Good morning and good evening. Welcome to the Sea Limited First Quarter 2020 Results Conference Call. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms. Yanjun Wang. Please go ahead..

Thank you, operator. Good evening and good morning, everyone and welcome to Sea’s 2020 first quarter earnings conference call. I am Yanjun Wang, Sea’s Group Chief Corporate Officer.

Before we continue, I would like to remind you that 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 discussion of certain non-GAAP financial measures such as adjusted revenue, adjusted EBITDA and net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes.

We believe these measures can enhance our investors’ understandings of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures.

For a 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 here with me Sea’s Chairman and Group Chief Executive Officer, Forrest Li and Group Chief Financial Officer, Tony Hou.

Forrest and Tony will share strategy and business updates, operating highlights and financial performance for the quarter. 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..

Thank you, Yanjun. Hello, everyone and thank you as always for joining today’s call. I hope that you are all in good health and staying safe. On behalf of all of us at Sea, I would like to thank you for your ongoing support during this exceptional period.

These are times of significant change and disruptions for communities, economies and businesses around the world. Against this challenging backdrop, we are proud that we have been accelerating growth and we are reporting very strong results for the first quarter. Our communities are increasingly relying on our platforms during the pandemic.

Our users are turning to Garena to enjoy interactive entertainment and socialize with their friends during the social isolation of the lockdown. Shopee is becoming a more integral part of the commercial ecosystem in each of our markets with consumers now relying on our platform for their staple, daily essentials and other consumption needs.

At the same time, more sellers are migrating to or relying more on Shopee to sell and grow their business. As our economies become more online and contactless, the digital payments and the financial services that SeaMoney provide are becoming an ever more important part of the infrastructure in our region.

The coronavirus crisis is driving a step change in the growth of the digital economy globally, particularly in the market and the segments, where Sea operates. It has materially accelerated a shift to online lifestyle that is broad, deep and in our view irreversible.

Building on our market leadership in some of the key and the largest segment of the digital economy, we believe we are gaining and will continue to gain a disproportionate share of that growth.

Our growth is also well-supported by strong balance sheet and the cash flow from operations and we will continue to invest in a highly prudent way to maximize efficiency. Sea was born in the middle of the global financial crisis.

We believe that certain key qualities like humility, focus, commitment, resilience, adaptability and prudence helped us survive and strive in those difficult days, when we first started our business. We believe that this quality still defines us today and in fact are more valuable to us in the current climate than ever before.

As businesses are stress tested by the crisis, our resilience and adaptability have enabled us to respond well to search a user demand, while we navigate the physical constraint and disruption caused by the coronavirus crisis.

For example, in all of Shopee’s key markets, we have launched and dramatically scaled up our offering of corporate, health and hygiene products and essential household items in a matter of days. We are also doing everything we can to support economic recovery across our markets.

We launched a region-wise Shopee seller support package to help merchants to get back on their feet. This includes a number of initiatives localized for the specific needs of merchants, and on the ground condition in each of our market.

This range from training and support programs to top new sellers move online or assist existing sellers to grow their business for free or discounted access to our services like advertising and marketing that enable sellers attract new customers online.

Furthermore, we are providing fee relief for some of our seller services to ease the financial burden on them during this difficult period. Meanwhile, our Garena team, have quickly scaled up our capacity to meet record search in customer demand.

We have also worked hard to create new ways for our users to engage online from creating dedicated online e-sports events, so that our communities can interact with each other even as they play, to using our platform to raise awareness of health and safety practices in fun and creative way.

Our adaptability ensures that our platform can support our customers and ecosystem partner when they need us most. This is helping us build strong bonds of affinity with them that will outlast this crisis. Just as importantly, this ensures that we can continue to grow our businesses and extend our leadership even in the most affecting circumstances.

I am equally proud to see how our team has come together to get aid to where it is needed most.

Across our markets, we have worked with local authorities to provide financial support as well as essential medical equipment such as ventilators, masks and personal protective equipments to the hospital and the healthcare workers on front-line of the battle against the coronavirus.

This mission is to better the lives of consumers and small businesses through technology and it has never been more important for us to live up to that mission. Let me now turn to our results for the first quarter. On a group level, adjusted revenue grew 58% year-on-year to $913.9 million for the first quarter.

Gross profit for the quarter was up 424% year-on-year to reach $206.8 million compared to $39.5 million in the same quarter of 2019. Total adjusted EBITDA was negative $69.9 million, compared to negative $32.0 million in the same period in 2019. Let’s look now at our digital entertainment business. Garena once again broke record in the first quarter.

Adjusted revenue grew by 30% year-on-year to $512.4 million. This robust top line growth was primarily driven by strong growth in both active user and paying user. In addition, we have hit new highs in terms of quarterly active users.

We reported 48% growth year-on-year to 402.1 million quarterly active user, while our quarterly paying users grew 73% year-on-year to 35.7 million. The quarterly paying user ratio remains at 8.9%. Free Fire saw particular strong growth in the first quarter and I am pleased to note that the strong growth extended into the second quarter.

The game recently exceeded new record for peak daily active users of 80 million. In April, Free Fire achieved another record high in monthly paying users, which more than doubled year-on-year. In India, our monthly paying users as a percentage of monthly active users already exceeded 10% in April.

We believe this growth in our user base is attributable both to the macro trends as well as our constant efforts to engage new and existing user with fresh, creative and highly localized content. For example, we introduced a new map, called Kalahari. It features a desert theme with faster, more intense game play.

The Kalahari map proved very popular with our users when it was first tested in select events, a few months ago, and has since been made a permanent part of the game. We have also rolled out a number of new features based on feedback from our communities such as the rank mode for our popular Clash Squad game mode.

The Clash Squad game mode features team of four competing against each other in 10 best of seven matches that last just 1.5 minutes each. It has been a big hit with the community.

And with the addition of our rank mode, based on their feedback adds a new competitive element where teams can challenge themselves against the best opponent in their region. Alongside this global content pushes, our local teams are focused on developing highly localized content for our users.

In Indonesia, for example, we have partnered with one of the country’s most popular actor and star of Mortal Kombat, Joe Taslim to create a playable in-game character called Jota, modeled after Joe himself.

To promote this we also worked with one of the Indonesia’s most popular director to create a short view with Joe showcasing his favorite martial arts skills. So far in Indonesia, over half of our users have played as Jota. This initiative highlights how this element of local flavor really resonates with our users.

Similarly in India, we partnered up with popular actor, Amol Parashar to produce a series of light-hearted videos highlighting Free Fire’s key features. These videos quickly went viral and today have recorded forward 37 million views on YouTube.

With offline e-sport events generally on hold, we have quickly adapted and introduced new ways to assist in our engagements with the Free Fire community. For example, in April, we hosted a special one-off global event called, Wonderland Peak.

This was a week-long celebration featuring special characters, items and in-game challenges to excite our community around the world and to reward our most loyal users. It was also Free Fire’s largest in-game event of the year so far and we saw significant user number growth as a result.

Moreover, we are working with local celebrity Free Fire Fans to create fun and engaging online competition that has been very popular with our users.

In Brazil, our long-term partner, DJ Alok, who is one of Brazil’s most popular musical artist took part in an online competition against some of the best known local Free Fire [indiscernible] at the Wal-Mart for a hugely popular live set he performed across local social media channels.

Meanwhile, in Colombia, two of the country’s best known footballers, James Rodriguez and David Ospina, each captained team of Free Fire [indiscernible] in an online charity tournament that attracted over 1 million views. In the first quarter, we recorded over 90 million online views for Free Fire’s e-sports event globally.

This is a testament for the growing reach and the popularity of this game across the world. Building on this growing and the more engaged user base, we will continue to focus on developing Free Fire into a long-lasting IP and a bigger platform. The larger user base also presents greater monetization opportunities over the longer run.

We are therefore fully focused on execution and leveraging there is a strong momentum for further accelerated growth globally. Let’s turn now to Shopee. Like Garena, Shopee also recorded standout result for the first quarter and into the second quarter.

Throughout the quarter and beyond, we have been making every effort to win the hearts and the minds of our consumers and the merchants given this difficult time for them. We set a new record high for GMV of $6.2 billion, representing year-on-year growth of 74.3%.

The year-on-year growth rate increased by almost 10 percentage point compared to 64.8% for the last quarter despite the disruptions of the coronavirus crisis. We also reported strong growth in orders, up 111% year-on-year to $429.8 million.

The year-on-year growth rate of gross order further accelerated to more than 140% in April as we saw the strong growth momentum on our platform carrying into the second quarter.

In the first quarter, we further extended our market leadership and continued to rank first across Southeast Asia by downloads monthly active users and the total time in app on Android according to App Annie. Notably, we were the top ranked app by monthly active users in each of Taiwan, Indonesia, Vietnam and Malaysia.

As we further expanded our user base, Shopee ranked third in the shopping category globally by downloads across the iOS and the Google Play app stores combined during the first quarter. Adjusted revenue grew strongly to $314.0 million, up 111% year-over-year and the marketplace revenue grew even more quickly to $236.7 million, up 132% year-on-year.

We believe this indicates the strength and the resilience of our platform despite the macro environment. Merchants are willing to keep investing in shopping even in this tough time, because they recognized the value that we offer, our unrivaled reach to consumers, and the return on their investment that Shopee provides.

The slight quarter-on-quarter decrease in our overall and the marketplace take rate is mainly due to the lockdown and other movement restrictions in the first quarter. This disruption had a particularly significant impact on some of our cross-border merchants. As a result, we saw an impact on revenue derived from sales by those merchants.

This includes revenue from cross-border logistics that is recognized on a gross basis. We also provided fee relief to our cross-border merchants who were materially impacted by the coronavirus crisis. Into the second quarter, we have seen meaningful recovery of cross-border transaction on the platform.

Our adjusted EBITDA loss per order declined further, falling by 48% year-on-year to $0.60 compared to $1.16 for the same period in 2019 and $0.70 last quarter.

Our ability to drive sustained improvement in unit economics even in this difficult environment highlights our focus on scaling with efficiency and our disciplined approach to growing our business.

In Indonesia, where Shopee is the largest e-commerce platform by orders, Shopee registered over 185 million orders for the market in the first quarter or a daily average of over 2 million orders. That represents an increase of 123% year-on-year, further extending Shopee’s market leadership.

Shopee also ranked first in Indonesia by average monthly active users, downloads, and total time spent in app on Android in the shopping category during the quarter, according to App Annie. Our sustained focus on engaging our users continues to be a key driver of platform growth.

As our community has fueled up, we are now able to drive engagement into activities in a much more personalized and a targeted way. For example, we launched a membership-based service called Shopee Moms Club across our market.

This service targets mothers who use our platform and enables them to discover a unique selection of highly quality, creative products and brands. Some of this product and brands are only available to members. They also enjoy discounts on many common items such as diapers.

This targeted group engagement builds stronger user thickness and activity and we are rolling out similar targeted offerings in other categories like health and beauty. From early March onwards, government in all our markets began to introduce restrictions on movement to curb the spread of the coronavirus.

In response to this, our local teams worked extremely hard to quickly launch and scale up our offering of FMCG, home and living and other categories of essential and household tools. We rolled out a special program called Shopee from Home in every market.

This program was designed to encourage our users to follow government guidelines and stay home by buying their essential needs online. We also on-boarded thousands of new merchants to help them migrate their business online during this difficult time and overcome the significant logistical and operational challenges imposed by the lockdown.

As Shopee becomes an increasingly vital part of the retail landscape in our market, more and more of the world’s top brands are building up their partnership with us. In early May, we rolled out a region-wide partnership with Procter & Gamble called Show Me My Home.

For this innovative campaign, Shopee and P&G collaborated to create dedicated macro site for each Shopee market that feature a curated selection of top P&G brands categorized by different rooms of the house. The campaign aims to give consumers a new brand and engaging way to find a product that they want from P&G’s world famous brands on Shopee.

I am really proud of our team for managing the business through the challenging environment we have faced in recent months.

We must increase the demand of our consumers and merchants in spite of significant stress test on our business and our ecosystem in whole by the pandemic itself and the various restrictions introduced to curb the spread of the virus.

We are well-positioned to continue capturing the expanded growth opportunity in the sector and further extending our market leadership. We believe that this strong leadership position combined with the resilient commitment and adaptability of our team will drive accelerated long-term growth.

Finally, SeaMoney continues to experience strong growth propelled by increased user demand for digital payment and financial services during the pandemic, accelerated growth of our Shopee platform and a deeper integration of our mobile wallet services with the platform. In the current climate, the overall digital economy is growing rapidly.

In particular, more people are spending more of their time and the money online and that is driving an increased need for both online payment services and the financial services as well as an increased need for contactless payment options.

That in turn means that more people are adopting digital payments and the financial services option as one of their primary channels of choice. Building on that, we are encouraged by the progress we have made in driving adoption of SeaMoney’s offering.

In the first quarter, our mobile wallet total payment volume or TPV exceeded $1 billion, a milestone achieved in just about a year after we started to integrate mobile wallet service with our Shopee platform. The quarterly paying user for our mobile wallet services surpassed 10 million.

More than 40% of Shopee’s gross orders in Indonesia, our largest market for SeaMoney were paid using our mobile wallet services in the month of April. Moreover, we are rapidly expanding third-party use cases and the partnership online and offline.

In March 2020, we joined forces with Google to offer our mobile wallet as a payment option for the Google Play Store in Thailand. We see significant growth ahead in the digital payment and the digital financial services segment and we see that growth accelerating as the coronavirus crisis drives more consumer activity online.

We also believe that SeaMoney is in an excellent position to capture this growth as we build on our strategic leadership position in some of the largest use cases in digital payments. We will continue to focus on scaling SeaMoney effectively and efficiently to reach strong leadership position across our key markets.

To conclude, we are glad to be reporting strong numbers for the first quarter. This performance demonstrates the fundamental strength and the resilience of this business and our position as the market leader in sectors of the economy that are experiencing the strongest growth.

Looking ahead, while we expect to face uncertainty in the near-term due to the coronavirus crisis, we believe that the step change in adoption of the digital economy that we have seen in recent months is here to stay, and it will experience rapid growth in our markets in the years ahead.

More importantly, we believe that these three core businesses, as the leader in their sectors, will capture an outsized share of that growth. Sea have been stress tested in recent months due to the coronavirus crisis and our performance under this condition, has underlined the fundamental strength and the resilience of our business.

This gives us confidence that we are well equipped to manage the current external turbulence and ready to capture the long-term growth opportunities. We will still continue to invest in our future and focus on winning the heart and the minds of the users across all of our platforms, given the time when they need us most.

We believe that Sea will emerge from the crisis in an even stronger position and better prepared for our long-term growth. With that, I will invite Tony to discuss our financials..

Thank you, Forrest. And thanks to everyone for joining the call. We have included detailed quarterly financial schedules together with the corresponding management analysis in today’s press release. And Forrest has discussed some of our financial highlights. So I will focus my comments on the other key financial metrics.

At Sea overall, our total adjusted revenue grew by 58% year-on-year to $913.9 million, which was mainly driven by the growth of our digital entertainment business, especially our self-developed game, Free Fire and our continued monetization efforts in our e-commerce business in the past quarters.

The 30% year-on-year growth in digital entertainment adjusted revenue to $512.4 million was primarily driven by the increase of our active user base and deepened paying user penetration, and in particular, the continued success of Free Fire.

Digital entertainment adjusted EBITDA was $298.4 million, an increase of 32% year-on-year, mainly due to strong top line growth in our self-developed game accounting for an increased share of revenue.

Our e-commerce adjusted revenue of $314 million, included marketplace revenue of $236.7 million, up 132% year-on-year and product revenue of $77.3 million, up 64% year-on-year. This growth is a result of our commitment to continue enhancing our service offerings, as we seek to create greater value for our platform users.

E-commerce adjusted EBITDA loss was $260 million as we continued our investment to fully capture the market opportunity in the region. We will continue to invest prudently and drive high quality growth by serving the user’s needs better in the long run.

Digital financial service’s adjusted revenue was $10.7 million, an increase of 278% year-on-year from $2.8 million in the first quarter of 2019. Adjusted EBITDA loss was $101.6 million in the first quarter of 2020 compared to a loss of $11.9 million in the same period of 2019.

This was primarily due to our continued efforts to integrate our mobile wallet services with our Shopee platform across different markets. We have also been expanding the use cases of our mobile wallet services outside of Sea’s platforms to include other online and offline merchants along with a variety of third-party use cases.

Returning to our consolidated numbers, we recognized a net non-operating income of $11.2 million in the first quarter of 2020 compared to a net non-operating loss of $442.8 million in the first quarter of 2019.

The net non-operating loss in the first quarter of 2019 was primarily due to a fair value loss of $436.1 million arising from the fair value accounting treatment for the 2017 convertible notes.

We had a net income tax expense of $23.2 million in the first quarter of 2020, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment business.

As a result, net loss, excluding share-based compensation and changes in fair value of the 2017 convertible notes was $239.4 million in the first quarter of 2020 as compared to $237.3 million for the same period in 2019.

From foreign exchange standpoint, we have seen increased volatility in the exchange rates of some of our local currencies against the U.S. dollar. And that meant for us on a constant-currency basis, the top line metrics would have been neutral to modestly better in some of the cases, but we did not assess the differences to be material.

With that, let me turn the call back to Yanjun..

Thank you, Forrest and Tony. We’re now ready to open the call for questions. Operator..

[Operator Instructions] The first question comes from Miang Chuen Koh of Goldman Sachs. Please go ahead..

Thank you. Good evening. Congrats on the results. A sets of questions, please.

Firstly, gaming, can you talk about what first Q revenues would have been on an FX-neutral basis, which countries did the growth in active users come from? And why did pay ratio fall QoQ? Secondly, on e-commerce, it was mentioned cross-border was the reason for the decline, decrease.

Can I confirm that this has hit your commission revenues more quarter-to-quarter than advertising and VAS? And given merchant supply initiatives in second quarter, will we likely see more revenue decline in that quarter or revenue take rate decline in the quarter? And I confirm that – can I confirm also FY ‘20 e-commerce revenue guidance is maintained as well? Thank you..

Thanks, Miang Chuen. And I will address the game question first. As Tony mentioned earlier, there has been some foreign exchange related fluctuations and that means FX-neutral basis, our top line number, including the game revenue could be slightly better than what we reported.

But if you noted that as Tony mentioned, that we assess difference not to be material and we will continue to monitor the situation if we think there is need to report more ForEx neutral numbers, we will do so in the future.

In terms of the active user growth, it came from across different markets in Southeast Asia, Latin America, India as well as the other markets in Middle East, Europe, U.S., Russia.

So I think during the COVID time, I think we see more people as they are confined at home in social isolation, they tend to our games, which is highly interactive and social for both entertainment as well as the human interactions with their friends and family and colleagues.

And we definitely see both active user increase, pay user increase – sorry, play time increase, and that we think in the longer run will continue to drive the longevity of the IP as well as monetization.

As we mentioned in earnings release, for Free Fire in April, we saw the pay user more than doubled, and at same time for example, another country, in India, where people usually do not see as a a big esports market, in fact, it has been one of the biggest market for us for Free Fire and at the same time, we see that in terms of monthly pay user ratio, it has already exceeded 10%.

While that is increasing, we also see average revenue per user increasing in India as well as in all the other markets that, so I think overall for our game side, it’s been very positive trend we’re observing. And we hope to outperform our full-year target. And if we have more data, we might update the market down the road later.

On the e-commerce side, so in terms of the take rate, I think if you look at Q1, overall Q1 is traditionally not a shopping season, it is also a shorter quarter compared to Q4.

In fact QonQ, our e-commerce continued to grow and growth rate in terms of GMV year-on-year growth rate even accelerated in Q1 by about 10 percentage points compared to Q4, which is very big shopping season for us. This is despite all the impact that might come from cross-border and more of a total lockdown in the Philippines.

So this shows how resilient our marketplace is, the strength of the marketplace leadership in the Q1, despite the physical constraints and market turbulences, our region might be facing. And in fact, as we look at Q2, we mentioned in the earnings release that our April order actually grew more than 140% year-on-year.

So if you look at the different markets, we see this as a step change in terms of adoption rate of e-commerce that is with benefits disproportionately accruing to us as a strong market leader.

In terms of the take rate, the Q1 take rate drop from Q4 is mainly driven by VAS, value-added services, which is primarily cross-border logistics that we recognize on a gross basis, which means if the seller pays us $2 for cross-border logistics fees, we pay the third-party logistics providers $2, we recognize this $2 as revenue as well as cost of revenue.

So with that, if you look at what happened in Q1, China had a lockdown during that period, which did have an impact on the cross-border logistics – sorry, both cross-border sales volume as well as cross-border logistics. And that is reflected in the take rate that we are looking at for Q1.

Since China has opened up and resumed most of the normal activities, we have seen this has bottomed out in February, and meaningfully recovered by April and we continue to cross-border logistics uptick in May and onwards.

So we think this one will not – is not a permanent impact on us, and we expect the take rate to gradually right back to the previous level and our revenue is going to be both driven by the right take rate as well as the increase in volume itself. So we are not worried about long-term monetization of e-commerce platform, this does not change our view.

In fact, it makes us even more bullish on the e-commerce business as a whole given the step up in the penetration rates. So if you look at our markets, where the penetration of e-commerce and digital economy as a whole is still relatively low, the COVID situation actually drives a lot of people online, as offline shops are closed.

And we – our all operations remain open and we deliver as normal in most of our market, so throughout this whole period.

This allow us to capture disproportionate amount of growth and also win the hearts and minds of our users with the quality of the services we provide them as well as assistance we are providing them especially the SME sellers on our platform, who are trying to move their business online.

And this will also be reflected in our seller commission relief program, the aid program, as well as the marketing credit that we might give to sellers.

So short term, we might continue to see take rates being a bit lower than what used to be before COVID situation, but long-term we have – that does not change at all our view of the steady state take rate is achievable and the monetization potential of the platform is also throughout drove further our growth as a market leader.

So in terms of guidance for Shopee, at this point, we think that as the situation is still evolving daily, while we continue to see strong growth, we think it’s – we would like to update the market if there is more data later. But at this stage, we don’t see there is a need to change the guidance..

[Operator Instructions] The next question comes from Thomas Chong of Jefferies. Please go ahead..

Hi, good evening. Thanks management for taking my questions.

Given that we have seen Free Fire has reached another milestone in terms of the peak active users, can you comment about the long-term trend or the stage of life cycle for Free Fire? And we’re also seeing that India in terms of their paying ratio is also doing very well, how should we think about the longevity of Free Fire in terms of the growth momentum? Should we expect it to be a multi-year or five through 10-years kind of socially phenomenal game? Any color on that would be great.

And then my second question is back to Shopee.

Given the fact that we may see some volatility in terms of the take rate in the near-term because of the coronavirus, and as we are seeing the China cross-border e-commerce is also coming back, should we expect take rate to back to year-on-year growth trend back in the second half and on that front, can you comment about in terms of the impact of coronavirus in different geographies, i.e., Indonesia, Taiwan, Malaysia, Vietnam, Philippines and Singapore.

I just want to get a sense about how the GMV actually is trending because of the coronavirus and also the pace of recovery in different countries? Thank you..

Thank you. I’ll start with Free Fire. I think, we see very positive trend. As you mentioned, we recently hit a peak daily active user of more than 80 million, and at the same time we also see pay user increase significantly with ARPPU at pretty steady stage.

That shows that a, monetization potential of this game is huge and b, we think that this also helps with the longevity when you have more players playing this game and more players paying for this game.

They tend to stick with the game for longer and also given how social interactive this game is, more people play this game, that also means more of your friends, family, other people are in the game and they talk about it, that’s part of your social life and circle, you also stick with the game for longer.

I think that we are trying to really how to focus on managing and maximizing the upside of the game and building it into a not only a long living classic IP, but also increasingly social platform.

As you can see that we introduced a new map, new contents in collaboration with other games as well as movie stars, football stars, and we introduced music video into the game, as playable characters acting in the music videos.

So these are all these features we are introducing that are very welcomed and very well received by our users, who are engaging with us in the game and also outside of game in online forums through live streamings and watching the game videos on different platforms.

So I think that there is definitely the focus on us to continue to build out this IP under this huge platform with now more than 80 million people interacting with each other daily. So I think that is something that we are very much focused on. And in terms of e-commerce take rates, we’re not worried at all about the volatility in the take rate.

As mentioned, Q1 volatility is more attributable to cross-border logistics, as which is the revenue recognized on gross basis.

But as you can – as we previously mentioned, the majority of our revenue actually came from the high margin revenue, i.e., commissions, handling fees, advertisement etcetera and these continue to be highly resilient during this period.

Now we do by choice actively gave sellers some relief and assistant packages to help them transition, especially those SME sellers who are more severely affected – impacted by this COVID situation to transition through this period.

This is something we think, we are very fortunate to be able to do from a position of strength to help our communities of sellers as are the broader communities to help them get on feet – back on their feet. So this is something that we might continue to do in the near-term as they recover.

But on the other hand, this is something that we think in the longer run, will help us win the goodwill and build a stronger and deeper bond with our key participants in our platform, and this is very worthwhile investment we’re making.

In terms of the different impact in geographies, I think probably in a broad basis three categories, one is markets where the lockdown was – there wasn’t a extended period of very strict or total lockdown. So these are markets like Taiwan and Vietnam. Vietnam did have a lockdown, but relatively short.

And then there are also markets where you see more extensive lockdowns that would include Singapore, Malaysia, Thailand, Indonesia and then there is also the Philippines which is – that has a lockdown that also for a very short period of time in March that prevents all delivery.

We are actually one of the first players to receive exemption from the government to deliver essential goods to our users. And we also start to see the lockdown easing in Philippines over time to allow more categories of goods to be delivered. And then there’s also China, where the cross-border impact is from.

So I think these markets are different in a sense that for the markets that has relatively less impact from the lockdown, we see normal growth – more normal growth year-on-year and quarter-on-quarter like before and we continue to grow very strongly.

And in markets that have more extended lockdowns, where our operations still carry on, I would say as much as normal as possible, despite the physical constraints our teams faced, which also speak volume about the resilience and execution capabilities of our teams, we actually see even more stronger, more profound increase in demand for our services.

And we have been able to deliver that. And that is the markets that we think that to extend the lockdown is still in place, we will continue to see strong demand.

And in markets where like Philippines that does affect e-commerce logistics delivery, there is a decrease in the overall volume that can be fulfilled, but again, we start to see that being eased and as a market leader, – this affects everybody, but as a market leader, I think we are still doing probably better than many other players in this regard.

And for China, I think that as you all know, pretty much the bottom has passed by the end of February and we see recovery in March, April. So the cross-border, we think will be back more quickly..

[Operator Instructions] The next question comes from Alicia Yap of Citigroup. Please go ahead..

Hi, good evening Forrest, Tony, Yanjun and other management. Thanks for taking my questions.

Very quickly, I know the Free Fire has sustained really strong momentum, but just curious out of this soft economy, do we anticipate the spending behavior will get more cautious as the macro outlook gets, I mean worsens, and also as we emerge from the lockdown? And then for, quickly on the Shopee side, any thoughts in terms of the longer-term strategy that we potentially would put more emphasis on building a combinations of the branded flagship store model versus – together with the long-term merchants? Thank you..

Thank you, Alicia. In terms of the macro outlook, of course, this is – the situation is evolving daily, it really depends on how long the lockdown might be and how well we can address a pandemic and the impact on the economies market by market.

But overall, I think, we do see game business generally to be quite counter cyclical, even during the economic recession, people still need some form of social engagement and entertainment and what they might pay for game, especially in our market, if you compare to like say, a movie ticket or subscription of streaming services, etcetera., it is – that’s the reason we call it micro transaction.

I think this is something that’s highly affordable to people’s still. And also for games where it’s not targeting a very small our game, especially as a large esports highly social game, we are targeting a very broad base of consumers.

And therefore, having a very large user base and we focus on QAU, QPUs, daily active users etcetera is very important. That gave us much better resilience against any potential downturn, and given that our game is not concentrated in any particular market.

In fact, we see in terms of user contribution, as well as revenue contribution increasing balance across different markets, including Southeast Asia and Taiwan, LatAm, India as well as other markets that gives us in a way better protection against any particular market downturn.

So we think in that way, we are quite fortunate to be in this business at this time. And in terms of longer term strategy for e-commerce, I think we will continue to grow both.

We see very strong growth on Shopee Mall, i.e., the branded merchants on our platform both before the COVID started and as well as during this period as brands also started to look at online commerce as – not as afterthought or as a good-to-have alternative now more as a – probably a more of a must-have alternative or even a greater focus, especially when the offline retail is pretty much shut down.

So I think, we are disproportionately benefiting from that migration and we are very focused on serving them well to retain our users and capture that growth.

But at the same time, we still think our markets, there are lot of SME sellers that we can benefit from our marketplace, and Shopee as – when we designed it to be a general merchandise marketplace as opposed to more of a niche kind of marketplace or a lumpy marketplace – a lumpy kind of a model, it’s precisely because we think there are large number of smaller merchants, SME merchants that can grow with our marketplace in our markets.

And we have a unique advantage in our ability to serve millions and tens of millions of them well with very highly localized operations and high quality management of the sellers category by category. This differentiates us from a lot of the existing players and helps us grow to the market leaders we are now.

So we will continue to focus on – focusing on serving them well and make them grow with our platform..

[Operator Instructions] The next question comes from John Blackledge of Cowen. Please go ahead..

Great. Thanks. On Shopee, any particular shopping categories that drove the [Technical Difficulty] and further accelerated in April and on April on the 140% growth in April, I was curious how growth is tracking....

Sorry, you’re breaking out.

Can you repeat the question, please?.

Yes, can you hear me?.

Yes, better..

On Shopee any particular shopping categories that drove the acceleration in 1Q and further acceleration in April and then [Technical Difficulty] growth that you are seeing that you maybe seeing in May? And then on SeaMoney, how should we think about the long-term opportunity and also just the near-term trajectory for [Technical Difficulty] and EBITDA losses which were $50 million higher? Thank you..

Yes. Thank you. So in terms of GMV growth, well I think if you look at our traditional segment that are – categories that are largest in our platform include fashion, health and beauty, home and living, baby products. We see very strong growth, accelerated growth, particularly in home and living, health and beauty, baby products.

We also see strong accelerated growth in FMCG, other FMCG goods, staple that we are also focusing on now to meet the surges in demand. So we think with the lockdown in place still in most of markets, this will probably continue for a while.

After the lockdown, we’ll have to observe, when life is back to normal, how much of that volume will continue to flow to us.

But I think what we focus on is, at this stage, when the users are being kind of naturally turning to online for – to fulfill their needs and these users are oftentimes the first time users, if you look at the e-commerce – low e-commerce penetration rate in our markets, we are not talking about alternative wallet share, we are actually talking about increase in terms of the baseline of new users coming naturally keen to be educated how to use e-commerce, and we are there – probably the first impression and providing the first time experience of e-commerce to them.

So this is what we focus on, whether they want to buy health products or FMCG or staple food, we try to as much as possible serve their needs well, and with our engaging experience as well as the large assortment of things, we can convert them into more frequent buyers into other products and goods as well.

So, during this period of time, we see increase in active buyers, sellers as well as by frequency, used to be between four and five, we see it increasing getting to above five and for some markets, even above six times a month.

So all the other categories are also increasing, even for fashion, which people might think as a more discretionary, we still continue to see year-on-year growth in April, professional order, but I would say the other category, the order growth probably is more pronounced compared to fashion, as now people don’t have to go out as much.

So I think, we will continue to observe going in to May. In terms of the long-term opportunities versus the EBITDA loss, if you look at our adjusted EBITDA loss per order, it’s at $0.60, now, which has been decreasing year-on-year and Q on Q.

And at the same time, if you look at our game EBITDA, this is, now it’s meaningfully larger than shop EBITDA loss for this quarter, which again as we said many times before that we want to breakeven we can any time, but we are focused on investing in growth – in extending our market leadership that will bring us much better return in longer run and profitability.

We’re very much focused on disciplined growth, and efficiency of growth.

And the same times, our view does not change that the investment in Shopee now is very effective and efficient and it’s increasingly covered by our cash generated from both Shopee monetization itself, as well as monetization from the digital entertainment side, which also is enjoying strong growth.

So we are in a, I would say, better-than-ever position now. And we’re very focused on maximizing the upside of being presented to us under the special situations, basically we’re fast-forwarding into the future.

The reason we focus on digital entertainment, e-commerce and digital financial services as our three core businesses is because our strong conviction in the growth of the digital economy of our region and that these three sectors are the largest opportunities in a digital economy of our region.

And with the current situation, we see that the adoption of digital economy as a whole has accelerated and the baseline has increased. And all three segments that we are focused on happen to be the biggest beneficiary. And we being the market leader in these segments, again, being the biggest beneficiary within these segments.

So we are very much focused on investing with discipline to capture that growth for our long-term potential..

This concludes our question-and-answer session. I would like to turn the conference back over to Yanjun Wang for any closing remarks..

Alright. Thank you everyone for joining today’s call. We look forward to speaking to you all again next quarter..

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect..