Good morning and good evening. Welcome to the Sea Limited Fourth Quarter and Full Year 2022 Results Conference Call. All participants will be in listen-only mode [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Ms. Min Ju Song. Please go ahead..

Hello, everyone, and welcome to Sea's 2022 fourth quarter and full year earnings conference call. I am Min Ju Song from Sea's Group Chief Corporate Officer's office.

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 a discussion of certain non-GAAP financial measures, such as adjusted EBITDA.

We believe these measures can enhance our investors' understanding 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 with me Sea's Chairman and Group Chief Executive Officer, Forrest Li; Group Chief Financial Officer, Tony Hou; and Group Chief Corporate Officer, Yanjun Wang. Our management will share strategy and business updates, operating highlights and financial performance for the fourth quarter and full year of 2022.

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..

Hello, everyone, and thank you for joining today's call. 2022 was another year of evolution for us, given the macro uncertainties, we pivoted decisively late last year to focus on efficiency and profitability. As a result, we began to see meaningful improvements in the bottom line.

For the fourth quarter, our net income and the total adjusted EBITDA both turned positive. Moreover, we generated $320 million of cash from operations in the quarter. It has not been an easy journey.

We could make this significant shift within such a short period of time only because of the collective efforts of our Sea team as a whole and a very strong determination and resilience that our team has demonstrated. We took the hard part, but we believe this is the right path to achieve long-term success.

As we continue this transition and manage sustainable growth going forward, we have adopted the approach of doing less, but doing this better. First, we sharpened our focus on areas with the greatest of potential across our businesses.

We exited or downsized operations in non-core markets, streamlined our pipeline with investments and project closures and deprioritized non-core initiatives. These measures brought immediate cost improvements. More importantly, they allowed us to focus our managerial, operational and financial resources on doing the core things better.

Meanwhile, we focused on doing better for our users across our digital ecosystem. At Shoppe, we continue to optimize customer services, seller management and logistics. At Garena, we worked to improve accessibility and the content quality of our core game.

We have also been leveraging SeaMoney's strong synergies with the rest of our ecosystem to better serve the under addressed the financial needs in our market. I will elaborate more in detail during the segment discussions.

Given the macro uncertainty and our recent strong EBIT, we continue to closely monitor the market environment and adjust our and fine-tune our operations accordingly. As a result, there may be near-term fluctuations in our results and performance.

However, we remain highly confident in the long-term growth potential of our markets and highly focused on capturing these opportunities. More importantly, our determination and ability to execute towards profitability enable us to start 2023 on a much stronger footing. Let's now discuss each business segment in detail. Starting with e-commerce.

I'm pleased to share that Shopee's adjusted EBITDA turned positive for the fourth time in the fourth quarter of 2022. The improvement we achieved in core marketplace revenue and operating costs were key factors driving fourth quarter profitability. In the fourth quarter, GAAP revenue was $2.1 billion, up 32% year-on-year.

This was mainly due to strong growth in core marketplace revenue. Within the core marketplace revenue, both transaction-based fees and advertising revenue increased as we deepened monetization and saw greater investments by sellers on our platform to serve buyers better.

Full year performance generally mirrored the trend of the fourth quarter with GAAP revenue growing 44% from 2021. In terms of operating costs, we made improvements for each of the major expenses in the fourth quarter.

GAAP sales and marketing expenses improved by 34% quarter-on-quarter and 55% year-on-year driven by more targeted investments across shipping incentives and brand marketing. There were also sequential improvements in R&D and G&A expenses. Now looking at each region.

In our Asia market, we reported a positive adjusted EBITDA of $320 million in the fourth quarter. This represents a significant improvement from the previous quarter, which had an adjusted EBITDA loss of $270 million. In our other markets, the adjusted EBITDA loss also decreased by more than 50% quarter-on-quarter to $124 million.

In Brazil, we continued to enjoy strong improvement in unit economics. Our contribution margin loss per order decreased by 54% from the previous quarter to $0.47. During 2022, we have been able to drive meaningful improvements in logistics costs to our ecosystem. This will remain an important area of focus going forward.

We believe that lowering the cost to serve will be key to our long-term growth by unlocking large underserved user segments across our markets. While we have already seen early results from these efforts, there is still greater room for improvement. In addition to cost management, we remain highly focused on improving user experience.

For example, we have been systematically reviewing and optimizing our process management for customer services. We focus not only on certain key metrics and targets for general user experience, but also on more proactive management of cases. On logistics, we have been working to provide a more efficient and reliable experience to our users.

This includes reducing wait time, minimizing delivery losses, and providing a more seamless impact experience to both sellers and buyers in managing logistics. The macro environment remains uncertain and there are still headwind on consumption in our market. With our recent pivot, we are showing a positive bottom line for the first time.

As such, our focus this year will be to continue to solidify the efficiency gains and optimize the cost structure across our markets. In our Asian market, we will work to further strengthen our leading position and profitability.

In Brazil, we will focus on driving the business towards profitability to capture the significant opportunity in this new market. GMV will largely remain an output for us in the near term. It is important to reemphasize our long-term focus on sustainable growth for Shopee.

In our view, e-commerce penetration to our market remains low as compared to its full potential relative to off-line retail. Our market also enjoys highly favorable demographical trend in terms of their large and growing digital population. This is further supported by long-term economic growth potential across our markets.

The key question presented to us at this stage is how much of these underserved needs for online consumption we can sustainably address? This determines the size of the profitable TAM [ph] we will be able to capture.

We believe a large part of the answer lies in our ability to continue to improve the cost structure of our ecosystem through creativity, technology, operational excellence and the most importantly an unwavering commitment to serve our users.

We believe everything we are doing now is to best position us to achieve visible growth, profitability and the defensibility of our ecosystem in the long run. Now let's turn to digital entertainment.

In 2022, online game as the market was broadly impacted by ongoing moderation in user engagement and monetization, our game experience and similar trends. During the fourth quarter, Garena guest revenue was $949 million and bookings were $544 million. Quarterly active users reached 486 million with 44 million quarterly paying users.

The paying user ratio and average revenue per user remains relatively stable quarter-on-quarter. For the full year of 2022, GAAP revenue was $3.9 billion, with bookings at $2.8 billion. Despite ongoing moderation, we remain highly focused on sustaining our current core games.

We prioritize user engagement by offering better and more enjoyable experiences in our game. We have targeted initiatives for existing and returning users. We have also been streaming line game content to improve accessibility and gameplay for all users across diverse markets.

In managing cost efficiency, we have comprehensively reviewed our publishing and staff development pipeline in line with our principle of doing less, but doing it better. As a result, we have divested and closed certain projects and remain selective about high potential projects to better direct our resources.

This year, we will focus on solidifying our strength in core games and communities while continuing to position ourselves to pursue long-term growth opportunities as they arise. Lastly, our digital financial services business. SeaMoney's GAAP revenue was $318 million in the fourth quarter of 2022, up 92% year-on-year.

Adjusted EBITDA also turned positive for the fourth time at $76 million for the fourth quarter. The improvement in profitability was driven by both strong top line growth and optimization of sales and marketing spends. For the full year of 2022 GAAP revenue was $1.2 billion, growing 150% year-on-year, and adjusted EBITDA loss was $229 million.

As of the end of the fourth quarter, the total loans receivable on our balance sheet was $2.1 billion, net of allowance for credit losses of $239 million. Our SeaMoney business is a highly synergistic part of our digital ecosystem.

For example, our mobile wallet has resulted in lower transaction costs and more stimulus transaction experience on Shopee. Shopee has allowed the mobile wallet to grow its user base and build user habits more efficiently.

With Shopee, our credit business is able to leverage a large captive user base, a highly relevant use case with significant scale and the wealth of user insights for more effective underwriting. At the same time, Shopee benefit as consumers enjoy more flexible payment options, successful credit and greater affordability.

We expect our digital insurance wealth management and the best businesses to enjoy similar synergies with our e-commerce platform to serve a large underserved community in our market. We see SeaMoney as an important long-term growth engine for us.

We will continue to prioritize the ecosystem strategy in pursuing this significant opportunity with efficiency and profitability. To conclude, our performance in the fourth quarter was an important demonstration of our ability to focus on profitability and deliver meaningful results.

This is a testament to the strength and the resilience of our underlying business model and the execution capability of our team. Although we expect macro uncertainty to continue to cloud the horizon in the near term, the long-term potential of our businesses and the market remains fast.

We plan to capture these opportunities while delivering strong and sustained shareholder returns over time. With that, I will invite Tony to discuss our financials. Tony Hou Thank you, Forrest, and thanks to everyone for joining the call.

We have included detailed 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 relevant metrics.

For Sea overall, total GAAP revenue increased 7% year-on-year to $3.5 billion in the fourth quarter and 25% year-on-year to $12.4 billion for the full year of 2022.

This was primarily driven by the improved monetization in our e-commerce and digital financial services businesses, partially offset by lower GAAP revenue in our digital entertainment business.

On e-commerce, our fourth quarter GAAP revenue of $2.1 billion included GAAP marketplace revenue of $1.8 billion, up 43% year-on-year and GAAP product revenue of $0.3 billion. For the full year of 2022, GAAP revenue of $7.3 billion included GAAP marketplace revenue of $6.2 billion, up 52% year-on-year, and GAAP product revenue of $1.1 billion.

E-commerce adjusted EBITDA stands positive for the first time in the fourth quarter at $196 million. The improvements were mainly from more targeted investments in our sales and marketing spending, deepened monetization and other optimization of cost structure.

Adjusted EBITDA for the fourth quarter was also positively impacted by approximately $80 million of accrual reversal resulting from changes in previous estimations of certain expenses as we made the management decision to strong exit a clear focus on cost efficiency. 2022 full year adjusted EBITDA loss improved by 34% year-on-year to $1.7 billion.

Digital entertainment bookings were $544 million in the fourth quarter and $2.8 billion for the full year of 2022. The GAAP revenue was $949 million in the fourth quarter and $3.9 billion for the full year of 2022. Digital entertainment adjusted EBITDA was $258 million in the fourth quarter and $1.3 billion for the full year of 2022.

In the fourth quarter of 2022, we also recognized an impairment of goodwill charge of $178 million pertaining to certain historical investments for the digital entertainment business.

Impairment of goodwill are excluded from segment adjusted EBITDA calculation as it is not reflected of the underlying trends in our current quarter operating performance. Digital Financial Services GAAP revenue was up by 92% year-on-year to $380 million in the fourth quarter and up by 116% year-over-year to $1.2 billion for the full year of 2022.

This was mainly driven by the growth in our credit businesses. Adjusted EBITDA turned positive for the first time at $76 million in the fourth quarter and adjusted EBITDA loss was $229 million for the full year of 2022. Improvements in the bottom line was driven by both strong top line growth and optimization of sales and marketing spend.

As of end of the fourth quarter, total loans receivable was $2.1 billion, net of allowance for credit losses of $239 million.

Nonperforming loans past due by more than 90 days as a percentage of our total gross loans receivable declined from less than 4% in the third quarter to less than 2%, mainly due to the shortening of loan write-off period in a certain market from 180 days to 120 days in the fourth quarter based on our assessment of historical credit losses.

Without this change in write-off period, the ratio would be around 5%. Returning to our consolidated numbers. We recognized a net nonoperating income of $35 million in the fourth quarter of 2022 compared to a net nonoperating loss of $71 million in the fourth quarter of 2021.

Our nonoperating income for the fourth quarter was primarily due to a $200 million net gain from 2022 convertible bond repurchase, partially offset by investment losses recognized amidst lower valuations in the broader markets. For the full year, our net nonoperating loss was $13 million compared to loss of $132 million for the full year of 2021.

We had a net income tax credit of $43 million in the fourth quarter of 2022 compared to net income tax expense of $106 million in the fourth quarter of 2021.

The income tax credit was primarily due to recognition of deferred tax assets from certain tax losses carried forward from our e-commerce business, partially offset by income tax incurred by our Digital Entertainment business.

We recognized the deferred tax assets as we assess that it is more likely than not that our future taxable income will be sufficient to allow the deferred tax assets to be utilized. For the full year, our net income tax expense was $168 million compared to $333 million for the full year of 2021.

As a result, net income was $423 million in the fourth quarter of 2022 as compared to net loss of $616 million in the fourth quarter of 2021.

This includes negative impact of $178 million impairment of goodwill related to certain historical investments for the Digital Entertainment business and the positive impact of $200 million net gain on debt extinguishment as well as positive impact of approximately $130 million in accrual reversal. For the full year, net loss was $1.7 billion.

With that, let me turn the call to Min Ju..

Thank you for that, Tony. We are now ready to open the call for questions. As usual, our Group Chief Corporate Officer, Yanjun Wang, will lead this call.

Operator?.

[Operator Instructions] Our first question comes from Pang Vitt from Goldman Sachs. Please go ahead..

Thank you, very much for the opportunity and Congratulations management team on a very strong quarter and solid turnaround. Two questions from me, please, on Shopee.

Number one, can you please explain to us on the major drivers that led to this really fast on about in Shopee earnings this quarter? How did you manage to achieve this? Is it by way of the take rate increase and cost cutting? Or is there a deliberate attempt to cut off unprofitable GMV in order to achieve this? That's question number one.

Question number 2, going forward, as you have already achieved solid turnaround in bottom line, how do you plan to balance between growth and profitability? How do we feel confident that growth will come back? And how do you view the current competitive landscape, especially direct from new social commerce player? Will you make sure that you maintain your market share? And is there any color or soft guidance that you can provide us when it comes to growth?.

Thank you, Pang. In terms of the drivers for our quick turnaround for Shopee, I think as we shared in the earnings and Forrest messaged earlier on, that it's on all fronts.

In terms of top line, we managed to increase our take rate and the monetization across various types of revenue, including the core marketplace revenue, which are relatively high margin as well as other types of revenue as our sellers invest more in the platform to grow with us.

And also on the cost front and expense front, we reduced sales marketing expense.

If you noticed, our sales and marketing for Shopee dropped more than 50% year-on-year, while GMV sustained and grew around 7% on the constant currency basis year-on-year, so that shows the resilience of our ecosystem and the strong leadership and execution excellence of our team in managing this fast transition over a few months' time to turn the platform into a positive bottom line, while still sustain a strong leadership of the platform.

At the same time, we also enjoyed savings in our R&D and G&A expenses quarter-on-quarter. So on all fronts, we've been improving and also is well aligned with our previous target to turn quickly and decisively as we see macro uncertainties in our markets.

And that has always been our ability to execute on what we deliver -- what we promised to the market and to our own teams. As we shared, there has not been an easy quarter. There's a lot of hard work, and we make sacrifices.

We exited the markets, we downsized operations, we walked through all these initiatives to decide which is core, which is less core, what we need to prioritize and what we need to deprioritize. With a lot of work condensed in a few months' time with a tremendous effort by the entire Sea team, and therefore, we managed to achieve this.

And I think this also gives us much better confidence to navigate whatever challenges that might come our way in the future. Now in terms of outlook and balancing growth and profitability. So as we shared also, our outlook for markets in the long run remains very strong.

Because of its demographic features, the young rolling population, deepened digital penetration vis-à-vis offline retail and also the economic growth potential of our region.

At the same time, we believe that all these efforts we are making in reducing the cost structure of our ecosystem, and strengthening our ability to serve our users with better user experience will allow us to capture a larger share of the pie in the long run and further strengthen our market leadership which is a dual role in addition to profitability we have for our Asian markets.

So there is not a shift in our view about the long-term growth potential and focus of our business to capture this opportunity.

In the near term, of course, we continue to see macro uncertainty, headwinds to consumption, so we will be adjusting and fine-tuning our pace and operations carefully in a highly dynamic manner, observe our markets from period to period and adjust accordingly.

And therefore, we also share that we may expect fluctuations in our performance and results in the near term from period to period. But on the other hand, I think we have demonstrated clearly our ability to execute both growth and profitability.

So in the long run, we are very focused on sustainable growth and further defending and solidifying our ecosystem.

Now in terms of competitive landscape, our view is that in the long run, investment in the ecosystem is important, but investment is not just solely in the shape of financial investment, but more importantly, in terms of operational capabilities, these local operational capabilities.

This is still a heavy operational system that we need to build for our online retail marketplace. Therefore, there will always become competitors or other entrants into the market with different angles, different positioning, different advantages, et cetera.

But the beauty of e-commerce is that it requires a comprehensive set of skills and capabilities that need to be built over a relatively long period of time, especially in our markets where infrastructure are still very underdeveloped, and especially in Southeast Asia, where the markets are diverse and their individual -- many individual markets.

Collectively, these are large opportunities, but you have to conquer them one by one. And every market test its own environment, its own setting, it's own requirements. Therefore, we believe we're unique in the sense that we're able to achieve strong market leadership market by market across so many markets in Southeast Asia.

And at the same time, quick turnaround of profitability, and that gives us confidence that we have more resources and capability not just financially, but also operationally and managerially to defend our ecosystem against any future competition, and we'll remain humble and remain vigilant on competition..

Our next question comes from Alicia Yap from Citigroup. Please go ahead..

Hi, thank you. Good evening, management. Congrats on the strong results and also thanks for taking my question. I have two questions.

First is I wanted to follow up on the previous regarding how should we balance between growth versus the profitability? Is there any short-term margin target that management would hope to maintain for each of your business segments? For example, if there's any incremental margin improvement that you can achieve, then you would reinvest those incremental back to the business to drive faster growth? Because you already turned profitable on both, for example, the Shopee and the DFS.

So I'm just wondering, is there a short-term margin target that you wanted to maintain and then any incremental that you can reinvest back to the business to drive faster growth? Second is on your digital finance services, given you will be rolling out the digibank initiatives soon, will that affect your EBITDA profitability trend for 2023? Thank you..

Thank you, Alicia. In terms of short-term margin targets, so different business units are different. Of course, for Garena, our focus now is continue to stabilize our user base and providing better experience to our users on our core games at the same time, continue to improve our profit margins.

I mean at more than 47% EBITDA margin, we believe that we are still very high compared to the industry average. And we have shown ability to achieve very high margin for the business before, and we'll continue to be very -- watching our margin closely to improve our efficiency.

In terms of digital financial services, I think we -- still it's very early stage.

We just turned a profit full in the first quarter, and we'll continue to expand the overall the service offerings to our users so that we can reach a broader user base and offer more diversified services and -- but the focus on that business is more on the quality and long-term sustainability and trust building with our users.

It's not to us at this stage a speed-driven business. We believe building a solid foundation, leveraging the ecosystem advantages manages it has being part of a Sea ecosystem with the strong synergies with Shopee, in particular, is the most important thing at this stage. And for Shopee, it's going to be a market-by-market dynamic assessment.

All our Asian markets are currently EBITDA-positive. Now Brazil market, which is relatively new, we've seen significant profitability improvement while we continue to see growth -- relatively stronger growth there compared to our Asia markets.

So I think it's going to be a highly dynamic process for each market at any period of time, we'll assess the market condition the natural user growth rates, the competitive landscape, our operational cost structure in that market, and then we'll assess what would be a reasonable profit margin we could achieve in that market versus the growth we want to achieve in the market.

As I said before, it's not necessarily a trade-off. If the business is -- the growth is driven only by investment in sales marketing, it's not a good business we want to be in to begin with. And the fact that we're able to cut sales and marketing by more than 50% while sustaining GMV already itself a strong testament of the our ecosystem capability.

So it doesn't necessarily go against each other. We don't necessarily think that growth and profitability need to be a trade-off.

We do think that while we some of our measures that we are focused on such as cost structure improvement, logistics improvement, seller management, better consumer services and better buyer experience all will improve the efficiency of any investment we make into our ecosystem and also improve the profitability as well as growth.

So a lot of it depends on natural growth, the macro environment, competitive landscape and our operational stage and views at any period of time in a market-by-market assessment. We don't have a single number for Shopee as a whole, but it's going to be a lot of bottom-up and dynamic assessment and fine-tuned operations.

So that's the trick of the business, but also, I think our range of strength in operating a highly diversified markets and with different development strategies, I think overall, we -- in long run, of course, we believe in sustainable growth, which also means profitable growth for the business, and we still see this as our strong growth engine..

Our next question comes from Piyush Choudhary from HSBC. Please go ahead..

Congratulations to the management on a strong set of results. Two questions.

Firstly, on Shopee, can you discuss GMV growth trends quarter-on-quarter in local currency, which markets are doing better? And any color on the outlook for '23? How is customer behaviour shaping with Shopee reducing promotions and shipping subsidy? I observe that your AOV has increased by around 22% in local currency terms.

So, what is driving that? Secondly, can you give some insights on your CapEx for 2023, which segments would you be investing? And what kind of investments we should expect in 2023 to strengthen your ecosystem? Thank you..

GMV remains output. And we will discontinue any quarter-on-quarter disclosure of operating metrics like GMV and orders and then we'll move to an annual disclosure in line with global peers.

In terms of CapEx for 2023, most of the CapEx in terms of the biggest ticket items are servers and then followed by some of the logistics related machineries such as sorting machines, and then office and data center leases, et cetera.

Now as we pivot to a strong focus on efficiency, we also have been significantly reducing and tightening our CapEx investments. So you still saw some CapEx spending in Q4 and may continue to see in Q1 earlier this year.

But going forward, we expect, at least in the immediate future, CapEx spending shouldn't be a significant part of our overall expenses.

The reason that we might still have some higher number in Q4 and Q1 is because the earlier commitments, as we shared in the previous quarter's earnings, some of the earlier commitments might arrive at a Q4 or Q1 timetable and that is not entirely within our control, and that might affect our financials. So it's a timing factor..

The next question comes from Thomas Chong from Jefferies. Please go ahead..

Hi, good evening and thanks management for taking my question. I have a question on Garena. Can you comment about the near-term trend and the full year outlook for the gaming business? I just want to get some color about whether we have any new games that we should be anticipating for this year? And my second question is about the total headcount.

Can management comment about the number of headcounts in 2022? And how we should think about 2023, if we would do the hiring?.

Thank you, Thomas. In terms of game pipeline, now as you're familiar with us, we don't discuss games that have not been publicly launched. And previously we mentioned that we have some games such as is being tested and might get released this year. And then also, there are always games in the pipeline we are focused on.

But also more importantly, the key focus in the near term, still on the core games and in particular, Free Fire that we want to turn into a strong evergreen franchise.

Although we continue to see some weakening in user trends in comparison to the significant growth it achieved during the COVID times, we do believe that there is a core defensible user base we can achieve, and it is a long-lasting franchise.

So there are a lot of things the team are currently doing and focusing on with the best talent and some of the top creative people we have to deliver better user experience, more accessible game package, more efficient downloading and also in terms of the content that is more suitable for our users and more interesting to them, even despite their many years of experience of playing this game.

So we think that still the focus in the immediate future. At the same time, we continue to form our core competency across some of the core genres that we have strong experience in and continue to observe any opportunities that my advice in the market and pick up new skills and new trends along the way.

So while game is from a financial perspective, we saw some weak trends immediately. We are -- from an organizational perspective as a whole team, we are very focused on game in the long run because it is the closest to the younger generations, and we already have a very strong and big platform.

Free Fire, despite its recent weakening, it's still one of the largest mobile game in the world and with very large user base and highly active spending a lot of time daily with us. And we can do a lot of things with them and engage them much better and also deliver new and more content to them down the road.

So this is something that we are very much focused on and will not give up on. In terms of headcount management, we had some headcount exercises, as we shared before, these are in relation to the operational changes we made, such as market exits, project closures, deprioritizing of initiatives, et cetera.

We didn't have any particular target of a X percentage to cut for a wide number of teams. That's not how we do headcount exercises.

So I think we also believe that with the successful completion of the major changes that we undertook in the past few months, we believe under the current environment, absent any major shifts in our external conditions, that our major changes are completed, and we do not foresee major changes -- more major changes in this year and in the foreseeable future..

Our next question comes from Jiong Shao from Barclays. Pease go ahead..

Thank you, very much for taking my question. I have two as well. The first is about Brazil. Will you be able to talk about the growth year-over-year or quarter-over-quarter for Brazil? And also, you cut the loss pretty drastically, which is great from like two bucks a year ago to now less than $0.50.

Could you talk about the drivers behind that? And do you have any expectation for breakeven in Brazil? My second question is about take rate. Again, my calculation shows the take rate is now above 10%. And you have made a progress in take rate every single quarter over the last few years.

I was wondering, do you have a target like for continued improvement for take rate this year? Thank you, very much..

Thank you, Jiong. In terms of the Brazil market, we managed to make significant gain in efficiency in our operations and also partly as a result of our scaling that there's efficiency gain from -- naturally from scale.

The drivers behind the fast reduction in order loss per order, similar to our other Asian markets, coming from both top line growth as well as cost improvement, in particular, logistics costs that we are very focused operationally on reducing for our users.

So that we can serve more under addressed segment's profitability and sustainably down the road. This will be our focus in the near term.

And while we don't give any projection or guidance breakeven time, we also do think our market in Brazil can also grow profitably over the long run, will be another significant opportunity that we should be able to capture.

And another thing is, as we shared before, the reason we are very focused on cost structure, in particular, logistics, is because we are trying to expand the profitable TAM for the market as a whole by addressing sellers and buyers who are underserved or unaddressed by existing players and having a better structure, having more target focus on the mass market allow us to be a differentiated player in the market, capturing a significant share of the pie in our view.

Now in terms of the take rate. So we do believe there is still room for expansion on take rate.

And just like our view about every market, we'll do it in a measured paced way and with strong communication to our sellers and as our platform grows and as we -- as sellers grow with us and invest more on our platform, while at same time growing their business.

The overall take rate in the Brazil market, as you probably know, obviously materially higher than many other markets. And there are, of course, more services being provided to the Brazilian sellers and buyers in view of some of the infrastructure differences in the market.

Therefore, we believe this is a strong market, and we do focus on growing that market..

The next question comes from Varun Ahuja from Crédit Suisse. Please go ahead..

Congrats on turning profitable. I've got a few questions. First, on the gaming side. If you look at your revenues right now, adjusted for the bookings, it's just 6% above pre-pandemic level. And if you look at the user base is around 20%. So how should we think like most of the benefits from the pandemic seems to have waned out by the fourth quarter.

Do you see more stabilization now on the gaming side? Or are you seeing there's still more headwind in front of that? Second, sticking to gaming side, if you can give some color on the team strength on the R&D side? How many people are there on R&D side split between new game development and versus on Free Fire? And thirdly, again, on the gaming, any update on the right of first refusal that you have with Tencent coming in this year? Lastly, on e-commerce, if you give some color, qualitative or some numbers on HQ cost quarter-on-quarter? Because we have been historically giving some commentary on the HQ cost for the e-commerce, while this quarter, there's isn't much commentary, so I just want to see how that cost has trended during this quarter? thank you..

Thank you, Varun. In terms of gaming, I think it's still too early to tell the trends. Obviously, COVID is such an unprecedented event. Nobody has any data on it. And also reopening together with inflation that had double headwinds from people's discretionary consumption power also further compounding the effects that we are seeing.

And therefore, it's premature for us to project where the game trend is going to event. But we have seen mobile games with long shelf life have seen also revival and when they have the right content and release at the right time are well received by users.

So that can be achieved, of course, with a lot of creativity and efforts, and that's what we are focused on. We won't be able to give guidance on any short-term trends at this point yet. In terms of R&D and relationship with Tencent.

Our R&D, while at the same time, we have been focusing on concentrating our resources and shared earlier and the divesting projects and deprioritizing, non, less pharmacy initiatives. At the same time, we are moving people towards more focus on the core projects and more promising ones down the road. Therefore, there are shifts in the staffing.

But overall, we maintain a very strong R&D team. In terms of relationship with Tencent, also, there has not been any change in the relationship. On the HQ cost trends, also trended downwards in terms of the efficiency gain we had in managing HQ costs. So there's Q-on-Q improvements on that as well..

The next question comes from Ranjan Sharma from JPMorgan. Please go ahead..

Good evening, and thank you for taking question. Two questions from my side.

Firstly, on the cost side and adjusted EBITDA, have there been any severance costs accounted for in this period? And with the cost optimization initiatives that you have done, how should we think of R&D and G&A costs in 2023 versus 2022? Secondly, on the fintech side, the loan book is down from third quarter to fourth quarter, considering your comments around macro headwinds and -- which cloud's outlook, how should we think of the loan book growth going forward? Thank you..

Thank you, Ranjan. Now in terms of severance, the impact has not been very significant. And I think, it's comparable to the previous quarter, and we don't seem it to be material. So there was no separate disclosure. We don't think it will also have any material impact on our 2023 financials.

In terms of R&D and G&A costs in this year, we continue to focus on efficiency improvements and tightening and also make sure that our costs are efficient relative to the size of our platform and our businesses.

In terms of the loan book growth, as we -- as I mentioned before, for the credit business and the SeaMoney business as a whole, we don't expect to be -- at least at this stage that we're not going to invest significantly to drive rapid growth and land grabbing.

We're more focused on building a solid business with strong underwriting and a strong user base serves them well and also diversify our offerings and also diversify our funding sources over time to build a sustainable long-term -- sustainable business with long-term growth.

So that's something that, given the current macro uncertainty and synergistic play with Shopee, we do not think that the growth is a KPI for our team in terms of the loan book, more -- our KPI is more in terms of quality of the loan book and profitability of the business..

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

Thank you, operator, and thank you all for joining today's call. We very much look forward to speaking to all of you again next quarter. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..