Earnings Call: Q3 2020

Nov 17, 2020

Good morning. Welcome to Sea Limited Third Quarter 2020 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. Mi Yoon Song. Please go ahead. Thank you, Kate. Good evening and good morning, everyone, and welcome to Sea's 2023rd quarter earnings conference call. I am Minju Song from Sea's Group's 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 that may not be realized in the future for various reasons as stated in our press release. Also, this call includes discussion of certain non GAAP financial measures such as adjusted EBITDA and net loss excluding share based compensation and changes in fair value of the 2017 convertible notes. We believe these measures can enhance our investors' 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 here with me, Steve's 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 update, operating highlights and financial performance for the quarter. 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 Boris. Hello, everyone, and thank you as always for joining today's call. We are very happy to report another quarter of strong performance across our business. We continue to see robust user growth and deepening of user engagement on each of our platforms during the quarter. We believe accelerating shift to digitalization in our global market is a sustaining trend. As the market leader in our core segments, we are well positioned to capture the growth opportunities presented by this acceleration. Our strong financial and operational results for the quarter once again underline our ability to execute well and see a disproportionate share of the faster growing market. On the group level, our quarterly GAAP revenue grew 99% year on year to reach $1,200,000,000 Gross profit grew 101 percent year on year to reach $407,600,000 We also recorded very strong bottom line results with adjusted EBITDA reaching $120,400,000 This further demonstrates the strength and efficiency of our business model. We will continue to drive rapid growth with efficiency as we further extend our market leadership. In line with our strong results, we are raising our guidance for both digital entertainment and e commerce for the full year of 2020. In digital entertainment, we believe our very strong performance in the Q3 will sustain through the Q4. As a result, we now expect bookings for Digital Entertainment to exceed $3,100,000,000 representing over 75% growth from 2019. This revised guidance represents an increase of more than 59% from the midpoint of the previously disclosed guidance. We also expect GAAP revenue plus sales incentive net off for e commerce to exceed $2,300,000,000 The revised guidance represents a more than 144% increase from 2019 and more than 31% increase from the midpoint of the previously disclosed guidance. These revisions reflect both the strong historical performance we have achieved so far this year and our continued positive outlook moving into the Q4. Let me start with the digital entertainment. The Q3 was another standout quarter for Garena with strong performance across all our key metrics. Bookings were $944,700,000 up 110% year on year. Adjusted EBITDA was $584,500,000 up 120% year on year, representing 62% of bookings. The strong performance was driven by robust active and paying user growth. Quarterly active users reached 572,400,000, an increase of 78% year on year. Quarterly paying users reached 65,300,000, up 124% year on year and represented over 11% of quarterly active users. We are particularly encouraged by the strong active and the paying user growth for the quarter. This reflects our ability to continually deliver high quality content that attract and engage users. Free Fire sustained its strong performance. According to FME, it continues to be the highest supporting mobile game in Latin America and Southeast Asia in the Q3. A key factor in Free Fire's continued success is our ability constantly deliver high quality content tailored for the taste and the preferences of our huge global user base. In recent months, Free Fire partnered with celebrities such as the Bollywood Actors and the Global Arty to create playable characters and other in game content inspired by these celebrities. For example, in September, we released a playable character of a Blue Star, who was the lead actor in the highest grossing Indian field in 2019. We have also worked with a popular global artist to create another song exclusively for Free Fire, which is a play inside game. Within 2 weeks of being launched, the song was streamed more than 25,000,000 times across various online platforms. We introduced the more social and the community features into the game. For example, the new training ground feature has been highly popular with our users. This is an area within the game where players can meet and hang out socially. So far, about 1 in 4 of our players spend time there every day on average. This and other social features further strengthen the network effect and the stickiness of the game. On a safe note, our Esports community continues to strive. Free Fire tournaments held during the quarter have accumulated over 150,000,000 online views to date. In August, we hosted a national tournament for Brazil spanning 2 months. This tournament has recorded over 47,000,000 online views today. We are also extending the reach of our esports events beyond our strong online audience. For example, the grand finals for Free Fire Indonesia Masters 2024 was forecasted on national TV reaching an even broader fan base online and offline. Our highly local and interactive content and community activities increase the affinity of our users with Free Fire. These efforts also ensure that the game stays fresh and relevant for our users over time. This, in turn, grows our user base and improves engagement. As we move into the Q4 and look to 2021, we will continue to focus on providing the global Free Fire community with captivating content and fresh and engaging experiences, both within the game and through our social and community features. We are confident that there is a very long runway ahead for this franchise. Turning to e commerce, Shopee had another great quarter. Building on our momentum and the leadership, we continue to capture more shares of our region's rapidly expanding e commerce segment. We also continue to deliver more value to our sellers and the buyers, while deepening monetization and driving efficient growth. Shopee reported 741,600,000 gross orders, up 131% year on year and a GMV of $9,300,000,000 an increase of 103% year on year. GAAP revenue for the Q3 was $618,700,000 up 173% year on year. We also continued to drive efficiencies across the business with adjusted EBITDA loss per order decreasing by 48% year on year to $0.41 during the quarter. In the Q3, Shopping continues to run as the number 1 in the shopping category across Southeast Asia and Taiwan by download, average monthly active users and the total time spent in app on Android based on FME. On a global level, Shopee was also the 2nd most downloaded app in the shopping category according to FNE. In our largest market, Indonesia, Shopee continues to further expand its market leadership. It registered over 3 10,000,000 orders at a daily average of around 3,400,000 orders, an increase of over 124% year on year. It was also ranked 1st in Indonesia by average monthly active users download and the total time spent in app on Android in the shopping category in the Q3 according to App Annie. As e commerce growth is important across the region, we have been focused on delivering more value for our merchants across the Shopee ecosystem. For example, in addition to the Google partnership announced last quarter, Shopee launched a new strategic partnership with 5,000,000 global media agencies. This program is designed to equip these agencies with in-depth e commerce knowledge, tools and skills, so they can help more brands and the retail merchants scale and succeed on Shopee. Further, we help merchants create better Shopee experiences to engage consumers. Shopee Live is one example. Sellers have found this feature helpful in driving user engagement and retention with memorable results. Shopee Live recorded over 48,000,000 hours watched in the 3rd quarter. Our momentum has carried forward into a record breaking Double 11 big sale shopping festival. We were heartened to see our SME sellers recording an incredibly successful sales event through the Shopee platform. In particular, the newer sellers who joined the Double 11 gig sale for the first time sold 10 times more orders than an average day. We have built powerful bonds of affinity with our users and today, Shopee is one of the most recognized and the best loved brands across our community. EU Golf recently published 2020 Global Best Brand Ranking. Shopee was the number 8 ranked brand globally and together with Amazon represent the 2 e commerce brands in the world top 10 ranking. As we continue to solidify and extend our market leadership in e commerce, we will stay focused on providing the best long term value for our users and building a healthy and sustainable ecosystem for our region. Moving on to SeaMoney. We saw the same strong growth momentum observed across Kurena and Shopee during the quarter. Our mobile wallet total payment volume for the quarter exceeded $2,100,000,000 with quarterly paying users surpassing 17,800,000. BitMoney continues to deepen its integration with Shopee, leveraging Shopee's rapid growth and extensive reach to scale efficiently and effectively. In October, more than 13% of Shopee's total gross orders across our market combined were paid using our mobile wallet. We also continued to expand our suite of online and offline third party use cases and the partnership in the 3rd quarter. This has further increased the usage and the brand awareness of SeaMoney across our community. We see a significant opportunity ahead of C Money and believe that we can capture it in a highly efficient manner by building on our core use cases. Our focus remains on scaling the business to enable more consumers and the merchants to benefit from the ease and the convenience of our digital solution. In closing, the strong momentum from the first half of the year has carried on into the Q3 and beyond. Our Q3 performance is a testament to our ability to quickly adapt to the rapidly evolving needs and the preferences of our communities. While we are benefiting from secular tailwinds and the rapid push towards digitalization, we remain very focused on strong execution to capture the growth opportunity. From highly local and deeply engaging content on Garena's game to shortlist new partnerships, we will continue to listen to and innovate around our users. As we move towards the end of 2020 and into 2021, we are further extending and solidifying our market leadership position across all the key segments of the digital economy in our region. Our conviction in the scale of the opportunities ahead we see over the long term is growing even stronger. We remain committed to serving our communities with technology and enabling them to benefit from the growth of the digital economy in the long run. With that, I will invite Tony to discuss our financials. Thank you, Forrest, and thanks to everyone for joining the call. We have included detailed quarterly financial schedules together with the corresponding management analysis in today's press release, as 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 grew by 99% year on year to $1,200,000,000 which was mainly driven by continued monetization efforts in our e commerce business in the past quarters as well as growth of our digital entertainment business, especially our self developed game Free Fire. The 110% year on year growth in digital entertainment bookings to $944,700,000 and 73 percent year on year growth in GAAP revenue to $569,000,000 were primarily driven by the increase of our active user base and deepened paying user penetration and in particular the continued success of our self developed game Free Fire. Digital Entertainment adjusted EBITDA was $584,500,000 an increase of 120% year on year, mainly due to strong top line growth and our self developed game accounting for an increased share of bookings. Our e commerce GAAP revenue of $618,700,000 included GAAP marketplace revenue of $467,100,000 up 164% year on year and GAAP product revenue of $151,600,000 up 208% year on year. The strong results demonstrated the deepening penetration of e commerce and our ability to capture these accelerated growth opportunities created by the rapid expansion of the digital economy. E commerce adjusted EBITDA loss was 300 and $1,600,000 as we continued our investment to fully capture the market opportunity in the region. We will continue to invest prudently and drive high quality growth with increasing efficiency. Digital Financial Services GAAP revenue was $14,400,000 an increase of 766 percent year on year from $1,700,000 in the Q3 of 2019. Adjusted EBITDA loss was $149,300,000 in the Q3 of 2020 compared to a loss of 33 point $6,000,000 in the same period of 2019. This was primarily due to our continued efforts to drive mobile wallet growth in our markets and expand a suite of online and off line third party use cases and partnerships. Returning to our consolidated numbers, we recognized a net non operating loss of $74,300,000 in the Q3 of 2020 compared to a net non operating income of $9,800,000 in the Q3 of 2019. Non operating loss in the Q3 of 2020 was primarily due to the higher interest expense and foreign exchange loss. We had a net income tax expense of $46,400,000 in the Q3 of 2020, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment business. As a result, net loss excluding share based compensation and changes in fair value of the 2017 convertible notes was $346,000,000 in the Q3 of 2020 as compared to $175,200,000 for the same period in 2019. With that, let me turn the call to Yanjun. Thank you. We are now ready to open the call for questions. Operator? We will now begin the question and answer session. At a time from each caller. Our first question is from Yang Wenxiu from Goldman Sachs. Go ahead. Thank you for that. Firstly, congratulations on another strong set of numbers. My two questions are firstly, we see for the gaming side, the pay ratio increased significantly sequentially. So just wondering, is it due to the e sports events you have launched or the social features you have added in the quarter? And along that line, what you see as the ceiling as well for pay ratio in coming quarters? And the second question is that, can we perhaps discuss a little bit of the 4th quarter gaming trends so far, especially given the new games you've launched in the last few months like Fantasy Town or Fairy Tail? I'm asking this because in terms of the full year gross billing guidance, it appears to suggest perhaps a bit of a decline quarter to quarter for gross billings in 4Q? Thank you. Thank you. So in terms of pay ratio, we see a very healthy pay ratio for this quarter and we'll continue to work on engaging with our users globally and deepening pay user ratio over time. Although we wouldn't say that is a singular KPI we're driving. Overall, I think for Free Fire, as our goal is to make it into a long living classic IT and a major gaming platform with varied content and also a tiny social community. Our focus is still to drive user growth globally in all our markets. At the same time, we want to increase our user engagement as you referred to a lot with community and Esports events. One thing I also wanted to highlight that during the Q3 also happened to be the 3rd anniversary of our Free Fire. And therefore, we had special events and content, which is very well received by our communities and that also helped with the pay user ratio. So if you look at our 4th quarter, we stated that we expect the overall gain bookings to exceed RMB 3,100,000,000. We actually wanted to highlight that we meant for the 4th quarter to be sustaining the strong performance of the Q3. And Q3 is an outstanding quarter with more than 100 close to 110% year on year growth. And despite that, we expect Q4 to continue this very strong trend with more than 90% year on growth even if we just hit the RMB3.1 billion, but we hope to beat that, although we want to remain conservative on our projections. And therefore, we think on the gaming side, we'll continue to see very strong performance into the 4Q and next year as well. In terms of our new games, Fantasy Town is a farming simulation casual game. We also incorporated a lot of local content. For example, Indonesia, local landmarks and characters into the game to really cater to our local communities' preferences. Fairy Tail is a turn based RPG game and these are our efforts to expand our genre and diversify our gaming portfolio over time. So we're not particularly focused on monetization per se for these games, but more on understanding our local community base and their preferences and user behavior with respect to different types of games. Our next question is from Thomas Chung from Jefferies. Go ahead. Thank you, management for taking my questions and congratulations on a strong set of results. My question is about the e commerce competitive landscape. Can management comment whether we see any intensifying competition in the Indonesian market? And on top of that front, can you also comment about how we should think on about online grocery category in the Southeast Asia market post COVID? Thank you. Thank you. On competitive landscape, I think it continues to improve as far as Shopee is concerned as we continue to extend our market leadership, our Q3 quarter order growth was more than 130% year on year, which is way ahead of the market growth rate and also we believe to be the other players' growth rates in our market. And as we said before, e commerce is something that enjoys a very strong network effect and the flywheel effect as well. So as we become a strong market leader, we believe we'll continue to grow and given the current environment of deepening rapidly deepening digitalization and accelerated adoption of e commerce, we believe it's a golden opportunity for us to capture a disproportionate share of the market growth. In any case, we think there is a very long runway for all players in the market given the relatively low penetration in Southeast Asia for e commerce at this stage yet. And we believe in the longer run, given the demographic and also the geographic nature of our region, we believe e commerce penetration should go much deeper. And we hope to work with all players in the market to collectively expand the pie, but at the same time, we also hope to further extend our market leadership. In terms of online grocery, we continue to see very strong demand on FMCG, including grocery on our platform. We believe that as people, especially new users during this COVID period come on to the platform having experienced the convenience of buying things online as well as especially during the social distancing period. I think this is something that once it's people get into the user habit, it is very sticky. And we continue to see very strong growth in this category. Our next question is from Biyush Kudray from HSBC. Go ahead. Yes, hi. Thanks a lot and congratulations for a strong set of results. Two questions, both on e commerce. Firstly, what drove a quarter on quarter improvement in monetization? And could you share what proportion of revenue comes from advertising income? And you have launched this program with 5 media agencies. Can you share some initial success of that? And secondly, on GM growth, can you give us insights on how it is faring across your countries? Sure. On the monetization, we are actually seeing a very strong and healthy growth in our revenue from Shopee e Commerce platform. And that is still largely attributable to increase in the high margin parts of the revenue, I. E, transaction based fees, including commissions, opt in programs, handling fees, etcetera, as well as advertisements. Also, the increased revenue from value added services, which mainly consists of cross border logistics, as well as on the 1st party product side contributed to the increase as well. But the key trend is that we continue to expand our high margin revenue, thanks largely to increase in demand for advertisement by our sellers as well as opt in programs where sellers can voluntarily pay a higher commission or fee for joining certain programs that benefit their consumers and that improve their own sales volume such as free shipping programs, any vouchers and also promotion programs and feature seller programs on our platform during also during the shopping events. So this I think is a very positive trend. We continue to work with our sellers to improve the adoption of these programs as well as advertisement as our seller communities continue to grow with us. Our next question is from Let me address the other two questions as well. Regarding the media agency partnership, this is another great example where we help our sellers, especially brand sellers on our mall site to grow the business faster. So we have been working with various media agencies to educate them on advertisement on Shopee platform, on our user behavior, on how to best attract and engage with our users and so that they can help their clients, which tend to be the brand better. And this is also in line with the recent trend whereby we see a lot of brands coming out to our platform. We now have more than 20,000 brands on Shopee platform and the number continues to increase fast, especially during this period where we see the brands increasingly see digital solution as something that's integral to their overall offering given the social distancing restrictions. And in terms of GMV growth across different markets, I think we continue to see very strong growth. The market differences are in terms of sort of market generally were less affected by COVID throughout this period like Taiwan, Vietnam as we shared before. Their growth rates continue to be robust and in line with our general trend. And there are also markets that have been affected by the lockdowns more, but subsequently have lifted most of the lockdown measures. For example, like Thailand, we spent and in Singapore, we see initially very strong increase in our e commerce demand and especially new user growth and those users tend to stick with us. And therefore the performance is staying throughout. Even though the Q on Q growth wouldn't be so strong as between Q1 to Q2. The year on year growth continue to be very strong. In some markets, we even saw 5 times or 6 times difference. And in other markets like Indonesia, the Philippines and Malaysia, we continue to see some resurgence of cases and from time to time, lock down restrictions being imposed in different formats. And as a result, I think we still continue to see heightened demand in our platform as well. So I think it's still too early to talk about a post COVID situation. But given the lockdown measures have been lifted before in pretty much all the markets And during those periods of time, we have observed a very sustained strong growth of our platform. We continue to believe that the deepening of digitalization and adoption of e commerce during this period is sustainable. Our next question is from John Blackridge from Cowen. Go ahead. Okay. Thanks. A couple of questions. First on digital entertainment. Could you discuss Free Fire's monetization in markets outside of Southeast Asia and Latin America? And then on Shopee, in the past you've called out that Taiwan is EBITDA flattish before corporate expenses, in part given significant market share advantage. In your other markets, if you get to similar market share position, is there anything structurally that would limit the margin profile? And more broadly, just any color on choppy's EBITDA trajectory going forward would be helpful? Thank you. Thank you. In terms of monetization outside of Southeast Asia, we previously shared before that our revenue contribution for markets outside of Southeast Asia already constitute the majority of our digital entertainment bookings. And we continue to see very strong trends, including in the Latin America market, which has similar population size, but in terms of GDP per capita, probably it's a bit higher than Southeast Asia region. We think there is a very good potential to continue to drive user growth and paid user and deepening engagement with our users and drive monetization over the long run. Again, we will we're looking at it as a very long term gain and therefore, we're not trying to share every last dollar. We're still at the growth stage 12 to continue to grow this game in Latin America as well as other markets in the world. And in terms of the shopping platform, Taiwan's EBITDA margin continued to rise. Taiwan's EBITDA margin continued to rise. So it's not actually flattish. So therefore, we do believe that there is we have no doubt that e commerce, especially a strong market leader can command a very healthy margin. Although we don't separately disclose it, but it's not actually flattish. So therefore, we do not believe that in other markets, there's anything that we see that would potentially limit the margin that can be achieved in the longer run by a very strong market leader. Our next question is from Rajan Sharma from JPMorgan. Go ahead. Hi, good evening and thank you for the presentation. Two questions from my side. Firstly, on Shopee Brazil, can you share what is your strategy for that market now? It seems to have evolved more than a cross border business because we do see some local sellers there. So if you can talk about your aspirations for Brazil from an e commerce perspective. The second question is on Free Fire Max. We have been seeing a number of open beta tests happening. If you can share what the feedback has been and then what you are doing to drive success of that game in more developed markets? Thank you. Thank you. In terms of Shopee Brasil, as we shared before, it was initiated and started by our cost border team and therefore, it's primarily cost border driven. And as the team continues to grow the business, we also saw adoption by local sellers, which we certainly welcome that. In terms of Free Fire and Max, again, it's a we see it as an integral part of Free Fire as we try to cater to the broadest range of consumers so that you can our users can choose to play the Free Fire version or Free Fire Max depending on their own preferences and their phone specs. And basically, we don't see it as a separate game, but also as part of the Free Fire experience. And I think we are focused on making sure the user experience is highly smooth because people who are playing Free Fire and Free Fire Max will be on the same map. So a lot of details need to be worked out and we will continue to focus on improving our user experience whether it's through Free Fire or Mac version. Our next question is from Alicia Yap from Citigroup. Go ahead. Hi, thank you. Good evening, management. Thanks for taking my questions. Also congrats on the strong results. I have some follow-up questions on the e commerce. In terms of the monetization model, could you help us rank in terms of the percentage of revenue contributions among transaction fee VAS advertising? And also potentially, you could help us rank by the fastest growth rate, the year over year growth rate this quarter. Any meaningful difference between, let's say, the country in Indonesia versus the overall group level? And then secondly, just is there a change of the product mix or seasonality this quarter? Because it seems like the AOV is a little bit lower. So what could be the reasons for that? And if you can update us on the purchase frequency this quarter? Thank you. Thank you. In terms of the percentage of revenue, we don't specifically split it, but it's a fact to say that the high margin revenue from transaction based fees as well as advertising is the majority of our revenue and also the majority of the contribution to the revenue growth. The reason we lump transaction bases and advertising together in our market is that certain programs like a lot of some opt in programs that are driving very important contributing to the revenue growth, it's actually relating to advertisement or featured shop placement on shopping platform. And the reason it's under transaction based fee is because we actually help our sellers who might not be sophisticated yet to individually manage their advertisement placements and calculate our own advertisements, etcetera, so that we actually facilitate that by offering this program to allow seller to pay shop their highest fee and then they become worry free. We will manage the key word search bidding, the placement, the banner, participation in events, etcetera, for them as part of the transaction based fees. So, it's a little bit hard to say whether that's advertisement or transaction based fees, but I think the important thing is it's a high margin revenue that is the higher percentage and driving the growth. That is also part of reason we believe in the longer run the profitability model of the e commerce is not to be worried. And also in terms of our AOV for e commerce this quarter, I think we mentioned before that low to mid double digit low teen to mid teens range is something that probably appropriate to our market. I think naturally, as you see, countries like Indonesia and Philippines with larger population and the growth over time overtaking markets like Taiwan or Singapore, generally with the smaller population. Therefore, those markets with lower basket size tend to account for over time more GMV than those with larger basket size, but smaller population. And also in particularly during this period, we see very strong growth from those markets as we mentioned like Indonesia, Philippines, Malaysia, where there are more lockdown measures being implemented on and off during the whole period. So there's the yearly growth is particularly strong from those markets. But I think overall, we'll continue to launch the product mix very closely. I think what we see is that during the COVID period, particular categories like home and living, FMCG enjoyed a particularly strong growth. And now with lockdown being eased in most of our regions, we continue to see fashion start to recover and the pace of recovery is accelerating and it remains the top category. So the overall category top category mix hasn't really changed much. But while home and living continue and FMCG, the health and beauty continues to be very strong. We also start to see very strong recovery Our next question is from John Choi from Daiwa. Go ahead. Good evening and thank you for taking my question. I have two questions here. So first of all, on your Shopee business, I think clearly we're seeing a very strong trend on the GMV and also the revenue side. I just want to understand like what are the priorities when it comes to investment to further propel the top line growth and eventually narrow down our EBITDA going forward? I think I want to know the investment priorities and where do you think you need to put your more work into? And second is on Free Fire. I know that we've done very well across the region. And I think management did share some highlights. Can you kind of elaborate a bit more how we should think about the average bookings per user right now? Clearly, it seems like we're still in an early stage, but how much more upside do we see in terms of, I mean, the ARPU? And are we going to launch any new type of monetization methodology within the games? Thank you. Thank you. In terms of e commerce, I think we're very consistent in our approach and communication that we want to continue to grow our e commerce platform and continue to strengthen our market leadership, at the same time focus on efficiency of growth and deepening of monetization at a right pace for our market. And therefore, our focus is never changed in that regard. Of course, as a business model eventually naturally breakeven will come and the natural accounting margin, we believe, can be reached. It is a scale business and it is also a business with very strong network effect. And therefore, we believe it's very important to continue to drive growth, especially during period where we continue to see very rapid adoption of e commerce and deepening of digitalization in our region. As we emphasize, this is like the golden time to drive growth and we want to make sure the e commerce penetration can go further in our region. And also in terms of digital entertainment booking, so overall, I think we have a very healthy and strong number achieved for our Q3 at $1.7 per user. And that is an active user base of more than $570,000,000 for the quarter. So I think for our gain, we believe that given the global market it is accessing and growing, there are also potential to continue to drive pay user ratio as well as average booking we can achieve per paying user over time. But again, the focus similar to e commerce is to continue to grow this game itself. We're not worried about monetization of a massive again with a massive user base and high user engagement. This is it does come very naturally. If you look at our performance and also top line growth as well as the bottom line at a good level especially, we didn't even try that hard, we didn't try it. It just comes naturally when the business scales. So scaling is something that we continue to focus on. But of course, we are very careful about efficiencies and in our scaling and of course watching the natural market dynamics and be very close to our users, this is still the top priority. Our next question is from Mark Goodridge from Morgan Stanley. Go ahead. Hi, guys. Just had a question on the games business, specifically for Latin America. We obviously heard from you guys last year we're potentially growing out a third party publishing business in that marketplace. And then we've seen the huge success of Free Fire. So it's been a bit quieter coming through on that front. But I just wanted to ask, would you be able to share some of the initiatives that you've been doing specifically this year, some of the games that are potentially coming through into specifically into Latin America? Then following on that, is there an opportunity to replicate that potential third party publishing business into India as well? Thanks guys. Thank you. In terms of third party publishing that we continue to work very closely with our developer partners globally and to discuss potential opportunities in the global market. And the performance of Free Fire, in particular, in those markets is definitely very helpful basically a data point for all developer partners in assessing our understanding of the market operational capabilities and strong capability to drive growth in those relatively difficult and complex markets where I would say not wouldn't be another player that of all the scale have achieved the kind of track record that we have. So that's put us in a very unique position globally in driving growth on the mobile game, e sports side. So, we'll continue to work with our partners and potential partners. And as usual, we don't disclose things or initiatives or discussions or pipeline for confidentiality reasons. You will see it when we officially announce it, but that's something that we also continue to focus on. Our next question is from Rune Asouya from Credit Suisse. Go ahead. Yes. Hi. Good evening, everyone. So I've got three questions. First, 2 on the gaming side. If you look at last two quarters, you have seen very strong quarter on quarter growth of more than 30% on the gaming side, primarily I think given by Free Fire. So if you can provide a little bit more color, I know it has been also coincided with the COVID, but which all markets said there'll be such a strong performance on the free fire? We have seen also rankings moving in U. S. And is it India where monetization is happening much better? Any other countries which have shown growth? The key thing that I'm coming from is sustainability of this revenue growth. I know you have mentioned that you believe that the game has still long way to go. But just to give some data points to draw some comfort will be helpful. That is number 1. Number 2 is on the new games launches. It's been a while we have seen some new games from you. Any color, anything that would be helpful? Another thing is that League of Legends Mobile is being launched. You guys didn't get it. Any reasons for this change? Is it not under ROFA? Any color on that is difficult. Lastly, on the consolidated EBITDA, if you look at, you have come very now if you look at on the profitability side, it's very comfortably you are on consolidated EBITDA profitability. Is there any future if you look at ahead, is it likely to remain this or it's going to fluctuate quarter on quarter depending upon the e commerce investment that you will have to make? Thank you. Okay. Thank you. In terms of our global performance of Free Fire, the revenue contribution, we talked broadly 3 buckets, Southeast Asia and Taiwan and Latin America and then the rest of the world, which are the what we call the emerging new emerging frontier markets for us. And that's granted by the time of launching and engage user engagement of the game. So in terms of that, we see that revenue contribution coming from all three regions and same as revenue growth. And so we see very strong trends in all three buckets and that is very encouraging. And of course, if you think about long term growth potential and runway, probably the frontier market presents the greatest opportunities in terms of given the current very low penetration yet in the global market, many of which including some very high demand markets that we haven't really fully captured and even I wouldn't say formally entered yet. So I think there are still very huge long runway and huge opportunity for our team to tap in that regard. Whereas for Southeast Asia Taiwan, for example, we will continue to drive user engagement and deepening monetization. And same for Latin America, which is a relatively new market for esports games. I think in terms of how deep the penetration can be, including the payer penetration remain to be seen. We already see very strong positive trends that showcase the market has at least as a good potential, if not more than Southeast Asia, as I mentioned before. So I think we're very optimistic of continuing to grow in the game there. And that is one reason that gave us confidence in the sustainability of the revenue growth of Free Fire. And if you look at our year on year growth, Q1 was at 30%, Q2 more than 60%, Q3 more than 100%. So it was a very fast rapid acceleration. I think that's why we are very happy to see that our projection for Q4 is sustaining the strong performance of Q3 and continue to get to close to the 3 digit growth for gaming revenue of this magnitude, I think is a quite achievement for our game team. And again, we will continue to grow the game for the long run. In terms of EBITDA trajectory, we do not give guidance on EBITDA. And as I said before, that our focus for each of our business is to drive growth as given that our potential massive user base as well as a low penetration in many of the core markets we are seeing in each of our core business units. I think the opportunity of additional economies in our region and for our game business in particular globally is really way ahead of us to cap. And for each of our businesses, we also are very confident of the ultimate profitability of the business. You can't see a game business that's really loss making or a strong market leader in e commerce cannot be profitable to drive very healthy margin. And so as DFS, I think the ultimate business model has been very well proven. I think the question is how can we scale our business and at an efficient rate that is right for our market and we will continue to execute and our track record has shown that we focus on growth as well as efficiency at the same time. So when the margin improvement naturally comes, it comes. But I wouldn't say it is something that we try very hard to artificially drive it. This concludes our question and answer session. I would now like to turn the call back to Mingyu Song for closing remarks. Go ahead. Thank you, everyone, for joining today's call. We look forward to speaking to you all again next quarter. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.