Earnings Call: Q1 2021

May 18, 2021

Good morning and good evening. Welcome to the Sea Limited First Quarter 2021 Results Conference Call. All participants will be in listen only mode. 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. Minju Song. Please go ahead. Hello, everyone, and welcome to Sea's 2021 First Quarter Earnings Conference Call. I am Min Thank you, 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 and net loss excluding share based compensation. 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 usual 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 MiSeas Chairman and Group Chief Executive Officer, Forrest Li Group Chief Financial Officer, Tony Ho and Group Chief Corporate Officer, Yanjun Wang. Our management will share strategy and business updates, operating highlights and financial performance for the Q1 of 2021. This will be followed by a Q and A session in which we welcome any questions you have. With that, let me turn the call over to Forrest. Thank you, Minju. Hello, everyone, and thank you as always for joining today's call. We are pleased to start 2021 on a strong note With our results for the Q1 showing continued high growth across all our businesses. Even with the gradual recovery in offline activities in our region since the second half of twenty twenty, Our strong performance in terms of user growth and engagement shows that digital adoption is still rising healthily As the communities we serve continue to embrace the benefit of online lifestyle. At the group level, for the Q1 of 2021, we are happy to report GAAP revenue of CAD1.8 billion, which represents 147 percent year on year growth. We recorded particularly strong growth in gross profit, Which reached CAD645,400,000 up 2 12% year on year. Well adjusted EBITDA was CAD88.1 million compared to a loss of CAD59.9 million a year ago. This strong performance on both the top and the bottom line once again demonstrates these ability To capture the high growth potential of the industries and the regions we operate in, while deploying capital and resources effectively and efficiently across our businesses. Before we discuss our business performance in detail, It is important to note that many of the communities, consumers and the small businesses we serve continue to face Significant challenges as a result of the ongoing impact of the pandemic, including recent increases In cases in some countries, at sea, we are committed to play our part In helping our communities navigate these ongoing challenges, this includes support to address the most surprising near term needs of Our communities as well as our systems focus on helping more people to benefit from the growth of the digital economy. Our global teams are working hard to identify ways in which we can offer tangible near term support to our communities. For example, in Badong, Indonesia, we recently set up a vaccination center in collaboration with the West Java Health Office to deliver 20,000 doses of vaccine. In the Philippines, we launched a second series of our frontline package for healthcare workers, Delivery and the logistics providers and other personnel who contribute in the fight against the pandemic. We have offered them an exclusive package of discount and mobile vouchers and prepaid WiFi devices From Shopee and its partners. Meanwhile, we are mindful that many small businesses around the region are Still recovering from the shock of the last year, and we continue to invest in initiatives to help them successfully adjust to the digital economy, As an example, in March, Shopee announced that it will work with the School of Export in Indonesia To help 500,000 small and medium enterprise export their products by 2,030. In April, Shopee Pay announced that it will be offering training programs for female entrepreneurs in Indonesia to digitalize their businesses and expand their customer reach. In Malaysia, Shopee worked with the Federal Agriculture Marketing Authority to teach local farmers on how to effectively move their businesses online and adapt to the effects of the pandemic. We also continue to grow talent during this difficult period. We are clearly aware that many people in our key markets, both young and old, may need to cultivate new skill sets To benefit from the rapidly growing digital economy, we want to do our part to bring positive impact to our communities By helping to nurture these new skill sets, in February, we announced the 2nd season of our Shopee Code League, The largest online code lead in Southeast Asia and Taiwan attended by 15,000 participants from 8 countries. In addition, as an ongoing initiative, our Garena Academy in Thailand helps guide and educate young people on how to develop a career in the gaming and esports industry. Most importantly, We are proud to serve the underserved with our businesses by connecting communities, enabling consumers And empowering small businesses, especially those who traditionally like access to tech platforms and the opportunities they bring. With that, let me now discuss each business individually, starting with digital entertainment. Garena delivered another quarter of outstanding performance. Bookings were $1,100,000,000 up 117% year on year, while adjusted EBITDA reached $717,300,000 up 140% year on year. In the quarter, quarterly active users Reached 648,800,000, up 51% year on year, while quarterly paying users Hit 79,800,000, up 124% year on year. Our paying user ratio rose to reach 12.3% compared to 8.9% a year ago, showing that we can grow our user base, while also deepening monetization. Once again, Free Fire had a standout quarter As our focus on building out the platform with more creative and engaging content and user engagement activities Indeed, Brickfire remained highest America, Southeast Asia and India for the quarter according to F and E, maintaining its top rank Latin America and Southeast Asia for 7 consecutive quarters and achieving the same in India for 2 consecutive quarters. A key success factor is our ability to keep our strong global community deeply engaged with our platform In the Q1, we rolled out partnership with popular Japanese manga titles like 1 Punch Man and Attack on Titan To create memorable crossover events and the content experiences for our users. We also received very positive feedback When we introduce the in game characters based on popular local celebrities, for example, in Vietnam and in MENA, We collaborated with the popular WePok train, Samsung MTP, Who has more than 9,000,000 followers and nearly 2,000,000,000 views on YouTube and the famous Egyptian singer An actor, Mohammed Rademen, who had a top hit song last year that has since generated over 225,000,000 views Our community engagement and esports efforts Our key drivers of success, in the Q1, we introduced a highly popular community content around India's Holy Festival, a special free fire music video for the festival, drove 15,000,000 views. We also organized esports tournaments like the Free Fire League Latino America 2021. In April, our flagship Garena World event generated an online audience of 1,200,000 During the fully virtual 2 day event that was hosted in Thailand, we used the combination of augmented reality, Visual effects, animation and other technologies to provide our fans with an interactive and immersive experience. For example, we hosted a dedicated live streaming platform where viewers can customize their avatars and express their views through chat. We also welcome 39 teams from 9 regions to The best battle royale game. These efforts to grow and strengthen the Free Fire platform Through continuous content rollout and emphasis on community building activities have delivered clear results, not only in terms of Indeed, Our Free Fire cohort analysis shows that even as strict lockdowns in our core markets have been gradually eased Since the Q2 of 2020, time spent per daily active user on Free Fire remains far higher The pre pandemic levels, we are encouraged to see that for older cohorts. The time spent per active user And especially paying user ratio are still rising even though these users have been playing Free Fire since its early days. New cohorts also start off stronger than older cohorts, displaying a higher and faster growing paying user ratio Looking ahead, we continue to plan for a deep pipeline of innovative content, Fresh partnerships and exciting esports activities to further and better engage with our ever growing global communities of users. We are also working to ensure that our long term games portfolio pipeline remains strong. A significant number of our more than 1,000 in house game developers globally are constantly working on new ideas, While we continue to engage with 3rd party game studios for collaborations on promising and complementary game development and publishing Shopee delivered exceptional results for the Q1, building on its stellar performance in 2020. As this continues to gain momentum and attract more buyers and sellers. In the Q1, Shopee recorded 1,100,000,000 sports orders, up 153% year on year And GMV of $12,600,000,000 an increase of 103% year on year. GAAP revenue grew 2 50 percent year on year to $922,300,000 Our year on year order growth rate continues to accelerate in the quarter, Adjusted EBITDA loss per order fell once again. It declined 38% year on year to RMB0.38 during the quarter, Demonstrating the growing efficiencies of our core e commerce operations, even as we continue to invest in growth. According to SME, Shopee continued to rank 1st across Southeast Asia and Taiwan By average monthly active users and the total time spent in app on Android in the shopping category for the quarter. In Indonesia, Shopee's largest market, we continue to ramp 1st across those same metrics, while our year on year gross order growth further accelerated in the quarter. We also saw growing user reception to our platform in Brazil. We will continue to assess the Our focus on executional excellence remains the key factor driving Shopee's sustained success. In everything we do, we are relentlessly about optimizing our performance and maximizing the output. In the Q1, we rolled out more initiatives to support our regional seller base and the brand. As an example, for small, medium sellers, we worked with SkillsFuture Singapore in March to offer a step by step program to successfully help them to transition online. For brands, We launched new programs like our regional champion brand program and our $100,000,000 club to help them maximize their online growth potential. We also gave out awards like Best of Product Launch For Best Attack Innovation to reward brands who have differentiated themselves on our platform like P&G, Disney, L'Oreal, Samsung and Unilever. We are happy to The number of brands working with Shopee Mall has grown to more than 25,000. To conclude, we believe that e commerce penetration remains low across all our markets, in spite of the step change In digitalization since the onset of the pandemic, against this backdrop, we remain committed Alongside our commitment to focus and invest with efficiencies for the long term will allow us to build a healthy Turning now to Digital Financial Services. SeaMoney continues to see very high growth In the quarter, building upon its excellent performance last year. For the Q1, Zimani's mobile wallet services reported a total payment volume of $3,400,000,000 which more than tripled compared to the $1,100,000,000 a year ago. Quarterly paying users surpassed 26,100,000 in the quarter. We are pleased that Shopee Pay continues To gain traction at the quick and convenient online and contactless payment option. Indeed, According to Snap Card Indonesia Subway in March, Shopee Pay was the most used, the most remembered and the most liked Mobile Wallet by Indonesian Consumers during the Q4. In addition to leveraging the strong and the growing on platform use On Shopee, we continue to expand our range of off platform use cases. For example, Shopee Pay is now available as a payment option at Indomart, one of Indonesia's leading convenience store chains, As well as various popular F and B chains such as Wendy's and the Domino's Pizza. The reception so far has been strong. In the 1st week of our partnership with Indomart, more than 1,000,000 transactions were paid using Shopee Pay. We also added new features to the Shopee Pay experience to enhance its utility for both consumers In April, we launched a new feature called More Around Your Permall For Dear Deals Near Me, which shows the users attractive deals in their immediate vicinity. User can then purchase the relevant vouchers on the app and redeem them immediately at the physical outlets. This has been highly successful in driving significant actual football for onboarding off line merchants. We believe the digital financial services sector in our region is still in the early stages and expect it As we scale this business, we will apply the same reward and discipline in efficiency as we have To conclude, our first quarter results is a great start to the year. Each of our businesses has performed impressively and is well positioned to benefit from attractive long term industry potential. Yiwen, when offline activity continues to resume, we expect rising digital adoption to be a tailwind We will also keep investing prudently and efficiently And the small medium businesses with technology is stronger than ever, and we are determined to enable more people across our communities to benefit from the digital economy. With that, I will invite Tony to discuss our financials. Thank you, Boris, 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. 4Q, overall, total GAAP revenue increased 147% year on year to $1,800,000 This was mainly driven by strong performance in our e commerce business as we continue to roll out tools to better serve our users' needs As well as growth of our digital entertainment business, especially our sales developed games Free Fire. Digital Entertainment bookings grew 117% year on year to $1,100,000,000 GAAP revenue was up 111% year on year to $781,300,000 The growth was primarily driven by the increase of our active user base and deepened paying user penetration as we continue to engage Digital Entertainment adjusted EBITDA was $717,300,000 This represents year on year growth On e commerce, our first quarter GAAP revenue of $922,300,000 included GAAP marketplace revenue of $715,900,000 up 2.85% year on year And GAAP product revenue of $206,400,000 up 167% year on year. The strong results demonstrated the deepening penetration of e commerce and our ability to capture these accelerated growth opportunities As we continuously enhance our offerings to create greater value for our platform users. E Commerce adjusted EBITDA loss was $412,900,000 as we continued our investments to fully capture the opportunities in our markets. We remain committed to efficiently investing in and growing the ecosystem to serve our users better. Digital Financial Services GAAP revenue was $51,300,000 an increase of 3.96% year on year from $10,300,000 in the Q1 of 2020. The growth was primarily due to increasing traction as we compared to a loss of $93,100,000 in the same period of 2020. This was primarily due to our continued efforts to drive mobile wallet adoption. Returning to our consolidated numbers, we recognized a net non operating loss of $23,300,000 in the Q1 of 2021 compared to a net non operating income of $11,200,000 in the Q1 of 2020. Our non operating loss in the Q1 of 2021 was primarily due to increased interest expense on convertible notes. We had a net income tax expense of $51,000,000 in the Q1 of 2021, which was primarily due to corporate income tax and withholding tax recognized in our Visual Entertainment business. As a result, net loss, Share based compensation was $320,000,000 in the Q1 of 2021 as compared to 200 $39,500,000 for the same period in 2020. With that, let me turn the call to Yanjun. Thank you, Forrest and Tony. We are now ready to open the call for questions. Operator? We will now begin the question and answer session. In the interest of time, we will take a maximum of 2 questions at a time from each caller. If you wish to ask more questions, please request to join Our first question comes from Thomas Chong from Jefferies. Please go ahead. Hello, Thomas, is your line muted? Thanks management for taking my questions. Can you comment about the life cycle of our refiner as well as the pool drivers in terms of MAU, Thanks, Thomas. Regarding your question, sir, your line isn't super clear. I understand your Regarding the life cycle of Free Fire as well as the growth drivers of the users and ARPPU And whether the new growth is coming from LatAm region, are these correct? I'll answer these questions first. Regarding the 3rd party, I think as we can observe from our disclosure of quarterly active user, quarterly paying user And bookings as well as the bottom line on adjusted EBITDA, which is Largely also attributable to Free Fire being a global game and growing at a very healthy rate Globally, we see it still at its early stage of the lifecycle. And in fact, We see it increasingly as a platform and a major IP franchise. We are focusing on continuing to grow our user base. The growth driver of the growth come from both Southeast Asia and LatAm as well as India and the rest of the world. And that's the same for both user base as well as pay user base. So we're still at an early stage of driving growth On the user base as well as pay user base for this game and developing it into a increasing a social platform where people not only Can't play the core gameplay, but also enjoy other modes, hang out, listen to music, socialize. The time spent in the game continues to be very high, 2 to 3 hours per daily active user. And as we discussed in the Earlier comments that we observed very encouraging trends on the cohort analysis as well, where The older cohorts who have been with us since the early days of this game have shown stronger trends And there is also, as we mentioned, positive feedback loop Between paying user as well as stickiness of the game, as user pay and pay more, they tend to Play the game more and be with the game for longer. We also been focused on building our ecosystem on eSports, the communities As well as collaborations with 3rd party IP, as we mentioned before, we have Collaborated with, for example, One Punch Man, which is a very successful campaign to promote further engagement in our game. I think this is very much a broad based user growth as well as pay user growth, and we'll continue to focus on growing this The next question comes from Piyush Mubayi from Goldman Sachs, please go ahead. Thank you, Forrest, Tony and Jim. When I look at the e commerce business, I was hoping you could shed some light on where you are in Brazil and also help Understand the drivers of the improvement that we saw in the take rate and related to e commerce In better understanding the spend that is taking place, would you be able to tell us or give us a feel for how much the investment is that's The drag on the EBITDA for the e commerce side at this stage in the 1Q period. Thank you. Thanks, Fiyush. As we mentioned earlier, we've seen continue to see positive user in Brazil, and we'll continue to invest to enhance our offerings to our sellers and growing user base there. At this stage, it's still very early for us, and we are continuing to observe the trends locally and focus on efficient investments there. Could you shed some light on whether there is a drag on the overall EBITDA because of investments in Given it's still very early I think it's still too early to talk about the market separately. Overall, I think the Contribution in terms of the margin we're seeing from an e commerce perspective is still very positive. Our EBITDA loss per Order continues to fall. And in terms of top line growth, at 2 50%, which is very, very strong on all fronts. So I think that it's still very early stage hopeful for us to discuss even in the separate market. The next question comes from Alicia Yap from Citigroup. Please go ahead. Hi. Good evening, management. Thanks for taking my questions. Congratulations on the solid results. I have 2 quick questions. Number 1, just wondering if management can share the conditions in India, Given the Free Fire attractions there, given the lockdown, do you actually see the time spent increasing Or you're actually seeing some negative impact because of the illness and the instability. So any color on the game performance in India? And then second question is on the food delivery business. If you can share your plans and ambitions, will that be more complementary Or is it a need to win basis that you wanted to challenge the market leader? Thank you. Thank you, Alicia. Regarding India, we also observed the local situation. Firstly, India has, as we mentioned in our earnings, continued to be a top grossing market and where Our game performed very strongly. Time spent per user continue to be very high. We see rising pay user ratio there. We see it as a highly promising market and will continue to contribute meaningfully to our growth In a game with a very long runway, and we'll focus on promoting our game and user engagement in India. And in terms of food delivery, we see it as a category on shopping. And we see very strong user reception And similar to how we're able to grow all these other categories, Shopee Through strong execution, right business model and user engagement. And as we mentioned before, For food, we see it as a more of a complementary to our other e commerce offerings. And we do become the market leader naturally like what happened in Vietnam. We're happy to see that, but we see it as a Focused on healthy growth and sustainable growth as a part of the overall e commerce ecosystem. The next question comes from Ranjan Shlarna from JPMorgan. Please go ahead. Hi, it's Ranjan Sharma from JPMorgan. Thank you for the presentation. Two questions from my side. Firstly, on Shopee in LatAm, you have seen success in driving adoption in Brazil, in Mexico. If you could also share How you see the rest of Latin America as an opportunity for e commerce? And secondly, on food delivery, You are in Vietnam, you are in Indonesia. How should we think about Shopee Food expanding throughout RCM? Thank you. In terms of our lifetime market, again, even Brazil is very, very early stage Not to mention the others. We don't have much to update at this point. If there's any development, then we will update the market. Same thing for food. We've been doing food in Vietnam and has been the market leader there. And in Indonesia, we very recently rolled out first in Jakarta and graduating other expanding to other markets over But we have not announced any plan for any other markets. If there's any update, we'll also let the market know. The next question comes from John Blackledge from Cowen. Please go ahead. Great. Thanks. Two questions. First, could you just give us an update on Joffe's competitive positioning In the core markets in Greater Southeast Asia. And then this is kind of an ask I'm going to ask again. Sales and marketing spend was higher than expected. Could you just provide some further color on the sales and marketing spend? And was Brazil Thank you. Thank you. In terms of competitive landscape, it continues to improve for us as we Continue to extend our market leadership in the markets across all fronts and as evidenced by our Improving the top line GME order growth at a very high rate, more than 150% in Southeast Asia plus Taiwan and also our increasing take rate over time And monetization, in terms of sales and marketing spend, I think our top line growth also probably in a way exceeded the consensus. So sales and marketing spend as a percentage of GMV actually dropped quarter on quarter. So I think we'll continue to observe the trends. Now it's very important to note that this is really a managed outcome for us As we look at all the opportunities, as a company that we have this is actually the 11th quarter That we've shown triple digit growth at the top line. I think a company of our scale and size And speed of growth, there might not be many other large cap Internet companies that have Showed this level of sustained very high growth. And our growth is carefully managed results Through prudent and efficient spending and investment in the long term development And we are in high growth regions, whereby the penetration of the show economy is still very low. So the runway is very, very high. The competition landscape is not a kind of red ocean, 0 sum game situation. Instead, we actually continue to see our market leadership Dandi, as we while we are bigger, we are also growing, we believe, at a faster rate than many other players. So that actually bodes very well for our growth opportunities, and we want to continue to invest in the long term The next question comes from Josh Levin from Autonomous Research. Please go ahead. Hi, good afternoon. I have two questions. First of all, in the ecom business, as you think about the future, How are you thinking about the mix of in house versus 3P Logistics? And then second, what are the implications Of Gojek and Tokapedia merging for your business? And do you see any disadvantage to not having a ride hailing business? Thank you. In terms of logistics, our approach has been quite consistent, Where we primarily work with 3rd party logistics services providers in our region And who've been also focused on investing in growth with us, and we further more deeply integrated with them, Help them to improve their efficiency and quality of services to our users as we continue to see delivery time being shortened, Efficiency improved and cost lowered over time. Our own express delivery services are complementary to the 3rd party logistics services in this market. And of course, we will have continued to have the first party capabilities to make sure our users are well served, especially during peak season or sometimes during the lockdowns when there could be In terms of the implications of the merger, first, we'd like to Congratulate our friends on their successful merger. And we think that, as I mentioned, It's a huge opportunity in our region. There is a very long runway, and we should all collectively focus on Spending the pie and growing the digital economy in our region and investing in the long run to In terms of the disadvantage of any not having any particular business, We don't really see that. We think that we are very fortunate to have 3 of the largest consumer Internet opportunities in the high growth region that we are in, and we are able to manage it across so many Complex and different markets. And with the 3 growth engines and also Actually, a highly profitable game business that helped to largely fund our growth in e commerce and digital financial services, We think we stand in the best opportunity to in the best position to really capitalize the opportunity to build the largest consumer Internet ecosystem in this region, and we'll continue to focus on executing our core businesses as well as building this ecosystem. The next question comes from Piyush Choudhary from HSBC, please go ahead. Good evening. Thanks a lot and congratulations for solid results. Two questions. Firstly, for Free Fire, could you share your thoughts on where do you see opportunity to And where time spent per user can potentially expand? Secondly, on your digital financial services strategy, Beyond wallets, can you talk about your consumer lending and merchant lending products? How has been the response to buy now, pay later and merchant lending and Your outlook for regional expansion? Thank you. Yes. I think we continue to see opportunity to expand our user base in across all markets in Southeast Asia, Lat The trends, historically, we see the penetration rate is still deepening over time, So as pay user penetration rate. And as we continue to roll out more IP engagements And different game modes and engage with our users online and offline through different activities, community engagement. We think there are definitely opportunities to further grow the user base as well as user time spent on the platform. We have seen user can spend for some of the top users who can spend multiple hours a day on the platform, And we are focused on, of course, more of a raw base time spent as opposed to talk I'm spent by a small group of users. Of course, with more than 100,000,000 daily active users, we're talking about A much larger community over time. So our focus is continue to promote a massive based Online platform and an online community and provide them with content and opportunities for Socializing, engagements, trial different modes of games, trial different characters, avatars or Having different ways of playing, for example, we recently are launching a more of a mystery solving Game mode, something like Among Us with pets that players own in this game. So we're continuing to innovate to bring more content to them, and that's what we focus on in growing the user base as well as time spent per user and engagement in the game. In terms of the final pay later program, we see it as an integral part of our Money services to our whitelisted Shopee users. And as we continue to improve our model And understand our user behavior better, we might gradually roll out the program across more user a larger user base as well as More markets, but we continue to focus on efficiency, high quality lending and management of user experience in that respect. I think this is a program that facilitates Wallet usage as well as further facilitate growth of our e commerce platform at the same time allow us to provide better services and have better models, on top of which we can build other digital financial services such as Intratech and Wealth Management Technology Services. Again, we'll continue to focus on Using technology to power delivery of underserved financial services to underserved Communities and we are focused on collaborating with other financial institutions in growing the pipe together collectively. The next question comes from Varun Auj from Credit Suisse. Please go ahead. Yes, hi. Good evening, management, and thanks for the opportunity. Three questions. First, on the e commerce side, I think 1Q is seasonally supposed to be relatively weaker given it's coming out of a strong 4Q, but this quarter It's again a 6% quarter on quarter growth on GMV, so a strong growth. Can you just give some colors in terms of which segments and which countries It's doing well. And obviously, you have not given the number of orders by Indonesia. If you can give some color on that front, that will be helpful. On the gaming side, can you provide a little bit more color on have you launched Free Fire MAX? And anything about the Any game launches, any time, anything color that will be helpful? And if yes, on Free Fire Max, any color how is it Thirdly, on the Digital Financial Services side, if you can share how much of this $3,400,000,000 of TPV is related to the e commerce fuel platform versus how much are third party? Any break up? That would be helpful. Thank you, Beryl. In terms of the E Commerce business, yes, it continues to experience hypercharged growth across all markets And categories, so our category composition really hasn't shifted much. And we continue to see growth across all major categories. And same for the market, different markets. In Indonesia, we mentioned that our year on year growth rate actually further accelerated. In fact, this is the highest year on year growth rate we've seen in recent times. And in terms of Free Fire MAX, we continue to The proof on that is the game and in terms of understanding our user preference and behavior, we've been testing it In control environment in select markets, to work on this version, I think our goal is to have different offerings for users with different preferences and have integrated and seamless user experience Okay. In terms of our new game launch pipeline, I think we previously announced Amdons, which is an open world survivor game. And we believe it will also Offer a fresh content to communities in our game world. And then also the Moonlight Blade, which is MR RPG game and based on a more well known IP in parts of Asia. I think these are some of the examples that we have mentioned in the pipeline. Again, as you know, practice, while we do have a long pipeline of potential IP, we don't We announced those in earnings. We really would like our gamer community to hear directly from our game in the first. And in terms of the TPV, most of it still are related to As well as our self owned services, as I mentioned before, we believe the most efficient way Of growing our SeaMoney business or in particular the e wallet business is through growing our own ecosystem of We own the use case, which also happen to be the largest and some of the highest quality online use Our next question comes from Pang Vit from Goldman Sachs, please go ahead. Thank you very much for the opportunity. Just two questions for me. Firstly, on Garevena, can we understand why is the margin decline quarter on quarter given that Free Fire continues to Dan, is this based? And second question is related to COVID impact. We've seen a worsening in COVID situation of October, Should we expect a massive round of service support program as we've seen last year? Thank you. Thank you, Fran. In terms of the EBITDA margin, we mentioned before that we believe our EBITDA margin might fluctuate From time to time, but remain at a high rate compared to the industry average. So more related to the Q1, as I mentioned, we have IP collaboration such as One Punch Man and this might also contribute to additional payout we need to make to 3rd party IP owner. But overall, we think this is very helpful in further engagement with our users and in promoting our games to a broader base and in promoting the pay user as well. So we will continue to focus on growing the user base and pay user base and user engagement. We have proven our ability to commercialize any whether it's self developed or third party IP incorporated We are at in our being broadly across many markets. In terms of COVID impact, You're right that we have seen a resurgence of cases and restart of some Form of lockdown or restriction of social movements in our region, such as Taiwan, Singapore, Other countries like Indonesia, Malaysia, Philippines, we continue to see a large number of cases. So I think we're So very much in the COVID situation, and we are well prepared, we believe, to I'll handle that since early last year. Even when the pandemic was hit, I think our team have shown resilience and adaptability to be able to manage the strictest form of lockdown Specs in service levels, and we continue to fulfill those services and demand with quality. I think we're also well prepared for any new surgeons in cases and we continue to be vigilant. I think regardless of COVID, the step up in digitalization, we believe, is here to And there has been evidence in our numbers. Of course, if there are further lockdown and restrictions on movements, We think there will be even greater need for our online services to reach broader communities, and we are ready to deliver that. Our next question is a follow-up from Ranjan Sharana from JPMorgan. Please go ahead. Hi, thank you. Can I just have a quick follow-up on Free Fire in the U? S? There seems to be A vast improvement in popularity in the U. S, if you can share any color what's driving this? And if the engagement remains where it is, How do you feel about the gaming guidance for this year? Thank you. Yes. We continue to see positive reception and growth of Free Fire in developed markets in North America. And we think it's a highly encouraging sign and we'll continue to serve the users there. I think there are not all Battle Royale games are the same. Each top hit game has its own appeal to And I think our game differentiates itself in terms of the appeal to broad based, Not necessarily action focused audience, but with a lot of broad based appeal with fantasy elements, Social elements and various forms of engagement and game modes And user friendliness to bot based communities across gender, age and level of Experience with Battle Royale or action game in general, I think this helps in promoting our game to different types of audiences And they will, one way or the other, find us and we see strong organic growth in game communities. I will continue to focus on reaching the right communities with our game and serving them well in the developed markets as well. In terms of gaming guidance, of course, we see very strong results this We'll continue to observe and if we need to update the guidance, we'll let people know. But at this point, we'll continue to observe the Thanks. This concludes our question and answer session. I would like to turn the conference back over to Minju Song for any closing Thank you all for joining today's call. We look forward to speaking to all of you again next quarter. Thank you.