Good day. Welcome to the Sea Limited second quarter 2019 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Yanjun Wang. Mr. Wang, please go ahead.
Thank you, operator. Good evening and good morning, everyone, and welcome to Sea's 2019 second 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 discussions of certain non-GAAP financial measures such as adjusted revenue and adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flow 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.
On the call with me are 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.
Thanks, Yanjun. Hello, everyone, and thank you as always for joining today's call. I'm very pleased to report that we had another great quarter. Across the business, we saw sustained strong growth and further improvements on the top and bottom lines. For Sea as a whole, our adjusted revenue tripled year-on-year to reach $665.4 million and our adjusted EBITDA improved once again to negative $11 million. Our results for the quarter show that we continued to drive revenue growth and improve efficiencies across our business. We are increasingly able to fuel our growth with cash generated through operations, which we believe positions us well to continue driving long-term sustainable growth. As you know, at the start of the year, we set ourselves some very ambitious targets for adjusted revenue growth in 2019.
With our very strong performance in the first half of the year, we have decided to raise our guidance for our full-year adjusted revenue for both digital entertainment and e-commerce. For digital entertainment, we now expect full-year 2019 adjusted revenue to be between $1.6 billion and $1.7 billion, representing 142.0%-157.2% growth from 2018. This compares to the previous guidance of between $1.2 billion and $1.3 billion, representing 81.5%-96.7% year-on-year growth. We are also increasing our guidance for full-year adjusted revenue for e-commerce to between $780 million and $220 million, which represents 158.3%-182.1% growth from 2018. This compares to the previously stated guidance of between $630 million and $650 million, representing 116.7%-127.0% year-on-year growth. Our increased full-year targets reflect our confidence in both the growth opportunities ahead and in our ability to execute our strategies to capture those opportunities.
Let me start with Garena, where we saw healthy growth across key metrics in the second quarter. On the top line, adjusted revenue for the digital entertainment business more than tripled year-on-year to $443.2 million. In terms of the bottom line, adjusted EBITDA for digital entertainment was up 443% year-on-year to $263.8 million. Adjusted EBITDA margin further increased to 59.5% for the second quarter of 2019 from 34.9% for the second quarter of 2018. Our quarterly active user numbers or QAU almost doubled from a year ago to reach more than 310.5 million. The pay user ratio, which is quarterly paying users as a percentage of QAUs, more than doubled from 4.1% a year ago to 8.4% in the second quarter. There are three key highlights to Garena's success this quarter. First, we continued to drive strong organic growth in active users globally.
In particular, Free Fire, our self-developed smash hit game, was the third most downloaded mobile game and the most downloaded battle royale game globally across the Google Play and the iOS App Store in the second quarter, according to App Annie. We are excited to see continued user growth across our core markets of Southeast Asia and Latin America, as well as in other growth markets like India, Russia, Turkey, and the Middle East. Second, we are strengthening our foothold in Latin America. As we mentioned in previous quarters, the huge success of Free Fire in Latin America is opening up opportunities for Garena in this high-growth market of more than 600 million people. I'm pleased to report that in late July, we launched Garena Speed Drifters across Latin America.
This is the first third-party licensed game that we are publishing in Latin America, and it is an important step forward in expanding our footprint in this very exciting market. Finally, we continue to deepen our engagement with our gamers while driving monetization across our game portfolio. For example, throughout June, we ran a series of themed competitions in Free Fire and offered a wide range of in-game items based on campaign themes, which were very popular with our gamers. This translated into both user number and revenue growth for the game. At the same time, our esports and community building efforts are also enhancing engagement across our titles. In Brazil, for example, we hosted our largest ever esports tournament for Free Fire in that market in July, which attracted over 12 million views online.
During the grand final of the tournament, the peak concurrent views on YouTube alone exceeded 800,000. In June and July, we also hosted Arena of Valor World Cup in Vietnam. This was the first time that this global tournament was held in Southeast Asia, and it was a huge success. We recorded cumulative online views of over 74 million, with over 850,000 concurrent views at the peak. We believe that this showcases Arena of Valor's popularity as one of the region's top mobile games. Looking to the quarter ahead, our pipeline remains strong. For example, we recently launched pre-registration for Call of Duty: Mobile in our core markets in Southeast Asia. We also see plenty of headrooms for our existing titles to continue growing.
In particular, as we further deepen engagement with Free Fire's growing global user base, we believe that this game and the battle royale genre, in general, are still young and evolving. For the upcoming quarters, we believe that Garena is in a great position for long-term growth. This is also reflected in our decision to raise the full-year outlook for the digital entertainment business. Turning to Shopee. In the second quarter, we continued to deliver our strategy to scale with efficiency to capture market share and deepen monetization. Looking first at growth, Shopee further strengthened its market leadership.
In the second quarter, it ranked the highest in the shopping category by both average monthly active users and by app downloads across the Google Play and the iOS App Store in both Southeast Asia and Taiwan, and it ranked the third in app downloads in the same category globally, according to App Annie. Gross orders for the quarter increased more than 90% year-on-year to 246.3 million, and the GMV for the quarter increased 72.3% year-on-year to $3.8 billion. These data points underline our success in building and sustaining a strong and engaged user base across the region and continuing to capture market share. As we scale, we also continue to improve our growth efficiency. Shopee's adjusted EBITDA loss per order decreased by $0.46, or 31.3%, compared to the same period in 2018. More importantly, we continue to see sustained improvements in monetization and take rate.
Adjusted revenue more than tripled year-on-year to $177.4 million. Adjusted revenue as a percentage of total GMV increased to 4.6% in the second quarter, up from 2.6% for the same period a year ago. Adjusted marketplace revenue as a percentage of total GMV reached 3.6% in the quarter. Indonesia, the biggest e-commerce market in Southeast Asia, and also Shopee's biggest market, our growth accelerated in the second quarter as we further extended our market leadership. We reached over 110 million orders for the quarter, which represents a daily average of over 1.2 million orders. In Taiwan, Shopee continued to record a positive quarterly adjusted EBITDA before allocation of the headquarters common expenses for the second quarter. This is a powerful demonstration of the long-term profit potential of our e-commerce model. Our focus for Shopee is not only on the quantity of growth, but also on quality.
We believe that long-term success for Shopee is based on capturing the hearts and minds of shoppers in our region and translating that into deep and sustained user engagement. That's why one metric that we track closely is total time in-app, which we believe is a measure of our ability to attract and deepen engagement with our users. By this metric, Shopee was once again number one in the second quarter in Southeast Asia as a whole, and in each of our five biggest markets on Android, according to App Annie. From the beginning, we designed the Shopee experience to be highly engaging and social by pioneering in-app live chats, games, and social features in our region. We are constantly working on new ways to enhance the user experience. For instance, we rolled out our new live streaming feature across all of our markets by the second quarter.
This feature offers a new and powerful way for consumers to engage with our platform, brands, and the sellers through live video streams created by Shopee or by the sellers themselves. As consumers discover new products through this feature, they can make immediate purchases without leaving the stream. We also employed AI and AR technologies to further enhance consumer experience on our platform. For example, our new AI and AR-powered tools, which were introduced in partnership with L'Oréal, enable our users to try different shades of makeup or get personalized professional skincare advice in the Shopee app. In addition, we leverage our unique strengths in both digital entertainment and social commerce by introducing e-sport streaming on the Shopee platform. This has helped us attract and better engage with an even broader audience across market segments.
Just last week, we announced the world-famous footballer, Cristiano Ronaldo, as Shopee's new brand ambassador in Southeast Asia and Taiwan. Ronaldo is one of the world's best-known athletes and an icon across our region. We are confident that our partnership with him will resonate with consumers and deepen their engagement with the Shopee brand. We believe that our focus on keeping our users engaged and entertained gives Shopee unique strength in better attracting and retaining users. It also offers us numerous opportunities to better understand our users' needs and preferences to help them discover more new products on our platform. To conclude, looking to the second half of the year, we believe we are in a great position to drive sustained growth across both e-commerce and digital entertainment, and to do so with increasing efficiency. That said, we are still very much in growth mode across our businesses.
We have a great opportunity ahead of us to grow our markets over the long term, and we are very well-placed to capture the largest slice of this growing pie. As we have always said, we believe scale and strong market leadership will translate into long-term profitability. Our results for the second quarter demonstrate that our businesses become increasingly efficient as we scale, and we are committed to continuing scaling up to maximize those efficiencies. With that, I will invite Tony to share more about the 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. I will focus my comments on the key financial metrics. For Sea overall, our second quarter total adjusted revenue was $665.4 million, an increase of 203% year-on-year. This was mainly driven by the growth of our digital entertainment business, especially our self-developed game, Free Fire, and our continuous monetization efforts in our e-commerce business in the past quarters. Digital entertainment adjusted revenue was $443.2 million, an increase of 219% year-on-year. The growth was primarily driven by the enlarged paying user base as we continue to improve the monetization of our games, especially Free Fire.
Digital entertainment adjusted EBITDA was $263.8 million, an increase of 443% year-on-year, mainly due to strong top-line growth and our self-developed game accounting for an increased share of revenue. The increase was also partially due to the improved operating efficiencies, as shown by the lower sales and marketing expenses, as well as General and Administrative expenses as a percentage of our adjusted revenue. E-commerce adjusted revenue was $177.4 million, up 202% year-on-year. Within this, marketplace revenue was $137.8 million, up 269% year-on-year, while product revenue was $39.7 million, up 85% year-on-year. E-commerce adjusted EBITDA loss was $248.3 million as we continued our investment to fully capture the market opportunity in the region. We will continue driving the high-quality growth by serving the users' needs better and improving operational efficiencies in the long run.
Digital financial services adjusted revenue was $2.8 million, a decrease of 18% year-on-year from $3.4 million in the second quarter of 2018, as we focused our efforts on strengthening the infrastructure to support our existing platforms. Adjusted EBITDA loss was $18.1 million in the second quarter of 2019, compared to a loss of $6.8 million in the same period of 2018. This was primarily due to our continued efforts to integrate our AirPay and Shopee platforms. Returning to our consolidated numbers, we recognized a net non-operating loss of $29.2 million in the second quarter of 2019, compared to a net non-operating loss of $30.8 million in the second quarter of 2018. We had a net income tax expense of $15.3 million in the second quarter of 2019, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment segment.
Finally, net loss, excluding share-based compensation and changes in fair value of the 2017 convertible notes, was $215.1 million in the second quarter of 2019 as compared to $198.7 million for the same period in 2018. With that, let me turn the call back to Yanjun Wang.
Thank you, Forrest and Tony. We're now ready to open the call for questions. Operator?
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Our first question today comes from Miang Chuen Koh with Goldman Sachs. Please go ahead.
Hi. Thank you for the opportunity. On the gaming business, it appears that the average revenue per paying user fell quite a bit quarter-to-quarter. I recognize there may be some dilution from more Free Fire paying users. Again, the paying users increased even more QOQ in 1Q. The ARPU did not fall as much then on a sequential basis. Just wondering what drove sort of the larger than usual decline in ARPU. Secondly, Free Fire revenues in the quarter, is it possible to give us some indications? Thirdly, on your expansion plans globally, especially in places like LatAm, can you give us a sense of whether we should be expecting a lot more headcount increases in some of these regions and how that would affect your OPEX structure in the second half of this year?
If I may as well on the e-commerce side, a couple of questions as well. One, the take rate increased 70 basis points QoQ, which is quite high. Can we have a sense of how much of this 70 basis points increase was from value-added service, and how much was from commissions and advertising? Finally, Indonesia, we see you start to charge star sellers, obviously on the C2C marketplace side in July. What exactly do you see from the industry perspective that gives you confidence in that, and what does it mean for other markets? Sorry, that's quite a handful of questions, but thank you.
Thank you, MC. Happy to answer your questions. Regarding the ARPPU trends, I think as we discussed before, when we look at an esports title that has a large user base and long game life, we tend to focus on different things at different phases. Usually start with growing the user base and then gradually ramping up monetization, deepen the pay user ratio, and then optimize for ARPPU. For Free Fire in particular, as you can see, we see very strong growth both on the user side as well as on the pay user penetration quarter-on-quarter. This is contributing significantly to the revenue increase as well. In terms of ARPPU, it is not currently the focus for us for Free Fire.
We believe the game is still very young and has a long runway, and we're focusing on broadening the user base as well as continuing to deepen the pay user penetration. For example, one tool that we find pretty helpful in bringing more pay users to our game would be the Elite Pass or the Fire Pass. Although it has a lower ticket size at $5 a month, it's very effective in converting free user to pay user over time. For that, we've been focusing on promoting more of a Fire Pass user engagement over the period. As you can see, overall, our revenue trend has been very positive, and the margin has increased also over time, even though we already started with very high margin compared to the game industry as a whole.
We think this is a positive trend and shouldn't be of any concern. We think in the longer run, there will be growth potential on the revenue as well as ARPPU side for the game business and for Free Fire in particular. In terms of Free Fire revenue outlook, as mentioned earlier, we think the game is still young and evolving, and we're very focused on bringing new content into the game. We have more than 300 developers in our studio now, and about half of them are devoted to creating new content, new innovations for the game, to engage the user better. Most recently, we have offered themed competitions and themed virtual items that have been very effective to attract new users. This is a new mode of play that we have introduced. We are quite confident about Free Fire's revenue and the trend going forward.
As you can see in our revised guidance, that we are basically guiding towards more than 140%-150% year-on-year growth in our game revenue. That is largely attributable to the strength in the Free Fire game performance over the longer run. Also overall, our other existing games that we continue to see pretty stable performance. We are confident of our longer-term game performance in the markets. In terms of LATAM expansion, we have set up small operations locally in Brazil and Mexico. We are quite careful in expanding into new markets. These teams are focused on local operations, bringing with the payment partners, and organizing local esports events and community building, as well as local customer services. Our focus will be to gradually ramp up operations.
As you can see from our past practices and track record, our gaming operation has been highly efficient. In terms of G&A spending has been fairly low. That gives rise to the high EBITDA margin in our gaming business compared to the industry standard. Now turning to e-commerce. Yes, as you've observed, our take rate continued to rise, and to us it's a clear sign that as we scale and continue to gain market leadership and market share across various markets, we are also able to ramp up monetization while we continue to grow. In terms of the uptick in the take rate, vast majority of that is from the high margin type of parts of the revenue, i.e., the commission, handling fee, and advertisement income. We think we're on a very healthy growth path over time to monetize over the e-commerce platform.
At this stage, we are very much focused on growing the platform and attracting more users, more sellers, as well as building up our assortment and services to the sellers. We are not worried about potential to monetization, as we have shown. This has a huge runway to go. At this time, we are focused on building up our market leadership across the market, which is showing all of the various, for example, we are the top-ranked app in terms of downloads, user time spent, monthly active users in the shopping category in our region. These are also important indicators of the growth of the platform and the solid leadership it is able to command across the markets. In terms of the star seller, as you correctly pointed out, we have started to charge a commission on the star sellers in Indonesia.
Again, we see very robust growth in Indonesia of our e-commerce platform as we continue to extend our market leadership. In Q2, our daily order volume has exceeded 1.2 million, and accelerated growth from quarter-to-quarter. Even though Indonesia is actually our largest market, it is also enjoying one of the highest growth rates across different markets. As a result, we are also providing more services and returning greater value to our sellers as they derive the most sales volume and income from our platform. They are happy to pay the rate because they see the value in working with us, in providing them the access to the vast user base, the services, the integrated logistics, and payment services we provide them, as well as the other services.
Therefore, we believe, over the long run, we can continue to ramp up monetization across different markets, including Indonesia, our biggest market, where we are commanding an even stronger leadership now. We are confident about that approach.
Got it. Thank you.
The next question comes from Michael Olson with Piper Jaffray. Please go ahead.
Hey, thanks for taking my questions. As you just talked about, Latin America has been surprisingly strong region. Outside of Latin America, do you believe there's a significant opportunity in some of these other regions that you mentioned, like Eastern Europe, India, Middle East, et cetera? Will you focus on building out those regions with Free Fire first or with other third-party games? Just overall, you mentioned continued opportunities for growth broadly for the business across both major segments. What do you expect your key areas of investment across the company will be in the next few quarters? Will it be new game development or new content for existing games, or marketing or subsidies, or what kinds of things will you specifically be investing in for growth? Thanks.
Thank you. In terms of expansion to the other high-growth markets, we have mentioned before that we see very strong user growth in markets like India, Russia, Turkey, the Middle East for our self-developed game, Free Fire. We believe that with the wealth of user data and deepening user understanding over time we acquire from this global hit game, we are very well-positioned to continue to build upon the success of that game to deepen monetization as well as potentially introducing new content and even new IP, whether it's self-developed or third party to these markets. Just like what we did in LATAM. We started with Free Fire, our self-developed game, grow the user base there, monetize over time, now we are reaping the fruits of that effort.
In addition, we have recently rolled out a second game, which is a third-party licensed game from Tencent, Speed Drifters, in the market. We believe this approach can also potentially work in the other high-growth markets. I think given that our unique advantage in being able to operate well and deeply in so many complex, diverse, but high-growth young markets across the globe, we are very well-positioned to capitalize on the new opportunities in these emerging markets with the rise of mobile technologies. That enables a lot more new content being introduced to our users across the world. In terms of key areas of investment, we are very much focused on the gaming side, both deepening our development capabilities as well as global expansion.
On the other hand, if you take a look at our gaming performance so far, we enjoy very high growth at a very high EBITDA margin. That doesn't mean that we're not investing in games. We're actually investing heavily in terms of human capital. This business, we believe, is a creativity-based business. It's not about just dumping money to buy growth. It is about deepening understanding of the user, making good use of the wealth of user data we have, and leverage the experience and understanding of our complex, diverse markets to build up content development capabilities. That is very much talent-driven, as well as knowledge-driven. To that front, we devote a lot of time and resources in terms of management timing and management focus on continuing to develop our game businesses and also in understanding our global markets better to introduce more content globally.
On the e-commerce side, as we mentioned, we're in a better-than-ever position to build up our e-commerce ecosystem. As our platform continues to scale, as you can see, we're enjoying increasing efficiency in terms of EBITDA loss per order. It continues to decline over time, and our sales marketing has been fairly stable as a percentage of GMV. As we mentioned before, shipping subsidy is increasingly a minor part of the sales marketing. The majority of the sales marketing spending is now on discretionary brand marketing. For example, our partnership with Mr. Cristiano Ronaldo, and our sponsorship of Liga 1 in Indonesia, which is the most popular football event nationally. These are very efficient marketing activities generating high ROI for us and promoting our brand awareness across the region as well as globally.
We will continue to be optimistic about it and leverage good marketing opportunities to further promote our brand, as we become a go-to marketplace in our region.
Thank you.
The next question comes from John Blackledge with Cowen. Please go ahead.
Great. Thanks. A couple questions on Shopee and one on Garena. How should we think about for Shopee, the GMV trajectory in the back half of the year? If you can talk about market share positioning and any update on the competitive environment across the different markets. Second on Shopee, the second quarter growth was really strong, obviously, particularly order growth. The AOV was a little lower than we thought. Just any color on what drove the lower AOV and how we should think about that going forward. On Garena, just any color on the Free Fire Pass and what's the monetization around that and what that looks like?
Thank you. In terms of the Shopee GMV trajectory, as we continue to scale the platform across different markets, for Q2, we have more than 70% year-on-year growth in GMV and more than 90% year-on-year growth in order. The GMV growth slightly lower than order growth is, as you mentioned, relating to the average order value. To that, we do have a view on what will be an optimal value or a range of optimal value for our markets in building out a general merchandise marketplace e-commerce. If you look at some of the large general merchandise e-commerce platforms such as Taobao, we understand their basket size is also around the mid-teens range.
We think that's a good range to have for building an e-commerce platform in our market as well, with a focus on the key categories of fashion, health and beauty, home and living, as well as baby products. These are the high-margin, non-standardized products that lend themselves very well to build up a large, diverse seller base and buyer base, and eventually the largest e-commerce marketplace in China. We believe we will focus on building out these core categories and drive user base as well as buy frequency, while maintaining a healthy range of order value. In particular, relating to the Q-on-Q fluctuations, for example, there are different reasons that the extrinsic factor that could affect the period-to-period average order value.
During the Ramadan season, for example, we see higher demand in the fashion category, which tend to have a smaller basket size, and therefore could affect the order value as a whole. These are the extrinsic factors we think, as long as we maintain a healthy mix in terms of the GMV of different categories for our marketplace ecosystem, we are on track to continue to grow the marketplace and extend our leadership further. That falls to the next question regarding competition. Now, obviously, we take competition very seriously and have a deep respect for our peers in the market. Some context, I think it's important to note that none of the competition we currently see is new to us. All our peers have been longer established, have been in the market for many years before we even started the e-commerce business.
Yet we managed to grow from zero to market leadership with more than $15 billion of annualized GMV and a Q2 4.6% of take rate in less than four years time over such diverse, complex markets. None of them are in all the markets that we are in. We have local competition, but we don't even have competition across all these markets. I think our track record has shown that we have been very effective in competition. We believe we will continue to be so, because our competitive advantages are in our understanding of the right timing, right model, and right market for the e-commerce marketplace business, as well as our ability to execute very well in highly diverse, complex markets with highly localized operations.
Adapt our business strategies over time based on our deep understanding of local users as well as market conditions, in addition to our deep understanding of the essence of marketplace e-commerce, that business model. I think these competitive advantages remain, and we now have additional advantage of being the market leader across markets in e-commerce. As you can see, some of our peers are now following our footsteps in some of their operations. For example, focusing more on mobile, switching from 1P to a marketplace model and focusing more on the social aspects of it, or even in charging certain take rates, et cetera. We have a lot respect for our peers and their efforts in this regard. We believe that collectively, all these industry players, including us, are growing the pie for all of us as a whole.
Given the low penetration rate of online retail currently in our region, we believe there's a huge potential opportunity for all of us to tap. Being the market leader with existing scale and given our growth rate, we believe we have the best opportunity to take the largest share of the growing pie over time. In terms of the Free Fire monetization and outlook, as I mentioned before, we believe this Free Fire is a battle royale game. It has a lot of depth in it. It's very young and still evolving, and we are constantly building new content, new modes of playing into this game. We believe that as we continue to see organic user growth across markets, including our core markets in Southeast Asia, Taiwan, in Latin America, as well as the new frontier markets in India, Russia, Middle East, Turkey.
We believe the game has a huge potential and a long runway. We are now still focusing on continuing to grow the user base as well as deepen the user penetration.
Thank you.
Next question comes from Ranjan Sharma with J.P. Morgan. Please go ahead.
Hi, it's Ranjan from J.P. Morgan. Thank you for the call. Two questions from my side. Firstly, on the gaming side, you've of course, had a very strong second quarter. If I look at the top end of your gaming's revenues guidance, it feels like you're not expecting any further growth in quarterly revenues in the third and fourth quarter of this year, despite having two strong launches in Speed Drifters and in Call of Duty. If you can share your thoughts around on how you get to this guidance. Are you expecting any kind of maturity in Free Fire coming through? That's the first question. Secondly, in terms of Indonesia, we have seen LinkAja, a local payment business, getting access to a number of platforms across the marketplaces. I don't think it's part of Shopee yet.
If you can share, if you're looking to add them as well or if you're looking to grow your own ShopeePay business. Thank you.
Sure. If you look at our guidance, it is based on the year-on-year growth. It is a very high rate at 142%-157%. If you look at our EBITDA, adjusted EBITDA for this quarter, I believe it's higher than our adjusted EBITDA for last year, the entire year. We are continuing to see very strong growth on the game side. As usual, we hope to be able to deliver beyond expectation. For the new games, we have launched or start pre-registration for including Speed Drifters in the LATAM markets as well as Call of Duty: Mobile in Southeast Asia and Taiwan. As mentioned, our focus would initially still be on growing the user base, understanding the user preferences for these new genres.
In the case of Speed Drifters, a racing game for the LATAM users, and in case of CODM, a mobile FPS game with a very big IP but also being newly introduced to our region as in a free-to-play kind of mode. There are a lot for us to work on in collaboration with the developers and to understand our markets better, understanding user preferences, grow the user base before we gradually ramp up monetization. In terms of payment, we obviously don't discuss any specific commercial arrangement. We've been supporting our Shopee platform also with our own payment app. With the integration of our own self-owned e-wallet with the Shopee app over time, we've seen user adoption, very encouraging signs of user adoption. We believe that digital financial services will be one of the largest opportunities in the digital economy of our region.
We stand very well positioned to benefit from the growth of that given our own capabilities, track record in that front in building up the e-payment as an infrastructure for our Shopee as well as Garena businesses as well as further growing DFS overall.
Thank you for that. Maybe just one quick follow-up. In terms of Speed Drifters, are you saying that you have not rolled out monetization for the game in Latin America right now?
Yeah. We haven't been focusing on monetization yet.
Okay. Thank you.
Next question comes from Conrad Werner with Macquarie. Please go ahead.
Hey, thanks a lot. Maybe just a first question on the e-commerce side of the business. The take rates are continuing to show good momentum. It sounds like you're starting to charge some more commissions. Can that trend continue? In other words, I guess we can assume that take rates should continue to rise in the second half of the year. If that is the case, what's going to drive that? Are you able to put some more commissions into the market given your scale right now? One other question on the e-commerce side of the business. Was there any impact on FX from exchange rates on your GMV? In other words, might your GMV have been slightly understated due to exchange rate impacts? Just thinking about the average order value stuff we were talking about before. Just last question on the e-commerce.
When you say you're leaders in all your markets, what metric is that on? Is it on GMV, or is it on orders or something else? Maybe just on the digital entertainment side of the business. In the past, you gave a range for what % Free Fire was of the total revenues. It was 50%-60% in the first quarter. Could we just have an update on that? Also, could we get an update on how much of the digital entertainment business was ex-Southeast Asia? Maybe just as a last question on the digital entertainment, beyond Call of Duty and Speed Drifters, I guess, which is a reasonably new title, relatively speaking, any other games in the pipeline that we should be looking out for? Are you monetizing Speed Drifters in Southeast Asia to a good degree right now?
Sorry, I know I'm asking a lot of questions here. The last one is, just on a group level. I know that you're still in investment mode, et cetera, but the margins in the Digital Entertainment are very good. As you say, you're starting to fund the business with internal cash. Could we see group-level profitability before the end of the year? Thank you. On an EBITDA basis. Thanks.
Thank you. On the first question regarding the take rate trends, we will continue to gradually ramp up monetization over time. That is going to be driven by, first, the scale of our platform as we continue to grow, engage with a larger user base, larger seller base. The sellers of our platform derive more income from the platform. With their margin, with the right mix of categories and the focus, we believe that there's continuing to be very good potential to gradually ramp up monetization. In terms of the composition of the take rate, we believe that, one, there is potential for higher commission as well as handling fees, as well as advertisement income. At the same time, we are rolling out the fullest spectrum of services as that seller will be very happy to utilize and pay for.
If you look at Taiwan market, for example, this is the first market that we have achieved a positive adjusted EBITDA without common expense allocation. This is a market where we start monetizing first, a couple of years ago, with advertisement, then followed by the full spectrum of commission, handling fees, as well as VAS, value-added services. By now, we have rolled out commissions for all sellers, be it mall sellers, preferred sellers, or other sellers across border. At, of course, different rates based on the type of sellers and based on the categories in that market. That has helped to increase the monetization for us. At the same time, that platform in Taiwan continues to grow at a very healthy rate. This is what we ideally would like to see gradually roll out in all other markets as well.
By now, we have rolled out commission and handling fees for the mall sellers in all our markets. More recently, we have rolled out commission for star sellers in Indonesia and increased the rate for some of the mall sellers in Thailand, for example. We believe this trend will continue, and the reason we are able to do that is the value we are delivering to our sellers and buyers. In our markets, for the infrastructure for e-commerce, online retail, tends to be underdeveloped. That also gives us more opportunities and more touchpoints with our sellers and buyers to serve them better. That means we also have more opportunities to charge a higher take rate over time. That is what we believe will gradually roll out. In terms of ForEx question, I will invite our CFO, Tony, to answer that.
Yeah, sure. We constantly monitor the constant currency key metrics like GMV and revenue growth. Actually, due to the appreciation of US dollar against some of our regions' currencies like Indonesia Rupiah and Taiwan dollars, the growth profile, had we choose to present using constant currency, would be better than using the actual exchange rate. Having said that, we will be continuing monitoring the gap, and we choose to present the constant currency if the gap is becoming larger.
Okay. Regarding in terms of the metrics we use to measure market leadership. We use a range of metrics to see how well our e-commerce business is growing. In some of the markets, obviously, our leadership is so clear, so strong, that whatever metrics you use pretty much, we are the clear leader. In other metrics, people might say, "Oh, this market has different kind of GMV metrics," et cetera. The reason we look at a range of metrics based on the disclosure in our PR, including the order number, the downloads, the active user, time spent in-app, et cetera, is because looking at GMV alone can be misleading for the business as a whole.
If we tell our people to just look at GMV, the outcome might not be ideal in growing the e-commerce business because then the team will be trying to focus on growing the basket size with higher ticket items in those more standardized goods, but lower margin, lower competitive mode categories, such as virtual goods, electronics, or even wholesale stuff. These are easy to grow GMV, but they don't lend to a healthy e-commerce platform with a core category focus that we mentioned again and again. These are fashion, health and beauty, home and living, and baby products. When we look at GMV or the size of GMV, we have to ask the next level question: What's the basket size, and what's the order number?
Are you growing the GMV by growing the basket size and skewing towards the different categories of goods versus the core e-commerce marketplace categories, or are you truly growing the order? These orders are sustainable, high-value, high-margin orders that are real and will come back again. These are the categories we focus on, and we look at actual orders that we believe are recurring and that can allow us to charge a high take rate, allow us to build a healthy e-commerce platform with diverse seller and user base, and eventually an ecosystem around it. That's why we look at array of different things. Another example will be time spent in app. We focus on that because we have a deep understanding of our young users in our region. These are social, community-based, native generation, native to the mobile technologies.
They like to socialize, and they like to talk to each other, engage with each other. That's how they express themselves, live their lives, and also do their shopping transactions. On that front, we have built in a lot of social gamification features, live streaming, AR features, even esports stream, for example, leveraging our strength in the esports front to engage our users and build a community and follow in that. That also helps to retain users better as well as lower our user acquisition costs and make our scaling much more efficient over time. Therefore, when we look at market leadership, we look at a host of metrics together and the health of the ecosystem as a whole. By that, we have disclosed consistently that we are the market leader.
For example, in Indonesia, we have mentioned that we are the market leader by order for several quarters already and with a specific order number being disclosed. Going back to digital entertainment, as you can probably imagine, Free Fire continued to be a large part of the revenue, although we don't specifically disclose the %. It's been increasing contribution from Free Fire in the revenue mix. In terms of region outside of Southeast Asia, also without disclosing the specific % for competitive reasons, this is an increasingly significant part of our revenue as we diversify our game businesses. As we mentioned, if you look at our core market now, not just including Southeast Asia and Taiwan, we also refer to LATAM as our core part of a core market. Collectively, they're about 1.2 billion-1.3 billion population.
That's almost the size of population of China, but with even younger population profile and higher population growth. It's a very attractive demographic features, and we are probably standing the best position given our track record in capitalize on such high growth but highly diverse and complex emerging markets. In terms of our pipeline, again, for competitive reason, we don't disclose specifics about pipeline. You can imagine, when we said that we devote half our studio to building on Free Fire, the remaining half, we devote to building up our self-development pipeline in small teams. It doesn't take a lot of people to come up with a prototype of a new game. When we built up Free Fire, initially, there was a team of four or five people.
We continue to work with all the game talent we can find in the market and build up that team and let them run with their creativity and come up with all kinds of potential ideas that we could build into our game portfolio. At the same time, we work with top studios in the world. If you look at our track record, we pretty much work with everybody in the U.S., Japan, Korea, as well as China. I think given our wealth of user data from all the emerging markets globally with the hugely successful Free Fire game, I think we're very well-positioned to introduce new content into those markets, whether it's self-developed or licensed from third parties.
In terms of the group level EBITDA, as you rightly pointed out, we are seeing increasingly less loss in adjusted EBITDA, and increasingly, we are funding growth with internal cash generated. Obviously, if we want to break even, can we? Yeah, we can, right? As I said before, it's not the focus of the business as we're in a better than ever position to grow our ecosystem of digital economy, of consumer internet platform with some of the largest opportunities we ever see in the region and beyond in digital entertainment, in e-commerce, and digital financial services. You don't have these kind of opportunities coming along that easily for many generations. There might be one time we believe that we are in the historical moment where we can capture that growth in a right region where there is still low penetration, but a high-growth potential.
We believe given our strong cash position, given our cash also from the game business that it can fill our internal investments. We believe we want to invest in the long-term growth of our ecosystem, and will not trade that for short-term profitability. In the longer run, when we do achieve clear leadership and build out the entire ecosystem that we envision for ourselves, for our employees, and for the stakeholders, we believe it's a much more valuable business.
This concludes our question and answer session. I would now like to turn the conference back over to Yanjun Wang for any closing remarks.
Thank you for joining the call today. We're happy to keep talking with our investors, analysts, in case you have any further questions. We look forward to speaking to you all again next quarter.
This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.