Good morning and good evening to everyone, and welcome to the Sea Limited Fourth Quarter and Full Year 2024 Results Conference Call. I would like to inform all participants that this call is being recorded. Thank you. I would now like to invite Ms. Rebecca Lee to begin the conference. Please proceed.

Hello, everyone, and welcome to Sea's 2024 Fourth Quarter and Full Year Earnings Conference Call. I am Rebecca Lee from Sea's Investor Relations team. On this call, 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 the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows of our main businesses, even 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 with me, Sea's Chairman and Chief Executive Officer, Forrest Li; President, Chris Feng; and Chief Financial Officer, Tony Hou. Our management will share strategy and business updates, operating highlights, and financial performance for the fourth quarter and full year of 2024. This will be followed by a Q&A session in which we welcome any questions you have. With that, let me turn the call over to Forrest.

Hello, everyone, and thank you for joining today's call. We delivered a great 2024 with all three businesses going back to strong double-digit growth, exceeding our original guidance. It was also our second consecutive year of annual positive profit with all three of our businesses recording positive adjusted EBITDA. We are very proud of achieving this milestone as we expect each business to remain profitable and self-sufficient going forward. This strong set of results validates our strategies. We made the right decisions at the right time and executed very well on them. 2024 also marked our 15th anniversary. It is rewarding to look back and see how over 15 years we have created and excelled in three separate business verticals, improving the lives of hundreds of millions of people. Garena brings joy to over 100 million global gamers every day. Shopee is the clear e-commerce market leader in all seven of our Asian markets with a sizable and growing presence in Brazil. Our e-commerce GMV exceeded $100 billion for the first time in 2024, and SeaMoney, with a loan book size of over $5 billion and over 26 million active borrowers, is already one of the largest consumer lending businesses in Southeast Asia. I'm very proud of the hard work from all our teams, which has made these incredible outcomes a reality, and I'm very grateful to all our investors for your support throughout this journey. With that, let me take you through each business' performance and strategic outlook. Starting with e-commerce. Shopee is celebrating its 10th year with a great set of results. GMV surpassed $100 billion with over 10 billion orders in 2024. It was our first full year of being adjusted EBITDA positive. We reinforced our market leadership by returning to high growth, with GMV growing 28% year-on-year, and we have become profitable in both Asia and Brazil. We improved our monetization significantly in 2024 through higher commission and advertising take rates. This was driven by the market becoming more rational and increased adoption of our ad tech offerings among sellers. In the fourth quarter, our ad revenue increased by more than 50% year-on-year, and our ad take rate improved by more than 50 basis points compared to the same period last year. 2024 has been a strong demonstration that our e-commerce strategy works. Our results reflected solid execution across our three operational priorities: enhancing price competitiveness, improving service quality to customers, and strengthening our content ecosystem. I believe our ability to execute very efficiently and consistently across these priorities sets us apart and has made Shopee a beloved household name across our markets. Our end-to-end integration with our logistics partners has proven to be a key differentiator of Shopee's service quality. SPX Express, in particular, helped us reach many efficiencies due to its geographic reach, fast delivery speed, and cost leadership. After years of delivery network improvements, SPX Express is now able to consistently deliver industry-leading service standards for buyers and sellers, even during seasonal peaks. Almost half of SPX Express orders in Asia were delivered within two days of order placement in the first quarter, an improvement from the same period last year. At the same time, we reduced Shopee's overall logistics cost per order by $0.05 year-on-year in the fourth quarter. The efficiencies we gained from this tight logistics integration allow us to pass on savings to buyers and sellers while giving them assurance of reliable and cost-effective logistics solutions. Beyond logistics, we continue to adopt AI to improve service quality in a practical and effective manner. By using large language models to understand queries, we have made search and discovery more accurate, helping users find relevant products faster. We provide our sellers with AI tools to enhance product listings by improving descriptions, images, and videos. These initiatives have improved purchase conversion rates while also making sellers more willing to spend on ads, boosting our ad revenue. We have also used AI to enhance our customer service capabilities. After upgrading our chatbots with AI, we saw a meaningful increase in our customer service satisfaction score over the past year and a reduction in our customer service cost per contact by nearly 30% year-on-year. We also enhanced our buyer return refund process with the help of large language model capabilities, addressing a key e-commerce pain point. In the fourth quarter, we improved resolution times in our Asia market by more than 40% year-on-year, with nearly six in ten cases resolved within one day. We believe we are still early in the AI adoption curve and remain committed to exploring AI-driven innovations to improve efficiency and deliver better experiences for our users. We continue to strengthen our content ecosystem, which has become an integral part of our e-commerce ecosystem. In Southeast Asia, live streaming now contributes around 15% of Shopee's overall order volume for physical goods. In the fourth quarter, our average daily unique streamers and viewers grew strongly, with over 40% and 30% growth year-on-year, respectively. In Indonesia, we have maintained our lead as the largest live streaming e-commerce platform throughout 2024. Our live streaming unit economics have also improved consistently across the year driven by expanded scale, more optimized marketing spend, increased adoption of Shopee Live Ads, and higher average basket size. Continued improvement in live streaming unit economics will help to enhance Shopee's overall profitability in 2025. We continue to see positive momentum from our collaboration with YouTube, which enables video viewers to make seamless purchases from Shopee. It has also attracted many YouTube creators to Shopee's content ecosystem. In Indonesia, average daily orders attributed to YouTube content in January this year have grown more than sixfold since the collaboration first launched in September last year. We are also seeing promising results since launching the collaboration in Thailand and Vietnam, and we look forward to expanding this partnership to more markets this year. Beyond Asia, I'm very proud of our strong performance in Brazil, both in terms of our market share gains and improving profitability. Our average monthly active buyers increased by more than 40% year-on-year in the fourth quarter, significantly outpacing the industry average. Our efforts to onboard more brands, diversify our product categories, and improve delivery speeds have attracted more users to our platform and resulted in larger basket size purchases. This has given us much better unit economics and allowed us to achieve positive adjusted EBITDA for the second consecutive quarter. Looking ahead, we remain excited about Shopee's growth potential in Brazil. In summary, I'm very pleased with Shopee's achievements in 2024. We delivered strong growth and became profitable in both Asia and Brazil. Our competitive modes are deepening, empowering us to maintain market share leadership in Asia. As market dynamics become more rational, long-term success in e-commerce will hinge on structural cost advantages and operational excellence, both of which Shopee is extremely well positioned to leverage. With e-commerce penetration still low across many of our markets, we remain confident about our ability to continue delivering profitable growth in 2025. We expect Shopee's full year 2025 GMV growth to be around 20% with improving profitability. Next, moving on to digital financial services. This segment is already a sizable and profitable business and a meaningful contributor to our overall growth and profitability, with annual revenue of $2.4 billion and adjusted EBITDA of over $700 million. Both our top line and bottom line achieved over 30% year-on-year growth in 2024. While we have scaled fast, risk management remains our top operational priority for this segment. Today, our digital financial services business offers consumer and SME credit, digital payment, digital banking, and InsurTech products in Southeast Asia and Brazil. Credit-related business is currently the main driver of our digital financial services revenue. So let us focus on that. We delivered exceptional loan book growth of more than 60% year-on-year in the fourth quarter, surpassing $5 billion as of the end of 2024, making us one of the largest consumer lending businesses in Southeast Asia. In the fourth quarter, we added approximately 5 million first-time borrowers and saw 50% year-on-year growth in our active users, which now total more than 26 million. Even with this strong growth, our risk exposure has remained stable, with a 90-day NPL ratio at 1.2% in the first quarter. Our credit business strategy focuses on sustainable, healthy growth driven by a deep understanding of risk. We currently only operate this business in markets where we already have a strong e-commerce presence, giving us the ability to thoroughly assess risk and manage it in each market. As our large Shopee user base continues to grow in our markets, we can take a prudent, progressive approach to user acquisition and product offerings, allowing us to scale up rapidly at low cost while maintaining a very stable risk profile. Today, our credit business stands on two pillars: Shopee's SPayLater loans and off-Shopee cash loans and off-Shopee SPayLater loans. In all our markets, Shopee's SPayLater purchases are the first and very natural touchpoint we have with most of our credit users. It allows them to build an initial credit track record while allowing us to develop our credit model for the market. Once we understand the users' credit behavior, we give them access to other products with longer tenures and larger amounts. When we have built a credit risk model for each market that we feel confident in, we start to scale our loan book. Managing our loan book includes diversifying into more off-Shopee scenarios, thus giving us access to a much larger pool of consumer spend. Across our Asian markets, off-Shopee loans now account for about half of our loan book. In most of our markets, credit card penetration is still very low. Our SPayLater product acts almost as a virtual credit card for a massive addressable user base that has significant underserved demand for credit. With rising digital adoption, we see great potential to tap into more off-Shopee consumption use cases in our markets. In summary, 2024 was a very good year for our digital financial services business. We launched more products to serve more users and we grew both our top line and bottom line strongly and healthily. We expect this strong momentum to continue into this year. In 2025, we expect loan book size to grow meaningfully faster than Shopee's GMV annual growth rate, as we improve credit penetration, both on and off-Shopee. Finally, moving on to digital entertainment. 2024 was a great year for Garena, marking Free Fire's remarkable comeback. After the post-pandemic headwinds in 2022 and 2023, Free Fire responded with annual bookings growing at 34% year-on-year in 2024, and we expect continued growth in 2025. In 2024, Free Fire was the world's largest mobile game by average DAU and the most downloaded title according to Sensor Tower. Despite its massive scale, average DAU in 2024 grew 28% year-on-year, standing well above 100 million. With these high levels of engagement and retention, even in its eighth year, we believe Free Fire has secured its place as an evergreen franchise. Free Fire's comeback was the result of our continuous execution on expanding our user base and driving user engagement. We expanded our user base by prioritizing accessibility, ensuring that Free Fire remains lightweight enough to run smoothly on a wide range of devices. This gave us a competitive edge in high-growth emerging markets with significant untapped potential. For instance, after we managed to improve connection speeds for players in Nigeria, active users there surged 90% year-on-year in December. We kept pushing ourselves to find ways to drive user engagement, both within and beyond the game. We elevated gameplay with frequent content updates, high-profile collaborations, and immersive experiences that bridge the game and the real world. Major updates, like the seventh anniversary event and collaborations with Demon Slayer and the BLUE LOCK franchise, energized both new and existing users. We started 2025 with the Free Fire and NARUTO SHIPPUDEN IP collaboration. Our users have responded extremely positively to this collaboration, giving Free Fire a strong start to the year. While Free Fire is a global game played in more than 150 markets, our local teams put a lot of effort into incorporating each market's local trends and elements into the game to make it feel hyper-local for gamers everywhere. We celebrated local festivals with thematic in-game elements, from the Day of the Dead in Mexico to Tet in Vietnam. In Indonesia, we created a Ramadan campaign that allowed our users to donate in-game currency to renovate an orphanage in West Java. Such efforts have made Free Fire feel deeply local for players across different markets, creating a much richer sense of belonging for our gamers. Free Fire's popularity is also a result of having a strong presence beyond the game app itself. It has a powerful following on social media. On our major social media platforms such as TikTok and YouTube, Free Fire has accumulated more than 1 trillion views to date. Our flagship annual eSports event, the Free Fire World Series global finals, returned to Brazil last November and generated massive excitement. Viewership hours increased by 43% compared to the previous year, thanks to our partnerships with content creators and game streamers to build hype around the event. With large-scale engagement fueling word-of-mouth organic growth, Free Fire remains relevant and continues to grow. We are incredibly proud of the sustained success of Free Fire and the solid performance of our long-standing published games. Looking ahead into 2025, we will continue scaling our user base and broadening our content offerings. We now expect Garena to grow double digits year-on-year for both user base and bookings in 2025. In closing, we are proud of what we have achieved in 2024. Our strategies have proven effective, and our businesses are on strong footing to continue growing and improving profitability in 2025. We will continue to work hard and execute well. Our goal for the next phase is to pursue high-quality growth by driving both our top line and bottom line expansion in a healthy and sustainable manner. We are in a stronger financial position now than ever and are a much more experienced company after going through multiple cycles. The fundamental growth opportunities in our markets remain strong. 2024's success is just the start. 2025 will be another great year for us. Thank you, as always, for your trust and support. With that, I invite Tony to discuss our financials.

Thank you, Forrest, and thanks to everyone for joining the call. For Sea, overall, total GAAP revenue increased 37% year-on-year to $5 billion in the fourth quarter of 2024 and 29% year-on-year to $16.8 billion for the full year of 2024. This was primarily driven by GMV growth of our e-commerce business and the growth of our digital financial services business. Our total adjusted EBITDA was $591 million in the fourth quarter of 2024, compared to an adjusted EBITDA of $127 million in the fourth quarter of 2023. For the full year of 2024, our total adjusted EBITDA was $2 billion compared to an adjusted EBITDA of $1.2 billion for the full year of 2023. On e-commerce, Shopee's gross orders grew 20% year-on-year to $3 billion in the fourth quarter of 2024, and GMV increased by 23% year-on-year to $28.6 billion in the fourth quarter of 2024. Our fourth quarter GAAP revenue of $3.7 billion included GAAP marketplace revenue of $3.2 billion, up 41% year-on-year, and GAAP product revenue of $0.5 billion. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $2.4 billion, up 50% year-on-year. Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.8 billion, up 21% year-on-year. For the full year of 2024, GAAP revenue of $12.4 billion included GAAP marketplace revenue of $9 billion, up 38% year-on-year, and GAAP product revenue of $1.6 billion. E-commerce adjusted EBITDA was $152 million in the fourth quarter of 2024 compared to an adjusted EBITDA loss of $225 million in the fourth quarter of 2023. For 2024, we achieved a full year adjusted EBITDA positive of $156 million compared to an adjusted EBITDA loss of $214 million for the full year of 2023. Both Asia and other markets recorded positive adjusted EBITDA for the fourth quarter of 2024. Digital financial services GAAP revenue was up by 55% year-on-year to $733 million in the fourth quarter and up by 35% year-on-year to $2.4 billion for the full year of 2024. Adjusted EBITDA was up by 42% year-on-year to $211 million in the fourth quarter of 2024, and up by 29% year-on-year to $712 million for the full year of 2024. As of the end of December, our consumer and SME loans principal outstanding reached $5.1 billion, up 64% year-on-year. This consists of $4.2 billion on book and $0.9 billion off book loans principal outstanding. Nonperforming loans past due by more than 90 days, as a percentage of total consumer and SME loans, was 1.2% at the end of the quarter. Digital entertainment bookings were $543 million in the fourth quarter, up 19% year-on-year and $2.1 billion for the full year of 2024, up 19% year-on-year. GAAP revenue was $519 million in the fourth quarter and $1.9 billion for the full year of 2024. Adjusted EBITDA was $290 million in the fourth quarter and $1.2 billion for the full year of 2024. Returning to our consolidated numbers, we recognized a net non-operating income of $28 million in the fourth quarter of 2024, compared to a net non-operating income of $32 million in the fourth quarter of 2023. For the full year, our non-operating income was $117 million compared to an income of $208 million for the full year of 2023. We had a net income tax expense of $89 million in the fourth quarter of 2024 compared to a net income tax expense of $77 million in the fourth quarter of 2023. For the full year, our net income tax expense was $321 million compared to $263 million for the full year of 2023. As a result, net income was $238 million in the fourth quarter of 2024, as compared to a net loss of $112 million in the fourth quarter of 2023. For the full year, net income was $448 million as compared to net income of $163 million for the full year of 2023.

Thank you, Forrest and Tony. We are now ready to open the call to questions. Operator?

And your first question comes from Pang Vitt with Goldman Sachs.

Congratulations for a solid performance. Two questions from me. Number one, on e-commerce. Could you help us provide more color on your 2025, 20% GMV growth guidance? What is the underlying assumption you put in place in terms of competitive landscape, marketing spending, service quality investment? And is this already factored in the FX impact in the numbers? On top of this, could you help us understand how profitability will trend in the upcoming quarter as well? That's number one. Number two, on Fintech, strong performance across the board, both on the top line and on the bottom line and on the user trend as well. Could you help explain the driver behind, especially on the country mix and product mix? And can you help us also contextualize what do you mean by loan book to grow meaningfully faster than Shopee GMV?

Thank you. On the first one, for Shopee. In 2025, as Forrest mentioned in the opening, we expect to grow around 20% on the GMV basis. We are assuming the Forex rate to be similar to the current rate. So we are not taking a decision on the Forex forecast for now. If there's a big fluctuation on Forex, we will look at other situations. In terms of the things we are doing to drive the growth, the growth is driven by both user number growth and purchase frequencies as we are executing our key operational priorities. If we look at Asia and Brazil, we expect those markets to grow quite well. Although since Brazil is a newer market, it may have a slightly faster growth pace than the Asian market. On the profitability side, we do expect the profitability for 2025 to be better than 2024 as a trend. However, as you might know, e-commerce does have some seasonality, so there might be some fluctuation due to that. On the SeaMoney side of the businesses, the off-market grows very well in terms of the loan outstanding be it on both the on-Shopee SPayLater and off-Shopee part of the businesses. In terms of the country mix, as you probably know, we grow the loan outstanding from countries like Indonesia and the Philippines first, and others contribute later. Regarding the profitability of the loan book, we do believe that because of the country mix and as we expand to a more prime segment of user base, there may be some impact on the return on assets, driven by the country mix and some of the user mix that we come in. But overall, we do believe that the absolute EBITDA will grow well in 2025. Just now you mentioned that the outstanding grow meaningfully faster than the Shopee GMV. I think that's partially because we will expect our penetration on Shopee to further expand, even in the older countries like Indonesia and the Philippines. We will still expect the penetration of SPayLater to further expand. At the same time, the off-Shopee part of the businesses, the cash loan part and the SPayLater off-Shopee, we will also further expand. So this will add together and make our outstanding of SeaMoney grow meaningfully faster than Shopee GMV.

And your next question comes from the line of Alicia Yap with Citigroup.

Congrats on the strong results. Two questions. First is that, I wanted to follow up on the assumption behind the GMV guidance. If management could provide how much would be driven by the growth of new users, the increase of purchasing frequency, and also the wallet spend by users? If management can also comment on any changes in consumer behavior that you have observed and how any change would affect our marketing strategy and category mix? The second question very quickly on the gaming Garena guidance. When you mentioned that you expect the active user base to also experience double-digit growth. Just wondering, are you expecting more deepening penetration in the existing market? Or are you looking for some of the new markets, like you mentioned, for example, Nigeria, where you saw some fast growth? Any color in terms of the drivers for bookings and the active user growth for gaming would be appreciated.

On the first question regarding e-commerce, our GMV growth is driven both by purchase frequencies and new users; I don't think there's a particular one thing that dominates over the other. In terms of consumer behavior, we don't see any significant shifts in behavior. There were meaningful shifts after COVID, during COVID, etc. But if we compare 2024 to the current quarter, we don't see anything that stands out. As we shared, one of our priorities for Shopee is to improve our service quality. By doing so over time, we observe that we attract more high-quality buyers to our platform, which helps us expand our category coverage, both in Asia and Brazil. If we take Brazil, for example, we have been working very hard to not only lower delivery costs but also improve delivery speed. We have seen a meaningful reduction in delivery times in Brazil, which allows us to serve slightly higher-end users and penetrate categories that were historically more challenging. All of these factors will help us reach out to better quality segments and retain them over time, which is less about behavior change but rather a consequence of executing our strategy.

On the Garena guidance, let me start. The guidance we offer here is pretty much based on our existing portfolio. This includes our self-developed game Free Fire and our publishing game portfolio by working together with third-party game developers. At this moment, we don't put too much weight on new games, although we do plan to launch new games this year. The current guidance is more focused on the existing games for which we have a lot of historical data to forecast. The growth in Free Fire plays a very significant role in the entire portfolio. We have observed that growth is occurring across all markets, including both our existing markets and some new markets, such as Nigeria. For instance, we set up a local server for Nigerian gamers to improve connection quality, and the results have been very positive, with a 90% increase in user base in December. We see similar trends in other parts of the world. Overall, our guidance reflects our confidence in both market segments. Throughout 2024, we noticed that users have started to return to gaming and spend more time playing, which is a positive trend. Our previous focus was on ensuring the game's market fit. We want to provide a great gaming experience that is inclusive and suitable for a wider range of gamers. Free Fire is becoming a phenomenon from a trending topic across social media. This will help us continue to attract new users and engage our existing users with the content we offer through the game. Putting all these factors together gives us the confidence in continued growth this year, along with the strong growth we experienced in 2024. So far, we've seen positive momentum continuing into Q1 this year, which gives us a very good start to the year.

And your next question comes from the line of Divya Kothiyal with Morgan Stanley.

Two questions from me. One on logistics and the other is on Brazil. On logistics, we're seeing that Shopee is selectively participating in fulfillment now in some countries like Brazil as well as Singapore. Can you elaborate more on the benefits of engaging this? Does this require more CapEx or even subsidies, which would mean wider logistics losses in the near term? And do we plan to do fulfillment in more markets? That's the first question. And my second question is on Brazil. Could you talk about the profitability in this market, given the high growth we've seen? Last time, you mentioned that profitability could be choppy quarter-to-quarter. I would keen to know how profitability in this market and what the guidance for 2025 is. Also, if you could comment on the latest AOV in this market and the growth of the fintech business?

On Brazil, for the fulfillment, we are in the very early stages of fulfillment businesses in Brazil. It is a proven model that some of our competitors have engaged in the market. The purpose of signing fulfillment is to serve sellers, especially brand sellers from categories where we were historically not as strong. There are groups of sellers who prefer to be managed by the platform rather than rely on our capabilities alone, which helps improve the buyer experience with shorter delivery times because this reduces fulfillment times from the seller side. We don't expect this will significantly impact our profitability in the near term, as this is still in the early stage, resulting in small size. Additionally, we do not own the fulfillment centers; we rent them and operate in a pretty CapEx-light fashion. Regarding whether we will do fulfillment in other markets, we have had fulfillment in some Asian markets for quite a while. We serve brand sellers, especially in markets where sellers prefer someone else to fulfill their products. We don't expect this will significantly impact our CapEx or profitability in the foreseeable future. On the AOV trend in Brazil, we do see an increase in average order size in Brazil due to our efforts. Part of this is a result of improved delivery quality and speed, which allows people to buy higher-value items. Additionally, the expansion to new categories contributes to this growth. In terms of profitability in Brazil, both Asia and Brazil achieved profitability in Q4. We are able to grow Brazil at a considerable pace while maintaining profitable EBITDA. Our current profitability allows us to grow rapidly. For the fintech side of the business in Brazil, we’ve experienced robust growth in the past few quarters. A few quarters ago, we found a way to credit-rate our users in Brazil, allowing us to increase SPayLater penetration quarter-over-quarter. We also launched cash loans in Brazil, customizing the product based on local needs, allowing SPayLater and cash loan users to share the same pool of limits, which is different from our approach in Asia. We incorporate a lot more data in Brazil due to its availability in the market, and we’ve implemented various strategies to engage users on both SPayLater and cash loans, leading to strong growth in our fintech business in Brazil. We expect Brazil will be one of our fastest-growing markets within the SeaMoney business.

And your next question comes from the line of Piyush Choudhary with HSBC.

Congratulations to the team on a great set of results. Two questions, both on e-commerce. Firstly, as 50% of your orders are now delivered through Shopee Express in Asia in less than 2 days, are there any operational targets or priorities for delivery of orders in less than 1 day? Are you seeing any kind of meaningful increase in order frequency as delivery speed has been improving? If you can give some examples of countries where that material difference is coming? That's the first question. Secondly, on Shopee core marketplace take rate, which has increased to 8.5% now, what is the outlook on the take rate? Are there any seasonalities we should expect in take rate trends going forward as ad revenue has become a larger portion?

On the first question regarding deliveries, as you mentioned, we do have about half of our orders delivered through SPX Express within two days. Within that, there is meaningful growth of same-day delivery as well. However, this varies by country. For example, in Indonesia, we have a sizable number of standard deliveries around the Greater Jakarta region. In Thailand, Malaysia, and Vietnam as well, we have started same-day delivery services. In Singapore, same-day delivery is still quite rare in the market due to cost structure. I think the approach will vary by country in terms of how extensively we push for same-day versus next-day deliveries, which correlates with cost structure and seller behaviors in the market. As a general direction, we aim to improve service quality and increase delivery speed across the board. As a consequence of that, we see improvements in order frequencies for the users who enjoy same-day or next-day delivery services. It's not just the speed but also the cost; in many markets, while we're reducing delivery costs, this will also help retention rates and subsequently translate to higher order frequencies. Regarding the take rate, it has two main components: the commission and the ad take rates. We see potential to grow on both fronts. Over time, as you pointed out, ad revenue is becoming a larger portion of the take rates, and while there are seasonalities—you mentioned that sellers' holidays can impact ad take rates—we believe there is still ample room for growth quarter-to-quarter or year-to-year. The seasonality may cause some fluctuations, but we can still grow our overall take rate even amidst those seasonal variations.

And your next question comes from the line of Sachin Salgaonkar with BofA.

Congrats on a great set of numbers. Two questions from my side. First question, we've seen your competitors in Southeast Asia increase take rates in the last few quarters, and the gap between your and their take rates has narrowed. So directly, I want to understand how do you think about slightly increasing take rates? I know there are the levers like ads and others, but any thoughts on charging merchants slightly more? The second, given that every business is now throwing a good amount of cash, you also have a good amount of cash on the balance sheet. Any directional thoughts on proceeds on uses of cash? Is there a thought, a, to go international at some point in the future? b, to give dividends apart from any debt repayment which is there out there? So love to know your thoughts on this.

On the first question, regarding take rates, we've talked extensively about this already. The feedback from our ecosystem indicates that our current take rate remains quite healthy. We review our commission take rate on a regular basis, even monthly, considering various factors, such as seller health, their margins, competition—as you mentioned—and the overall economic situation within the countries. Therefore, it's a dynamic process. We believe there is potential for growth over time, although it might be slower than the pace observed last year concerning the commission side.

In terms of the usage and deployment of our cash reserves, yes, you are absolutely right. Our cash position is improving quarter after quarter, which is fantastic. This positions us well—financially and operationally—in our ability to execute daily. More financial resources give us more levers and room to operate efficiently. We remain open-minded about the best way to utilize these funds while considering potential returns. To that end, dividend distributions and share buybacks, among other options, are actively on the table. There's also significant interest in how these financial resources can help us better serve our customers. For example, we are thinking about many initiatives to improve service quality and efficiency using AI, which requires some capital. However, this doesn't imply that we are looking to reduce CapEx investments, unlike some industry peers. We believe we can be pragmatic and cautious. Having ample cash gives us flexibility. Acquisition opportunities are also of interest; however, historically, we have mainly focused on organic growth and would remain open-minded to how best we can enhance our capabilities and better serve our customers.

And your next question comes from the line of Thomas Chong with Jefferies.

My question is about AI. I think management talks quite a lot on how AI is reshaping our business across different segments. I just wanted to get some color on the benefit from AI. Are we actually seeing cost efficiency, i.e., is the use of AI actually saving a lot of the manual labor costs? So that helps achieve a lot of cost savings? Or are we actually seeing the monetization getting better from AI?

Yes. On the AI side, we are seeing benefits in both regards. For example, in our search and recommendations, we leverage large language models to better understand user queries, making certain discoveries much more accurate and helping users find relevant items more quickly. This means that when a user submits a query, the new technology can help us expand what it means from the query, not only through text but also through understanding the context better. We also use AI to better comprehend the products historically tied to fintech; now we can utilize existing pictures, descriptions, and reviews to generate a much richer understanding of the products. All of this supports us in matching our product offerings with user intent far more effectively. We also provide AI-generated content as a tool for our sellers, allowing them to produce improved images, descriptions, and videos for their products, significantly increasing our conversion rates on the platform. On the cost-saving aspect, as Forrest mentioned earlier, 80% of the queries are currently answered by chatbots, leading to meaningful cost savings in our operations. This is one reason our cost management for e-commerce is performing well. Even for the 20% requiring agent intervention, we leverage AI tools to help agents understand contexts better, enabling them to respond to customers more efficiently. Another application of our AI model includes better judgment in return and refund decisions. Previously, returned items required human intervention, but with our AI engine, we can improve the speed and effectiveness of those decisions, thus reducing the number of agents required to handle customer issues regarding returns. Those are just examples, but indeed, we see the impacts on both efficiency and monetization.

This concludes our question-and-answer session. I would now like to turn the conference back over to Ms. Rebecca Lee for any closing remarks.

Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.