Earnings Call Transcript - SE Q1 2020

Operator, Operator

Good morning and good evening. Welcome to the Sea Limited First Quarter 2020 Results Conference Call. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms. Yanjun Wang. Please go ahead.

Yanjun Wang, Group Chief Corporate Officer

Thank you, operator. Good evening and good morning, everyone and welcome to Sea’s 2020 first quarter earnings conference call. I am Yanjun Wang, Sea’s Group Chief Corporate Officer. Before we continue, I would like to remind you that 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 discussions of certain non-GAAP financial measures such as adjusted revenue, adjusted EBITDA, and net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes. We believe these measures can enhance our investors' understanding of our major businesses 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 here with me Sea’s Chairman and Group Chief Executive Officer, Forrest Li and Group Chief Financial Officer, Tony Hou. Forrest and Tony will share strategy and business updates, operating highlights, and financial performance for the quarter. 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.

Forrest Li, Chairman and CEO

Thank you, Yanjun. Hello, everyone and thank you as always for joining today’s call. I hope that you are all in good health and staying safe. On behalf of all of us at Sea, I would like to thank you for your ongoing support during this exceptional period. These are times of significant change and disruptions for communities, economies, and businesses around the world. Against this challenging backdrop, we are proud that we have been accelerating growth and we are reporting very strong results for the first quarter. Our communities are increasingly relying on our platforms during the pandemic. Our users are turning to Garena to enjoy interactive entertainment and socialize with their friends during the social isolation of the lockdown. Shopee is becoming a more integral part of the commercial ecosystem in each of our markets, with consumers now relying on our platform for their staple daily essentials and other consumption needs. At the same time, more sellers are migrating to or relying more on Shopee to sell and grow their business. As our economies become more online and contactless, the digital payments and the financial services that SeaMoney provide are becoming an ever more important part of the infrastructure in our region. The coronavirus crisis is driving a step change in the growth of the digital economy globally, particularly in the markets and segments where Sea operates. It has materially accelerated a shift to an online lifestyle that is broad, deep, and in our view, irreversible. Building on our market leadership in some of the key and largest segments of the digital economy, we believe we are gaining and will continue to gain a disproportionate share of that growth. Our growth is also well-supported by a strong balance sheet and the cash flow from operations and we will continue to invest in a highly prudent way to maximize efficiency. Sea was born in the middle of the global financial crisis. We believe that certain key qualities like humility, focus, commitment, resilience, adaptability, and prudence helped us survive and thrive in those difficult days when we first started our business. We believe that this quality still defines us today and in fact are more valuable to us in the current climate than ever before. As businesses are stress tested by the crisis, our resilience and adaptability have enabled us to respond well to surges in user demand while we navigate the physical constraints and disruptions caused by the coronavirus crisis. For example, in all of Shopee’s key markets, we have launched and dramatically scaled up our offering of corporate health and hygiene products and essential household items in a matter of days. We are also doing everything we can to support economic recovery across our markets. We launched a region-wide Shopee seller support package to help merchants get back on their feet. This includes a number of initiatives localized for the specific needs of merchants and on-the-ground conditions in each of our markets. This ranges from training and support programs for new sellers to help them move online or assist existing sellers to grow their business for free or discounted access to our services like advertising and marketing that enable sellers to attract new customers online. Furthermore, we are providing fee relief for some of our seller services to ease the financial burden on them during this difficult period. Meanwhile, our Garena team has quickly scaled up our capacity to meet record surges in customer demand. We have also worked hard to create new ways for our users to engage online, from creating dedicated online e-sports events so that our communities can interact with each other even as they play, to using our platform to raise awareness of health and safety practices in a fun and creative way. Our adaptability ensures that our platform can support our customers and ecosystem partners when they need us most. This is helping us build strong bonds of affinity with them that will outlast this crisis. Just as importantly, this ensures that we can continue to grow our businesses and extend our leadership even in the most challenging circumstances. I am equally proud to see how our team has come together to get aid to where it is needed most. Across our markets, we have worked with local authorities to provide financial support as well as essential medical equipment such as ventilators, masks, and personal protective equipment to the hospitals and healthcare workers on the front lines of the battle against the coronavirus. This mission is to better the lives of consumers and small businesses through technology, and it has never been more important for us to live up to that mission. Let me now turn to our results for the first quarter. On a group level, adjusted revenue grew 58% year-on-year to $913.9 million for the first quarter. Gross profit for the quarter was up 424% year-on-year to reach $206.8 million compared to $39.5 million in the same quarter of 2019. Total adjusted EBITDA was negative $69.9 million, compared to negative $32.0 million in the same period in 2019. Let’s look now at our digital entertainment business. Garena once again broke records in the first quarter. Adjusted revenue grew by 30% year-on-year to $512.4 million. This robust top line growth was primarily driven by strong growth in both active users and paying users. In addition, we have hit new highs in terms of quarterly active users. We reported a 48% growth year-on-year to 402.1 million quarterly active users, while our quarterly paying users grew 73% year-on-year to 35.7 million. The quarterly paying user ratio remains at 8.9%. Free Fire saw particularly strong growth in the first quarter, and I am pleased to note that the strong growth extended into the second quarter. The game recently exceeded a new record for peak daily active users of 80 million. In April, Free Fire achieved another record high in monthly paying users, which more than doubled year-on-year. In India, our monthly paying users as a percentage of monthly active users already exceeded 10% in April. We believe this growth in our user base is attributable both to the macro trends as well as our constant efforts to engage new and existing users with fresh, creative, and highly localized content. For example, we introduced a new map called Kalahari. It features a desert theme with faster, more intense gameplay. The Kalahari map proved very popular with our users when tested in select events a few months ago and has since been made a permanent part of the game. We have also rolled out a number of new features based on feedback from our communities such as the rank mode for our popular Clash Squad game mode. The Clash Squad game mode features teams of four competing against each other in ten best-of-seven matches that last just 1.5 minutes each. It has been a big hit with the community. And with the addition of our rank mode, based on their feedback, it adds a new competitive element where teams can challenge themselves against the best opponents in their region. Alongside this global content push, our local teams are focused on developing highly localized content for our users. In Indonesia, for example, we have partnered with one of the country’s most popular actors and star of Mortal Kombat, Joe Taslim, to create a playable in-game character called Jota, modeled after Joe himself. To promote this, we also worked with one of Indonesia’s most popular directors to create a short video with Joe showcasing his favorite martial arts skills. So far in Indonesia, over half of our users have played as Jota. This initiative highlights how this element of local flavor resonates with our users. Similarly, in India, we partnered with popular actor Amol Parashar to produce a series of light-hearted videos highlighting Free Fire’s key features. These videos quickly went viral and recorded over 37 million views on YouTube. With offline e-sport events generally on hold, we have quickly adapted and introduced new ways to engage with the Free Fire community. For example, in April, we hosted a special one-off global event called Wonderland Peak. This was a week-long celebration featuring special characters, items, and in-game challenges to excite our community around the world and reward our most loyal users. It was also Free Fire’s largest in-game event of the year so far, and we saw significant user growth as a result. Moreover, we are working with local celebrity Free Fire fans to create fun and engaging online competitions that have been very popular with our users. In Brazil, our long-term partner, DJ Alok, who is one of Brazil’s most popular musical artists, took part in an online competition against some of the best-known local Free Fire players at Walmart for a hugely popular live set he performed across local social media channels. Meanwhile, in Colombia, two of the country’s best-known footballers, James Rodriguez and David Ospina, each captained teams of Free Fire players in an online charity tournament that attracted over 1 million views. In the first quarter, we recorded over 90 million online views for Free Fire’s e-sports event globally. This is a testament to the growing reach and popularity of this game across the world. Building on this growing and more engaged user base, we will continue to focus on developing Free Fire into a long-lasting IP and a bigger platform. The larger user base also presents greater monetization opportunities over the longer run. We are therefore fully focused on execution and leveraging this strong momentum for further accelerated growth globally. Let’s turn now to Shopee. Like Garena, Shopee also recorded standout results for the first quarter and into the second quarter. Throughout the quarter and beyond, we have been making every effort to win the hearts and minds of our consumers and merchants, given this difficult time for them. We set a new record high for GMV of $6.2 billion, representing year-on-year growth of 74.3%. The year-on-year growth rate increased by almost ten percentage points compared to 64.8% for the last quarter, despite the disruptions of the coronavirus crisis. We also reported strong growth in orders, up 111% year-on-year to $429.8 million. The year-on-year growth rate of gross orders further accelerated to more than 140% in April as we saw strong growth momentum on our platform carrying into the second quarter. In the first quarter, we further extended our market leadership and continued to rank first across Southeast Asia by downloads, monthly active users, and the total time in app on Android according to App Annie. Notably, we were the top-ranked app by monthly active users in each of Taiwan, Indonesia, Vietnam, and Malaysia. As we further expanded our user base, Shopee ranked third in the shopping category globally by downloads across the iOS and the Google Play app stores combined during the first quarter. Adjusted revenue grew strongly to $314.0 million, up 111% year-on-year, and the marketplace revenue grew even more quickly to $236.7 million, up 132% year-on-year. We believe this indicates the strength and the resilience of our platform despite the macro environment. Merchants are willing to keep investing in shopping even in this tough time because they recognize the value that we offer, our unrivaled reach to consumers, and the return on their investment that Shopee provides. The slight quarter-on-quarter decrease in our overall and marketplace take rate is mainly due to the lockdown and other movement restrictions in the first quarter. This disruption had a particularly significant impact on some of our cross-border merchants. As a result, we saw an impact on revenue derived from sales by those merchants. This includes revenue from cross-border logistics that is recognized on a gross basis. We also provided fee relief to our cross-border merchants who were materially impacted by the coronavirus crisis. Into the second quarter, we have seen meaningful recovery of cross-border transactions on the platform. Our adjusted EBITDA loss per order declined further, falling by 48% year-on-year to $0.60 compared to $1.16 for the same period in 2019 and $0.70 last quarter. Our ability to drive sustained improvement in unit economics even in this difficult environment highlights our focus on scaling with efficiency and our disciplined approach to growing our business. In Indonesia, where Shopee is the largest e-commerce platform by orders, Shopee registered over 185 million orders for the market in the first quarter, or a daily average of over 2 million orders. That represents an increase of 123% year-on-year, further extending Shopee’s market leadership. Shopee also ranked first in Indonesia by average monthly active users, downloads, and total time spent in app on Android in the shopping category during the quarter, according to App Annie. Our sustained focus on engaging our users continues to be a key driver of platform growth. As our community has fueled up, we are now able to drive engagement into activities in a much more personalized and targeted way. For example, we launched a membership-based service called Shopee Moms Club across our market. This service targets mothers who use our platform and enables them to discover a unique selection of high-quality, creative products and brands. Some of these products and brands are only available to members. They also enjoy discounts on many common items such as diapers. This targeted group engagement builds stronger user thickness and activity and we are rolling out similar targeted offerings in other categories like health and beauty. From early March onwards, the governments in all our markets began to introduce restrictions on movement to curb the spread of the coronavirus. In response to this, our local teams worked extremely hard to quickly launch and scale up our offering of FMCG, home and living, and other categories of essential and household tools. We rolled out a special program called Shopee from Home in every market. This program was designed to encourage our users to follow government guidelines and stay home by buying their essential needs online. We also onboarded thousands of new merchants to help them migrate their business online during this difficult time and overcome the significant logistical and operational challenges imposed by the lockdown. As Shopee becomes an increasingly vital part of the retail landscape in our market, more and more of the world’s top brands are building up their partnership with us. In early May, we rolled out a region-wide partnership with Procter & Gamble called Show Me My Home. For this innovative campaign, Shopee and P&G collaborated to create dedicated microsites for each Shopee market featuring a curated selection of top P&G brands categorized by different rooms of the house. The campaign aims to give consumers a new brand and engaging way to find products they want from P&G’s world-famous brands on Shopee. I am really proud of our team for managing the business through the challenging environment we have faced in recent months. We must increase the demand of our consumers and merchants despite the significant stress tests on our business and ecosystem as a whole due to the pandemic and the various restrictions introduced to curb the spread of the virus. We are well-positioned to continue capturing the expanded growth opportunity in the sector and further extending our market leadership. We believe that this strong leadership position, combined with the resilient commitment and adaptability of our team, will drive accelerated long-term growth. Finally, SeaMoney continues to experience strong growth propelled by increased user demand for digital payment and financial services during the pandemic, accelerated growth of our Shopee platform, and a deeper integration of our mobile wallet services with the platform. In the current climate, the overall digital economy is growing rapidly. In particular, more people are spending more of their time and money online, and that is driving an increased need for both online payment services and financial services, as well as an increased need for contactless payment options. That in turn means that more people are adopting digital payments and financial services as one of their primary channels of choice. Building on that, we are encouraged by the progress we have made in driving adoption of SeaMoney’s offering. In the first quarter, our mobile wallet total payment volume (TPV) exceeded $1 billion, a milestone achieved in just about a year after we started to integrate mobile wallet services with our Shopee platform. The quarterly paying users for our mobile wallet services surpassed 10 million. More than 40% of Shopee’s gross orders in Indonesia, our largest market for SeaMoney, were paid using our mobile wallet services in April. Moreover, we are rapidly expanding third-party use cases and partnerships online and offline. In March 2020, we joined forces with Google to offer our mobile wallet as a payment option for the Google Play Store in Thailand. We see significant growth ahead in the digital payment and digital financial services segment, and we see that growth accelerating as the coronavirus crisis drives more consumer activity online. We also believe that SeaMoney is in an excellent position to capture this growth as we build on our strategic leadership position in some of the largest use cases in digital payments. We will continue to focus on scaling SeaMoney effectively and efficiently to reach a strong leadership position across our key markets. To conclude, we are glad to be reporting strong numbers for the first quarter. This performance demonstrates the fundamental strength and resilience of this business and our position as the market leader in sectors of the economy that are experiencing the strongest growth. Looking ahead, while we expect to face uncertainty in the near term due to the coronavirus crisis, we believe that the step change in the adoption of the digital economy that we have seen in recent months is here to stay, and it will experience rapid growth in our markets in the years ahead. More importantly, we believe that these three core businesses, as leaders in their sectors, will capture an outsized share of that growth. Sea has been stress-tested in recent months due to the coronavirus crisis, and our performance under these conditions has underlined the fundamental strength and resilience of our business. This gives us confidence that we are well-equipped to manage the current external turbulence and ready to capture the long-term growth opportunities. We will continue to invest in our future and focus on winning the hearts and minds of users across all our platforms, especially during the times when they need us the most. We believe that Sea will emerge from the crisis in an even stronger position and be better prepared for our long-term growth. With that, I will invite Tony to discuss our financials.

Tony Hou, CFO

Thank you, Forrest. And thanks to everyone for joining the call. We have included detailed quarterly financial schedules together with the corresponding management analysis in today’s press release, and Forrest has discussed some of our financial highlights. So I will focus my comments on the other key financial metrics. At Sea overall, our total adjusted revenue grew by 58% year-on-year to $913.9 million, which was mainly driven by the growth of our digital entertainment business, especially our self-developed game, Free Fire, and our continued monetization efforts in our e-commerce business in the past quarters. The 30% year-on-year growth in digital entertainment adjusted revenue to $512.4 million was primarily driven by the increase of our active user base and deepened paying user penetration, particularly the continued success of Free Fire. Digital entertainment's adjusted EBITDA was $298.4 million, an increase of 32% year-on-year, mainly due to strong top line growth in our self-developed game accounting for an increased share of revenue. Our e-commerce adjusted revenue of $314 million included marketplace revenue of $236.7 million, up 132% year-on-year, and product revenue of $77.3 million, up 64% year-on-year. This growth is a result of our commitment to continue enhancing our service offerings, as we seek to create greater value for our platform users. E-commerce adjusted EBITDA loss was $260 million as we continued our investment to fully capture the market opportunity in the region. We will continue to invest prudently and drive high-quality growth by serving users' needs better in the long run. Digital financial services' adjusted revenue was $10.7 million, an increase of 278% year-on-year from $2.8 million in the first quarter of 2019. Adjusted EBITDA loss was $101.6 million in the first quarter of 2020 compared to a loss of $11.9 million in the same period of 2019. This was primarily due to our continued efforts to integrate our mobile wallet services with our Shopee platform across different markets. We have also been expanding the use cases of our mobile wallet services outside of Sea’s platforms to include other online and offline merchants along with a variety of third-party use cases. Returning to our consolidated numbers, we recognized a net non-operating income of $11.2 million in the first quarter of 2020 compared to a net non-operating loss of $442.8 million in the first quarter of 2019. The net non-operating loss in the first quarter of 2019 was primarily due to a fair value loss of $436.1 million arising from the fair value accounting treatment for the 2017 convertible notes. We had a net income tax expense of $23.2 million in the first quarter of 2020, which was primarily due to withholding tax and corporate income tax recognized in our digital entertainment business. As a result, the net loss, excluding share-based compensation and changes in fair value of the 2017 convertible notes, was $239.4 million in the first quarter of 2020 compared to $237.3 million for the same period in 2019. From a foreign exchange standpoint, we have seen increased volatility in the exchange rates of some of our local currencies against the U.S. dollar. This means, on a constant currency basis, the top line metrics would have been neutral to modestly better in some of the cases, but we do not assess the differences to be material. With that, let me turn the call back to Yanjun.

Yanjun Wang, Group Chief Corporate Officer

Thank you, Forrest and Tony. We’re now ready to open the call for questions. Operator.

Operator, Operator

[Operator Instructions] The first question comes from Miang Chuen Koh of Goldman Sachs. Please go ahead.

Miang Chuen Koh, Analyst

Thank you. Good evening. Congrats on the results. A set of questions, please. Firstly, gaming, can you talk about what first-quarter revenues would have been on an FX-neutral basis, which countries did the growth in active users come from? And why did the pay ratio fall quarter-on-quarter? Secondly, on e-commerce, it was mentioned cross-border was the reason for the decline. Can I confirm that this has hit your commission revenues more quarter-to-quarter than advertising and VAS? And given merchant supply initiatives in the second quarter, will we likely see more revenue decline in that quarter or revenue take rate decline in the quarter? And can I confirm also FY '20 e-commerce revenue guidance is maintained as well? Thank you.

Yanjun Wang, Group Chief Corporate Officer

Thanks, Miang Chuen. I will address the game question first. As Tony mentioned earlier, there have been some foreign exchange related fluctuations, which means, on an FX-neutral basis, our top line number, including the game revenue, could be slightly better than what we reported. But if you noted that, as Tony mentioned, we assess the difference not to be material and we will continue to monitor the situation. If we think there is a need to report more FX neutral numbers, we will do so in the future. In terms of the active user growth, it came from across different markets in Southeast Asia, Latin America, India, as well as other markets in the Middle East, Europe, U.S., and Russia. I think during the COVID time, we see more people, as they are confined at home in social isolation, tend to our games, which are highly interactive and social for both entertainment as well as human interactions with their friends and family and colleagues. We definitely see active user increase, pay user increase, and play time increase, and we think that, in the longer run, this will continue to drive longevity of the IP as well as monetization. As we mentioned in the earnings release, for Free Fire in April, we saw the pay user more than doubled, and in another country, India, where people usually do not see it as a big esports market, in fact, it has been one of the biggest markets for us for Free Fire, and at the same time, we see that in terms of monthly pay user ratio, it has already exceeded 10%. While that is increasing, we also see average revenue per user increasing in India as well as in all other markets. So I think overall for our game side, it’s been a very positive trend we’re observing. We hope to outperform our full-year target, and if we have more data, we might update the market down the road later. On the e-commerce side, in terms of the take rate, looking at Q1, overall, the first quarter is traditionally not a shopping season; it is also a shorter quarter compared to Q4. In fact, Q1 continued to grow quarter-on-quarter, and the growth rate in terms of GMV year-on-year increased by about 10 percentage points compared to Q4, which is a very big shopping season for us. This is despite all the impact that might come from cross-border and more of a total lockdown in the Philippines. So this shows how resilient our marketplace is, the strength of the marketplace leadership in Q1, despite the physical constraints and market turbulence our region might be facing. And as we look at Q2, we mentioned that our April order actually grew more than 140% year-on-year. If you look at the different markets, we see this as a step change in the adoption rate of e-commerce, which will disproportionately benefit us as a strong market leader. In terms of the take rate, the Q1 take rate drop from Q4 is mainly driven by VAS, value-added services, which is primarily cross-border logistics that we recognize on a gross basis. If the seller pays us $2 for cross-border logistics fees, we pay the third-party logistics providers $2; we recognize this $2 as revenue as well as cost of revenue. If you look at what happened in Q1, China had a lockdown during that period, which impacted both cross-border sales volume and cross-border logistics. Since China has opened up and resumed most of the normal activities, we have seen this has bottomed out in February and has meaningfully recovered by April. We continue to have a cross-border logistics uptick in May and onwards. We think this will not be a permanent impact on us, and we expect the take rate to gradually return to the previous level, and our revenue will be driven by the right take rate as well as the increase in volume itself. We are not worried about long-term monetization of the e-commerce platform; this does not change our view. In fact, it makes us even more bullish on the e-commerce business as a whole, given the step up in the penetration rates. If you look at our markets, where the penetration of e-commerce and the digital economy as a whole is still relatively low, the COVID situation actually drives many people online as offline shops are closed. Our operations remained open, and we deliver as normal in most of our markets, allowing us to capture a disproportionate amount of growth and win the hearts and minds of our users with the quality of the services we provided them as well as the assistance we are offering, especially to SME sellers on our platform who are trying to move their business online. This will also be reflected in our seller commission relief program, the aid program, as well as the marketing credit that we might provide to sellers. So, in the short term, we might continue to see take rates being a bit lower than what it used to be before the COVID situation, but long term, we believe that a steady state take rate is achievable and the monetization potential of the platform will drive further our growth as a market leader. In terms of guidance for Shopee, at this point, we think that as the situation is still evolving daily, while we continue to see strong growth, we would like to update the market if there is more data later. But at this stage, we don’t see the need to change the guidance.

Operator, Operator

[Operator Instructions] The next question comes from Thomas Chong of Jefferies. Please go ahead.

Thomas Chong, Analyst

Hi, good evening. Thanks management for taking my questions. Given that we have seen Free Fire has reached another milestone in terms of the peak active users, can you comment about the long-term trend or the stage of life cycle for Free Fire? And we’re also seeing that India, in terms of their paying ratio, is also doing very well. How should we think about the longevity of Free Fire in terms of the growth momentum? Should we expect it to be a multi-year or five to ten-year kind of socially phenomenal game? Any color on that would be great. And then my second question is back to Shopee. Given the fact that we may see some volatility in terms of the take rate in the near term because of the coronavirus, and as we are seeing the China cross-border e-commerce is also coming back, should we expect take rate to return to year-on-year growth trend back in the second half? On that front, can you comment about the impact of coronavirus in different geographies, i.e., Indonesia, Taiwan, Malaysia, Vietnam, Philippines, and Singapore? I just want to get a sense of how the GMV is actually trending because of the coronavirus and also the pace of recovery in different countries? Thank you.

Yanjun Wang, Group Chief Corporate Officer

Thank you. I’ll start with Free Fire. I think we see a very positive trend. As you mentioned, we recently hit a peak daily active user of more than 80 million, and at the same time we also see pay user increase significantly with ARPPU at a pretty steady stage. That shows that a, the monetization potential of this game is huge, and b, we think that this also helps with longevity when you have more players playing this game and more players paying for the game. They tend to stick with the game for longer, and also given how social and interactive this game is, more people playing means more of your friends, family, and other people are in the game and they talk about it; that’s part of your social life and circle, and you also stick with the game for longer. We are focused on managing and maximizing the upside of the game and building it into a long-lasting classic IP, as well as an increasingly social platform. We are introducing new maps, contents in collaboration with other games and movie stars, football stars, and introducing music videos into the game as playable characters acting in those music videos. These features are very welcomed and well received by our users, who engage with us in the game and also outside of it, through online forums, live streamings, and watching game videos on different platforms. In terms of e-commerce take rates, we’re not worried at all about the volatility in the take rate. As mentioned, Q1 volatility is more attributable to cross-border logistics, which is revenue recognized on a gross basis. The majority of our revenue actually came from high-margin revenue, i.e., commissions, handling fees, advertisement, etc. and these continue to be highly resilient during this period. Now, we actively gave sellers some relief and assistance packages to help them transition, especially those SME sellers who were more severely impacted by the COVID situation to transition through this period. We think we are fortunate to be able to do this from a position of strength to help our sellers and broader communities. This is something we might continue to do in the near term as they recover. On the other hand, we believe this will help us build goodwill and deepen bonds with our key participants on our platform, which is a worthwhile investment. In terms of different impacts in geographies, we can probably categorize them broadly into three categories: first, markets where the lockdown was not extended considerably; these include Taiwan and Vietnam. Vietnam had a lockdown, but it was relatively short. Then, there are markets with more extensive lockdowns, such as Singapore, Malaysia, Thailand, Indonesia. Finally, there is the Philippines, which experienced a total lockdown for a very short period in March, which prevented all delivery. We were among the first players to receive exemption from the government to deliver essential goods to our users. We are beginning to see lockdowns ease in the Philippines and allow more categories of goods to be delivered. For markets affected by extended lockdowns, we will continue to see strong demand because our operations are functioning more normally than other players, which speaks volumes about the execution capability of our teams. For markets like the Philippines, where e-commerce logistics delivery was affected, we witnessed decreased overall volume delinquent, but we are starting to see this easing up. As a market leader, we believe we are weathering the situation better than most players. For China, we believe that any bottom has passed, by the end of February, and we see recovery in March and April.

Operator, Operator

[Operator Instructions] The next question comes from Alicia Yap of Citigroup. Please go ahead.

Alicia Yap, Analyst

Hi, good evening Forrest, Tony, Yanjun and other management. Thanks for taking my questions. Very quickly, I know Free Fire has sustained really strong momentum, but just curious, out of this soft economy, do we anticipate the spending behavior will get more cautious as the macro outlook gets, I mean, worse and as we emerge from the lockdown? And then for quickly on the Shopee side, any thoughts in terms of the longer-term strategy that we potentially would put more emphasis on building a combination of the branded flagship store model versus together with the long-term merchants? Thank you.

Yanjun Wang, Group Chief Corporate Officer

Thank you, Alicia. In terms of the macro outlook, of course, this situation is evolving daily and depends on how long the lockdown might be and how well we can address the pandemic's impacts on the economies market by market. Overall, we see the game business generally operates counter-cyclically. Even during economic recessions, people still need social engagement and entertainment. What they may pay for games, especially in our market, is relatively affordable compared to alternatives like movie tickets or subscription services. Our game targets a broad base of consumers, which gives us better resilience against downturns, especially since we have a balanced user contribution across markets including Southeast Asia, Taiwan, LatAm, India, and others. We are quite fortunate to be in this business at this time. In terms of longer-term strategy for e-commerce, we will continue to grow both branded flagship stores and long-term merchants. We see strong growth on Shopee Mall, i.e., the branded merchants on our platform, both before COVID-19 and during this period, as brands now focus on online commerce as a must-have alternative, particularly when offline retail is shut down. We are benefiting from that migration and are focused on serving them well to retain users and capture that growth while also helping smaller merchants grow alongside us.

Operator, Operator

[Operator Instructions] The next question comes from John Blackledge of Cowen. Please go ahead.

John Blackledge, Analyst

Great. Thanks. On Shopee, any particular shopping categories that drove the acceleration in the first quarter and further accelerated in April, and I was curious how growth is tracking...?

Yanjun Wang, Group Chief Corporate Officer

Sorry, you’re breaking out. Can you repeat the question, please?

John Blackledge, Analyst

Yes, can you hear me?

Yanjun Wang, Group Chief Corporate Officer

Yes, better.

John Blackledge, Analyst

On Shopee, any particular shopping categories that drove the acceleration in Q1? Further acceleration in April and then growth that you are seeing in maybe May? And then on SeaMoney, how should we think about the long-term opportunity and also just the near-term trajectory for EBITDA losses which were $50 million higher? Thank you.

Yanjun Wang, Group Chief Corporate Officer

Yes. Thank you. In terms of GMV growth, well, if you look at our traditional categories of largest interest on our platform, including fashion, health and beauty, home and living, and baby products, we see very strong growth, particularly in home and living, health and beauty, baby products. We also see strong accelerated growth in FMCG and other staple products that we focus on now to meet the surges in demand. We think with the ongoing lockdowns, this will continue for a while. After the lockdown, we’ll have to observe when life is back to normal how much volume will continue to flow to us. We focus on creating first-time users who might fulfill various needs online and have their first e-commerce experience with us. During this period of time, we see increases in active buyers, sellers, as well as frequency, reaching above 5 times a month, with some markets even above 6. All categories are increasing even for fashion, which might be seen as discretionary. We continue to see year-on-year growth in April. In terms of the long-term opportunities versus the EBITDA loss, our adjusted EBITDA loss per order is at $0.60, decreasing year-on-year and quarter-on-quarter. Meanwhile, game EBITDA is now meaningfully larger than Shopee’s EBITDA loss for this quarter. We focus on investing in strengths to maximize growth potentials. The reasons we focus on digital entertainment, e-commerce, and digital financial services as three core businesses are our strong conviction in the region's digital economy growth and that these three sectors are the largest opportunities. We see that COVID-19 has accelerated adoption of all three areas, benefitting us as market leaders in those segments.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Yanjun Wang for any closing remarks.

Yanjun Wang, Group Chief Corporate Officer

Alright. Thank you everyone for joining today’s call. We look forward to speaking to you all again next quarter.

Operator, Operator

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.