Earnings Call: Q1 2020

May 18, 2020

Good morning and good evening. Welcome to the Sea Limited First 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. Yanjing Wang. Please go ahead. Thank you, operator. Good evening and good morning, everyone, and welcome to Sea's 20 2Q1 earnings conference call. I am Bianchun Huang, Sea's Group Chief Corporate Officer. Before we continue, I would like to remind you that we may make forward looking statements, which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our press release. Also, this call includes discussion of certain non GAAP financial measures such as adjusted revenue, adjusted EBITDA and net loss excluding share based compensation and changes in fair value of the 2017 convertible notes. We believe these measures can enhance our investors' 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 Sea's Chairman and Group Chief Executive Officer, Forrest Li and Group Chief Financial Officer, Tony Ho. Forrest and Tony will share strategy and business updates, 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 Forrest. Thank you, Yanjun. Hello, everyone, and thank you as always for joining today's call. I hope that you are all in good health and staying safe. On behalf of all of us at Sea, I would like to thank you for your ongoing support during this exceptional period. These are times of significant change and disruption for communities, economies and businesses around the world. Against this challenging backdrop, we are proud that we have been accelerating growth and we are reporting very strong results for the Q1. Our communities are increasingly relying on our platforms during the pandemic. Our users are turning to the arena to enjoy interactive entertainment and socialize with their friends during the social isolation of the lockdown. Shopee is becoming a more integral part of the commercial ecosystem in each of our markets, with consumers now relying on our platform for their stable daily essentials and other consumption needs. At the same time, more sellers are migrating to or relying more on Shopee to sustain and grow their business. As our economics become more online and contactless, the digital payment and the financial services that SeaMoney provides are becoming an ever more important part of the infrastructure in our region. The coronavirus crisis is driving a step change in the growth of the digital economy globally, particularly in the markets and the segments where ea operates. It has materially accelerated a shift to online lifestyle that is broad, deep and in our view, irreversible. Building on our market leadership in some of the key and largest segments of the digital economy, we believe we are gaining and will continue to gain a disproportionate share of that growth. Our growth is also well supported by strong balance sheet and cash flow from operations, and we will continue to invest in a highly prudent way to maximize efficiency. Zhi was born in the middle of the global financial crisis. We believe that certain key qualities like humility, focus, commitment, resilience, adaptability and prudence helped us survive and thrive in those difficult days when we first started our business. We believe that this quality still defines us today and the effects are more valuable to us in the current climate than ever before. As businesses are drastically impacted by the crisis, our resilience and adaptability have enabled us to respond well to search in user demand while we navigate the physical constraints and disruption caused by the coronavirus crisis. For example, in Olog Shorty's key markets, we have launched and dramatically scaled up our offering of corporate health and hygiene products and essential household items in a matter of days. We are also doing everything we can to support economic recovery across our markets. We launched a region wide Shopee seller support package to help merchants to get back on their feet. This includes a number of initiatives localized for the specific needs of merchants and and underground conditions in each of our markets. This range from training and support programs to help new sellers move online or assist existing sellers to grow their business to free or discounted access to our services like advertising and marketing that enable sellers attracting new customers online. Furthermore, we are providing fee relief for some of our seller services to ease the financial burden on them during this difficult period. Meanwhile, our Garena team has quickly scaled up our capacity to meet record search in customer demand. We have also worked hard to create new ways for our user to engage online from creating dedicated online esports events, so that our communities can interact with each other even as they play part to using our platform to raise awareness of health and safety best practices in fun and creative ways. Our adaptability ensures that our platform can support our customers and ecosystem partners when they need us most. This is helping us build strong bonds of affinity with them that will outlast this crisis. Just as importantly, this ensures that we can continue to grow our businesses and extend our leadership even in the most attacking circumstances. I'm equally proud to see how our team has come together to get aid to where this is needed most. Across our market, we have worked with local authorities to provide financial support as well as essential medical equipment such as ventilators, masks and personal protective equipment to the hospital and the healthcare workers on the frontline of the battle against the coronavirus. This mission is to better the lives of consumers and small businesses through technology and it has never been more important for us to lead us to that mission. Let me now turn to our results for the Q1. On a group level, adjusted revenue grew 58% year on year to $913,900,000 for the Q1. Gross profit for the quarter was up 4 24% year on year to reach 206 $800,000 compared to $39,500,000 in the same quarter of 2019. Adjusted EBITDA was negative $69,900,000 compared to negative $32,000,000 in the same period in 2019. Let's look now at our digital entertainment business. Garena once again broke record in the Q1. Adjusted revenue grew by 30% year on year to $512,400,000 This robust top line growth was primarily driven by strong growth in both active users and paying users. In addition, we hit new highs in terms of quarterly active users. We recorded 48% growth year on year to 402,100,000 quarterly active users, while our quarterly paying users grew 73% year on year to 35,700,000. The quarterly paying user ratio remained strong at 8.9%. Free Fire saw particular strong growth in the Q1, and I'm pleased to note that this strong growth extended into the Q2. The game recently hit a new record for peak daily active users of 18,000,000. In April, Free Fire achieved another record high in monthly paying users, which more than doubled year on year. In India, our monthly paying user as a percentage of monthly active users already exceeded 10% in April. We believe this growth in our user base is attributable both to the macro trend as well as our constant effort to engage new and existing users with fresh, creative and highly localized content. For example, we introduced a new map called Kalahari. It features a desert theme with faster, more intense gameplay. The Kalahari map proved very popular with our users when it was first piloted in select events a few months ago and has since been made a permanent part of the game. We have also rolled out a number of new features based on feedback from our community, such as the ramp mode for our popular Clash Squad game mode. The Clash Squad game mode featured teams of 4 competing against each other in 10 best of seven matches that last just 1.5 minutes each. It has been a big hit with the community and the addition of a ranked mode based on their feedback as a new competitive element where teams can challenge themselves against the best opponents in their region. Alongside this global content push, our local teams are focused on developing highly localized content for our users. In Indonesia, for example, we have partnered with 1 of the country's most popular actors and star of Mortal Kombat, Joe Chaplin, to create a playable in game character called Jota, modeled after Joe himself. To promote this, we also worked with 1 of Indonesia's most popular directors to create a short film with Zhou showcasing his favorite martial art skills. So far in Indonesia, over half of our users have played as Jota. This initiative highlights how these elements of local flavor really resonate with our users. Similarly, in India, we partnered up with popular actor Amol Parashah to produce a series of lighthearted videos highlighting Free Fire's key features. This video quickly went viral and today has recorded over 37,000,000 views on YouTube. With offline esports events generally on call, we have quickly adapted and introduced new ways to sustain our engagement with the Free Fire community. For example, in April, we hosted a special one off global event called Wonderland Peak. This was a week long celebration featuring special characters, essence and in game challenges to excite our community around the world and to reward our most loyal user. It was also Free Fire's largest in game event of the year so far and we saw significant user number growth as a result. Moreover, we are working with local celebrity free fire fans to create fun and engaging online competition that has been very popular with our users. In Brazil, our long term partner, DJ Alloc, who is one of Brazil's most popular musical artists, took part in an online competition against some of the best known local free fire influencers as the Walmart for a hugely popular live that he performed across local social media channels. Meanwhile, in Colombia, 2 of the country's best known food bowlers, Hans Rodriguez and David Ostina, each kept a team of Free Fire influencers in an online charity tournament that attracted over a 1,000,000 views. In the Q1, we recorded over 90,000,000 online views for Free Fire Esports events globally. This is a testament to the growing reach and the popularity of this game across the world. Building on this growing and more engaged user base, we will continue to focus on developing Free Fire into a long lasting IP and a bigger platform. The larger user base also presents greater monetization opportunities over the longer run. We are therefore fully focused on execution and leveraging the strong momentum to further accelerate its growth globally. Let's turn now to Xiaopi. Like Arena, Xiaopi also recorded standout results the Q1 and into the Q2. Throughout the quarter and beyond, we have been making every effort to win the hearts and the minds of our consumers and the merchants during this difficult time for them. We hit a new record high for GMV of $6,200,000,000 representing year on year growth of 74.3%. The year on year growth rate increased by almost 10 percentage points compared to 64.8% for the last quarter, despite the disruptions of the coronavirus crisis. We also recorded strong growth in orders, up 111% year on year to RMB 429.8 million. The year on year growth rate of gross orders further accelerated to more than 140% in April as we saw the strong growth momentum on our platform carrying into the 2nd quarter. In the Q1, we further expanded our market leadership and continued to rank 1st across Southeast Asia by download monthly active users and the total time in app on Android according to App Annie. Notably, we were the top ranked app by monthly active users in each of Taiwan, Indonesia, Vietnam and Malaysia. As we further expanded our user base, Shopee ranked 3rd in the shopping category globally by download across the iOS and the Google Play app stores combined during the Q1. Adjusted revenue grew strongly to $314,000,000 up 111% year on year And the marketplace revenue grew even more quickly to $236,700,000 up 132% year on year. We believe this indicates the strength and resilience of our platform despite the macro environment. Merchants are willing to keep investing in Shopee even in this tough time because they recognize the value that we offer, our unrivaled reach to consumers and the return on their investments that Shopee provides. The slight quarter on quarter decrease in our overall and the marketplace take rate is mainly due to the lockdown and other movement restrictions in the Q1. This disruption had a particularly significant impact on some of our 4th quarter merchants. As a result, we saw an impact on revenue derived from sales by those merchants. This includes revenue from cross border logistics that is recognized on a gross basis. We also provided fee relief to our cross border merchants who were materially impacted by the coronavirus crisis. Into the Q2, we have seen meaningful recovery of cross border transactions on the platform. Adjusted EBITDA loss per order declined quarter, falling by 48% year on year to $0.15 compared to $1.15 for the same period in 2019 and $0.70 last quarter. Our ability to drive sustained improvement in unit economics even in this difficult environment highlight our focus on scaling with efficiency and our disciplined approach to growing our business. In Asia, where Shopee is the largest e commerce platform by order, Shopee registered over 185,000,000 orders for the market in the Q1 or a daily average of over 2,000,000 orders. That represents an increase of 123% year on year, further extending Shopee's market leadership. Shopee also ranked the 1st in Asia by average monthly active users download and the total time spent in app on Android the shopping category during the quarter according to App Annie. Our sustained focus on engaging our users continues to be a key driver of platform growth. As our community has scaled up, we are now able to drive engagement activity in a much more personalized and targeted way. For example, we launched a membership based service called Shopee Mask Club across our market. This service targets mothers who use our platform and enables them to discover a unique selection of highly quality curated products and brands. Some of these products and brands are only available to members. They also enjoy discounts on many common items such as diapers. These targeted group engagements use stronger user stickiness and activity, and we are rolling out similar targeted offerings in other categories like health and beauty. From early March onwards, governments in all our markets began to introduce restrictions on movement to curb the spread of the coronavirus. In response to this, our local team worked extremely hard to quickly launch and scale up our offerings of FMCG, home and living and other categories of essential and household goods. We rolled out a special program called from home in every market. This program was designed to encourage our users to follow government guidelines and stay at home by buying their essential needs online. We also onboarded thousands of new merchants to help them migrate their business online during this difficult time and overcome the significant logistical and operational challenges imposed by the lockdown. As Shopee becomes an increasingly vital part of the retail landscape in our market, more and more of the world's top brands are building up their partnerships with us. In early May, we rolled out a region wide partnership with Porter and Gamble called Show Me My Home. For this innovative campaign, Shopee and P&G collaborated to create dedicated microsites for each Shopee market that feature a curated selection of top P&D brands, categorized by different rooms of the house. The campaign aims to give consumers a new, fun and engaging way to find the product that they want from P&G's world famous brand on Shopee. I'm really proud of our team for managing the business through the challenging environment we have faced in recent months. We met increased demand of our consumers and merchants in spite of significant stress test on our business and our ecosystem imposed by the pandemic itself and the various restrictions introduced to curb the spread of the virus. We are well positioned to continue capturing the expanded growth opportunities in the sector and further extending our market leadership. We believe that this strong leadership position, combined with the resilience, commitment and adaptability of our team, will drive accelerated long term growth. Finally, SeaMoney continues to experience strong growth propelled by increased user demand for digital payments and financial services during the pandemic, accelerated growth of our Shopee platform and the deeper integration of our mobile volume services with the platform. In the current climate, the overall digital economy is growing rapidly. In particular, more people are spending more of their time and money online, And that is driving an increased need for both online payment services and the financial services as well as the increased need for contactless payment options. That in turn means that more people are adopting digital payments and the financial services options as one of their primary channels of choice. Building on that, we are encouraged by the progress we have made in driving adoption of SeaMoney's offering. In the Q1, our mobile wallet total payment volume or TPD exceeded $1,000,000,000 a milestone achieved in just about a year after we started to integrate the mobile wallet service with our Shopee platform. The quarterly paying users for our mobile wallet services surpassed 10,000,000. More than 40% of Shopee's gross orders in Asia, our largest market for Z money, were paid using our mobile wallet services in the month of April. Moreover, we are rapidly expanding third party use cases and partnerships online and offline. In March 2020, we joined forces with Google to offer our mobile wallet as a payment option for the Google Play Store in Thailand. We see significant growth ahead in the digital payment and the digital financial services segments, and we see that growth accelerating as the coronavirus crisis drives more consumer activity online. We also believe that SeaMoney is in an excellent position to capture this growth as we build on our strategic leadership position in some of the largest used cases in digital payments. We will continue to focus on scaling T Money effectively and efficiently to reach strong leadership position across our key markets. To conclude, we are glad to be reporting strong numbers for the Q1. This performance demonstrates the fundamental strength and resilience of this business and our position as the market leader in sectors of the economy that are experiencing the strongest growth. Looking ahead, while we expect to face uncertainty in the near term due to the coronavirus crisis, we believe that that change in adoption of the digital economy that we have seen in recent months is here to stay, and it will experience rapid growth in our markets in the years ahead. More importantly, we believe that these 3 core businesses as the leader in their sectors will capture an outsized share of that growth. Tea has been stress tested in recent months due to the coronavirus crisis, and our performance under these conditions has underlined the fundamental strength and resilience of our business. This gives us confidence that we are well equipped to manage the current external turbulence and ready to capture the long term growth opportunity. We will therefore continue to invest in our future and focus on winning the hearts and the minds of the users across all of our platforms during the time when they need us most. We believe that Sea will emerge from the crisis in an even stronger position and better prepared for our long term growth. With that, I will invite Tony to discuss our financials. Thank you, Forrest, and thanks to everyone for joining the call. We have included detailed quarterly financial schedules together with the corresponding management analysis in today's press release, and Forrest has discussed some of our financial highlights. So I will focus my comments on the other key financial metrics. For Sea overall, total adjusted revenue grew by 58% year on year to $913,900,000 which was mainly driven by the growth of our digital entertainment business, especially our self developed game Free Fire and our continued monetization efforts in our e commerce business in the past quarters. The 30% year on year growth in digital entertainment adjusted revenue to $512,400,000 was primarily driven by the increase of our active user base and deepened paying user penetration and in particular the continued success of Free Fire. Digital Entertainment adjusted EBITDA was $298,400,000 an increase of 32% year on year, mainly due to strong top line growth and our self developed game accounting for an increased share of revenue. Our e commerce adjusted revenue of $314,000,000 included marketplace revenue of 200 and $36,700,000 up 132% year on year and product revenue of $77,300,000 up 64% year on year. This growth is a result of our commitment to continue enhancing our service offerings as we seek to create greater value for our platform users. E commerce adjusted EBITDA loss was $260,000,000 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 by serving the users' needs better in the long run. Digital Financial Services adjusted revenue was $10,700,000 an increase of 2 78% year on year from $2,800,000 in the Q1 of 2019. Adjusted EBITDA loss was $101,600,000 in the Q1 of 2020 compared to a loss of $11,900,000 in the same period of 2019. This was primarily due to our continued efforts to integrate our mobile wallet services with our Shopee platform across different markets. We have also been expanding the use cases of our mobile wallet services outside of these platforms to include other online and offline merchants along with a variety of third party use cases. Returning to our consolidated numbers, we recognized a net non operating income of $11,200,000 in the Q1 of 2020 compared to a net non operating loss of $442,800,000 in the Q1 of 2019. The net non operating loss in the Q1 of 2019 was primarily due to a fair value loss of $436,100,000 arising from the fair value accounting treatment for the 2017 convertible notes. We had a net income tax expense of $23,200,000 in the Q1 of 2020, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment business. As a result, net loss excluding share based compensation and changes in fair value of the 2017 convertible notes was $239,400,000 in the Q1 of 2020 as compared to CAD237.3 million for the same period in 2019. From a foreign exchange standpoint, we have seen increased volatility in the exchange rates of some of our local currencies against the U. S. Dollar. And that meant for us on a constant currency basis, the top line metrics would have been neutral to modestly better in some of the cases, but we did not assess the differences to be material. With that, let me turn the call back to Yanjun. Thank you, Forrest and Tony. We're now ready to open the call for questions. Operator? We will now begin the question and answer session. The first question comes from Yong Shin Kuo of Goldman Sachs. Please go ahead. Thank you. Good evening. Congrats on the results. Two sets of questions, please. Firstly, gaming. Can you talk about what 1st year revenues would have been on an FX neutral basis? Which countries did the growth in active users come from? And why pay ratio for Q o Q? Secondly, on e commerce, it was mentioned cross border was a reason for the decline take rates. Can I confirm that this has hit your commission revenues more quarter to quarter than advertising and us? And given merchant support initiatives in Q2, will we likely see more revenue decline in that quarter or revenue take rate decline in that quarter? And I confirm that can I confirm what the FY 2020 e commerce revenue guidance is maintained as well? Thank you. Thanks, Nancy. And I will address the game question first. As Tony mentioned earlier, there has been some foreign exchange related fluctuations and that means on an FX neutral basis, our top line number, including the game revenue, could be slightly better than what we reported. But if you noted that, as Tony mentioned, we assess the difference not to be material, and we'll continue to monitor the situation if we think there is a need to report more ForEx neutral numbers, we will do so in the future. In terms of the active user growth, it came from across different markets in Southeast Asia, Latin America, India as well as the other markets in Middle East, Europe, U. S, Russia. So I think during the COVID time, I think we see more people as they are confined at home. In social isolation, they turn to our game, which is highly interactive and social for both entertainment as well as the human interactions with their friends and family and colleagues. And we definitely see both user active user increase, pay user increase, sorry, play time increase and that we think in the longer run will continue to drive the longevity of the IP as well as monetization. As we mentioned in earnings release, for Free Fire in April, we saw the pay user more than doubled. And at the same time, for example, another country, India, where people usually do not see as a big esports market, In fact, it has been one of the biggest market for us for Free Fire. And at the same time, we see that in terms of monthly pay user ratio, it has already exceeded 10%. While that is increasing, we also see average revenue per user increasing in India as well as in all the other markets that so I think overall for our game side has been a very positive trend we are observing, and we hope to outperform our full year target. And if we have more data, we might update the market down the road later. On the e commerce side, so in terms of the take rate, I think if you look at Q1, overall Q1 is traditionally not a shopping season. It is also a shorter quarter compared to Q4. And in fact, Q on Q, our e commerce continue to grow. And growth rate in terms of GMV, year on year growth rate even accelerated in Q1 by about 10 percentage points compared to Q4, which is a very big shopping season for us. This is despite all the impact that might come from cross border and more of a total lockdown in the Philippines. So this shows how resilient our marketplace is, the strength of the marketplace leadership in the Q1, despite the physical constraints and market turbulences that our region might be facing. And in fact, as we look at Q2, we mentioned in earnings release that our April order actually grew more than 140% year on year. So if you look at the different markets, we see this as a step change in terms of adoption rate of e commerce that is with benefits disproportionately occurring to us as a strong market leader. In terms of the take rates, the Q1 take rate drop from Q4 is mainly driven by VAS, value added services, which is primarily cross border logistics that we recognize on a growth basis, which means if the seller pays us $2 for cost for the logistics fees, we pay the 3rd party logistics providers $2 We recognize these $2 as revenue as well as cost of revenue. So with that, if you look at what happened in Q1, China had a lockdown during that period, which did have an impact on the cross border logistics sorry, both cross border sales volume as well as cross border logistics. And that is reflected in the take rate that we are looking at for Q1. Since China has opened up and resumed most of the normal activities, we have seen this has bottomed out in February and meaningfully recovered by April, and we continue to see cross border logistics uptick in May and onwards. So we think this one will not is not a permanent impact on us, and we expect take rate to gradually rise back to the previous level. And our revenue is going to be both driven by the rise take rate as well as the increase in the volume itself. So we're not worried about long term monetization of the e commerce platform. This does not change our view. In fact, it makes us even more bullish on the e commerce business as a whole, given the step up in the penetration rate. So if you look at our markets where the penetration of e commerce and digital economy as a whole is still relatively low, the COVID situation actually drive a lot of people online as the offline shops are closed. And we our operations remain open and we deliver as normal in most of our markets. So throughout this whole period, this allow us to capture disproportionate amount of growth and also win the hearts and minds of our users with the quality of the services we provide them as well as assistance we are providing them, especially the SME sellers on our platform who are trying to move their business online. And this will also be reflected in our seller commission relief program, the aid program, as well as the marketing credit that we might give to sellers. So short term, we might continue to see take rates being a bit lower than what used to be before COVID situation. But long term, we have that does not change at all our view of the steady state take rate is achievable and the monetization potential of the platform is also drove further our growth as a market leader. So in terms of guidance for Shopee, at this point, we think that as the situation is still evolving daily, while we continue to see strong growth, we think it's we would like to update the market if there's more data later. But at this stage, we don't see there's a need to change the guidance. The next question comes from Thomas Chong of Jefferies. Please go ahead. Hi, good evening. Thanks management for taking my questions. Given that we have seen Free Fire has reached another milestone in terms of the peak active users. Can you comment about the long term trend or the stage of life cycle for Free Fire? And we're also seeing that India in terms of the pain ratio is also doing very well. How should we think about the longevity of Free Fire in terms of the growth momentum? Should we expect it to be a multi year or 5 to 10 years kind of socially phenomenal game? Any color on that would be great. And then my second question is back to Shopee. Given the fact that we may see some volatility in terms of the tick rate in the near term because of the coronavirus. And as we are seeing the China cost for the e commerce is also coming back, should we expect the take rate to back to year on year growth trend back in the second half? And on that front, can you comment about in terms of the impact of coronavirus in different geographies, I. E, Indonesia, Taiwan, Malaysia, Vietnam, Philippines and Singapore. Just want to get a sense about how the GMV actually is trending because of the coronavirus and also the pace of recovery in different countries? Thank you. Thank you. I'll start with Free Fire. I think we see very positive trend. As you mentioned, we recently hit peak daily attributes of more than 80,000,000. And at the same time, we also see pay user increase significantly with AR PPU at pretty steady stage. That shows that, a, monetization potential of this game is huge and b, we think this also helps with the longevity when you have more players playing this game and more players paying for this game, they tend to stick with the game for longer. And also given how social, interactive this game is, more people play with play this game, that also means more your friends, family, other people are in the game and they talk about it. That's part of your social life and circle. You also stick with the game for longer. I think we're trying to really how to focus on managing and maximizing the upside of the game and building it into a not only a long living classic IP, but also increasingly a social platform. As you can see that we introduced a new map, new content in collaboration with other game as well as movie stars, football stars, and we introduced music video into the game as playable characters acting in the music video. So these are all these features we're introducing that are very welcome and very well received by our users who are engaging with us in the game and also outside of game, in online forums, through live streaming and watching the game videos on different platforms. So I think that there is definitely the focus on us to continue to build out this IT and this huge platform with now 180,000,000 people interact with each other daily. So I think that is something that we are very much focused on. And in terms of e commerce take rate, we're not worried at all about the volatility in the take rate. As mentioned, Q1 volatility is more attributable to cross border logistics, which is revenue recognized on a growth basis. But as you can as we previously mentioned, the majority of our revenue actually came from the high margin revenue, I. E. Commissions, handling fees, advertisement, etcetera. And these continue to be highly resilient during this period. Now we do, by choice, actively gave sellers some relief and system packages to help them transition, especially those SME sellers who are more severely affected, impacted by this COVID situation to transition through this period. This is something we think we're very fortunate to be able to do from a position of strength to help our communities of sellers as well as the broader communities to help them get on feet back on their feet. So this is something that we might continue to do in the near term as they recover. But on the other hand, this is something that we think in the longer run will help us win the goodwill and build a stronger and deeper bond with our key participants in our platform. And this is a very worthwhile investment we're making. In terms of the different impact in geographies, I think probably in a broad basis 3 categories. One is markets where the lockdown was there wasn't an extended period of very strict or total lockdown. So these are markets like Taiwan and Vietnam. Vietnam did have a lockdown, but relatively short. And then there are also markets where you see more extensive lockdown that would include Singapore, Malaysia, Thailand, Indonesia. And then there's also the Philippines, which is that has a lockdown that also for a very short period of time in March that prevents all delivery. We are actually one of the first players to receive exemption from the government to deliver essential goods to our users. And we also start to see the lockdown easing in Philippines over time to allow more categories of goods to be delivered. And then there's also China, where the cross border impact from. So I think these markets are different in a sense that for the markets that has relatively less impact from the lockdown, we see normal growth more normal growth year on year, quarter on quarter like before, and we continue to grow very strongly. And in markets that have more extended lockdown, where our operations still carry on as, I would say, as much as normal as possible despite the physical constraints our teams faced, which also speak volume about the resilience and execution capabilities of our teams. We actually see even more stronger, more profound increase in demand for our services. And we have been able to deliver that and that is a market that we think that to the extent the lockdown is still in place, we will continue to see strong demand. And in markets where like Philippines, that does affect e commerce logistics and delivery, there is a decrease in the overall volume that can be fulfilled. But again, we start to see that being eased. And as a market leader, this affects everybody. But as a market leader, I think we are still doing probably better than many other players in this regard. And for China, I think, as you all know, pretty much the bottom has passed by the end of February and we see recovery in March, April. So the cost border, we think, will be back more quickly. The next question comes from Alicia Yap of Citigroup. Please go ahead. Hi. Good evening, Forrest, Tony, and Jean's and other management. Thanks for taking my questions. Very quickly, I know the Free Fire has sustained really strong momentum. But just curious, out of this soft economy, do we anticipate the spending behavior will get more cautious as the macro outlook get in worsens and also as we emerge from the lockdown? And then for quickly on the Shopee side, any thoughts in terms of the longer term strategy that we potentially would put more emphasis on building a combination of the branded flagship store model versus together with the long tail merchants? Thank you. Thank you, Alicia. In terms of the macro outlook, of course, this is the situation is evolving daily. It really depends on how long the lockdown might be and how well we can address the pandemic and the impact on the economies market by market. But overall, I think we do see gaming business generally to be quite countercyclical even during the economic recession. People still need some form of social engagement and entertainment. And what they might pay for games, especially in our market, if you compare it to, like, say, movie ticket or subscription of streaming services, etcetera, that's the reason we call it micro transaction. I think this is something that's highly affordable to people still. And also, for games, we're not targeting a very all game, especially as a large esports, highly social game, we're targeting very broad based of consumers. And therefore, having a very large user base and we focus on QAU, QPU, daily active users, etcetera, is very important. That give us much better resilience against any potential downturn. And given that our game is not concentrated in any particular market, in fact, we see in terms of user contribution as well as revenue contribution, increasing balance across different markets, including Southeast Asia and Taiwan, LatAm, India as well as other markets, that gives us in a way better protection against any particular market downturn. So we think in that way, we're quite fortunate to be in this business at this time. And in terms of longer term strategy for e commerce, I think we will continue to grow both. We see very strong growth on shopping mall, I. E, the branded merchants on our platform, both before COVID started and as well as during this period, as brands also started to look at online commerce as not as afterthought or as a good to have alternative, now more as a probably more of a must have alternative or even a greater focus, especially when the offline retail is pretty much shut down. So I think we are disproportionately benefiting from that migration and we are very focused on serving them well to retain our users and capture that growth. But at the same time, we still think our market, there are a lot of SME sellers that really can benefit from our marketplace. And Shopee is when we designed it to be a general merchandise marketplace as opposed to more of a niche kind of marketplace or a 1P market a 1P kind of model is precisely because we think there are a large number of smaller merchants, SME merchants that can grow with our marketplace and our markets. And we have a unique advantage in our ability to serve 1,000,000 and tens of 1,000,000 of them well with very highly localized operations and high quality management of the sellers category by category. This differentiates from a lot of the existing players and help us grow to the market leader as we are now. So we'll continue to focus on focusing on serving them well and make them grow with our platform. In the interest of time, we are limiting a maximum of 2 questions at a time from each caller. The next question comes from John Blackledge of Cowen. On Shopee, any particular shopping categories that drove the growth acceleration in the quarter and further acceleration in April? And on April on the 140% growth in April, exterior side growth is tracking? Sorry, you're breaking up. Can you repeat the question, please? Yes. Can you hear me? Yes, better. Okay. Choppy, any particular shopping categories that drove the acceleration in 1Q and the further acceleration in April? And then curious growth that you're seeing that you may be seeing in May? And then on C Money, how should we think about the long term opportunity? And also just the near term trajectory for CV and EBITDA losses, which were $50,000,000 higher Q4 Q? Thank you. Yes. Thank you. So in terms of GMV growth, I think if you look at our traditional segment or categories that are largest on our platform include fashion, health and beauty, home and living, baby products. We see very strong growth, accelerated growth in particularly in home and living, health and beauty, baby products. We also see a strong accelerated growth in FMCG, other FMCG goods, staple that we are also focusing on now to meet the surges in demand. So we think with the lockdown in place still in most of the markets, this will probably continue for a while. After the lockdown, we'll have to observe when life back to normal, how much of that volume will continue to flow to us. But I think what we focus on is at this stage when the users are being kind of naturally turning to online for to fulfill their needs And these users are oftentimes the first time users. If you look at the e commerce low e commerce penetration rate in our markets, We're not talking about alternative wallet share. We're actually talking about an increase in in terms of the baseline of new users coming naturally, keen to be educated how to use e commerce and we are there probably the first impression and providing the first time experience of e commerce to them. So this is what we focus on, whether they want to buy health products or FMCG or staple or food. We try to as much as possible, so if they need wealth and with our engaging experience as well as a large assortment of things, we can convert them into more frequent buyers than to other products and goods as well. So during this period of time, we see increase in active buyers, sellers as well as by frequency. It used to be between 4 and 5, we see an increase in getting to above 5 and for some markets even above 6 times a month. So all the other categories are also increasing. Even for fashion, which people might is more discretionary, we'll still continue to see year on year growth in April for fashion order. But I would say the other category, the order probably is more pronounced compared to fashion as now people don't have to go out as much. So I think we will continue to observe going into May. In terms of the long term opportunities versus the EBITDA loss, if you look at our adjusted EBITDA loss per order, it's at RMB0.60 now, which is has been increased decreasing year on year and Q on Q. At the same time, if you look at our game EBITDA, this is now it's meaningfully larger than shop EBITDA loss for this quarter, which again, as we said many times before that we want to breakeven, we can anytime. But we are focused on investing in growth in extending our market leadership that will bring us much better return in the longer run and profitability. We're very much focused on disciplined growth and efficiency of growth. And at the same time, our view does not change that the investment in Shopee now is very effective and efficient and is increasingly covered by our cash generated from both Shopee monetization itself as well as monetization from the digital entertainment side, which also is enjoying strong growth. So we are in, I would say, better than ever position now. We are very focused on maximizing the upside being presented to us under the special situations. Basically, we're fast forwarding into the future. The reason we focus on digital entertainment, e commerce and short financial services as our 3 core businesses is because our strong conviction in the growth of the digital economy of our region and that these three sectors are the largest opportunities in the digital economy of our region. And with the current situation, we see that the adoption of digital economy as a whole has accelerated and the baseline has increased. And all three segments that we are focused on happen to be the best biggest beneficiary. And we've been the market leader in these segments, again, being the biggest beneficiary within these segments. So we are very much focused on investing with discipline to capture that growth for our long term potential. Conference back over to Yanjun Wang for any closing remarks. Thank you for everyone for joining today's call. We look forward to speaking to you all again next quarter. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.