Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sea Ltd (SE, Financial) reported a solid quarter with strong momentum from Q1 continuing into Q2, showing growth and higher profitability across all three business segments.
- Shopee's market share in Southeast Asia remains strong, with the company expecting adjusted EBITDA positivity from Q3 and revising up its full-year GMV growth rate to the mid-20s.
- SeaMoney has shown strong momentum, growing its loan book size to $3.5 billion, up almost 40% year on year, with nonperforming loans improving slightly.
- Garena's Free Fire has shown more than 20% year-on-year growth in bookings, with over 100 million daily active players, reinforcing its status as an evergreen franchise.
- Sea Ltd (SE) has added two new independent directors with expertise in AI and financial services, strengthening its board and future strategic direction.
Negative Points
- Total adjusted EBITDA for Sea Ltd (SE) decreased to $448 million in Q2 2024 from $510 million in Q2 2023.
- E-commerce adjusted EBITDA showed a loss of $9 million in Q2 2024, although this was an improvement from previous quarters.
- Net income for Q2 2024 was $80 million, a significant drop from $331 million in Q2 2023.
- The company faces competitive pressures in markets like Taiwan and Indonesia, with new entrants and increased subsidies from competitors.
- Despite strong growth in Free Fire, the company remains cautious about the sustainability of this momentum and the potential impact of seasonality on gaming revenue.
Q & A Highlights
Q: Could you please comment on the latest competitive landscape you have observed and how this translates into your results and updated guidance? Also, what type of near- and medium-term margins can we expect Shopee to deliver?
A: (Tianyu Hou, CFO & Director) We see a more stable competitive environment with positive movements in take rates. Our long-term profitability target remains 2% to 3% EBITDA. In the short term, we focus on profitability and growth, aiming to outgrow the market while maintaining profitability.
Q: Is it possible to further increase take rates, and are you able to reduce shipping subsidies? Also, can you talk about the unit economics of the live streaming business?
A: (Tianyu Hou, CFO & Director) We believe there are opportunities to further increase take rates, particularly in advertising. We have built infrastructure to support this. For live streaming, we see quarter-on-quarter improvement in unit economics, with some markets already profitable.
Q: How do you plan to achieve improved profitability in Brazil, and is it sustainable? Also, can you clarify if the adjusted EBITDA positive guidance is for Q3 standalone or overall nine months?
A: (Tianyu Hou, CFO & Director) We are improving margins in Brazil through better shipping costs and user experience. We see potential for further market share penetration. The adjusted EBITDA positive guidance is for Q3 standalone.
Q: Can you share updates on acquiring non-Shopee platform users for DFS and the GTV growth for non-Shopee platforms? Also, how will you optimize Shopee Express operations?
A: (Li Xiaodong, Chairman & CEO) We are expanding credit use cases both online and offline. For Shopee Express, we will improve efficiency through scale, coverage, automation, and better technology.
Q: What timeline do you anticipate for ramping up ad revenue to levels similar to mature market players? Also, can you comment on the sustainability of Free Fire's momentum and the potential financial contribution from Need for Speed Mobile?
A: (Li Xiaodong, Chairman & CEO) We expect to see ad revenue improvements in the next few quarters. Free Fire's momentum is strong, and we are confident in its growth. It's too early to comment on the financial contribution from Need for Speed Mobile.
Q: What is your view on the higher risk from competition from cross-border e-commerce, and how are you planning to respond? Also, is the higher GMV guidance coming more from Brazil or ASEAN?
A: (Tianyu Hou, CFO & Director) The impact from cross-border e-commerce is limited as domestic transactions dominate in our markets. The higher GMV guidance reflects growth in both ASEAN and Brazil.
Q: Can you provide more color on the margin trends for different DFS categories and your risk management approach given global macro uncertainties? Also, how should we think about the longer-term revenue mix profile?
A: (Tianyu Hou, CFO & Director) Margins are stable, with some markets showing better risk profiles. We manage risk through short loan durations and smaller ticket sizes. In the long term, we expect DFS to become more meaningful in our revenue mix.
Q: Are there structural reasons why your commission take rate won't be close to global peers, and what is the timing to reach that goal? Also, given the strong booking growth for Free Fire, should we expect higher growth for 2024?
A: (Tianyu Hou, CFO & Director) We believe our total take rate, including ads, will be competitive with global peers. We remain cautious but confident in Free Fire's growth, and we will update the market as trends continue.
Q: How do you view the competitive intensity in Taiwan and Indonesia, and how are you responding to increased subsidies in Indonesia?
A: (Li Xiaodong, Chairman & CEO) In Taiwan, we maintain a dominant position through better delivery and cost efficiency. In Indonesia, we focus on long-term trends rather than short-term fluctuations in subsidies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
