Sea Ltd (SE) 2021 Q1 法說會逐字稿

Good morning, and good evening. Welcome to the Sea Limited First Quarter 2021 Results Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Ms. Min Ju Song. Please go ahead.

Hello, everyone, and welcome to Sea's 2021 First Quarter Earnings conference call. I am Min Ju Song from Sea's Group Chief Corporate Officer's office.

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 a discussion of certain non-GAAP financial measures, such as adjusted EBITDA and net loss, excluding share-based compensation. 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 GAAP disclosures. For a discussion of the usual -- 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 Group Chief Executive Officer, Forrest Li; Group Chief Financial Officer, Tony Hou; and Group Chief Corporate Officer, Yanjun Wang. Our management will share strategy and business updates, operating highlights and financial performance for the first quarter of 2021. 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.

Thank you, Min Ju. Hello, everyone, and thank you as always for joining today's call. We are pleased to start 2021 on a strong note. With our results for the first quarter showing continued high growth across all our businesses. Even with the gradual recovery in offline activities in our region since the second half of 2020, our strong performance in terms of users growth and engagement shows that digital adoption is still rising healthily as the communities we serve continue to embrace the benefit of online lifestyle.

At the group level for the first quarter of 2021, we are happy to report GAAP revenue of $1.8 billion, which represents 147% year-on-year growth. We recorded particularly strong growth in gross profit, which reached $645.4 million, up 212% year-on-year, while adjusted EBITDA was $88.1 million compared to a loss of $69.9 million a year ago. This strong performance on both the top and bottom lines once again demonstrates Sea's ability to capture the high-growth potential of the industries and the regions we operate in, while deploying capital and the resources effectively and efficiently across our businesses.

Before we discuss our business performance in detail, it is important to note that many of the communities, consumers and the small businesses we serve continue to face significant challenges as a result of the ongoing impact of the pandemic, including recent increases in cases in some countries. As Sea, we are committed to play our part in helping our communities navigate these ongoing challenges. This includes support to address the most pressing near-term needs of our communities as well as our sustained focus on helping more people to benefit from the growth of the digital economy.

Our global teams are working hard to identify ways in which we can offer tangible near-term support to our communities. For example, in Bandung Indonesia, we recently set up a vaccination center in collaboration with the West Java Health Office to deliver 20,000 doses of vaccine. In the Philippines, we launched the second series of our frontline package for health care workers, delivery and logistics providers and other personnel who contribute in the fight against the pandemic.

We have offered them an exclusive package of discount and mobile vouchers and the prepaid WiFi devices from Shopee and its partners. Meanwhile, we are mindful that many small businesses around the region are still recovering from the shock of the last year. And we continue to invest in initiatives to help them successfully adjust to the digital economy, scale their businesses and generate more income to provide for their families. As an example, in March, Shopee announced that it will work with the school of export in Indonesia to help 500,000 small and medium enterprise export their products by 2030. In April, ShopeePay announced that it will be offering training programs for female entrepreneurs in Indonesia to digitalize their businesses and expand their customer reach.

In Malaysia, Shopee worked with the Federal Agriculture Marketing Authority to teach local farmers on how to effectively move their businesses online and adapt to the effect of the pandemic.

We also continue to groom talent during this difficult period. We are clearly aware that many people in our key markets, both young and old, may need to cultivate new skill sets to benefit from the rapidly growing digital economy. We want to do our part to bring positive impact to our communities by helping to nurture this new skill sets. In February, we announced the second season of our Shopee Code League. The largest online code league in Southeast Asia and in Taiwan, attended by 15,000 participants from 8 countries. In addition, as an ongoing initiative our Garena Academy in Thailand helps guide and educate young people on how to develop a career in the gaming and esports industries.

Most importantly, we are proud to serve the underserved with our businesses by connecting communities, enabling consumers and empowering small businesses. Especially those who traditionally like access to tech platforms and the opportunities they bring.

With that, let me now discuss each business individually. Starting with digital entertainment. Garena delivered another quarter of outstanding performance. Bookings were $1.1 billion, up 117% year-on-year. While adjusted EBITDA reached $717.3 million, up 140% year-on-year. In the quarter, quarterly active users reached 648.8 million, up 61% year-on-year, while quarterly paying users peaked 79.8 million up 124% year-on-year.

Our paying user ratio rose to reach 12.3% compared to 8.9% a year ago, showing that we can grow our user base while also deepening monetization. Once again, Free Fire had a standout quarter as our focus on building out the platform with more creative and engaging content and user engagement activities continue to resonate with gamers around the world. Indeed, Free Fire remained highest grossing mobile game in Latin America, Southeast Asia and India for the quarter according to App Annie, maintaining its top rank for Latin America and Southeast Asia for 7 consecutive quarters and achieving the same in India for 2 consecutive quarters. A key success factor is our ability to keep our strong global community deeply engaged with our platform by constantly delivering fresh, high-quality and locally relevant content.

In the first quarter, we rolled our partnership with popular Japanese Manga titles like One-Punch Man and Attack on Titan to create memorable crossover events and content experiences for our users. We also received very positive feedback when we introduced the in-game character based on popular local celebrities. For example, in Vietnam and in MENA, we collaborated with the popular V-pop Prince, Son Tùng M-TP, who has more than 9 million followers and nearly 2 billion views on YouTube. And the famous Egyptian singer and actor Mohamed Ramadan, who had a top hit song last year that has since generated over 225 million views on YouTube. To creating game characters, our community engagement and esports efforts are key drivers of success.

In the first quarter, we introduced the highly popular community content around India's Holi festival, a special Free Fire music video for festival drove 15 million views. We also organized esports tournaments like the Free Fire League Latinoamerica 2021. In April, our flagship Garena World event generated an online audience of 1.2 million and more than 40 million online views across Facebook, YouTube and other social media channels. During the fully virtual 2-day event that was hosted in Thailand. We used the combination of augmented reality, visual effects, animation and other technologies to provide our fans with an interactive and immersive experience. For example, we hosted a dedicated live streaming platform where viewers can customize their avatars and express their views through chat.

We also welcome the 39 teams from 9 regions to compete in our online game tournament. This event demonstrated our ability to adapt to faster changing environment and to successfully deepen engagement with our users through technology. We also received a number of awards at the Pocket Gamer Awards 2021 with Garena winning the Best Mobile Publisher award and Free Fire named as the Best Battle Royale Game.

These efforts to grow and strengthen the Free Fire platform through continuous content rollout and emphasis on community building activities have delivered clear results, not only in terms of strong user metrics and financial performance, but also in user stickiness.

Indeed, our Free Fire cohort analysis shows that even a strict lockdown in our core markets have been gradually eased since the second quarter of 2020. Time spent per daily active user on Free Fire remains far higher than pre-pandemic levels. We are encouraged to see that for older cohorts. The time spent per active user and especially paying user ratio are still rising, even though these users have been playing Free Fire since its early days. New cohorts also start off stronger than older cohorts, displaying a higher and faster-growing paying user ratio that older cohorts over time.

Looking ahead, we continue to plan for a deep pipeline of innovative content fresh partnerships and exciting esports activities to further and better engage with our ever-growing global communities of users. We are also working to ensure that our long-term games portfolio pipeline remains strong. A significant number of our more than 1,000 in-house game developers globally are constantly working on new ideas, while we continue to engage with third-party game studios for collaboration on promising and complementary game development and publishing opportunities.

Let's turn to e-commerce. Shopee delivered exceptional results for the first quarter, building on a stellar performance in 2020. As this continues to gain momentum and attract more buyers and sellers. In the first quarter, Shopee recorded 1.1 billion gross orders, up 153% year-on-year and GMV of $12.6 billion, an increase of 103% year-on-year. GAAP revenue grew 250% year-on-year to $922.3 million. Our year-on-year order growth rate continued to accelerate in the quarter, underscoring our strengthening market leadership. We are pleased to note that adjusted EBITDA loss per order fell once again. It declined 38% year-on-year to $0.38 during the quarter, demonstrating the growing efficiencies of our core e-commerce operations, even as we continue to invest in growth.

According to App Annie, Shopee continued to rank first across Southeast Asia and Taiwan by average monthly active users and the total time spending app on Android in the shopping category for the quarter. In Indonesia, Shopee's largest market, we continued to rank first across those same metrics, while our year-on-year gross order growth further accelerated in the quarter. We also saw growing user reception to our platform in Brazil. We will continue to access the trends and opportunities there carefully and invest with efficiency to continually enhance our platform offerings to the users.

Our focus on executional excellence remains the key factor driving Shopee's sustained success. In everything we do, we are very likely about optimizing our performance and maximizing the output. In the first quarter, we rolled out more initiatives to support our regional seller base and brands. As an example, for small, medium sellers, we work with SkillsFuture Singapore in March to offer a step back tech program to successfully help them to transition online. For brand, we launched new programs like our Regional Champion Brands Programme and our $100 million class to help them maximize their online growth potential. We also gave out awards like Best Product Launch or Best Tech Innovation to reward brands who have differentiated themselves on our platform, like P&G, Disney, L'Oreal, Samsung and Unilever. We are happy to share that the number of brands working with Shopee Mall has grown to more than 25,000.

To conclude, we believe that e-commerce penetration remains low across all our markets instead of the step change in digitalization since the onset of the pandemic. Against this backdrop, we remain committed to investing with efficiency to capture the attractive potential over the long run. We believe our hyper-local and highly-targeted approach alongside our commitment to focus and invest with efficiencies for the long term will allow us to build a healthy and sustainable ecosystem that can offer the best long-term value for buyers and sellers, and in turn, our other stakeholders.

Turning now to digital financial services. SeaMoney continues to see very high growth in the quarter, building upon its excellent performance last year. For the first quarter, SeaMoney's mobile wallet services reported a total payment volume of $3.4 billion, which more than tripled compared to the $1.1 billion a year ago. Quarterly paying users surpassed 26.1 million in the quarter. We are pleased that ShopeePay continues to gain traction as a quick and convenient online and contactless payment options. Indeed, according to Snapcart Indonesia's survey in March, ShopeePay was the most used, the most remembered and most liked mobile wallet by Indonesian consumers during the first quarter.

In addition to leveraging the strong and growing on-platform used cases on Shopee, we continue to expand our range of off-platform used cases. For example, ShopeePay is now available as a payment option at Indomaret, one of Indonesia's leading convenience store chain as well as various popular F&D chains such as Wendy's and Domino's Pizza. The reception so far has been strong. In the first week of our partnership with Indomaret, more than 1 million transactions were paid using ShopeePay.

We also added new features to the ShopeePay experience to enhance its utility for both consumers and ShopeePay merchants. In April, we launched a new feature called malls around you, promo or Deals Near Me, which shows the user attractive deals in their immediate vicinity. User can then purchase the relevant vouchers on the app and redeem them immediately at the physical outlet. This has been highly successful in driving significant actual footfall for onboarded offline merchants. We believe that digital financial services sector in our region is still in the early stages and expect it to develop significantly more use cases features and opportunities in due course. As we scale this business, we will apply the same rework and discipline and efficiency as we have achieved across our businesses so far.

To conclude, our first quarter results is a great start to the year. Each of our businesses has performed impressively and is well positioned to benefit from attractive long-term industry potential. Even when offline activity continues to resume, we expect rising digital adoption to be a tailwind for this sustained growth. We will also keep investing prudently and efficiently to strengthen our competitive mode and to position ourselves for new opportunities. Our commitment to serve consumers and small medium businesses with technology is stronger than ever. And we are determined to enable more people across our communities to benefit from the digital economy.

With that, I will invite Tony to discuss our financials.

Thank you, Forrest, and thanks to everyone for joining the call. We have included detailed financial schedules together with the corresponding measurement analysis in today's press release, and Forrest has discussed some of our financial highlights. So I will focus my comments on the other relevant metrics.

For Sea, overall, total GAAP revenue increased 147% year-on-year to $1.8 billion. This was mainly driven by strong performance in our e-commerce business as we continue to roll out tools to better serve our users' needs as well as growth of our digital entertainment business especially our self-developed game, Free Fire. Digital entertainment bookings grew 117% year-on-year to $1.1 billion. GAAP revenue was up 111% year-on-year to $781.3 million. The growth was primarily driven by the increase of our active user base and deepened paying user penetration, as we continue to engage the community through new content and partnerships rollout and esports events.

Digital entertainment adjusted EBITDA was $717.3 million. This represents year-on-year growth of 140%. This was mainly due to strong top line growth and an increased share of our self-developed game among our total bookings. On e-commerce, our first quarter GAAP revenue of $922.3 million included GAAP marketplace revenue of $715.9 million, up 285% year-on-year and GAAP product revenue of $206.4 million, up 167% year-on-year. The strong results demonstrated the deepening penetration of e-commerce and our ability to capture this accelerated growth opportunities, as we continuously enhance our offerings to create greater value for our platform users.

E-commerce adjusted EBITDA loss was $412.9 million, as we continued our investments to fully capture the opportunities in our markets. We remain committed to efficiently investing in and growing the ecosystem to serve our user better. Digital financial services GAAP revenue was $51.3 million, an increase of 396% year-on-year from $10.3 million in the first quarter of 2020. The growth was primarily due to increasing traction as we continue to expand our suite of service offerings. Adjusted EBITDA loss was $153.1 million compared to a loss of $93.1 million in the same period of 2020. This was primarily due to our continued efforts to drive mobile wallet adoption.

Returning to our consolidated numbers. We recognized a net nonoperating loss of $23.3 million in the first quarter of 2021, compared to a net nonoperating income of $11.2 million in the first quarter of 2020. Our nonoperating loss in the first quarter of 2021 was primarily due to increased interest expense on convertible loans. We had a net income tax expense of $51 million in the first quarter of 2021, which was primarily due to corporate income tax and withholding tax recognized in our digital entertainment business. As a result, net loss, excluding share-based compensation, was $320 million in the first quarter of 2021 as compared to $239.5 million for the same period in 2020.

With that, let me turn the call to Yanjun.

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

(Operator Instructions) Our first question comes from Thomas Chong from Jefferies.

Can you comment about the life cycle of Free Fire as well as the growth drivers in terms of MAU and users in the ARPU? Should we expect the growth to be more coming from the LatAm going forward?

Regarding your question, sorry, your line isn't super clear. I understand your question is regarding the life cycle of Free Fire. As well as the growth drivers of the users and ARPPU and whether the growth is coming from LatAm region? Are these, correct?

I'll answer these questions first. Regarding the Free Fire, I think as we can observe from our disclosure of quarterly active user, quarterly paying user and bookings as well as the bottom line adjusted EBITDA, which is largely also attributable to Free Fire being a global game and growing at a very healthy rate globally. We see still at -- it's the early stage of life cycle. And in fact, we see it increasingly as a platform and a major IP franchise.

We are focusing on continuing to grow our user base. The growth -- driver of the growth comes from both Southeast Asia, LatAm as well as India and the rest of the world. And that's the same for both the user base as well as pay user base. So we're still at an early stage of driving growth on the user base as well as pay user base for this game and developing it into a social platform where people not only come to play the core gameplay, but also enjoy other modes hangout, listen to music, social lives.

The time spent in the game continue to be very high, 2 to 3 hours per daily active user. And as we discussed in the earlier comments, that we observed very encouraging trends on the cohort analysis as well, where the older cohorts who have been with us since the early days of this game have shown stronger trends in time play as well as pay ratio. And we also see younger cohorts coming in more recently, showing even faster growth of pay user ratio as well as stickiness.

And there is also, as we mentioned, positive feedback loop between paying user as well as -- and stickiness of the game. As user pay and pay more, they tend to play the game more and be with the game for longer. We have also been focused on building our ecosystem on esports, the communities as well as collaborations with third-party IP. As we mentioned before, we have collaborated with, for example, One-Punch Man, which is a very successful campaign to promote further engagement in our games. So I think this is very much a broad-based user growth as well as pay user growth, and we'll continue to focus on growing this game globally.

The next question comes from Piyush Mubayi from Goldman Sachs.

When I look at the e-commerce business, I was hoping you could shed some light on where you are in Brazil and also help us understand the drivers of the improvement that we saw in the take rate. And related to e-commerce in better understanding the spend that is taking place. Would you be able to tell us or give us a feel for how much the investment is, that's the drag on the EBITDA for the e-commerce side at this stage in the 1Q period?

As we mentioned earlier, we've seen -- continue to see positive user reception in Brazil, and we'll continue to invest to enhance our offerings to our sellers and growing user base there. At this stage, it's still very early for us, and we are continuing to observe the trends locally and focus on efficient investment there.

Could you shed some light on whether there is a drag on the overall EBITDA because of investments in outside this region as far as e-commerce is concerned?

Given this is still very early stage. I think it's still too early to talk about the market separately. Overall, I think the contribution in terms of the margin we are seeing from an e-commerce perspective, it's still very positive. Our EBITDA loss per order continued to fall. And in terms of top line growth, at 250%, which is very, very strong on all fronts. So I think it's still a very early stage, for Brazil, for us to discuss even as a super market.

The next question comes from Alicia Yap from Citigroup.

Congratulation on the solid results. I have two quick questions. Number one, just wondering if management can share the conditions in India. Given the Free Fire tractions there, given the lockdown, do you actually see the time spend increasing or you're actually seeing some negative impact because of the illness and the instability? So any colors on the game performance in India.

And then second question is on the food delivery business. If you can share your plans and ambitions. Will that be more a complementary? Or is it a need-to-win basis, that you wanted to challenge the market leader?

Regarding India, we also observed the local situation. Hopefully, India has, as we mentioned, in our earnings, continue to be a top growth market and where our game performed very strongly. Time spent per user continue to be very high. We see rising pay user ratio there. We see it as a highly promising market, and we will continue to contribute meaningfully to our growth in the game with a very long runway. And we'll focus on promoting our game and user engagement in India.

And in terms of food delivery, we see it as a category on Shopee. And we see very strong user reception naturally and similar to how we're able to grow all these other categories on Shopee, through strong execution, right business model and user engagement. And as we mentioned before, for food, we see it as more of a complementary to our other e-commerce offerings. And we do become the market leader naturally, like what happened in Vietnam. We're happy to see that. But we see it as a focus on healthy growth and sustainable growth as part of the overall e-commerce ecosystem.

The next question comes from Ranjan Sharana (sic) [Ranjan Sharma] from JPMorgan.

It's Ranjan Sharma from JPMorgan. Two questions from my side. Firstly, on Shopee in LatAm. You have seen success in driving adoption in Brazil or in Mexico. If you could also share how you see the rest of Latin America as an opportunity for e-commerce? And secondly, on food delivery, you're in Vietnam, you in Indonesia, how should we think about ShopeeFood expanding throughout Asia?

In terms of our LatAm market, again, even Brazil is a very, very early stage for us, not to mention the others. We don't have much to update at this point, if there's any development then we will update the market. A same take for food. We've been doing food in Vietnam and testing the market leader there. And in Indonesia, we very recently rolled out first in Jakarta and gradually other -- expanding to other markets over time. But we have not announced any plans or any other market. If there's any update, we'll also let the market know.

The next question comes from John Blackledge from Cowen.

Two questions. First, could you just give us an update on Shopee's competitive positioning in the core markets in Greater Southeast Asia. And then this is kind of been asked but I'm going to ask again. Sales and marketing spend was higher than expected. Could you just provide some further color on the sales and marketing spend? And was Brazil expansion, a key driver of the sales and marketing spend?

In terms of competitive landscape, they continue to improve for us as we continue to extend our market leadership in the market across all fronts. And as evidenced by our improving top line GMV order growth at a very high rate, more than 150% in Southeast Asia plus Taiwan and also our increasing take rate over time. And monetization. In terms of sales and marketing spend, I think our top line growth also probably in a way exceeded the consensus. So sales and marketing expense percentage of GMV actually dropped quarter-on-quarter. So I think we'll continue to observe the trends.

Now it's very important to note that this is really a managed outcome for us as we look at all the opportunities. As a company that we have, this is actually the 11th quarter that we've shown triple-digit growth at the top line. I think as a company of our scale and size and speed of growth, there might not be many other large tech Internet companies that have shown this level of sustained very high growth. And our growth is carefully managed results through prudent and efficient spending and investment in the long-term development of the business model. And we are in high-growth regions, whereby the penetration of digital economy is still very low.

So the runway is very, very high. The competition landscape is not a kind of red ocean zero-sum game situation. Instead, we actually continue to see our market leadership extending as we -- while we are bigger, we are also growing, we believe, at a faster rate than many other players. So that actually bodes very well for our both opportunities, and we want to continue to invest in the long-term business model, which we believe can maximize profitabilities down the road for us and our shareholders in the long run.

The next question comes from Josh Levin from Autonomous Research.

I have two questions. First of all, in the e-com business, as you think about the future, how are you thinking about the mix of in-house versus 3P logistics? And then second, what are the implications of Gojek and Tokopedia merging for your business? And do you see any disadvantage to not having a ride handling business?

In terms of logistics, our approach has been quite consistent, where we primarily work with third-party logistics services providers in our region. And they've been also focused on investing in growth with us and we further more deeply integrated with them, helped them to improve their efficiency and quality of services to our users as we continue to see delivery time being shortened, efficiency improved and cost lowered over time.

Our own express delivery services are complementary to the third-party logistics services in this market. And of course, we will have -- continue to have the first-party capabilities to make sure our users are well served, especially during peak season or sometimes during the lockdowns when there could be constraints in capacity.

In terms of the implications of the merger. First, we'd like to congratulate our friends on their successful merger. And we think that, as I mentioned, it's a huge opportunity in our region. There's a very long runway, and we should all collectively focus on expanding the pie and growing the digital economy in the region and invest in a long run to serve our users and communities better. In terms of the disadvantage of any -- not having any particular business, we don't really see that. We think that we are very fortunate to have three of the largest consumer Internet opportunities in the high-growth regions that we are in, and we're able to manage it across so many complex and different markets.

And with the three growth engines and also especially high profitable game business, the fund helped to largely fund our growth in e-commerce and digital financial services. We think we stand in the best opportunity to -- in the best position to recapitalize the opportunity to build the largest consumer Internet ecosystem in this region. And we'll continue to focus on executing on our core businesses as well as building those ecosystems.

The next question comes from Piyush Choudhary from HSBC.

Congratulations for solid results. Two questions. Firstly, for Free Fire, could you share your thoughts on where do you see opportunity to expand user base further and where time spent per user can potentially expand? Secondly, on your digital financial services strategy beyond wallets, can you talk about your consumer lending and merchant lending products? How has been the response to buy-now-pay-later and merchant lending and outlook for regional expansion?

Yes. I think we continue to see opportunity to expand our user base in -- across all markets, in Southeast Asia, LatAm as well as, of course, India and the rest of the world. And in fact, there has been a consistent trend historically. We see the penetration rate is still deepening over time so as the pay user penetration rate. And as we continue to roll out more IT and engagement and different game modes and engage out with our users online and offline through different activities, community engagement, we think there are definitely opportunities to further grow the user base as well as user time spent on the platform.

We have seen user time spend for some of the top users, who can spend multiple hours a day on the platform, and we are focused on, of course, more of a broad-based time spent as opposed to top time spent by a small group of users. Of course, with 100 million daily active user. We're talking about a much larger community over time. So our focus is continue to promote a massive-based online platform and online community and provide them with content and opportunities for socializing engagement, try out different modes of games, try out different characters, avatars or having different ways of playing. For example, we recently launching a more of a mystery solving game mode, something like, Among Us, with pets, that players own in the game. So we'll continue to innovate to bring more content to them. And that's what we focus on in growing the user base as well as time spent per user and engagement in the game.

In terms of the buy-now-pay-later program, we see it as an integral part of our SeaMoney services to our one-listed Shopee users. And as we continue to improve our model and understand our user behavior better, we might gradually roll out the program across more -- a larger user base as well as across more market, but we'll continue to focus on efficiency, high-quality lending and management of user experience in that respect. I think this is a program that facilitates wallet usage, as well as further facilitate growth of our e-commerce platform at the same time, allow us to provide better services and have better models on top of which we can build other digital financial services, such as Internet tech and wealth management technology services. Again, we'll continue to focus on using technology to power delivery of under -- financial services to underserved communities, and we are focused on collaborating with other financial institutions in growing the pie together collectively.

The next question comes from Varun Ahuja from Crédit Suisse.

Three questions. First, on the e-commerce side, I think 1Q is supposed to be weaker given it's coming out of a strong 4Q. But this quarter, it's again a 6% quarter-on-quarter growth in GMV, so a strong growth. Can you just give some colors in terms of which segments and which countries it's doing well? And obviously, you've not given the number of orders by Indonesia. If you can give some color on that front, that will be helpful?

On the gaming side, can you provide a little bit more color on have you launched Free Fire MAX? And anything about the -- any game launches, any plan, anything, color, that will be helpful? And if it is on Free Fire MAX, any color how is it trending in the developed market?

Thirdly, on the digital financial services side, if you can share how much of this $3.4 billion of TPV is related to the e-commerce, your platform versus how much are third party, any breakup? That would be helpful.

In terms of the e-commerce business, yes, it continues to experience hypercharge growth across all markets and categories. So our category composition really hasn't shifted much. And we continue to see growth across all major categories. And same for the market -- different markets. In Indonesia, we mentioned that our year-on-year growth rate actually further accelerated, in fact, this is the highest year-on-year growth rate we've seen in recent times.

And in terms of Free Fire MAX, we continue to improve on that the game and in terms of understanding our user preference and behavior, we've been testing it in control environment in select market to work on the dispersion. I think our goal is to have different offerings. For users with different preferences and have integrated and seamless user experience on our game.

In terms of new game launch pipeline, I think we previously announced Undawn, which is a open world survival game, and we believe it will also offer a fresh content to communities in our game world. And then also the Moonlight Blade, which is MMORPG game. And based on a more well-known IP in parts of Asia. I think these are some of the examples that we have mentioned in the -- in our pipeline.

But again, as practice, while we do have a long pipeline of potential IP. We don't preannounce those earnings. We really would like our game of community to hear from directly our game in the first and in terms of the TPV, most of it still related to Shopee as well as our self-owned services. As I mentioned before, we believe the most efficient way of growing our SeaMoney business or, in particular, the e-wallet business, is through growing our own ecosystem of the own use case, which also happened to be the largest -- some of the highest quality online use cases that allow us to grow the wallet efficiently and on top of which to have high quality user analysis and understanding to be able to build comprehensive digital financial services on top of it. So this will continue to be our strategy.

(Operator Instructions) Our next question comes from Pang Vitt from Goldman Sachs.

Just two questions from me. Firstly, on Garena, can we understand why is the margin decline quarter-on-quarter given that Free Fire continues expand is base?

And second question is related to COVID impact. We've seen a worsening in COVID in Asia and rest of the world and maybe in Singapore in Thailand and also in India, how prepared is Sea this time? And if situation continues to worsen, should we expect a lessor route of seller support program that we've seen last year?

In terms of the EBITDA margin, we mentioned before that we believe our EBITDA margin might fluctuate from time to time but remain at a high rate compared to the industry average. So related to the first quarter, as I mentioned, we have IP collaboration such as One-Punch Man, and this might also contribute to additional payout. We need to make to third-party IP owner. But overall, we think this is very helpful in further engagement with our users, and in promoting our games to a broader based and in promoting the pay user as well.

So we will continue to focus on growing the user base and pay user base and user engagement. We have proven our ability to commercialize any -- whether it's self-developed or third-party IP incorporated in our being broadly across many markets.

In terms of the COVID impact, you're right that we have seen resurgence of cases and restart of some form of lockdown or restriction of social movement in our region such as Taiwan, Singapore, Thailand, Vietnam, of course, India being also -- we also see a very large number of cases. And for other countries like Indonesia, Malaysia, Philippines, we continue to see a large number of cases. So I think we're still very much in the COVID situation, and we are well prepared, we believe, to handle that, since early last year, even when this -- the pandemic first hit, I think, our team have shown resilience and adaptability to be able to manage the stricter form of lockdown to deliver the well-needed services to our communities and with specs in service levels, and we continue to fulfill those services and demand with quality.

I think we're also well prepared for any new surges in cases and will continue to be vigilant. I think regardless of COVID, the step-up in digitalization, we believe is here to stay, and that has been evidenced in our numbers. Of course, if there are further lockdown and restrictions on movements, we think there will be even greater need for our online services to reach broader communities, and we are ready to deliver that.

Our next question is a follow-up from Ranjan Sharma from JPMorgan.

Can I just have a quick follow-up on Free Fire in the U.S. There seems to be a vast improvement of popularity in the U.S. If you can share any color what's driving this? And then the engagement remains where it is, how do you feel about the given guidance for this year?

Yes. We continue to see positive reception and growth of Free Fire in developed markets in North America, and we think it's a highly encouraging sign, and we'll continue to serve the users there. I think there are -- not all battle royale games are the same. Each top hit game has its own appeal to its own audience. And I think our game differentiates itself in terms of the appeal to broad-based, not necessarily action focused audience but with a lot of broad-based appeal with fantasy elements, social elements and various forms of engagement and game modes and user friendliness to broad-based communities across gender, age and level experience with battle royale or action game in general.

I think this helps in promoting our game to different types of audiences, and we'll -- they will -- one way or the other find us, and we see strong organic growth in-game communities and will continue to focus on reaching the right communities with our game and serving them well in the developed markets as well. In terms of gaming guidance, of course, we see very strong results this quarter. We'll continue to observe. And as we need to update the guidance, we'll let people know. But at this point, we'll continue to observe the trends.

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

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

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