in active buyers, purchase frequency, and average basket size. This strong performance was supported by solid fundamentals, including wide product assortment at competitive prices and our structural logistics cost advantage. We also made steady progress strengthening our presence in the upmarket segment, enabled by our strong logistics capability. We continued to improve delivery time by more than one day in the first quarter compared to last year. We opened three new fulfillment centers, bringing our total to five. These efforts allowed us to onboard more merchants, especially to Shopee More, supporting stronger spending among buyers. In the first quarter, GME from Shopee More sellers more than doubled year on year and now contributes around 15% of GME. We remain confident in Brazil's long-term growth potential and in our ability to further strengthen our competitive position in this market. On to AI. We have taken a practical, resource-oriented approach, embedding AI into our operations to drive better outcomes for our users and greater efficiency across our platform. It is already making a meaningful impact. AI-powered enhancements to our search and recommendation algorithm have led to better product discovery. Our AI-generated content tools are helping sellers create more compelling product listings. This effort supported a 14% improvement in purchase conversion rates year-on-year in the first quarter. An AI-driven personalization and the targeting helped to contribute to the strong year-on-year ad revenue growth we saw this quarter. On the cost side, Around 80% of customer queries are now handled by our AI chatbot. AI usage helps reduce customer service cost per contact by around 30% year-on-year, while maintaining high satisfaction rates. Looking ahead, we are exploring authentic AI experiences. For buyers, we are testing an AI Shopping Assistant that leverages purchase history and preferences to deliver personalized recommendations and optimize savings. For sellers, we are building an AI agent that acts as a virtual business advisor, providing diagnostic and actionable insights on shop performance. Both are in early stages. We plan to roll them out more widely over time. In summary, Shopee has had a great start to 2026. delivering strong growth while maintaining financial discipline. We are being deliberate about where we invest in delivery, fulfillment, our Shopee VIP membership program, and user acquisition. We are already seeing some improvement in unique economics and we expect this to continue over time. Looking ahead, we are confident in the strength of our Shopee ecosystem and our ability to execute our strategies. we are on track to deliver our 2026 guidance to grow Shopee's annual GMV by around 25% year-on-year, with full-year adjusted EBITDA no lower than 2025 in absolute dollar terms. Next, moving to money. Money also had a strong start to the year, with robust year-on-year growth across both revenue and adjusted EBITDA. Credit continues to be the primary driver of our growth. Our loan book reached $9.9 billion at the end of March, an increase of more than 70% year-on-year while maintaining stable asset quality. We continue to expand the credit business along three fronts. First, by deepening existing user relationships, offering them more credit as we get to know them and their repayment behavior better. Second, by acquiring new users, especially in segments with better risk score and greater affluence. These users tend to have better repayment behavior and higher borrowing capacity. Our campaign to attract such new users with competitive pricing, higher limits, and longer tenure are showing early signs of success. And third, by expanding our credit use cases beyond Shopee, an important runway for future growth. We are making good headway with off-Shopee expansion. More users are progressing from on-Shopee as pay later to off-Shopee as pay later and personal cash flow. Following strong momentum in Malaysia, we are also seeing good traction in some other markets. Off-shopping SPLater loans in Thailand and Indonesia exceeded 20% of the SPLater portfolio at the end of the quarter. Notably, we are seeing strong growth in higher-value categories such as electronics and two-wheelers in Indonesia, where installment credit plays a meaningful role in enabling such purchases. Taken together, This effort resulted in strong growth in both user numbers and the loan outstanding per user. In the first quarter, we added 4.9 million first-time borrowers. Our active credit users crossed 38 million at the end of the quarter, an increase of more than 35% year-on-year. An average loan outstanding per user grew to around $250 at the end of the quarter, 25% higher year-on-year. Brazil has become our fourth market to cross $1 billion in loan book size, growing over 250% year-on-year. The strong growth momentum was supported by a localized product we introduced last year, a combined escalator and a cash loan limit that aligns well with how Brazilian consumers utilize credit. This led to strong user growth with higher repeat usage where average loan outstanding per user more than doubled compared to last year. S&P later penetration on Shopee is around 10% of GMV in Brazil, well below our more mature market, indicating substantial headroom for growth. We also obtained the FDFI license in Brazil during the quarter, allowing us to broaden the scope of financial services we can offer. We are still in the early stages of scaling this business in Brazil with a strong foundation in place to support future growth. Risk management remains our top priority. Our 90-day NPL ratio remains stable at 1.1% at the end of the quarter. This reflects the strength of our underwriting capabilities and the disciplined way we expand across users and markets. Our deep understanding of our market and the borrowers allows us to respond quickly to macro changes. Our loans typically have short tenure and we can adapt our product success, credit limit, and the tenure in real time. These attributes enable us to adjust our risk appetite and optimize our asset quality as we scale. In summary, money continues to grow healthily. expansion into more user segments, offshore key use cases, and early markets like Brazil are giving us a much larger addressable opportunity across our portfolio. We remain confident that money will be a significant long-term profit contributor for SEA. Next, turning to Garena. Garena had a stellar start to 2026. delivering its best quarter since 2021. Bookings were up 20% and adjusted EBITDA to 25% year-on-year. This performance was driven by the continued strength of Free Fire alongside a record contribution from Arena of Valor. In January, Free Fire launched a major collaboration with the popular anime Fujitsu Kaisen. As with our previous collaboration, we invested significant effort in bringing core elements of the anime into gameplay. We transformed a part of the map into settings from the Jujutsu High School and introduced a cursed energy resource that the players could collect to activate special character abilities. For instance, Gojo's Unlimited Voice, one of the highest level techniques from the anime, allowed the players to draw their opponent into a separate domain for a one-on-one site. Clear resonates strongly with the campaign's attention to detail and authentic visual effects. This collaboration generated over 700 million official content views, making this one of our most successful IP partnerships to date. Taken together with the highly successful Naruto Shipton collaboration last year, we have demonstrated our ability to consistently execute high-impact partnerships with global IP owners. We are also evolving how we sell our content globally. One of Free Fire's long-standing strengths is our ability to hyper-localize the game for players. This year, we have challenged ourselves to both localize and globalize some of this content, making it highly resonate for target markets and also enjoyable for everyone else. A good example from the first quarter is our Ramadan campaign. In past years, this campaign was only launched in Ramadan observance markets. This year, we scaled it into a global event under a lots of treasure theme. Players from markets celebrating Ramadan recognize this as a festive event catering to them, while players from other markets saw it as a desert-themed campaign that was new, interesting, and fun to play. During matches, players could find treasure maps triggering team-based missions, guiding them to hidden treasure locations. This highly interactive campaign resonated strongly across markets. Global social media platform impressions exceeded 120 billion, up around 70% compared to last year's Ramadan campaign. The strong response we got to this campaign shows our growing capability to take culturally rooted events from local markets and expand them into globally resonant content. Globalizing campaigns let us pool resources, elevate content quality, and deliver more frequent and distinctive experiences to our players. Beyond Free Fire, Arena of Valor delivered record high quarterly bookings in the first quarter in its tenth year of operation. The sustained success of both games demonstrates our unique ability to operate games well across genres, in multiple markets, and over long periods of time. Arena has started 2026 with great momentum. We will remain focused on delivering fresh experiences and building the long-term value of our game portfolio. In conclusion, we have started 2026 well, with each business expanding its addressable opportunity while strengthening its competitive position. Meanwhile, across our ecosystem, we see the AI era creating significant opportunities for a company like ours. With established skill, reach cross-vertical data, and deep local expertise. We are investing deliberately to capture the growth runway ahead, and we are confident of continuing to deliver robust top-line growth while improving our adjusted EBITDA year-on-year. With that, I invite Tony to discuss our financials.