Sea (SE.US) 2024 Q4 performance meeting: It is expected that Shopee's GMV will increase by around 20% in 2025.

Recently, Sea (SE.US) stated in the fourth quarter earnings conference call in 2024 that in 2025, it is expected that Shopee's GMV will grow by approximately 20%, assuming foreign exchange rates remain similar to current levels. They are not currently forecasting foreign exchange rates, but will adjust as needed if there are significant fluctuations. The growth will be driven by an increase in user numbers and purchasing frequency, prioritizing key operational strategies. It is expected that the Asian and Brazilian markets will experience good growth, with Brazil possibly growing slightly faster than the Asian market. In terms of profitability trends, it is expected that profitability in 2025 will be better than in 2024, but there may be fluctuations due to the seasonal nature of e-commerce. Overall, Sea believes that EBITDA in 2025 will see good growth. The growth of the lending business is significantly exceeding that of shopping GMV, partly due to the expected further market penetration of Shopee in mature countries like Indonesia and the Philippines. Additionally, the cash loan component in overseas operations will also expand. These factors together contribute to the significant increase in loan balances for Shopee compared to shopping business. Q&A Q: What are the potential assumptions behind the 20% GMV growth guidance for 2025 in the e-commerce business, including competitive landscape, marketing expenses, and investments in service quality? Has this figure taken into account the impact of foreign exchange (FX)? How will profitability change in future quarters? A: In 2025, it is expected that Shopee's GMV will grow by approximately 20%, assuming foreign exchange rates remain similar to current levels. They are not currently forecasting foreign exchange rates, but will adjust as needed if there are significant fluctuations. The growth will be driven by an increase in user numbers and purchasing frequency, prioritizing key operational strategies. It is expected that the Asian and Brazilian markets will experience good growth, with Brazil possibly growing slightly faster than the Asian market. In terms of profitability trends, it is expected that profitability in 2025 will be better than in 2024, but there may be fluctuations due to the seasonal nature of e-commerce. Q: What are the driving factors behind the strong performance of the financial technology business, especially in terms of country and product portfolios? Why is the scale of the lending business growing significantly faster than the e-commerce business? A: In the financial technology business, the growth of Shopee Pay Later and the lending balance in overseas operations is very good. In terms of country portfolios, the lending balance is initially growing in countries such as Indonesia and the Philippines, with other countries contributing later. So in the coming quarters, we may see new countries growing slightly faster than mature markets. Regarding the profitability of the lending business, changes in the country portfolio and expansion to higher quality user groups may affect asset return rates and internal rates of return. However, overall, we believe that EBITDA in 2025 will see good growth. The growth of the lending business is significantly exceeding that of shopping GMV, partly due to the expected further market penetration of Shopee in mature countries like Indonesia and the Philippines. Additionally, the cash loan component in overseas operations will also expand. These factors together contribute to the significant increase in loan balances for our Shopee compared to the shopping business. Q: What drives the GMV growth in the e-commerce business, and have there been any significant changes in consumer behavior? A: The growth in GMV in the e-commerce business is driven by both purchasing frequency and new users, with no clear dominance of either. In terms of consumer behavior, there have been no significant changes in this quarter compared to 2021, although there were significant changes during the pandemic. A priority for Shopee is to improve service quality, which over time has attracted more high-quality buyers to the platform, helping to expand category coverage not only in Asia, but also in Brazil. In Brazil, Shopee is working to reduce delivery costs and improve delivery speed, resulting in a significant decrease in delivery time, which helps to serve high-end users, penetrate historically difficult categories, and increase user retention rates. Q: What is the performance guidance for Garena based on, and how is the growth situation? A: The performance guidance for Garena is primarily based on the existing product portfolio, including in-house games like "Free Fire" and collaborative products with third-party game developers. The current guidance does not take into account new games planned for this year, focusing mainly on existing games. "Free Fire" plays a very important role in the entire product portfolio, with growth covering all markets, including existing markets and new markets like Nigeria in Africa. By investing efforts in these markets, such as setting up local servers to improve connection quality, Garena has confidence in the market operations of "Free Fire" over the past few years, focusing on market feedback and inclusivity of the product to not only provide an outstanding gaming experience, but also attract more players. "Free Fire" captures global and local trends and hot topics, making it a social phenomenon that continuously attracts new users and maintains engagement with existing players. There has been good growth in 2024, with momentum continuing in the first quarter of 2025. Q: How is the profitability in the Brazilian market, what is the profit guidance for 2025, and how are the latest average order values (AOVs) and growth of the financial technology business? A: In the fourth quarter of 2024, both the Asian and Brazilian markets were profitable. The average order value in the Brazilian market has increased, partly due to improvements in delivery quality and speed, as well as the expansion of new categories. The financial technology business has experienced good growth in Brazil, with Shopee's growth in loan balances.Customized products for the Brazilian market, allowing cash loan users and installment users to share the same credit limit pool.AI AIIn terms of relevant content, expanding the understanding of queries from both the textual and knowledge level is possible; utilizing AI can better understand products, combine existing images, descriptions, and reviews to generate a richer understanding of the product, thereby better matching the product with user intent. The platform also has many AI-generated contents, providing tools for sellers to create product images, descriptions, or videos, which has significantly improved the conversion rate of the platform. On the other hand, it saves costs as about 80% of user inquiries are answered by the chatbot Siasun Robot & Automation, saving a lot of costs for operations and demonstrating good cost management for e-commerce. For the 20% of queries answered by customer service personnel, AI tools help them understand the context faster to respond to customers, which helps in managing the number of customer service personnel. Moreover, using AI models can make better judgments on return and refund decisions, faster than manual judgments in the past, thereby shortening problem resolution time and reducing the number of customer service personnel needed to process returns and refunds.Q: What benefits has AI brought to the company, is it achieving cost efficiency (saving a lot of manual costs), or is it achieving better monetization? A: The benefits brought by AI to the company mainly manifest in two aspects: cost efficiency improvement and better monetization. Through AI technology, companies can more accurately match user needs and advertising content, increasing the click-through rate and conversion rate of advertisements, thereby increasing advertising revenue. At the same time, AI technology can optimize logistics routes and delivery times, improve delivery efficiency, and reduce logistics costs. In addition, AI can also reduce manual intervention and lower operating costs through intelligent customer service and automated processing of returns and refunds.