Sea Ltd. (Singapore) Q4 FY2024 earnings call

• E-commerce: Shopee celebrated 10th year with strong results, GMV surpassed $100 billion, returned to high growth, became profitable in Asia and Brazil. Reinforced market leadership through enhancing price competitiveness, improving service quality, and strengthening content ecosystem. Used AI to improve various aspects like search, product listings, and customer service. Live streaming contributed significantly to order volume, and collaboration with YouTube attracted more creators and orders.
• Digital Financial Services: Risk management is top priority. Loan book grew strongly, with stable risk exposure. Operates in markets with strong e-commerce presence, allowing deep access to risk management. Pillars are Shopee SPayLater loans and off-Shopee loans, with off-Shopee loans accounting for about half of the loan book.
• Digital Entertainment: Garena's Free Fire made remarkable comeback, with high user engagement and retention. Expanded user base in emerging markets like Africa, and drove engagement through content updates, collaborations, and local elements. Social media presence is powerful, and eSports event generated massive excitement.

E-commerce (Shopee)

• 2024 GMV surpassed $100 billion with over 10 billion orders. Fourth quarter GMV grew 28% year-on-year. Adjusted EBITDA positive in both Asia and Brazil. Fourth quarter ad revenue increased over 50% year-on-year, ad take rate improved by over 50 basis points. Full year 2025 GMV growth expected to be around 20% with improving profitability.
• Logistics: SPX Express helped reach efficiencies, with almost half of SPX Express orders in Asia delivered within 2 days of order placement in the first quarter, and logistics cost per order reduced by $0.05 year-on-year in the fourth quarter.
• AI adoption: Used AI to improve search/discovery, product listings, customer service. Chatbots upgraded with AI saw customer service satisfaction score increase and cost per contact reduce by nearly 30% year-on-year. Resolution times in Asia market for buyer return refund improved by over 40% year-on-year in the fourth quarter.
• Live streaming: Contributes around 15% of Shopee's overall order volume for physical goods in Southeast Asia. Average daily unique streamers and viewers grew strongly in the fourth quarter.

Digital Financial Services (SeaMoney)

• 2024 annual revenue $2.4 billion, adjusted EBITDA over $700 million. Both top line and bottom line achieved over 30% year-on-year growth. Loan book size over $5 billion as of end of 2024, with over 26 million active borrowers. Fourth quarter loan book growth over 60% year-on-year. 90-day NPL ratio 1.2% in the first quarter.
• Business stands on 2 pillars: Shopee SPayLater loans and off-Shopee cash and off-Shopee SPayLater loans. Off-Shopee loans now account for about half of the loan book. Expect loan book size to grow meaningfully faster than Shopee's GMV annual growth rate in 2025.

Digital Entertainment (Garena)

• 2024 was a great year for Garena, with Free Fire's annual bookings growing 34% year-on-year. Average DAU in 2024 grew 28% year-on-year, standing well above 100 million. Free Fire is the world's largest mobile game by average DAU and most downloaded title. Expanded user base by prioritizing accessibility, and drove user engagement with content updates, collaborations, and local festivals. Expect double-digit year-on-year growth for user base and bookings in 2025.

• Shopee: Expect full year 2025 GMV growth to be around 20% with improving profitability. Assumes ForEx rate similar to current rate. Growth driven by user number growth and purchase frequencies.
• Digital Financial Services: Expect loan book size to grow meaningfully faster than Shopee's GMV annual growth rate in 2025 as credit penetration on and off-Shopee improves.
• Digital Entertainment: Expect Garena to grow double digit year-on-year for both user base and bookings in 2025.

• Market competition: Competitors may increase take rates, which could impact Shopee's market position and profitability.
• Exchange rate fluctuations: Could affect GMV and financial results if there are significant changes in ForEx rates.
• Operational risks: Issues in logistics, customer service, or AI adoption could impact user experience and business performance.

Q: On e-commerce, help provide more color on 2025, 20% GMV growth guidance, underlying assumptions, FX impact, and profitability trend in upcoming quarter.

A: For Shopee, 2025 GMV growth around 20% assumes ForEx rate similar to current rate. Growth driven by user number growth and purchase frequencies. Expect profitability for 2025 to be better than 2024 as a trend, but e-commerce has seasonality which may cause fluctuation.

Q: On Fintech, driver behind country mix and product mix, and loan book to grow meaningfully faster than Shopee GMV.

A: Country mix: Grew loan outstanding from Indonesia and Philippines first, newer countries may have faster growth pace. Product mix: Off-market grows well. Loan book to grow faster as escalator penetration expands on Shopee and off-Shopee parts of the business expand.

Q: On logistics and Brazil, details on fulfillment participation, CapEx, plans for more markets, AOV trend in Brazil, and fintech growth in Brazil.

A: Fulfillment in Brazil is early stage, rented centers, CapEx-light. Do have fulfillment in other Asian markets. AOV in Brazil increased due to better delivery quality and speed, and expansion to new categories. Fintech in Brazil has good growth with customized products, increased SPayLater penetration, and launched cash loan, growing well.

Q: On AI, benefit from AI in terms of cost efficiency and monetization.

A: Using AI for search/discovery, product understanding, and AIGC for sellers increased conversions. Chatbots with AI saved costs with 80% of queries answered by chatbot, and AI tools helped agents respond faster. Also used AI for better return refund judgment, reducing resolution time.