Sea Ltd (SE) Q2 2026 Earnings Call Transcript

Good morning and good evening to all and welcome to the C-Limited second quarter 2026 results conference call. All lines have been muted to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Mr. Casey Ong to begin the conference. Please go ahead.

Hello everyone and welcome to SEAS 2026 Second Quarter Earnings Conference Call. I am Casey from SEAS 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 major businesses when used as a complement to our gap disclosures. For discussion of the use of non-gap financial measures and reconciliation with the closest gap measures, please refer to the section on non-gap financial measures in our press release. I have with me CIS Chairman and Chief Executive Officer Forrest Leib, President Chris Peng and Chief Financial Officer Tony Ho. Our management will share strategy and business updates, operating highlights and financial performance for the second quarter of 2026. This will be followed by a Q&A section 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. Our strong momentum from the first quarter has continued into the second. C generated $7.8 billion in revenue, up 48% year-on-year, and over $917 million in adjusted EBITDA. Our investments have enabled Shopee and Mani to continue to strengthen our market leadership while improving our user penetration. Many of our initiatives' unique economics continue to improve, a testament to our strong financial discipline and operational efficiency. We will continue to invest prudently in serving more users and serving them better, broadening our foundation for profitable growth into the future. With that, let me take you through each business' performance. Starting with Shopee. Shopee continued its strong momentum into the second quarter. GMB grew 28% year-on-year, marking eight consecutive quarters of sequential growth, and we again achieved new highs in gross order volume and revenue. We generated an adjusted EBITDA of more than $250 million during the second quarter. Our improving operational efficiency and growing skill have strengthened our unique economics. We can now profitably serve a wider range of users, enabling us to lean further into user acquisitions. We have engaged and re-engaged several user groups through brand awareness campaigns, expanding our content channels and broadening our logistics offerings to cater to different preferences. This job remarkable new buyer growth in the second quarter. Average monthly new active buyers grew more than 35% year-on-year, a significant acceleration from previous quarters. Average monthly active buyers increased 18% year-on-year, and overall buyer engagement also continued to improve, with purchase frequency increasing by 8% year-on-year. Our monetization strengthened further in the second quarter. Ad revenue was up more than 70%, and the ad take rate improved by over 90 business points year on year. We continued to make advertising simpler and smarter for sellers. For example, pairing ads with vouchers that are personalized to buyers to increase purchase conversion and improve the efficiency of sellers ad spend. Ad adoption and the spend continued to improve across our seller base. The number of ads paying sellers goes around 45 percent, while average ad spend per seller increased more than 15 percent year-on-year. Our operational priorities remain consistent, improving price competitiveness, service quality, and our content ecosystem. To keep strengthening our execution across these priorities, we continued to deepen our structural modes across logistics, Shopee VIP, and content. Strong logistics capabilities continue to be a key contributor to Shopee's reputation for excellent service. We continued to make delivery faster and more reliable across a wider product assortment in the second quarter. Instant and same-day delivery gained strong traction as we captured more everyday purchases. Our instant service in Indonesia can now deliver in as fast as one hour in urban areas. We continue to extend our presence in high-frequency categories such as groceries and pharmacy items to serve our buyers better. Order volumes using instant delivery grew around 80% year-on-year in Indonesia, while cost per order fell by around 20%, driven by economies of skill and efficiency gains. Beyond delivery, we also made good progress in fulfillment, with order volumes up more than 20% quarter-on-quarter. Fulfillment benefits both sides of our marketplace. Sellers offload operational complexity and skew more efficiently, while buyers enjoy faster, more reliable delivery. In some markets, more than 60% of our fulfilled parcels arrive the next day, meaningfully higher than the platform average. The gains are especially noticeable in places where geography makes delivery challenging. For example, in Mindanao, a mountain region in the Philippines, fulfillment plus buyer waiting time by one to three days, buyers can feel the difference. Listings that converted to fulfillment saw more than a 20% first month uplift in orders on average in Southeast Asia. Second, our shorty VIP program continued to scale strongly. Now live across Asia and Brazil, total membership exceeded 15 million at the end of June, up 45 percent from the previous quarter. Across Asia, VIP members contributed 24 percent of GMB in the quarter. Average monthly retention remained strong at around 80 percent, and members continued to show higher engagement, spending meaningfully more after subscribing. In Brazil, early adoption has been encouraging since our April launch, with membership already surpassing 1 million. Beyond buyers, we are seeing encouraging support among both Shopee sellers and external partners for our Shopee VIP program. We have broadened member benefits across travel, dining, and entertainment, improving the program's value proposition. More sellers and partners have come on board to cost-bound benefits, demonstrating the value they see in engaging our Shockey VIP buyer base. This has helped improve the program's unique economics in Asia. Third, we have continued to improve our content ecosystem to make product discovery more engaging. Orders from live streaming and short-form video grew more than 50% year-on-year, accounting for more than 25% of physical goods orders in Southeast Asia. Unique economics also improved sequentially as we further optimize our marketing spend. We have deepened our relationships with YouTube and Meta to drive order growth. Shopee affiliate orders generated by linked creators on Facebook increased by more than 85% quarter-on-quarter, with Facebook Rails proving to be a very popular channel to drive purchases. We have now extended our Instagram collaboration to all eight of our core markets, and we are seeing promising early results from Indonesia, the first market where we launched the partnership. I'm particularly happy with our progress in Brazil, which remains our fastest growing market in the second quarter. We once again outpaced the broader market on GMB growth, supported by increases in active buyers, purchase frequency, and average basket size. We continue to invest in and optimize our end-to-end logistics capabilities, expanding our network while ramping up utilization. We improve the delivery speed, reducing average buyer waiting time by 15% year-on-year, and doubled our penetration of fulfillment orders year-on-year. These logistics improvements are also supporting our expansion upmarket. We onboarded nearly 500 new official brands during the quarter, while GMB from shopping mall sellers more than doubled year-on-year. We still see significant headroom for girls in Brazil, and we will continue to invest in this market in a disciplined and profitable manner. I'm pleased that Shopee has delivered a strong first half of 2026. With this solid momentum, we are optimistic that Shopee will achieve the milestone of $1 billion in adjusted EBITDA for the full year. Next, moving to money. Money delivered another great quarter with continued strong growth in both revenue and adjusted EBITDA. Credit remained the primary driver of growth. Our loan book reached $11.1 billion at the end of June, up 62% year on year. Asset quality remained stable with our 90-day NPL ratio at 1.0%. The Philippines has become our fifth market with a loan book exceeding $1 billion. We continue to expand our credit business on three fronts, acquiring new users, deepening our relationships with existing users, and expanding our credit use cases. One key enabler of our credit business growth has been the ongoing advances we have made in our credit risk capabilities. Our latest risk models are pre-tuned on a broad set of behavioral and transactional data across our ecosystem using transformer architecture similar to those following today's large language models. The model learns from the full sequence of a user's actions over time capturing richer context around how customers interact with our platform. Recent enhancements to our underwriting models have helped lift approval rates by around 10% when compared to previous models, while maintaining a similar level of risk. This further reinforces the scale of our ecosystem as a durable advantage. To further strengthen this capability, we are also drawing on more external data sources to better assess users who are newer to our ecosystem. For instance, through partnership with local mobile operators in Indonesia and open finance data in Brazil. We have also used AI to build tools to efficiently verify a diverse range of user submitted income documents across markets, languages, and formats. Review time reduced by around 95% while maintaining a very high level of accuracy, letting us respond to credit limit requests from users almost instantly. Supported by this improvement in risk underwriting, we have been pushing harder on new user acquisitions. We have found that many users begin using as pay later for convenience and subsequently generate rate more value through repeat transactions, installment conversion, and adoption of our other credit products. So we have broadened the rollout of one month interest-free as-pay-later loans, giving borrowers the option to either settle their balances within the month or easily convert purchases into interest-bearing installment. Similarly, we have been more widely offering promotional interest rates for first-time personal cash loans. Taken together, these efforts contributed to strong new user growth during the quarter. We added around 5.3 million unique first-time borrowers, and our active credit users grew around 34% year-on-year to over 40 million at the end of the quarter. We also saw deeper user engagement. Average loans outstanding per user grew around 20% year-on-year. Offshopee SPLater has continued to scale well, driven by integration with national QR payment infrastructure and continued merchant onboarding. By the end of the quarter, Offshopee accounted for over 20% of our total SPLater portfolio, with this figure as high as 35% in some markets. In Thailand, we are testing a new product, the Shopee Pay Unlimited Card. It lets users pay with their S-Pay Later balance at any merchant that accepts card payments, further expanding S-Pay Later use cases. The standalone Shopee Pay app remains a key pillar of our strategy to grow money beyond Shopee. serving as a one-stop platform for users' payments, credit, insurance, and broader financial needs. In the second quarter, monthly transaction users on the map more than doubled. The Shopee Pay app is currently live in Indonesia, Thailand, Malaysia, and Vietnam, and we will launch a similar standalone app in Brazil soon. In summary, Mani delivered another strong quarter, with a broad-based growth across our products and markets. The advances in our risk capabilities are compounding. Each improvement helps us serve more users, serve them better, and reach further beyond Shopee. We are still at an early stage of growth. Only a fraction of the users across our ecosystem are using money's financial products today, and the credit penetration remains low across our markets. This gives us great confidence in money's long-term growth and earnings potential. Next, turning to Garena. Garena delivered another strong quarter with bookings growing 15% year-on-year, with profitability remaining healthy and growing well year-on-year. Free Fire anchored this strong performance now in its ninth year. It is still expanding its reach and scale globally, continuing to draw in over 100 million average daily active users. Free Fire's longevity comes from a simple discipline. We keep the experience fresh with the new gameplay and content, and we make it feel both local to the communities who play it and enjoyable for a global audience. A great example this quarter was Undersea Mystery, an ocean-themed campaign inspired by Songkran, Thailand's water festival. We integrated the steam into the land itself, creating a gateway into a new undersea realm. This extended battleground gave players fresh territory to explore and fight over, and the opportunity to hunt for powerful gear hidden in a hydro zone and fishing pond across the map. This continual reinvention of the core gameplay keeps players engaged over time. We also rode World Cup waves to build excitement and engagement with our players. Our Fire Kickoff campaign rolled football into the map itself, turning part of it into a football field. Eliminated players were sent to a one-on-one football showdown for a chance at rejoining the match. And a new football form let players turn themselves into a football to speed across the map and pull off surprise plays. The campaign also resonated well beyond the game. the original campaign song Booyah Ole became a standout organic driver of social engagement, generating over 350 million social media views. I'm also very excited about what's life ahead for our portfolio. We announced two mobile games, both built on strong globally recognized IP. Power World Online is an open-world multiplayer survival adventure game developed and published by Garena under license from Pocket Pair. And Monster Hunter Outlanders is a survival hunting action game developed by Tencent based on Capcom's iconic franchise. Taken together, these titles show how Garena is expanding into new genres, strengthening our development and the publishing capabilities and the deepening our relationships with top global partners. In summary, Arena delivered another strong culture. Free Fire is still proving itself as an evergreen franchise and we continue to work towards diversifying our portfolio. We remain committed to delivering the high-quality experiences our players know us for. In conclusion, this culture strong results underscore both our financial display and the strength of our business. This promising momentum gives us greater confidence for the rest of the year. With that, I invite Tony to discuss our financial.

Thank you, Boris, and thanks to everyone for joining the call. For CEO overall, total debt revenue increased 48% year on year to $7.8 billion dollars in the second quarter of 2026. This was primarily driven by growth in Shopee and money. Our total adjusted EBITDA was up by 11% year-on-year to 917 million dollars in the second quarter of 2026. On Shopee, gross orders increased 27% year-on-year to 4.2 billion in the second quarter of 2026, and GMV increased by 28% year-on-year to $38.3 billion in the second quarter of 2026. Our second quarter GAAP revenue of $5.6 billion included GAAP marketplace revenue of $4.9 billion, up 49% year-on-year, and GAAP product revenue of $0.7 billion dollars within that marketplace revenue core marketplace revenue mainly consisting of transaction-based fees and advertising revenues was 4.3 billion dollars up 66 percent year-on-year value added services revenue mainly consisting of revenues related to logistics services was 0.7 billion dollars. Shopee adjusted EBITDA was up by 12% year-on-year to 255 million dollars in the second quarter of 2026. Money gap revenue was up by 59% year-on-year to 1.4 billion dollars in the second quarter of 2026. Adjusted EBITDA was up by 13% year-on-year to 288 million dollars in the second quarter of 2026. As of the end of June, our consumer and SME loans principal outstanding reached $11.1 billion, up 62% year-on-year. This consists of $10 billion on-book and $1.1 billion off-book loans principal outstanding. Non-performing loans passed due by more than 90 days as a percentage of total consumer and SMB loans was 1% at the end of the quarter. Corina bookings grew 15% year-on-year to $764 million. Gap revenue was up by 34% year-on-year to $747 million. The growth was primarily due to the increase in our active user base and deeper pain user penetration. The arena adjusted EBITDA was up by 17% year-on-year to $430 million. Returning to our consolidated numbers, we recognized a net non-operating income of $66 million in the second quarter of 2026, compared to a net non-operating income of $83 million in the second quarter of 2025. We had a net income tax expense of $251 million in the second quarter of 2026 compared to net income tax expense of $144 million in the second quarter of 2025. As a result, net income was up by 11% year-on-year to $458 million.

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

We will now begin the question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. In the interest of time, we will take a maximum of two questions at a time from each caller. If you wish to ask more questions, please request to join the question queue again after your first questions have been addressed. At this time, we will pause momentarily to address our roster. Our first question comes from the line of Piyush Chowdhury with HSBC. Your line is open. Please go ahead.

Thank you. Congratulations, management, on a great set of results. Two questions. Firstly, on Shopee, your investments are delivering results on the growth. So can you talk a little bit about outlook for GMV growth? And are we behind the peak investments as margins have improved sequentially? Is the unit economics improving across VIP and content? And should we expect Shopee margins to improve? Or there could be volatility in second half due to seasonality. That is the first question. Secondly, can you give us an update on AI initiatives like last time you mentioned about AI shopping assistance for buyers, how have been the pilots and for sellers on your platform, what initiatives you have taken and benefits observed?

Thank I would take this question. If you look at the Shockey Outlook for GMV growth, we still see quite good growth in Q2 as we shared in the opening. We still see the trend continues in the coming quarter. The growth has been doing well across our market in South Asia, Taiwan and also Brazil. If we look forward for the full year, we remain well on track and confident of achieving our full year growth outlook of around 25%. That said, we want to make sure that we also anticipate the potential forex headwind as well. As you can observe that many of our market has a weaker currency against US dollars. Q3 and Q4 also have a higher the GME base. But again, we still believe that we're able to achieve the guidance we gave before of around 25%. In terms of the investment we're doing for the few initiatives that we shared before on the VIPs, on the fulfillment, our logistics, etc. In general, we see our economics has been improving, quote-unquote. I think for our conference businesses, which we share that we did an investment for a period of time, if you look at the economics has been as good as the platform already. The newer initiative, although we're doing the investment phase, but in general, we do see a positive trend on the economic improvement. And also in general, what we are doing is less a very CapEx-heavy investment, even with the fulfillment. We usually take a CapEx-like approach that we don't own there for human centers, but usually we rent a place with relatively light CapEx to enable the growth there. In terms of the margins, I think we shared our four-year ambition of achieving $1 billion in adjusted EBITDA. For the AI initiatives, we're doing quite a lot of work over the past few quarters, both on buy-in and sell-in side, as you mentioned. We are launching the IAM assistant for sellers in quite a few of the market. Essentially, instead of the seller talk to a key card manager, the IAM, as we call it, there is a digital IAM that they can talk to, which can help them to answer many questions and many answers they want to do with their shops. This is also 24 hours available, of course, compared to income managers, usually not available 24 hours by 7. I think just one of the examples that we're working with the sellers, among many others. On the buyer side, we spend a lot of effort on both helping the ads have better conversions, which reflects our ad-take rate improvement over time, but also just general conversion for our search recommendations. We've been rolling out our new GR algorithm, a generative algorithm for recommendation and search, which gave us a meaningful improvement on the conversion rate that we observed. We're also doing a lot of work on AIGC on content. If you look at our platforms, we have a lot more content that can be generated by AI Now, which can be used to do a personalized targeting for our buyers to improve the conversion as well. And many other work we are doing, I'm just sharing a few on top of my mind.

Your next question comes from the line of Alicia Yap with Citigroup. Your line is open. Please go ahead.

Hi, good evening. Thanks for taking my questions and also congratulations on the strong set of results. I wanted to follow up a little bit on the e-commerce, the Shopee question. So can management elaborate a little bit about performance this quarter and also the profitability trend for Brazil, Taiwan, and Southeast Asia, and also the latest competitive landscape there? And then on your guidance, I know that you mentioned the 25% is unchanged for the GMB growth. So in the case that if the GMB were to further exceed the guided growth rate, it says suggested that there is also further upside on the EBITDA for the second half. And then lastly, on the fulfillment investment cycle, just wondering, where are we in the time frame? Are we getting closer to what we wanted to invest, or are we still in the early stage of the investment cycle for the fulfillment center? Thank you.

Across the market, we see relatively good performance, both on growth and profitability. I don't think it's a single market trend, but relatively across the market. Regarding the competitive situation, we do observe that competitive situation to be relatively stable at this point of time. and we are able to maintain our market share. In certain markets, we are able to gain market shares as well over the quarters for South Asia and Taiwan. For Brazil, we also observed that our growth is well above the market growth levels and we believe we're growing faster than our close competitors as well there. Regarding the balance between growth and EBITDA, it's always a question on what's the best balance between the growth and EBITDA. And I don't think that is a simple answer there. I think something we always observe both on how much we can optimize internally and also look at how fast is the market growing. And of course, look at competitive landscapes to do this balancing. At this point in time, we have been seeing the competitive situation to be relatively stable as I shared. So the main driver of how the balancing work will lie on how we see the market growth rate look like in the rest of the year, and how much we can improve our efficiency internally for this. For the fulfillment, we believe there's still quite a lot of room for us to improve, to further penetrate on the fulfillment businesses. I think right now, both in South Asia and Brazil and Taiwan, we're still ramping up the fulfillment sizes. For example, I think we shared that our fulfillment grew more than 20% quarter-on-quarter. In quite a few markets, it's more than double-digit already of our businesses. But still, if you compare the size of our procurement with some of the other players in our market, especially in Brazil, or compare with the sizes of the peers in other markets, if you look at the few players with a procurement business and marketplace we're still much smaller as a size compared to them and with the good benefits we see from a fulfillment both on reducing the speed of deliveries and enhance the buyer conversions and also reduce the the effort of sellers selling our platform we do believe this is a good investment we're taking for the for our platform and also as I shared in the earlier questions our perfume economy has been improving quote-unquote driven both by the fact we are able to optimize the cost structures I think the learning process for and also just take time to optimize the operation just in general That's one. Also, as we grow the scale, with more and more sellers joining the fulfillment businesses, essentially we have better scale advantage on that. And number three is also because there are more and more buyers recognize the fulfillment businesses that we are offering. This gives us better economics over time. Another thing that's important to point out is that We're also doing a lot more integration between fulfillment and SPX. So essentially, to reduce the friction between how the warehouse, the item in our warehouse moves across the entire value chain, so we can realize the cost synergies and cost benefit by running both the warehouse and the logic together. and all these things help us to build the fulfillment businesses and helping us to gain the advantages of the overall platforms. Again, we run fulfillment business in relatively light capex fashion that we don't own the land, we don't own the warehouses. When we start a new fulfillment center, We do respiratory light capex to enable that. We are also experimenting more automation with our fulfillment center, which actually reduce our cost to run as well. But that's still in the early stage. We will share more when we scale more to our fulfillment centers over time.

Your next question comes from Divya Kothiel with Morgan Stanley. Your line is open. Please go ahead.

Thank you very much. My first question is on the e-commerce side. We've noticed that both Shopee and TikTok Shop have raised commissions in several ASEAN markets this year. Could you talk about how much more upside do you think there is for this? And can you confirm if ASEAN e-commerce is now profitable? And is that something that has specifically driven the guidance upgrade for e-commerce overall for this year? And my second question is on FinTech. Where do you expect money's margins to really stabilize? We did see sales and marketing expenses continue to rise. When should we expect money's EBITDA growth to re-accelerate to more healthy levels? And could you maybe just talk about any guardrails we should be mindful of in terms of NPLs, provisioning, especially as you're acquiring new users?

When we look at the tick rate, We look at tick rates from multiple angles. I think one is how much the tick rate is reinvesting to grow the ecosystem, which is very important for us to look at. That's number one. Number two is we look at how our price competitiveness is in our platform. So, essentially, after tick rate, do we still maintain a similar gap of price leadership or not compared to the other platforms? Number three is we also look at the price of e-commerce, essentially, on our platform versus the offline pricing. Number four, we also look at what does it mean for sellers' profitability. I think we put all the things together in terms of consideration for the tick rate. From what we observed so far, we have been seeing very healthy ecosystems, even with the increase of tick rate. And the reason for that is that we reinvest a large part of the tick rate to the ecosystem growth as well. and also that we're able to help the seller to operate online more efficiently over time with the combination of all the things our price is still very competitive not only compared to the other marketplaces in our market but also compared to the offline alternatives in the market and And going forward, we still see opportunities to increase our tick rate, not only from commissions, but also from the pay ads that we're being able to penetrate more and more over time. Although you can argue that the fixed commissions probably has the pace of the fixed commission increase probably will be less than we observed before, but again, there is still a room for us to increase the overall tick rate by both helping the sellers to operate more efficiently, but also helping the sellers grow their volumes by reinvesting part of the thing to the ecosystem and also increase the conversion potentials from the buyer side. With all the things together, I think we're able to grow this even more over time. On the money margin questions, if you look at individual countries of the money businesses, if you look at EBITDA over the outstanding ratios, it has been relatively consistent, our NPL has been relatively stable as well over time. I think typically when we operate, we look at product by product, by countries, by segment, and the shift of the retail asset is primarily driven by the mix of the things. For example, the certain countries, for example, let's say in Thailand or in Malaysia, which is a later country that grows more than the previous countries, the overall is slightly lower. So which kind of like, you know, we mix together, it reflects to the overall numbers. For example, some of the offshore SPL lending growth, which is quite meaningful, more than 20% of the SPL already as far as shared in the openly has naturally lower ROAs compared to the unshopped SPLs. For example, we've been trying to penetrate more to prime segment users, which naturally have slightly lower interest rate, et cetera. And all those growths are intentional. And as you observed from the number, that it does require some investment sometimes when we grow into the segment and sometimes it does mean that we're able to grow the outstanding a lot more but we're slightly lower our age compared to the previous segment or countries or products we focus on. So we actually see this as a positive movement rather than the nexus views out of this. Our guardrail is very simple. We want to maintain stable NPL for the segment of the product in the countries when we look at it. And when we grow a new segment, new product, new countries, we want to make sure it brings a positive return of the asset to us. That's why as a consequence, we always see that our So absolute EBITDA, every profit from money has been a growing quarter and quarter.

Your next question comes from John Chui with Daiwa. Your line is open. Please go ahead.

Thanks for taking my question and congratulations on a very strong quarter. I want to focus a little bit on Shopee's advertising take rate. I think Forrest also mentioned in his prepared remarks that ad take rate was pretty strong for a few reasons. but i think it was up by more than 90 basis points like how further upside do we see and i think you guys also mentioned the advertisers are seem to be more keen and taking up more of this um so what what are like you know the um uh ai technologies that we're implementing to further improve this ad take rate and um you know how much more room do we see uh and my second question is on money particularly for brazil i think you know um also in the you know slides you also said you guys is going to launch something astound on an app in Brazil. What will be the strategy? Should we be expecting somewhat similar to the Southeast Asian market?

On the app growth, we do see a pretty good growth on the app, as we shared in the remarks. I think there are a few things helping the app growth. I'm just listing some of the examples. One of the things, Smart Vulture, which is we kind of combine a personalized voucher from a buyer. together with ads, so we enhance the seller's ad traffic, increasing the purchase conversions. Another example is we have the ShopGNV MaxSmart diagnosis tools, so essentially these AI diagnosis reports and tools to help the seller to analyze how can they have a better return on the ad. It's leveraging the AI capability to analyze the ad performance and drive improvement. We also have in-depth audience insights for BrandMax. This feature essentially allows the more seller to view the number of shoppers in each stage of their purchase journey and how does the shopper move between stages. This will give them a more robust and algorithm-driven and branding solutions to capture the buyers better across their life cycles with the seller. And on top of that, there's also quite a lot of fundamental improvement on the algorithm for the ad, both on how can we match the buyer's intention to the ad product better. I think And that's where the AI-based algorithm, the GI algorithm, helps quite a lot when we come to the matching part. The other part is the content presentation. We are using Quellup AI tools to create better personalized content for the user when we see that. So all this incombination helps our asset rate to improve. In the coming quarters, we still see that meaningful potential to increase the intake rate, given that many of the tools, many of the algorithms we're implementing are still in progress. We can see meaningful optimization potentials while we are doing more experiments, while we are optimizing algorithms further in the coming quarters. For Brazil, on the money side, we do believe that money has a big potential in Brazil. We're seeing very good growth in Brazil for our lending businesses in the past two quarters. We were launching an app which is similar to Shopee Pay app in Brazil, but with the FFI license, which means we will be similar to what Mercado Pargo or other players in the market can offer in Brazil. We believe that Brazil is quite a big market for financial services, which is proven by a few other players in the market, with our e-commerce user base, our e-commerce data, and also with our better credit scoring algorithm that's proven in Asia already, but of course we customize for Brazilian flavor. We are able to broaden our products in Brazil over time. If you compare what we offer and what the other players offer, there are many low-hanging fruit that we believe that we can capture just by doing the right product structures, integrating the right data in our platforms to better credit scoring users and just also with the license we acquired, which is kind of as good as others already in the market.

Your next question comes from Navin Khitla with UBS. Your line is open. Please go ahead.

Hi, good evening and thank you for the opportunity. Two questions from me, firstly on the e-commerce business. So obviously we have seen the margins kind of stabilize over the last couple of quarters after inching down through the later part of last year. I just wanted to understand from here on and back to your medium term kind of aspiration of two to three percent, if you could help us, you know, if you could help us understand the path, the time frame, and how you get there. So that's, I guess, just a question on long-term margin evolution for e-commerce. And secondly, on money, you did mention, for example, that the average loan size is up some 20-odd percent compared to last year. Now, as your loan ticket size increases, does the credit risk also increase? Or, you know, if I could also just understand what the time frame of these loans is, the duration of these loans is, to get a better sense of how the credit risk is being managed with a larger loan book per customer?

We still believe that 2% to 3% is quite within our reach for the EBITDA percentage. I think, in fact, some of the market are well above that. I think the balance between growth and probability is something I shared in the previous answers. We do believe this is still a dynamic process on how do we make sure we capture the potential of the growth of the market versus taking more profit out of the ecosystem. I think this is something we'll balance over time. But the path to, if you look at the numbers, the path from where we are to 26% is relatively straightforward. Now we are 0.67% or so, and we're talking about 1 plus percent to get where we are. And part of that will come from over time. We don't need to invest so much in many of the things we invest in. you know, like many of the programs we're doing right now, you will get mature over time. I think we just invest less into it. Part of that comes from our cost improvements, fundamental cost structure improvements. For example, our logistics, our fulfillment cost structure improvements over time. Part of that comes from better takeaways from either ads or other forms. I think if you for that number together, we are really not too far. And we have done this in some markets already for this. We do see, as you mentioned, the outstanding per user increase year to year. I think part of that is because we are reaching out to a new prime segment of users who naturally takes a bigger ticket sizes. Part of that is also our country expansion. Some of the countries we grew recently faster than the others has a higher income capital in the market. With all that, we do see a stable credit risk within the country, within the segments within the product. So we didn't see any correlation between the increase of the alpha-inferent user and the increase of credit risk here. The duration of the large loan, it depends on the product countries. Some can be as long as 18 months, some of them can be top mountains, etc. But, you know, that's a relatively small percentage for very good prime users or for some specific lending products like the offline motorcycles that requires a longer period.

Your next question comes from Zhang Shou with Barclays. Your line is open. please go ahead.

Thank you so much for taking my questions. Please let me add my congrats as well. I have two follow-up questions around e-commerce. The first one is that you talked about a full year 26 EBITDA to be over a billion. That would suggest a higher EBITDA for the second half than the first half, which is different from last year. I think last year, the second half EBITDA was lower than the first half. I was hoping you can talk about the drivers behind that phenomena this year compared to last year. Does that also imply that perhaps your margins may be a bit better in the second half than the first half as well? My second question is back to Brazil. One of your key competitors in Brazil talked about the momentum they are seeing by lowering some of the take rates there and lowering the free shipping threshold. But that clearly hasn't stopped you from growing very, very fast. Could you just talk about sort of your profitability outlook in Brazil in the coming quarters and the years. Thank you.

As you already pointed out, we share the goal of more than one billion EBITDA this year. If you do the math, it does mean that in the absolute terms, our EBITDA for second half of the year will be higher than first of the year. Of course, partially because of the growth of the market. Essentially the overall GMV, we believe that we still see quarter over quarter growth. So the second half of the year of GMV base will be better than the first half of the year. Part of that comes from the continual work of all the initiatives we talked about. But again, the e-commerce is a business that kind of we adjust the pace, adjust the monetization based on many parameters, as I shared earlier, based on how we are optimizing the businesses, based on how the overall business growth of the country, and also based on how the competitive vision is. For Brazil, yes, I think your optimization is absolutely correct. But we still see that our growth is well above the market in the countries. And if you look at the price competitiveness, we are still very price competitive, a lot stronger than the competitive in the region, even after their change on the take rate and free shipping threshold. So, we believe that for e-commerce businesses, the fundamental still holds, it's the price competitiveness of our assortment, it's the completeness of our assortment, it's the fundamental structure of cost to serves, and it's experience of how the buyers can discover the product on our platform, and all those things help us to grow faster in the market in Brazil. And if you look forward, we still believe that Brazil has a long way to go in terms of e-commerce growth. We are hoping to grow in Brazil in a profitable fashion with the growth rate outpates the market in the coming quarters.

Your next question comes from the line of Ranjan Sharma with J.P. Morgan. in. Your line is open. Please go ahead.

Hi. Thank you so much for the opportunity and the presentation. Two questions from my side. Firstly, on the gaming, we discussed new publishing rights. Can you also help us understand which geographies do they cover? And also, earlier in the year, we talked about a possible Naruto collab coming back. If you can remind us when that's going to be. the second question is on fintech we noticed that the provisions for credit losses have increased quite a bit this quarter what are the trends that you're seeing in delinquencies and how does that affect your loan growth going forward thank you hi rajin thank you for your question uh i think for the new publishing games uh like we specifically talk about two games uh this quarter one is the Power World Online.

And since this game is our self-developed game, so we're going to publish it globally. And we probably were going to launch the game market by market and gradually. But the plans we're going to do this will be a global publishing opportunity for us. And for the Monster Hunter Outlander, this is a great collaboration between Garena and the Tencent. It's a Tencent developed game and also worked together with this fantastic IP owned by Capcom. We targeted to launch in the market in the market we are very familiar, like Southeast Asia, Latin America, like Taiwan, and potentially we are going also to launch the game in Middle East and some more markets so in the pipeline so the target launch time is will be this year yeah I think for the provision it's primarily driven by the loan mix I think there are two components our loan mix we naturally have high provisions one is on the off Shopee SPLs.

And second one is the Brazil loan outstanding. Although Brazil, we have very good LA there, but it's a high interest, high risk market. So the higher mix of these two components contribute to the higher provision you see.

This concludes our question and answer session. I would like to turn the conference call back over to Mr. Casey Ong 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.