Sea Limited Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Ecommerce: Shopee had a record quarter with sequential GMV growth for five consecutive quarters. Monetization improved via ad services, with ad revenue up over 70% and ad take rate rising. Investments in logistics (XPS Express) to enhance delivery in various regions, including rural and urban areas. Efforts to deepen user engagement through Shopee VIP membership (over 3.5 million members in SE Asia by September) and content ecosystem enhancements, including partnerships with YouTube and Meta. AI integration to improve search, recommendations, and product discovery.
• Digital Financial Services: Strong revenue and loan book growth with stable risk profile. Product expansion across markets, including pay later options available to almost all Shopee users, adding over five million first-time borrowers. Shopee Pay app launched in multiple markets, supporting online and offline payments. Personal cash loans grew strongly in various regions.
• Digital Entertainment: Garena's success driven by Free Fire campaigns and IP collaborations. Global yet local approach to IPs, with offline events and creator programs. Launch of EA SPORTS FC mobile in Vietnam, strengthening publishing portfolio.

Segment Performance

• Ecommerce (Shopee): Achieved total revenue of $6 billion, with Shopee's GMV growing by over 28% year-on-year. Quarterly GMV, cross-border volume, and revenue reached new highs. Monetization improved with ad revenue up over 70% and ad take rate rising by over 80 basis points. Logistics investments, including XPS Express, enhanced delivery capabilities in various regions. Revenue contribution: Ecommerce is a significant part of the total $6 billion revenue.
• Digital Financial Services (Money): Revenue grew by 51% year-on-year and adjusted EBITDA grew more than 35% year-on-year. Loan book expanded 70% year-on-year to $7.9 billion, with Thailand surpassing $2 billion in loans outstanding and Brazil's loan book more than tripling. Ninety-day NPL ratio remained stable at 1.1%.
• Digital Entertainment (Garena): Bookings were up 51% year-on-year, and adjusted EBITDA grew 48% year-on-year, marking the best quarter since 2021. Free Fire campaigns like WeGain and Naruto Shippuden chapter two drove strong performance, with events and IP collaborations boosting engagement.

Guidance

• Shopee's full-year 2025 GMV growth expected to be more than 25%.
• Garena on track for over 30% year-on-year growth in bookings for 2025.

Risks

• Forward-looking statements are subject to risks and uncertainties as stated in the press release. General market competition, regulatory changes, and potential impact of new entrants or evolving user behaviors could affect performance.

Q: On the 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 carrying into 2026? Also, margin trend for ecommerce 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?

A: On the growth guidance, it's based on observed momentum and competitive landscapes so far. Year-to-year margin shows consistent improvement. Investment areas include logistics and fulfillment capabilities, and deepening buyer engagement through programs like Shopee VIP. Most investments are asset-light, less fixed, with CapEx focused on improving warehouses and sorting facilities. The investment cycle is ongoing to strengthen competitive mode, contributing to long-term growth.

Q: 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 one of your 2026 priorities? Also, comment on the market shares in ASEAN, how have they moved in the third quarter? And also, if you could comment on Taiwan, do you foresee increasing marketing spend and investments in Taiwan next year? We're also seeing a bigger contribution from cross-border with Taobao getting more popular there.

A: Closing cross-border ops in smaller, distant markets to focus resources; reentering Argentina leveraging Brazil's capabilities. Milestones for Argentina include learning the market without heavy investment. In ASEAN, Shopee is gaining market share, growing faster than the market. In Taiwan, cross-border is a smaller part, but Shopee grows double digits, confident in market position with strong infrastructure, no immediate plan for increased marketing spend due to current growth.