Q2 2024 Earnings Summary
- Shopee is expected to become adjusted EBITDA positive from the third quarter, reflecting strong profitability improvements in the e-commerce segment. The company has also raised its guidance for Shopee's full-year GMV growth rate to the mid-20s, demonstrating confidence in sustainable growth.
- SeaMoney continues robust growth with GAAP revenue up by 21% year-on-year to $519 million and adjusted EBITDA up by 20% to $165 million. The consumer and SME loans principal outstanding reached $3.5 billion, up almost 40% year-on-year, with nonperforming loans remaining low at 1.3%, indicating prudent risk management and potential for further expansion.
- Garena's Free Fire game shows strong momentum, with over 100 million daily active users throughout Q2 and bookings up more than 20% year-on-year, reinforcing Free Fire as an evergreen franchise and contributing to the digital entertainment segment's growth prospects.
- Sea Limited faces increased competitive pressures in key markets like Taiwan and Indonesia, with new entrants such as Coupang in Taiwan and increased subsidies from competitors in Indonesia, which could impact its market share and profitability.
- The company's ability to increase take rates to match global peers may be limited, as commission rates remain below those of major global players like Amazon and eBay, potentially constraining profitability improvements in the near term. ,
- Sustainability of gaming revenue growth is uncertain, as despite an increase in users and bookings, average revenue per user (ARPU) continues to decline, and management expresses caution regarding future contributions from new games, acknowledging that it's "still early to comment" on potential revenue impacts. , ,
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E-commerce Take Rate Increase
Q: Is it possible to further increase take rates and reduce shipping subsidies?
A: We believe there is opportunity to further increase the take rate. While commissions and fees have increased meaningfully in past quarters, there is still potential for further increases, though perhaps not as significant as earlier in the year. Additionally, there is sizable opportunity on the ads side; we've focused on building ad infrastructure over the past few quarters, and expect these efforts to improve ad take rates in the coming quarters. -
Shopee Margins and Profitability
Q: What near- and medium-term margins can we expect Shopee to deliver, and how do you plan to achieve that?
A: Our longer-term profitability target remains unchanged at 2% to 3% of EBITDA as previously shared. In the short term, we'll focus on profitability and expect Shopee to be profitable in Q3 as per our guidance. We aim to outgrow the market in the short term rather than maximizing near-term profit, and expect the competitive landscape to evolve into a more rational stage, improving industry profitability. -
Free Fire Gaming Outlook
Q: Can you comment on the sustainability of Free Fire's momentum in the second half?
A: We are very happy with the improvement in metrics for Free Fire, including new users, retention, and monetization. We remain confident for the rest of the year and expect to deliver double-digit growth for Free Fire in both monetization and user growth. We continue to focus on content updates and leveraging AI tools to improve production efficiency and game experience. -
Competition from Cross-Border E-commerce Players
Q: Do you view higher risk from competition from cross-border e-commerce players entering your markets?
A: We monitor new entrants seriously but believe the impact on our business is limited. In markets like the Philippines, Thailand, and Malaysia, domestic e-commerce transactions dominate. Our pricing is very competitive due to lower operating costs and a competitive seller landscape. -
Shopee Express Cost Optimization
Q: How will you further optimize operations and cost structure for Shopee Express?
A: We plan to improve efficiency through increasing scale, expanding coverage with more hubs (adding about 900 hubs in Q2), adding automation in sorting centers, and enhancing technology for better routing and sequencing for last-mile delivery. Optimizing our off-clock process from pickup to delivery will also improve efficiencies. -
Financial Services Risk Management
Q: How are you managing risk in your Digital Financial Services amidst global macro uncertainties?
A: Our lending products have short durations—just a few months on average—and smaller ticket sizes, allowing us to be agile in managing the portfolio. This enables us to fine-tune our portfolio based on market environment changes, and we're comfortable with our position. -
Brazil Profitability and Growth
Q: How do you plan to sustain profitability in Brazil and achieve your ambition to be #2 in the market?
A: We are pleased with margin improvements in Brazil, with contribution margin now positive. We reduce shipping costs through our logistics network, improve user experience, and increase penetration in higher-basket categories where we've traditionally been less strong. With these initiatives, we see meaningful potential to grow further in the Brazil market. -
Unit Economics of Live Streaming
Q: Has the live streaming business turned profitable in some countries, and how is its contribution margin?
A: We see improvement in unit economics quarter-on-quarter. Some markets are already profitable, while others are improving, and we believe this trend will continue.