Sea Limited (SE) Earnings

Management highlights

### Overall Strategic Direction - The firm maintained a strategy of disciplined growth investment in 2026 to deepen competitive moats while retaining financial discipline. Management highlighted that strong Q1 results confirm the effectiveness of this approach, with improving unit economics for new initiatives and significant long-term growth runway across markets. - Artificial intelligence (AI) is identified as a major cross-ecosystem opportunity, with the company leveraging its existing scale, cross-vertical data, and local expertise to capture value. ### Shopee Operational Highlights - **Logistics & Fulfillment**: XPX Express maintains cost leadership while expanding faster delivery options. Instant/same-day delivery order volumes grew 35% YoY in Indonesia, with cost per order down 20% YoY, enabling expansion into high-frequency categories via 7,000 partnered offline stores by end-Q1. Fulfillment order volumes grew 25% sequentially; over one-third of fulfilled parcels in Asia deliver next-day, far above platform average. Taiwan's collection point network expanded 50% YoY to 3,100 locations, cutting average buyer waiting time by 12% YoY. Three new fulfillment centers were opened in Brazil, bringing the total to 5, and Shopee More GMV more than doubled YoY, now contributing 15% of total Shopee GMV in Brazil. - **Shopee VIP**: Total subscribers across Asian markets surpassed 10 million, up over 40% quarter-on-quarter (QoQ), with retention above 80%. Members see spending uplift of 10-40% and now contribute 20% of GMV across Asia. The program rolled out to Brazil in April 2026. - **Content Ecosystem**: Orders from live streaming and short-form video grew over 50% YoY, accounting for more than 25% of total physical goods orders in Southeast Asia. Content partnerships expanded, with YouTube-driven orders more than doubling YoY and Meta affiliate network growing 30% QoQ to 4.5 million affiliates, with Instagram integration launched in Indonesia. - **AI Integration**: AI-powered search/recommendation improved product discovery, and AI-generated content tools helped sellers create better listings, driving a 14% YoY improvement in purchase conversion. AI-driven targeting supported 80% YoY ad revenue growth, with ad take rate up 90 basis points YoY. Around 80% of customer queries are now handled by AI chatbots, cutting customer service cost per contact by 30% YoY while retaining high satisfaction. ### SeaMoney Operational Highlights - Growth is driven by three expansion fronts: deepening relationships with existing users by increasing credit limits as repayment history is established, acquiring new higher-affinity, lower-risk users, and expanding off-Shopee credit use cases. Off-Shopee SPLater loans reached over 20% of the total SPLater portfolio in Thailand and Indonesia by end-Q1, with strong growth in higher-value categories like electronics and two-wheelers in Indonesia. - Brazil's loan book grew over 250% YoY to exceed $1 billion, supported by a localized combined SPLater and cash loan product. The company obtained the FDFI license in Brazil during Q1 to expand its financial service offerings, with substantial remaining growth headroom as SPLater penetration on Shopee Brazil is only 10% of GMV. - Risk management remains the top priority, with stable NPL ratios enabled by data-driven underwriting, short loan tenures, and real-time adjustment of credit terms to changing market conditions. ### Garena Operational Highlights - Strong performance was driven by *Free Fire* and record results from *Arena of Valor* in its 10th year of operation. A major collaboration with *Jujutsu Kaisen* generated over 700 million official content views, one of the company's most successful IP partnerships to date. - The Ramadan campaign was expanded from regional observance markets to a global event, generating 120 billion global social media impressions (up 70% YoY), demonstrating the company's growing ability to turn culturally rooted regional content into globally resonant experiences, which allows resource pooling and higher content quality.

Guidance

- **Shopee**: Maintains full-year 2026 guidance for ~25% YoY GMV growth, with full-year adjusted EBITDA no lower than 2025's absolute value. The Q1 growth outperformance is partially attributed to favorable seasonal timing of holidays, and management will update guidance as market trends become clearer later in the year. - **Garena**: Expects 2026 to be a record year for *Arena of Valor* driven by ongoing content investments for the game's 10th anniversary. Reaffirms prior full-year guidance for strong YoY booking growth for Garena overall. - **SeaMoney**: Management notes the business is still in an early growth stage with significant expansion headroom, so no steady-state margin guidance is provided at this time. - **Share Buyback**: Confirms the company will continue executing its announced buyback program, driven by management's confidence in the long-term growth of all three business verticals.

Segment performance

Consolidated total GAAP revenue increased 47% year-on-year (YoY) to $7.1 billion in Q1 2026, with total adjusted EBITDA up 9% YoY to $1 billion, and net income up 7% YoY to $438 million. 1. **Shopee**: Revenue grew 29% YoY to $4 billion, with GMV up 30% YoY to $37.3 billion. GAAP revenue totaled $5.1 billion, consisting of $4.5 billion in GAAP marketplace revenue (up 44% YoY, 88% of Shopee GAAP revenue) and $0.6 billion in GAAP product revenue (12% of Shopee GAAP revenue). Within marketplace revenue, core transaction and advertising revenue was $3.8 billion (up 61% YoY, 75% of Shopee GAAP revenue), and value-added logistics-related revenue was $0.7 billion (14% of Shopee GAAP revenue). Adjusted EBITDA was $223 million, down from $264 million in Q1 2025, due to increased growth investments partially offset by higher monetization. 2. **SeaMoney**: GAAP revenue grew 58% YoY to $1.2 billion (17% of total consolidated GAAP revenue), and adjusted EBITDA grew 14% YoY to $275 million (27.5% of total adjusted EBITDA). Total consumer and SME loan principal outstanding reached $9.9 billion (up 71% YoY), with $8.8 billion on-book and $1.1 billion off-book. The 90-day non-performing loan (NPL) ratio was stable at 1.1%. 3. **Garena**: Bookings grew 20% YoY to $931 million, with GAAP revenue up 41% YoY to $697 million (10% of total consolidated GAAP revenue). Adjusted EBITDA grew 25% YoY to $574 million (57.4% of total adjusted EBITDA).

Risks & headwinds

- Persistently elevated oil prices driven by the Middle East conflict would increase operational delivery costs, though management notes government subsidies in key markets help absorb a portion of the increase, and the company works closely with logistics partners to mitigate cost impacts. Management expects the impact can be managed within existing full-year guidance. - Higher oil prices could also reduce consumer disposable income in key markets, but management notes Sea's platform positions are well-positioned to withstand this, as it offers the most competitive pricing for essential goods, and demand for low-cost offerings tends to hold up better during periods of constrained consumer spending. - Gaming bookings can vary quarter-to-quarter based on the timing of content updates, IP collaborations, and seasonal events, even with strong underlying franchise health. - E-commerce monetization adjustments carry potential seller pushback, though management notes that cost reductions for sellers from AI-powered operational tools and higher sales volume offset modest commission increases, maintaining a healthy seller ecosystem. - Expansion into new user segments and off-Shopee lending carries incremental risk, though management maintains active risk management with short loan tenures and real-time credit adjustment to keep asset quality stable.

Analyst Q&A

• Q: What share of Shopee's Q1 GMV growth and ASP increase comes from Brazil's high-end segment expansion versus Shopee VIP in Southeast Asia and Taiwan? Why is full-year 25% GMV guidance maintained despite strong Q1 growth? Is Arena of Valor's Q1 strength one-off or sustainable? /

  A: Shopee's Q1 growth comes from a combination of Brazil and Southeast Asia, with Brazil growing slightly faster than Southeast Asia. Favorable seasonality from holiday timing and the impact of 2025-initiated growth initiatives led to Q1 outperformance; management will maintain current guidance and update as market trends evolve. Arena of Valor's record Q1 is not a one-off, driven by deliberate investments in content and community engagement for its 10th anniversary. Management expects 2026 to be a record year for the game, while acknowledging Q1 was seasonally stronger due to Lunar New Year, and remains confident in full-year Garena booking growth.

• Q: How will Brazil Shopee's margin evolve in 2026 amid increased competitive investment, and how do Brazil loan returns compare to ASEAN? Will rising take rates in ASEAN improve margins, and is there a cap to seller commission increases? /

  A: Brazil Shopee has been profitable for consecutive quarters, and management expects this to continue. Scale gains from market share growth are driving down cost to serve, even as the company continues targeted investments in fulfillment, same-day delivery and Shopee VIP. Brazil lending performance is strong, driven by localized product design and integration with local open banking data that supports strong risk profiles, with massive remaining penetration headroom. Higher take rates are largely reinvested into growth initiatives, but ASEAN margins are still improving modestly quarter-over-quarter. Management maintains platform price competitiveness, and AI-driven seller cost reductions and higher sales volume offset modest commission increases, resulting in a healthy seller ecosystem.

• Q: What has driven Shopee's YoY EBITDA decline in Q1, and what is the long-term EBITDA margin target? What is the steady-state SeaMoney margin and when will it be reached? /

  A: The slight YoY EBITDA decline reflects deliberate investments in 2026 growth initiatives, with EBITDA actually increasing sequentially from Q4 2025. Management reaffirms guidance for full-year 2026 adjusted EBITDA to be at least as high as 2025, and targets a 2-3% medium-to-long term EBITDA margin for Shopee. For SeaMoney, the EBITDA margin as a percentage of loans fluctuates based on country and product mix (early markets like Indonesia have higher returns than newer markets), and the business is still early in its growth cycle, so no steady-state margin guidance is provided at this time. The key priority is growing the loan book while maintaining positive absolute incremental EBITDA.

• Q: What is your outlook for Shopee VIP unit economics, and what KPIs do you track for the program? What are the key growth drivers for SeaMoney's loan book going forward? /

  A: Management is still investing in the Shopee VIP program to grow penetration, given its strong user retention and spending uplift. Key tracked KPIs include GMV penetration, user retention, program unit economics, and number of partner benefits added. Over the long term, expanded partner offerings and tiered pricing could improve unit economics, with the program expected to become more profitable than non-VIP business. For SeaMoney, key long-term growth drivers are: 1) deeper credit penetration among existing users via more products and accumulated data; 2) expansion of off-Shopee use cases, including offline merchant partnerships and card-based credit, which already accounts for 20% of total SPLater volume and is growing faster than on-Shopee; 3) expansion into higher-affinity new user segments supported by improved risk models, which increases the total addressable loan pool.