Sea Ltd (SE) 2020 Q1 法說會逐字稿

Good morning, and good evening. Welcome to the Sea Limited First Quarter 2020 Results Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Ms. Yanjun Wang. Please go ahead.

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 discussion 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' understandings of the actual cash flows 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.

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.

This a time of significant change and disruption 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 the social life with your friend 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 stay-home daily essentials and other consumption needs. At the same time, more sellers are migrating to -- or relying more on Shopee to sustain and grow their business as our economies become more online and contactless, the digital payment and the financial services that SeaMoney provides are becoming an ever more important part of the structure in our region.

The coronavirus crisis is driving a step change in the growth of the digital economy globally, particularly in the markets and the segments where we operate. It has materially accelerated a shift to online lifestyle that is broad, deep and, in our view, irreversible.

Building on our market leadership in some of the key and the 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 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 drive and strive 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 surge the user demand while we navigate the physical constraints and disruptions caused by the coronavirus crisis. For example, in all our Shopee's key markets, we have launched and dramatically scaled up our offering of corporate, health and hygiene products and the essential household items in the 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 to 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 range from training and support programs to help new sellers 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 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 surge 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 cards, to using our platform to raise awareness of health and safety practices in 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 testing circumstances.

I'm equally proud to see how our teams have 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 health care workers on front line of the battle against the coronavirus.

Sea's mission is to better the life of consumers and small businesses through technology, and it has never been more important for us to lead us to that mission.

Let me now turn to our results for the first quarter. On 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 hit new highs in terms of quarterly active users. We reported 48% growth year-on-year to 402.1 million quarterly active users, while our quarterly paying user grew 73% year-on-year to $35.7 million. The quarterly paying user ratio remained strong at 8.9%.

Free Fire saw particular strong growth in the first quarter, and I'm pleased to note that the strong growth extended into the second quarter. The game recently did a new record for peak daily active user of 80 million. In April, Free Fire achieved another record high in monthly paying user, 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 gameplays. The Kalahari map proved very popular with our users when it was first piloted 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 community, such as the rank mode for our popular Clash Squad game mode. The Clash Squad game mode features team of 4 competing against each other in intense best of 7 matches that last just 1.5 minutes each. It has been a big hit with the community and the addition of a rank mode based on their feedback as a new competitive element were key and challenge themselves against the best opponent in the region.

Alongside this global content pushes, our local teams are focused on developing highly localized content for our users. Indonesia, for example, we have partnered with one of the country's most popular actor and star of Mortal Kombat, Joe Taslim, to create a playable Indian character called Jota modeled after Joe himself. To promote this, we also work with one of Indonesia's most popular directors to create a short film 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 really resonates with our users.

Similarly, in India, we partnered up with popular actor, Amol Parashar, to produce a series of lighthearted videos highlighting Free Fire's key features. This video quickly went viral and to date have recorded over 37 million views on YouTube.

With offline e-sports events generally on halt, we have quickly adapted and introduced new ways to sustain our engagement with the Free Fire community. For example, in April, we hosted a special one-off global events called Wonderland Peak. This was a week-long celebrations featuring special characters, items and in-game challenges to excite our community around the world and to 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 number growth as a result. Moreover, we are working with local celebrity Free Fire fans to create fun and engaging online competition that has been very popular with our users.

In Brazil, our long-term partner, DJ Alok, who is one of Brazil's most popular musical artist, took part in an online competition against some of the best-known local Free Fire influencer as a warm-up for hugely popular [live song] he performed across local social media channels.

Meanwhile, in Colombia, 2 of the country's best known footballer, James Rodriguez and David Ospina, each captained team of Free Fire influencer 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 e-sports events globally. This is a testament to the growing reach and the 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 bigger platform. The larger user base also presents greater monetization opportunities over the longer run. We are therefore fully focused on execution and leveraging Garena's strong momentum to further accelerate its 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 the minds of our consumer 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 10 percentage points compared to 64.8% for the last quarter, despite the disruptions of the coronavirus crisis.

We also recorded 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 the strong growth momentum on our platform carrying into the second quarter. In the first quarter, we further extended our market leadership and continued to ramp far across Southeast Asia by download, monthly active user 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 Google Play App stores combined during the first quarter.

Our 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 resilience of our platform despite the macro environment. Merchants are willing to keep investing in Shopee even in this tough times 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 the marketplace take rates 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 for 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 the total time spend in apps 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 scaled up, we are now able to drive engagement with activities in a much more personalized and targeted way. For example, we launched a membership-based service called Shopee Mom's Club across our markets. This service targets mothers who use our platform and enables them to discover a unique selection of highly quality, curated products and brands. Some of these products and brands are only available to members. They also enjoy discount on many common items such as diapers. This targeted group engagement gives stronger user stickiness and activity, and we are rolling out similar targeted offerings in other categories like health and beauty.

From early March onwards, government in all our markets began to introduce restrictions on movements to curb the spread of the coronavirus. In response to this, our local teams worked extremely hard to quickly launch and scale up our offerings 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 user 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 times 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 partnerships 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 macro sites for each Shopee market that feature a curated selection of top P&G brands categorized by different rooms of the house. The campaign aims to give consumers a new, fun and engaging way to find the product that they want from P&G's world famous brands on Shopee.

I'm really proud of our team for managing the business through the challenging environment we have faced in recent months. We managed to increase the demand of our consumers and merchants in spite of significant stress test on our business and our ecosystem in whole by the pandemic itself, and the various restrictions introduced to curb the spread of the virus. We are well positioned to continue capturing the expanded growth opportunities 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 payments and financial services during the pandemic, accelerated growth of our Shopee platform and the 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 the financial services as well as the increased need for contactless payment option. That, in turn, means that more people are adopting digital payments and the financial services option 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 offerings.

In the first quarter, our mobile wallet's total payment volume or TPV exceeded $1 billion, a milestone achieved in just about a year after we started to integrate the mobile wallet service with our Shopee platform. The quarterly paying user 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 the month of April.

Moreover, we are rapidly expanding third-party use cases and partnership online and off-line. 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 payments 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 out 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 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 the 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 the step change in 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 Sea's 3 core businesses, as the leader 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 therefore continue to invest in our future and focus on winning the hearts and minds of the user across all of our platforms during the time when they need us most. We believe that Sea will emerge from the crisis in an even stronger position and better prepared for our long-term growth.

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 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.

First, the overall 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 and in particular, the continued success of Free Fire.

Digital entertainment adjusted EBITDA was $298.4 million, an increase of 32% year-on-year, mainly due to strong top line growth and 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 the 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 off-line merchants along with a variety of third-party use cases.

Returning to our consolidated numbers. We recognized a net nonoperating income of $11.2 million in the first quarter of 2020 compared to a net nonoperating loss of $442.8 million in the first quarter of 2019. The net nonoperating 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, 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 as 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, and that meant for us, on a constant currency basis, the top line metrics would have been neutral to modestly better in some of the cases, but we did not assess the differences to be material.

With that, let me turn the call back to Yanjun.

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

(Operator Instructions) The first question comes from Miang Chuen Koh of Goldman Sachs.

Congrats on the results. Two sets of questions, please. Firstly, gaming. Can you talk about what first Q revenues would have been on an FX-neutral basis? Which countries did the growth in active users come from? And wide pay ratio for Q-o-Q?

Secondly, on e-commerce, it was mentioned cross-border was a reason for the decline in take rates, can I confirm that this has hit your commission revenues more quarter-to-quarter than advertising and us? And given merchant support initiatives in second quarter, will we likely see more revenue decline in that quarter or revenue take rate decline in the quarter? And I confirm that -- can I confirm also FY '20 e-commerce revenue guidance is maintained as well?

Thanks, MC. And I will address the game question first. As Tony mentioned earlier, there has been some foreign exchange-related fluctuations and that 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 assessed difference not to be material and we will continue to monitor the situation. If we think there's a need to report more ForEx-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 the other markets in Middle East, Europe, U.S., Russia. So I think during the COVID time, I think we see more people, as their confined at home in social isolation, they turn to our games, which is highly interactive and social for both entertainment as well as the human interactions with their friends and family and colleagues. And we definitely see both user -- active user increase, pay user increase -- sorry play time increase. And that, we think, in the longer run, will continue to drive the longevity of the IP as well as monetization.

As we mentioned in earnings release, for Free Fire in April, we saw the pay user more than doubled. And at the same time, for example, in another country, India, where people usually do not see as a big e-sports market, in fact, it has been one of the biggest market 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 the other markets. That -- so I think, overall, for our game side has been very positive trend we are observing. And we hope to outperform our full year target. And if we have more data, we might update it -- the market down the road later.

On the e-commerce side, so in terms of the take rate, I think if you look at Q1, overall, Q1 is traditionally not a shopping season. It is also a shorter quarter compared to Q4. And in fact, Q-on-Q, our e-commerce continued to grow and growth rate in terms of GMV year-on-year growth rate even accelerated in Q1 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 the Q1 despite the physical constraints and market turbulences our region might be facing. And in fact, as we look at Q2, we mentioned in the earnings release that our April order actually grew more than 140% year-on-year. So if you look at the different markets, we see this as a step change in terms of adoption rate of e-commerce, that is with benefit disproportionate accruing to 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, which means if the seller pays us $2 for cross-border logistics fees, we pay the third-party logistics providers $2. We recognize these $2 as revenue as well as cost of revenue.

So with that, if you look at what happened in Q1, China had a lockdown during that period, which did have an impact on the cross-border logistics -- sorry, both cross-border sales volume as well as cross-border logistics and that is reflected in the take rate that we're looking at for Q1. Since China has opened up and resumed most of the normal activities, we have seen this has bottomed out in February and meaningfully recovered by April, and we continue to see cross-border logistics uptick in May and onwards. So we think this one will not -- it's not a permanent impact on us, and we expect take rate to gradually rise back to the previous level. And our revenue is going to be both driven by the rise take rate as well as the increase in the volume itself.

So we're not worried about long-term monetization of our 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 rate. So if you look at our markets where the penetration of e-commerce and digital economy as a whole is still relatively low, the COVID situation actually drives a lot of people online as the off-line shops are closed. And we -- our operations remain open, and we deliver as normal in most of our markets, so throughout this whole period. This allowed us to capture disproportionate amount of growth and also win the hearts and minds of our users with the quality of the services we provide them as well as assistance we're providing them, especially the SME sellers on our platform who are trying to move their business online. And this will also be reflected in our seller commission relief program, the aid program as well as the marketing credit that we might give to sellers.

So short term, we might continue to see take rates being a bit lower than what used to be before COVID situation, but long term, we have -- that does not change at all our view of the steady state take rate is achievable and the monetization potential of the platform. This also drove further our growth as a market leader.

So 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 think it's -- we would like to update the market if there's more data later. But at this stage, we don't see there's a need to change the guidance.

(Operator Instructions) The next question comes from Thomas Chong of Jefferies.

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 the 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 multiyear or 5 through 10 years 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 back to year-on-year growth trend back in the second half? And on that front, can you comment about in terms of the impacts of coronavirus in different geographies, i.e., Indonesia, Taiwan, Malaysia, Lat Am, Philippines and Singapore? I just want to get a sense about how the GMV actually is trending because of the coronavirus and also the pace of recovery in different countries?

Thank you. I will start with Free Fire. I think we see very positive trends. As you mentioned, we recently hit peak daily active users of more than 80 million and at the same time we also see pay user increase significantly with ARPPU at pretty steady stage. That shows that, a, monetization potential of this game is huge; and b, we think that this also helps with the longevity when you have more players pay -- play in this game and more players paying for this game. They tend to stick with the game for longer. And also given how social interactive this game is, more people play with -- play this game, that also means more of your friends, family, other people in the game, and they talk about it, that's part of your social life and circle. You also stick with the game for longer.

I think we're trying to really how to focus on managing and maximizing the upside of the game and building it into a -- not only a long-living classic IP but also increasing social platform. As you can see that we introduced a new map, new content in collaboration with other games as well as movie stars, football stars, and we introduced music video into the game as playable characters acting in the music video, so these are all these features we're introducing that are very welcome and very well received by our users who are engaging with us in the game and also outside the game in online forums through live streaming and watching the game videos on different platforms.

So I think that there is definitely the focus on us to continue to build out this IP under this huge platform with now 180 million people interacting with each other daily. So I think that is something that we are very much focused on.

And 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 gross basis. But as you can -- as we previously mentioned, the majority of our revenue actually came from the high-margin revenue, i.e., commissions, handling fees, advertisement, et cetera. And these continue to be highly resilient during this period.

Now we do, by choice, actively gave sellers some relief and assistant packages to help them transition, especially those SME sellers who are more severely affected, impacted by this COVID situation to transition through this period. This is something we think we're very fortunate to be able to do from a position of strength to help our communities of sellers as well as the broader communities to help them get on feet -- back on their feet. So this is something that we might continue to do in the near term as they recover. But on the other hand, this is something that we think in the longer run will help us win the goodwill and build a stronger and deeper bond with our key participants in our platform, and it's a very worthwhile investment we're making.

In terms of the different impact in geographies, I think probably in a broad basis 3 categories. One is markets where the lockdown was -- there wasn't an extended period of very strict or total lockdown. So these are markets like Taiwan and Vietnam. Vietnam did have a lockdown, but relatively short. And then there are also markets where you see more extensive lockdown, that would include Singapore, Malaysia, Thailand, Indonesia. And then there's also the Philippines, which is -- that has a lockdown that also for a very short period of time, in March, that prevents all delivery. We are actually one of the first players to receive exemption from the government to deliver essential goods to our users. And we also start to see the lockdown easing in Philippines over time to allow more categories of goods to be delivered.

And then there's also China where the cross-border impact is from. So I think these markets are different in a sense that for the markets that has relatively less impact from the lockdown, we see normal growth -- more normal growth year-on-year, quarter-on-quarter, like before, and we continue to grow very strongly. And in markets that have more extended lockdown where our operations still carry on, I would say, as much as normal as possible despite the physical constraints our teams face, which also speaks volume about the resilience and execution capabilities of our team, we actually see even more stronger, more profound increase in demand for our services, and we have been able to deliver that. And that is the market that we think that to the extent the lockdown is still in place, we will continue to see strong demand.

And in markets, where -- like Philippines, that does affect e-commerce logistics delivery, there is a decrease in the overall volume that can be fulfilled. But again, we start to see that being eased. And as a market leader -- this affects everybody. But as a market leader, I think we are still doing probably better than many other players in this regard.

And for China, I think, as you all know, pretty much the bottom has passed by the end of February, and we see recovery in March, April. So the cross-border, we think, will be back more quickly.

(Operator Instructions) The next question comes from Alicia Yap of Citigroup.

Very quickly, I know the 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 some macro outlook worsens and also 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 combinations of the branded flagship store model versus -- together with the long tail merchants?

Thank you, Alicia. In terms of the macro outlook, of course, this is -- the situation is evolving daily and really depends on how long the lockdown might be and how well we can address the pandemic and the impact on the economies market by market. But overall, I think we do see game business generally to be quite countercyclical. Even during economic recession, people still need some form of social engagement and entertainment and what they might pay for game, especially in our market, if you compare to, like, say, a movie ticket or a subscription of streaming services, et cetera, it is -- that's the reason we call it micro transaction. I think this is something that's highly affordable to people still.

And also, the -- for games, we're not targeting a very small game, especially as a large e-sports, highly social game, we're targeting very broad base of consumers. And therefore, having a very large user base, and we focus on QAU, QPU, daily active user, et cetera, is very important. That gave us much better resilience against any potential downturn. And given that our game is not concentrated in any particular market, in fact, we see in terms of user contribution as well as revenue contribution, increasing balance across different markets, including Southeast Asia, Taiwan, Lat Am, India as well as other markets, that gives us, in a way, better protection against any particular market downturn. So we think in that way we're quite fortunate to be in this business at this time.

And in terms of longer term strategy for e-commerce, I think we will continue to grow both. We see very strong growth on Shopee Mall, i.e., the branded merchants on our platform, both before COVID started and -- as well as during this period. As brands also started to look at online commerce as -- not as afterthought or as good-to-have alternative, now more as a probably more of a must-have alternative or even a greater focus, especially when the off-line retail is pretty much shut down. So I think we are disproportionately benefiting from that migration, and we are very focused on serving them well to retain our users and capture that growth.

And -- but at the same time, we still think our markets, there are a lot of SME sellers that really can benefit from our marketplace. And Shopee is -- when we designed it to be a general merchandise marketplace as opposed to more of a niche kind of marketplace or a 1P market -- or a 1P kind of model. It's precisely because we think there are a large number of smaller merchants, SME merchants that can grow with our marketplace and our markets. And we have a unique advantage in our ability to serve millions and tens of millions of them well with very highly localized operations and high-quality management of the sellers category by category. This differentiates us from a lot of the existing players and help us grow to the market leader as we are now. So we'll continue to focus on -- focusing on serving them well and make them grow with our platform.

(Operator Instructions) Next question comes from John Blackledge of Cowen.

On Shopee, any particular shopping categories that drove growth acceleration in the first quarter and further acceleration in April? And in April -- and 104% growth in April, I was curious how growth is tracking...

Sorry, can you repeat the question, please?

Yes. Can you hear me?

Yes, it's better.

Okay. Shopee, any particular shopping categories that drove the acceleration in 1Q and the further acceleration in April? And then curious of growth that you are seeing in -- that you may be seeing in May?

And then on SeaMoney, how should we think about the long-term opportunity? And also just the near-term trajectory for (technical difficulty) and EBITDA losses, which were $50 million higher...

Yes. Thank you. So in terms of GMV, well, I think if you look at our traditional segments that are -- categories that are largest on our platform include fashion, health and beauty, home and living, baby products, we see a very strong growth -- accelerated growth in -- particularly in home and living, health and beauty, baby products.

We also see strong accelerated growth in FMCG, other FMCG goods, staples, that we are also focusing on now to meet the surges in demand. So we think with the lockdown in place still in most of the markets, this will probably continue for a while. After the lockdown, we'll have to observe when life back to normal, how much of that volume will continue to flow to us. But I think what we focus on is at this stage when the users are being kind of naturally turning to online to fulfill their needs and these users are oftentimes the first time users.

If you look at the e-commerce, low e-commerce penetration rate in all markets, we're not talking about -- or turn to wallet share, we're actually talking about an increase in terms of the baseline of new users coming naturally keen to be educated how to use e-commerce, and we are their probably the first impression and providing the first-time experience of e-commerce to them.

So this is what we focus on. Whether they want to buy house products or FMCG or staple or food, we try to, as much as possible, serve their needs well. And with our engaging experience as well as a large assortment of things, we can convert them into more frequent buyers into other products and goods as well.

So during this period of time, we see increasing active buyers, sellers as well as by frequency, we used to be between 4 and 5. We see it increasing, getting to above 5 and for some markets, even above 6x a month. So all the other categories are also increasing. Even for fashion, which people might think is more discretionary, we still continue to see year-on-year growth in April for fashion order. But I would say the other category, the order growth probably is more pronounced compared to fashion as now people don't have to go out as much. So I think we will continue to observe going into May.

In terms of the long-term opportunities versus the EBITDA loss, if you look at our adjusted EBITDA loss per order, it's at $0.60 now, which is -- has been increase -- decreasing year-on-year and Q-on-Q. At the same time, if you look at our game EBITDA, this is -- now it's meaningfully larger than Shopee EBITDA loss for this quarter, which, again, as we said many times before, that if we want to break even, we can any time. But we are focused on investing in growth and extending our market leadership that will bring us much better return in the longer run and profitability. We're very much focused on disciplined growth and efficiency of growth. And at the same time, our view does not change that the investment in shopping now is very effective and efficient, and it's increasingly covered by our cash generated from both Shopee monetization itself as well as monetization from the digital entertainment side, which are also enjoying strong growth.

So we are in, I would say, better-than-ever position now, and we are very focused on maximizing the upside being presented to us under the special situations. Basically, we're fast-forwarding into the future. The reason we focus on digital entertainment, e-commerce and digital financial services as our 3 core businesses is because our strong conviction in the growth of the digital economy of our region and that these 3 sectors are the largest opportunities in the digital economy of our region. And with the current situation, we see that the adoption of digital economy as a whole has accelerated, and the baseline has increased. And all 3 segments that we are focused on happen to be the best -- biggest beneficiary. And we have been the market leader in these segments, again being the biggest beneficiary within these segments. So we are very much focused on investing with discipline to capture that growth for our long-term potential.

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

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

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