Good morning and good evening to everyone, and welcome to the Sea Limited First Quarter 2025 Results Conference Call. All lines have been muted to minimize background noise. After the prepared remarks from the speakers, we will have a question-and-answer session. Additionally, I would like to inform participants that this call is being recorded. Thank you. I would now like to invite Mr. Elson Choi to start the conference, please proceed.

Hello, everyone, and welcome to Sea’s 2025 first quarter earnings conference call. I'm Elson 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 first quarter of 2025. 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 have delivered another great quarter of strong growth with improving profitability across all three businesses. Our businesses are now all self-sufficient and cash-generating, positioning us well to capture future opportunities. Our strong start to the year gives us more confidence of achieving our full-year guidance. Five days ago, on May 8, we celebrated Sea's 16th anniversary. On the same day, we rebranded our digital financial services business from SeaMoney to Monee, spelled Monee. We chose the name Monee because it is simple, cute and just like our company's name, Sea, easy to write and pronounce. Monee also resonates well with the name of its sister brand, Shopee, reflecting the seamless synergetic connection between the two ecosystems. Our digital financial services business already has a decade-long history. From AirPay to ShopeePay to SPayLater and to all of Monee's other products and services today, we create solutions that are simple, accessible and inclusive. We use technology to enable all our communities to join the digital economy and manage their money more easily. We remain grounded in these principles as we move forward. Today, Monee is already one of the largest unsecured consumer lending businesses in Southeast Asia, and I believe we are only at the start of realizing its full potential. We have expanded beyond Southeast Asia to Brazil, and we are moving beyond payments and credits to every aspect of people's lives relating to money, such as banking, investment and insurance. When we help people achieve their financial goals, it can be life-changing, not just for them today, but for their children and grandchildren as well. We are excited and committed to creating financial freedom and empowerment for consumers and small businesses with technology, both for this generation and the generations to come. With that, let me take you through each business' performance. Starting with e-commerce. Shopee has delivered a record high GMV and the gross order volume in the first quarter. We sustained market leadership with improved profitability across both Asia and Brazil. Unit economics improved, largely driven by our continued scale expansion, cost optimization and enhanced monetization, especially from advertising. Ad revenue grew by more than 50% year-on-year in the first quarter. Our operational priorities remain consistent to enhance price competitiveness, improve service quality and strengthen our content ecosystem. Our strong execution of these priorities has continued to make Shopee competitive and differentiated. On price competitiveness, our diverse product range and the competitive pricing continue to resonate well with buyers. Our ability to deliver a clear price advantage over our peers comes from our closer collaboration with sellers and a deeper integration with upstream suppliers. In a Qualtrics survey, we continue to rank as best in market across Asia and Brazil for offering good product prices. This has done a lot to build our brand share of being the most price competitive e-commerce platform in our markets. In the first quarter, our average monthly active buyers on Shopee grew by over 15% year-on-year. On service quality, logistics continue to be integral to our ability to deliver better and more reliable service to our customers. We further strengthened this value proposition in the quarter with both cost reduction and service quality improvements. In the first quarter, we reduced the Shopee's overall logistics cost per order by 6% in Asia and 21% in Brazil year-on-year, while continuing to improve delivery times and expand network coverage. These efficiencies enable us to pass on greater savings to buyers while providing a seamless and reliable shopping experience. In addition to these broad measures, we constantly explore and pilot new initiatives delivering value targeted at specific customer needs. For example, in some of Indonesia's major cities, we offer an instant delivery option that delivers orders in just a few hours. In the first quarter, we also piloted a Shopee VIP membership program in Indonesia to better serve our most loyal users. This paid membership program includes benefits such as unlimited free shipping, upsized discount vouchers, and priority customer service. Adoption has been encouraging, with more than 1 million users subscribing as of the end of March. Members purchase more than 3x as frequently and spend more than 4x as much as regular buyers. These are just some examples of how we continue to experiment with value-adding features to strengthen buyer engagement and stickiness. We also continue to improve service quality to our sellers by empowering them with intelligent tools and optimized ad tech solutions. For example, we introduced Shop AI Assistant to help sellers handle routine customer queries, making their daily operations on Shopee more effortless. Our upgraded ad tech product called GMV Max has also made it easier for sellers to launch campaigns, reach the right audience, and maximize their returns. In the first quarter, the number of sellers who spend on our ad products increased by 22%, and average ad spend increased by 28% year-on-year. We continue to make good progress with our content ecosystem, and it is playing an increasingly important role in driving buyer engagement and conversion. In Southeast Asia, content-driven orders, including those from livestreaming and short videos, accounted for about one-fifth of our total physical goods order volume in the first quarter. Unit economics also continued to improve, supported by growing scale, larger average basket size, better marketing efficiency, and higher adoption of Shopee Live Ads. We are also seeing strong traction from our partnership with YouTube, which we have expanded to all six of our Southeast Asian markets. As of March, over 4 million YouTube videos had Shopee product links embedded, and average daily orders attributed to YouTube content continue to rise steadily. This partnership has strengthened our relationship with creators who can now more easily monetize their engagement, while also allowing our sellers to tap on the high-traffic YouTube platform for sales. Beyond Asia, Brazil continues to show encouraging results. The pace of our user-based expansion continued to outpace the market average as we gained market share, and we remain adjusted EBITDA positive. This was driven by our strong execution. We expanded to serve more underserved market segments, onboarded more sellers, diversified into higher ticket size product categories and improved delivery speed, while maintaining our logistics cost advantage. Looking ahead, we see plenty of runway for further growth in Brazil and we remain committed to capturing the long-term opportunities in this market. In summary, Shopee has started 2025 on very strong footing, delivering high growth, while improving profitability across our markets. With solid first quarter results, we remain confident of achieving our full year GMV growth guidance of 20% with improving profitability. Next, turning to digital financial services. In the first quarter, Monee delivered another strong set of results with both revenue and adjusted EBITDA growing more than 50% year-on-year. This growth was delivered while maintaining stable asset quality, reflecting our continued commitment to prudent risk management. In the first quarter, our loan book grew by over 75% year-on-year to reach $5.8 billion, mainly driven by the healthy expansion of our user base. In the first quarter, we added over 4 million first time borrowers and we see new user cohorts continuing to generate positive profit over time as we scale. By the end of the quarter, active users for our consumer and SME loan products exceeded 28 million, representing more than 50% growth year-on-year. At the same time, our overall portfolio quality remains healthy with our 90-day NPL ratio staying relatively stable at 1.1%. Risk management remains our top priority. We take a proactive and dynamic approach to credit risk management, leveraging live insights from our ecosystem and closely tracking repayment trends across user cohorts. Our deep roots in local markets serving a massive user base gives us the unique advantage of first-hand data, letting us evaluate market conditions in real-time. With short loan tenure of typically three to six months, we can adjust underwriting cycles, credit limits and the pricing parameters quickly in response to macroeconomic changes. In the first quarter, we made good progress across various markets. In Thailand and Malaysia, SPayLater's campaigns with Shopee effectively drove new user acquisition and further increased penetration on Shopee. By the end of March, Thailand's loan book surpassed $1 billion. Brazil also delivered robust loan book growth in the first quarter, driven by both SPayLater's higher penetration on Shopee and the growing contribution from buyer cash loans. Such strong growth across different markets diversifies our overall loan book and reduces our exposure to any single market economic cycle, giving us a more stable and resilient loan portfolio. We also continue to roll out new products and strengthen our underwriting capabilities, enabling us to serve a wider range of users across different risk profiles and credit needs. For example, in the first quarter, we saw strong growth from credit products with lower interest rates, higher credit limits, and longer tenures in markets such as Indonesia and Malaysia. These products are helping us attract more higher-income users who may be more selective in their adoption of credit products. Having a larger cohort of premium users gives us significant cross-selling opportunities and a higher customer lifetime value. Taken together, as we continue to grow our credit penetration in more markets serving more users, we are cautiously constructing a long portfolio with better diversification across markets and user segments. This lets us maintain good asset quality which benefits our long-term growth and profitability. While the Shopee ecosystem remains an effective funnel for user acquisition and underwriting insights, Monee is steadily expanding its reach beyond Shopee. In Malaysia, off-Shopee usage of SPayLater has grown meaningfully by leveraging ShopeePay's merchant network and through targeted marketing campaigns that strengthen consumer acceptance of our credit products. Off-Shopee SPayLater loans now account for over 10% of our total loan book in Malaysia. We are seeing healthy repayment behavior with off-Shopee SPayLater loans and unique economics continue to improve. In Indonesia, off-Shopee growth has also been boosted by the standalone ShopeePay financial services app, which has surpassed 30 million downloads as of March. The app supports everyday payments beyond the Shopee platform. It seamlessly integrates SPayLater functionality to enable the use of credit for off-Shopee purchases. We continue to enhance the app with new features to drive user engagement and position it as a central hub for daily financial activities. This lays a strong foundation for cross-selling a broader suite of financial products and services in the future. In summary, Monee is on the right track to continue delivering strong loan book growth while maintaining sound credit quality, and we are confident of achieving our full-year guidance. As we scale, we remain focused on risk management as a top priority. Given our unique business model and the strong support we have from our Shopee ecosystem, we are confident that we can grow Monee in a way that is resilient to credit cycles and profitable into the long term. Next, turning to digital entertainment. Garena has a stellar start to 2025 with its best quarter since 2021. In the first quarter, Garena's total bookings grew 51% and adjusted EBITDA grew 57% year-on-year. In addition to Free Fire, our other games such as Ring of Valor, EA Sports FC Online, and Call of Duty Mobile have also had a good start in the first quarter, giving Garena a strong growth outlook for the year. In January, we launched a Free Fire collaboration with NARUTO SHIPPUDEN. This was our biggest ever anime IP collaboration to date. We spent over two years with the IP partner preparing for this major campaign. We came up with a comprehensive suite of content and features such as special moves, character-inspired variables, and recognizable themes from the animation. Our development team put a lot of effort into upgrading our character models to introduce the intricate finger movements and the hand signs that are iconic to the anime. This went a long way to bringing authenticity and the sensation of the anime into Free Fire. The NARUTO campaign was a resounding success with extremely positive feedback from our gamer communities around the world. Official video impressions gathered over 300 million views since the launch of the campaign, and the player feedback made it clear. The NARUTO campaign stands out as the highest rated collaboration Free Fire has ever done. The collaboration's strong social phenomenon allowed Free Fire to not only capture new users, but also reactivate churned players. Thanks to the huge success of the collaboration, Free Fire's average DAU in the first quarter was close to its peak quarterly average DAU during the pandemic. This further reinforced Free Fire's position as the world's largest mobile game by average DAU and downloads according to Sensor Tower. Beyond the NARUTO campaign, our focus on hyper-local content continues to drive strong user engagement by connecting with players through their culture and daily life. In the first quarter, Free Fire celebrated Ramadan through specifically designed in-game missions in Indonesia, allowing players to contribute real-world donations of clothing and food, turning the gameplay into a shared act of generosity during the holy month. This resonates very positively with our gamer community. In Arena of Valor, we brought community spirit to life by organizing offline floaters in Taiwan during the culturally significant Mazu Pilgrimage and lighting blessing candles at temples on behalf of users during Lunar New Year. The responses to these events on social media have been overwhelmingly positive. These initiatives show how our local teams proactively transform our games into platforms where cultural relevance meets social impact. Beyond our existing games, we are growing our portfolio to deepen our capabilities and the skill our market presents. In April, we published Delta Force Mobile, a first-person tactical shooting game across markets in Southeast Asia, MENA, and Latin America. Since launch, the game has seen good traction with over 10 million downloads. We have also started pre-registration for Free City, a self-developed open-world adventure game, and we will launch it in physical spaces beginning in May. We are confident that these new launches will deepen user engagement with our gamer community across our markets. In summary, Garena had a very strong start to the year. We will continue to drive Free Fire's popularity and longevity and expand our game portfolio for overall sustained growth. We remain confident of delivering our guidance of double-digit growth for Garena's user base and bookings in 2025. In closing, we are very happy with this strong start to 2025. All three of our businesses have shown strong growth and improving profitability. We remain committed to executing well and driving greater efficiency. We look forward to delivering a strong 2025 and beyond. Thank you as always for your 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 30% year-on-year to $4.8 billion in the first quarter of 2025. 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 $947 million in the first quarter of 2025, compared to an adjusted EBITDA of $401 million in the first quarter of 2024. On e-commerce, Shopee's growth orders grew 20% year-on-year to $3.1 billion in the first quarter of 2025, and GMV increased by 22% year-on-year to $28.6 billion in the first quarter of 2025. Our first quarter GAAP revenue of $3.5 billion included GAAP marketplace revenue of $3.1 billion, up 29% year-on-year, and GAAP product revenue of $0.4 billion. Within GAAP core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $2.4 billion, up 39% year-on-year. Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.8 billion, up 4% year-on-year. E-commerce adjusted EBITDA was $264 million in the first quarter of 2025, compared to an adjusted EBITDA loss of $22 million in the first quarter of 2024. Digital financial services GAAP revenue was up by 58% year-on-year to $787 million. Adjusted EBITDA was up by 62% year-on-year to $241 million. As of the end of March, our consumer and SME loans' principal outstanding reached $5.8 billion, up over 75% year-on-year. This consists of $4.9 billion on-book and $0.9 billion off-book loans' principal outstanding. Non-performing loans past due by more than 90 days as a percentage of total consumer and SME loans was 1.1% at the end of the quarter. Digital entertainment bookings were $775 million in the first quarter, up 51% year-on-year. GAAP revenue was $496 million. Adjusted EBITDA was $458 million. Returning to our consolidated numbers, we recognized a net non-operating income of $89 million in the first quarter of 2025, compared to a net non-operating loss of $18 million in the first quarter of 2024. We had a net income tax expense of $136 million in the first quarter of 2025, compared to a net income tax expense of $79 million in the first quarter of 2024. As a result, net income was $411 million in the first quarter of 2025, as compared to a net loss of $23 million in the first quarter of 2024.

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

Your first question comes from the line of Pang Vitt of Goldman Sachs.

Hi, good evening, management. Thank you very much for the opportunities and congratulations for a strong set of numbers. Two questions from me. Number one on Shopee. You delivered a very strong improvement in profitability this quarter. What drives that uptick and how should we think about the margin strain in the coming quarter? As these profit grows, how do you think about the risk to Shopee GMV growth amid this uncertain macro environment? And what gives you the confidence to maintain that 20% outlook? That's question number one. Question number two. Can you also share more color around the strong performance at Monee as well? What do we see that drives the uplift in loan book, whether it's new geography, new products? And how should we think about the return and margins on these new loans?

Starting from the Shopee side, there are several factors contributing to the strong growth for Q1. One factor is seasonality; this year, Ramadan fully falls in Q1, while the holiday is in Q2, which differs from previous years when it was easier to assess growth in Q2 or partially in Q1. This has positively impacted our numbers. Additionally, we have seen an improvement in take rates over time. As noted earlier, our advertising take rate has increased by 50 basis points compared to last year, bolstering our overall take rate. We have also successfully optimized our costs, particularly shipping costs, which have decreased significantly since last year. Moreover, we've streamlined our sales and marketing efforts and improved our operating costs through various initiatives, including using more AI solutions for customer service and listing management. These efforts have contributed to a better cost structure, leading to margin improvements. Looking ahead for the rest of the year, we maintain our top-line guidance of 20% growth. On the profit side, our long-term goal remains around 2% to 3% of EBITDA relative to GMV. In the short term, we are not overly constraining our ecosystem and are focused on growth while gradually improving EBITDA. Although quarter-over-quarter comparisons may show some similarities, we have not observed any significant impact on our Shopee growth from the macroeconomic environment. This is partly due to our strong position as a local marketplace, with our cross-border business representing a small portion of our overall operations. Consequently, fluctuations in cross-border trade should not materially affect our business. Additionally, we are a price-driven platform, attracting users seeking better deals. With low e-commerce penetration in many of our markets, this dynamic allows us to enhance e-commerce growth as users look for cheaper alternatives. Furthermore, Shopee functions as a more intent-driven marketplace, with impulse-driven purchases being less prevalent, making us less susceptible to changes in discretionary spending. These factors will support our growth even amid macroeconomic uncertainties. The only aspect that might affect our numbers is foreign exchange fluctuations. We monitor these closely, although they are not expected to significantly impact our local operations due to our focus on the local market. On the Monee side, growth has primarily been fueled by the increased penetration of Shopee through SPL, with a higher percentage of SPL usage on the Shopee platform. We are also witnessing strong growth on the non-Shopee side, particularly with our BCL products, and increased offline usage of SPL. For instance, we are expanding our SPL limit for mobile phones and have begun two-wheeler financing for motorbikes in Indonesia. Offline transactions via the national QR code have also seen considerable growth in recent months. Looking at the country mix, all regions are demonstrating positive growth, though newer countries are growing at a faster rate compared to larger, more established markets. Regarding margins, we experienced good margins in Q1, aided by efficient sales and marketing strategies aligned with seasonal trends. While margins may fluctuate over time due to changes in the country mix, product mix, and sales and marketing expenditures, we expect to maintain a solid long-term EBITDA margin, even if the percentage may slightly decline as our base expands.

Next question comes from the line of Piyush Choudhary of HSBC.

Yes. Hi, thanks. Congratulations to the management team on stellar results. Two questions. Firstly, how are you thinking about incremental capital allocation? As it seems in the first quarter, the majority of cash flows have been invested into the Monee segment to drive the credit business. So, incrementally, would you use own capital for the Monee segment? Or would you like to diversify sources of capital in the future? Second question is on gaming. 1Q booking was very strong. What's the outlook for booking growth in the gaming business? Can the current run rate be maintained? Or there could be quarterly volatility? I understand your full-year outlook on double-digit growth, but can it be like upward of 25% or any kind of range, if you can talk about on the booking growth?

Yes. For the first question, yes. And we are, like for all our three businesses now, it's self-sufficient and constantly generating cash quarter by quarter. And we are actively monitoring our cash position and really think through what is the best way in terms of the capital allocation from the shareholder perspective. Actually, this has been constantly the topic like, not only for the operations, but only on the Board meeting on the Board level. And specifically, in terms of if we are going to continually using our own money for our loan book growth, we have been very, very cautious on that. And in general, we would prefer to diversify our source of funding. And we would rather like instead of using our own cash, although it's probably in the short-term, from the short-term perspective, it may make more economic sense, but we want to build up a more sustainable and healthy source of funding by collaborating with third-party financial institutions and exploring different ways of our source of funding. And this includes working with other banks, right, in terms of the channeling arrangements and includes even we explore some structured products like DBS and some other channels as well. So, that is what is primarily our focus in terms of the source of funding for diversification. And in terms of the question on Garena, yeah, we have a very, very strong first quarter and we are very excited about that. And I think this is an extension of our strong growth momentum starting from a year ago. So 2024 has been a very, very strong year for Free Fire and Garena in general. And we are very happy to see entering to Q1 this year that growth is even accelerated. And I think that is a very, very positive sign that Free Fire itself will be continually to be a very, very long-term focus and could be, as we always aspired, to build it as an evergreen franchise and platform. And in terms of the quarterly volatility, yes, I mean, Q1 historically in most of the years has been the, because of the seasonality, usually being a strong month because of a lot of holidays end up like in this quarter. For example, the Lunar New Year, and this is a big holiday across a lot of our markets. And as Chris just mentioned, even for this year, Ramadan has also been in the first quarter, mainly in the first quarter as well. And especially for Q1, the great performance is also contributed a lot by the IT collaboration with NARUTO. That is a super successful collaboration. Of course, this has given us a lot of inspiration, right? And it's given us a very, very good back practice. We should explore more for the collaborations along these lines, but it probably will not happen every quarter. So we expect some volatility. But looking at from the whole year perspective, we still remain very, very optimistic. And we feel very confident about the growth perspective for Garena for this year. I think at this moment, we are excited by Q1 results, but I think we also should be just be cautious and be more focused on the product itself rather than just to say, okay, what is the financial number we can deliver? And when we have a better visibility across the year, and if we have a better sense of how the year will look like, we will come back to the market and give a more detailed update on that.

Your next question comes from Alicia Yap of Citigroup.

Congrats on the strong set of results. Thanks for taking my questions. Two questions here. First, it seems like Shopee and also your peer in Brazil continue to grow really well this quarter. So can management share with us the main driver for the sustainable fast growth stage in Brazil? And how long do you anticipate the fast growth stage to last? Second question is on the overall Shopee VAS revenue. So with the subscription membership, given it will be driving higher frequency purchase orders, would that actually put pressure on your VAS revenue growth in the short term? How should we think about overall monetization rate over the next few quarters?

On the Brazil question, we do see Brazil has a very good potential for us and for some of our peers as you can see. For Brazil, the key thing that we are doing well is similar to which are before. Number one is we have been a leading pricing advantage in the market. We always focus on making sure that on our platform, the user can get the best pricing. And that has been very welcomed by our core mass user groups. Second one is we have been working a lot on our infrastructure, especially on the SPX logistics, not only lowering down the cost, but we also shortened our delivery time quite a lot over the time. For example, if you look at Q1 2025 versus last year, our delivery time has been shortened by 2 to 3 days, which is quite a meaningful impact on the experience. We also have same-day delivery in Sao Paulo as well, which helps us to penetrate better in the cities. We are also starting procurement services for some sellers we just started, but we are seeing very good feedback from our sellers. And all this essentially helps us to serve our users better, with better pricing with better service and logistics along with lower shipping costs. I think that's kind of what drives our Brazil growth. We will foresee that if we can continue to improve on those aspects, we will still be able to grow the market, given the penetration of e-commerce in Brazil is still relatively low even compared to our South Asia market. We will try to improve on these aspects as far as we can. On the second question, on the VIP mentorship, we do see a very good pickup of the VIP memberships as far as we shared in the opening that we are seeing quite a lot of users subscribed to it, 1.5 million also as we shared. And the purchase frequency is a lot higher compared to the non-VIP users. We also see better retention for those users in general. I don't think this conflicts with the VAS revenues per se. I think we see this as a part starting two different elements. Our VAS revenue contributes a lot from the SOS and SPX shipping services and other types of services. Of course, ad is on top as well. So if you look at the overall monetization, the commission side of the monetization, we will probably not increase as much as you have seen last year, but there might still be some potential. We will adjust in different markets based on the feedback from the sellers. We have not seen any negative feedback from the sellers yet in terms of the commission side. So we'll monitor very closely based on seller feedback and also the pricing in our marketplace to adjust on the commission side. But on the Ad side, as we shared a few times, we still see there are meaningful potential for us to increase the ad take rate through both optimizing our efficiencies on the ad placement in our marketplace and also the seller adoption to increase seller adoption. We will both make it easier for sellers to invest in our ad, but also make the return on investment better for the sellers. So by doing all this, this will help us to increase the ad take rate. If you compare where we are right now versus the other marketplaces similar to us, we still have meaningful room there. So that will help us in general on the monetization side.

Your next question comes from the line of Divya Kothiyal from Morgan Stanley.

Two questions from me. The first one on e-commerce's competitive landscape. Could you please comment on how you're seeing the competitive landscape in ASEAN and Brazil? And how does that tie into the margin expansion that we are seeing? And specifically on Brazil, if you could comment on the launch of TikTok shop and how we are planning to showcase Shopee live there? What’s your needs to the likelihood of live stream becoming big in Brazil as it did in ASEAN and what would our strategy would be versus TikTok? So that's the first question. And my second question is, again, on fintech, specifically in Brazil. Could you give us some sense of how big Brazil is now relative to GMV there? How big is it as a part of the loan book? What are the differences in the returns, margin profile that you see for Brazil versus your ASEAN market? And how differently do we need to manage asset quality there given these differences?

On the competitive landscape, in general, we are seeing a relatively stable competitive landscape. I mean there's always fluctuations here and there, but largely strategically, we didn't see a big movement on that. And I think our margin improvement largely comes from, as I said earlier, better ad take rate, better cost structure, and just better operations from our side. So we will probably not see any big impact from that front. In our market, both in ASEAN and Brazil, I think as you rightly point out, TikTok shop launched in Brazil, actually just a few days ago. We will closely monitor the development. I think the core for us in Brazil is to ensure that we have a good pricing and that we have a good infrastructure to deliver lower cost and better experience. And we believe those things, if we do it well, we can continue to grow. As I shared in the last comment, the shopping line has been available in Brazil for quite a while, although the ecosystem development of Itau Brazil for live stream is still in early stage. Actually, not only as you can probably see that Medialso has livestream features here and there. And also the other social media platforms also have livestreaming features. So it's not completely new to the market. But although the overall development of the livestreams echos in the market is still in the early stage. So we will monitor quite closely. If you compare to Asia, the live stream behavior, as we see right now is probably not as prominent as we have seen in the Asia market. But again, just like what we did in Asia, if we see there is a good trend of development, we have the capability, we have the experience, and we have the technology to capture where we need it. On the fintech side, as you probably know, Brazil is a country we launched much later compared to the Asia market. So we have seen a very good growth on the penetration of SPL shopping GMV, although the absolute amount is still much lower than where Asia is, which shows that there is a much larger potential in the coming quarter to grow in Brazil as well. If you look at the overall margins, if you look at the EBITDA margins, it's somewhere sort of in the middle among our market. It's probably better and higher than some of the markets, but lower than the other markets, so somewhere in the middle. The difference is in Brazil, the interest rate is, in general, a bit higher. It's a high-interest market. And the high interest is able to cover slightly higher risk as well in the market, and just the nature of the market rather than anything we did very differently. We have been quite well profitable in the market. I think quite a while ago. It took us quite some effort to figure out how to do risk assessment in Brazil, which is likely different than Asia. Because the data source and the user behavior, etc., are all different? But I think we find a path, and we have a good grasp on the risk of the market. We also integrate a lot more data over the last few quarters. And we'll continue to integrate more data in the coming quarters, tapping on the open finance framework that the President Central Bank has set up, which we think we can leverage a lot on. So yes, in general, Brazil, we believe that it's a good market for us, and there is quite a good potential for us in the coming months and years.

Your next question comes from the line of Jiong Shao of Barclays.

My first question is regarding your Shopee EBITDA margin as a percentage of GMV. You've made significant progress in the past few quarters, now sitting at just over 0.9%. You've mentioned before that your long-term target is between 2% to 3%. Could you provide some insight on the timing for achieving that target? It seems to be lower compared to some of your peers globally. Do you believe there could be potential for upside to that target? My second question pertains to your spending. The takeaway for VAS has slightly decreased sequentially. Was this due to shipping subsidies? Have you altered your approach in terms of how you allocate funds between sales and marketing versus shipping subsidies? Is this decline seasonal for Q1, or is it part of a strategic decision for this year or the near future?

Yes. Regarding the EBITDA margin, we previously mentioned a range of 2% to 3%, which we believe is meaningful. However, if market conditions and growth align positively, we could exceed that range. We are not restricted by the range we provided. As you've noted, our global peers have a higher range, and we aspire to achieve that. We'll evaluate this based on the competitive landscape and market growth, as well as how buyers and sellers respond to our actions. Currently, we see significant growth potential in our market, with e-commerce penetration still low and over 20% market growth last year. We anticipate a similar 20% growth this year. At this stage, we prioritize growth to strengthen our market penetration. On the spending front, the take rate shown in our revenue figures is largely influenced by GAAP accounting. The absolute take rate in GAAP terms reflects the subsidies we provide. In Q1, we offered more shipping subsidies, which impacted the figures. Without those subsidies, our take rate should be increasing. We view shipping subsidies as an effective means to drive user growth, owing to our cost advantage on the SPX side. We continuously adjust our subsidy deployment—whether for shipping or other types—based on market responses. This is a dynamic process where we conduct daily and weekly tests and make adjustments accordingly. We believe that shipping updates are beneficial, as demonstrated in Q1, but this approach is not fixed, and we will adapt based on testing outcomes while operating our businesses.

Your next question comes from the line of John Choi of Daiwa.

I've got 2 questions. First of all, on Monee, your new other fintech business, I think we're talking about like driving off-Shopee growth. Can you kind of comment like what kind of investments are required here given that there will be much more investments compared to your Shopee platform and how this will impact our current EBITDA margin going forward? That's my first question. The second question is related to the AI investments. And also, how are you deploying this AI? What kind of investments have you been doing? And what's the plan? And how is this helping our business efficiently right at the current stage? And how do you expect this to improve our business down the road?

If you look at the off-Shopee growth, there are a few types. I think the first type is the cash loans. The second type is the SPayLater offline, out of Shopee platform. If you look at the Cash Loan side, Cash Loan is actually a very profitable business. The return on assets is probably even better than the SPayLater on Shopee. So, and we've been growing this quite well in the past. So we don't think that we need a particular investment to grow this that can impact the margins for this part. For the SPayLater, off-Shopee, for example, the scanning National QR code or specific type of categories for cell phones for motorcycles. The investment is very much on the teams that we have to build to deploy these services. And we have been running this business in a very prudent approach. So we have been trying to make sure that for all the services that we roll out, in general, we have a positive return rather than require a big investment upfront. Given the nature of our businesses, the way we run this is rather than you launch a new product and you try to do a big marketing, you try to attract a lot of new customers for that particular product, we first always leverage our existing user base, especially the user base we have been built through our SPayLater. So we target the new product to the existing user base, which will help us to save on marketing costs and also help us to manage risk very well for any new product we launched even for these off-Shopee products. So by doing all those, typically, we will have a positive return when we add a new product to our assortment. And the impact of EBITDA is left from the upfront investment, but more from, as I said earlier, as time goes, there will be a country mix, the certain countries have a higher profit margin than others. And also when we expand to different segments, and this can be across all different products, that doesn’t matter on-Shopee or off-Shopee. For certain off-Shopee products, it might have slightly lower margin by nature. For example, if you look at the big-ticket items like we talked about with motor loans, typically will have slightly lower margins versus the small ticket loans. If you look at a pure percentage of outstanding base, but still, if you look at absolute terms, it will still bring us positive EBITDA as absolute terms. So it will be a good product to have if you think about the absolute return. For the AI investment, we believe that AI will make a big change to our industry, both from a consumer-facing side and also from our internal product improvement. I think we shared a little bit on this last time. As an example, one of the big improvements that we did is on our search recommendations and our ad. So we're deploying AI solutions to help us to target our user a lot more efficient when users search us. And when people come to our app, we can recommend more accurate products to them and also help us to have better efficiency on the ad product. That's why we can improve the ad take rate over time. Another example is the AIGC production that we can help our sellers to create for their product descriptions. We have been increasing the video coverage for our product description a lot over time, and part of that is driven by the – we are enabling the seller to create videos based on the images or based on some of the descriptions. And typically, for this investment, we always have a very clear ROI measurement for any of the investment share before, whether we are spending our AI resources on better ads or we are spending our AI resources on better product descriptions. We measure the return on investment of that through our click-through rate, and we measure our investment through our conversion rate. And most of our investments so far, anything on the meaningful side has been positive returns for any investment with AI resources. Besides those consumer-facing, we are also investing quite a lot on improving our internal productivities, for example, that we're using AI to help our internal listing team to feature the product, and our marketplace a lot more efficient so we can discover the content, the fraud, etc., in a much cheaper way. And again, those – for all those things, we measure based on our investments versus the savings that we have typically brings a positive return. And we still see there's a lot of applications that we can do on both fronts. But again, we do this in a very prudent way.

This concludes our question-and-answer session. I would now like to turn the conference back to Mr. Elson Choi for any closing remarks. Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.

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