Strong ecosystem growth and lending expansion continued, while Shopee profitability declined year-on-year amid ongoing investment.
| Quarter | Q1 FY26 |
|---|---|
| Call date | 2026-05-13 |
| Results reported | 2026-05-12 |
| Length | 64 minutes |
| Speakers | Rebecca, Investor Relations; Forrest Lee, Chairman and Chief Executive Officer |
Results, guidance and Q&A analysis for this call
Rebecca (Investor Relations)
Hello, everyone, and welcome to SEEDS 2026 First Quarter Earnings Conference Call. I am Rebecca from the SEEDS Investor Relations team. On this call, we may make forward-looking statements which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our press release. Also, this call includes the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows of our major businesses when used as complement to our GAAP disclosures. For discussion of the use of non-GAAP financial measures and reconciliation with the closest GAAP measures, please refer to the section on Non-GAAP Financial Measures in our press release. I have with me Steve Chairman and Chief Executive Officer, Forrest Lee.
Forrest Lee (Chairman and Chief Executive Officer)
President Chris Fung and Chief Financial Officer Tony Ho. Our management will share strategy and business updates, operating highlights, and financial performance for the first quarter of 2026. 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 for joining today's call. We have had a strong start to the year. In the first quarter, we generated over $7 billion of revenue. representing 47% year-on-year growth. Adjusted EBITDA exceeded $1 billion for the first year. 2026 is the year where we are leaning into growth advancement to deepen our competitive mode while maintaining financial discipline. Our strong revenue growth reflects the effectiveness of this advancement, and we are already seeing unique economics start to improve for some of these initiatives. giving the significant runway for growth still ahead of us in our market. With that, let me take you through each business' performance, starting with Shopee. Shopee delivered another record-setting quarter, achieving new highs in GMB, gross order volume, and revenue. GMB grew 30% year-on-year in the first quarter. At the same time, we maintained financial discipline. generating an adjusted EBITDA of over $220 million. Our monetization strengthens further in the first quarter. Ad revenue grew 80% and ad click rate increased by more than 90 basis points year-on-year. Ad paying sellers and their average ad spend both increased by around 35% year-on-year, reflecting the strong value sellers see in our ad offerings. Our results validate the operational priorities we have laid out for Shopee, improving price competitiveness, service quality, and content ecosystem. Priorities show average monthly active buyers increase 16% year-on-year, and the buyer purchase frequency grew year-on-year. We continue to deepen our structural mold across logistics, Shopee VIP, and content. Logistics continues to be one of our most important depreciators. XTX Express remains one of the largest e-commerce logistics solution providers in our market. We have developed the strong capabilities to dynamically optimize for fee, cost, and user preference. In the first quarter, we continued to scale delivery options, serving different consumer demands while maintaining cost leadership. We have seen strong adoption of our instant and same-day delivery services with greater economic... We are seeing lower delivery costs per order for these faster services. For example, in Indonesia, our instant delivery service can deliver orders in as little as 2 hours in urban. Order volumes for this service grew over 35% in the first quarter, with cost per order reducing by around 20% year-on-year. Scaling this service has enabled us to set up assortment frequency categories, partnerships with major convenience stores, and pharmacy chain, such as Indumari. At the end of March, 7,000 offline stores available on our instant series. This has shifted more offline purchasing behavior online and into the Shopee ecosystem. Buyers using instant delivery enjoy greater convenience, and we are seeing such buyers spending more with better retention on Shopee. Beyond delivery, we are increasing our focus on fulfillment as a natural extension of our logistics capability. Fulfillment order volume grew by around 25% sequentially. Fulfillment allows for faster and more reliable delivery, enabling sellers to operate and sell more efficiently on our platform. With this happening, fulfillment orders consistently delivering faster than the platform average. In Asia, over one-third of products fulfilled by us were delivered within the next day in March. This delivery network allows us to drive significant improvements in both service and cost efficiency. For example, in Taiwan, our collection port network expanded to over 3,100 locations at the end of the first quarter, nearly 50% more locations. We leveraged our growing fulfillment capability to scale initiatives such as shipping directly to lockers without additional packaging, improving speed. With this effort, average buyer waiting time improves 12% in the first quarter year-on-year. We reported double-digit GMV growth year-on-year in the first quarter in Taiwan, deepening e-commerce penetration and strengthening our market leadership there. This subscription-based membership program continues to gain strong traction and drive user engagement. By the end of March, total subscribers across our Asian market surpassed 10 million, up more than 40% from the previous quarter, with strong program retention averaging above 80%. Across all markets, our Shopping VIP members have consistently demonstrated double-digit spending uplift after subscribing. 30% of Shopping VIP members contribute around 20% of GMV across Asia. Building on this success, we have rolled out our Shopping VIP program in Brazil in April, and the ecosystem continues to grow healthily. In the first quarter, orders from live streaming and short-form videos grew more than 50% year-on-year. These orders accounted for more than 25% of total physical goods orders in Southeast Asia. With further strengthening our content ecosystem, we continue to deepen our content partnerships. Orders driven by YouTube more than doubled year-on-year. Our collaboration with Meta is scaling well, with over 4.5 million affiliates across our market of nearly 30% quarter-on-quarter. In Indonesia, we have extended our meta-collaboration to enable seamless product promotion and checkout, not just on Facebook. I would also like to highlight our strong performance in Brazil and the growing role AI is playing in our business. In the first quarter, while continuing to be profitable, we continue to outpace the market on GMB growth driven by increased... frequency and fast design. This strong performance was supported by solid fundamentals including wide product assortment, competitive price and pure logistics cost advantage. We also made steady progress strengthening our presence in the upmarket segment. Enabled by our strong logistics capability, we continued to improve delivery time in the first quarter. We opened three new fulfillment centers. This effort allowed us to onboard more merchants, especially through ShopeeMore, supporting stronger spending among buyers. In the first quarter, GME from ShopeeMore sellers, more than doubled year-on-year, now contributes around 15% of GME. We remain confident in Brazil's long-term growth potential and our ability to compete in this market. We have taken a practical, resource-oriented approach. Inventing AI into our operations to drive better feature efficiency, it is already making a meaningful impact. AI-powered enhancements to our search and recommendation algorithms have led to better product discovery. AI-generated content tools help sellers create more compelling product listings. This effort supported a 14% improvement in product conversion rates year-on-year. An AI-driven personalization and targeting help to contribute to the strong year-on-year ad revenue growth we saw this quarter. On the cost side, customer queries are now handled by our AI chatbot. AI usage helps reduce customer service costs per customer by around 30% year-on-year, while maintaining high-tech, looking-at-hand AI experiences. We are testing an AI Shopping Assistant that offers purchase history and preferences to deliver personalized recommendations and optimized savings. business advisor providing diagnostic and actionable insights of performance. Both are in early stages. We plan to roll them out more widely over time. We are being deliberate about delivery, CBIP membership program, and user acquisition. We are already seeing some impacts need to continue over time. Looking ahead, we are confident in our ability to execute our team. We are on track to deliver our 2026 guidance. We grow Shopee's annual GMB by around 25% year-on-year, with full-year adjusted EBITDA no lower than 25. Money also had a strong start to the year, with robust year-on-year growth across both revenue and adjusted EBITDA. Credit continues to be the primary driver of our growth. Our loan book reached $9.9 billion at the end of March, an increase of more than 70% year-on-year in stable asset quality. along three-pronged user relationships, offering them more credit as we get to know them and their repayment behavior better. Second, hiring new users, especially in segments with better risk support. Lead users tend to have better repayment behavior and capacity. Our campaign is to attract new users with longer tenure. And third, expanding our credit use cases beyond Shopee, an important runway for future growth. headway with OffShopee expansion. More users from OffShopee escalator to OffShopee escalator and personal cash flow. Following strong momentum in Malaysia, we are also seeing good traction in some other markets. OffShopee escalator loans in Thailand and Indonesia exceeded 20% at the end of the quarter. Notably, growth in higher value categories such as electronics and Indonesia, where installment credit plays a meaningful role in enabling such purchases. Taken together, this effort resulted in strong growth in both user numbers and the loan outstanding per user. In the first quarter, we added 4.9 million first-time borrowers for active credit at the end of the quarter and 35% year-on-year. And average loan outstanding per user grew to around $250 at the end of the quarter, 25% higher year-on-year. $1 billion in loan book size, 205% year-on-year. The strong growth momentum was supported by a localized approach we introduced last year. A combined escalator and a cash loan limit that aligns well with how Brazilian consumers utilize credit. This led to strong user growth, higher repeat usage, average loan outstanding per user more than doubled. Escalator penetration on Shopee is around 10% of GME in Brazil. well below our model, indicating substantial headroom for growth. We also obtained the SDI-5 license in the scope of financial services. We continue in the early stages of this business in Brazil to support futures. Our top priority ratio remains stable at 21% at the end of the quarter. This reflects the strength of our underwriting capabilities and the disciplined way we spend our time. We have a deep understanding of our market and the followers who respond quickly to our changes. Loans typically have short tenures and we can adapt our products. These attributes enable us to adjust our and optimize quality as we sell. In summary, more users like off-shopping use cases and early markets like Brazil are giving us a much larger addressable opportunity across our portfolio. Confidence is a significant long-term profit contributor for GE to 2026 and 2021. rankings were up 20% and adjusted EBITDA to 25% year-on-year. This performance was driven by the continuous strength of Free Fire's contribution. In January, Free Fire launched a major collaboration with the popular anime Fujitsu Kaisen. As with our previous collaborations, we invested significant effort in bringing core elements of Fujitsu Kaisen. We transformed a part of the map into settings from the Fujitsu haiku and introduced energy resource that players could use to activate special abilities, allow the players separate domains where players resonate strongly with the campaign's attention to detail and authentic visual effects. This collaboration generated over 700 million official content views, making this one of our most successful IP partnerships to date. Taken together with the highly successful Naruto Shippen collaboration last year, We have demonstrated our ability to consistently execute high partnerships with global IP owners. We are also evolving how we sell our content globally. One of Free Fire's long-standing strengths is our ability to hyper-localize the game for players. This year, we have to both localize and globalize some of this content, making it highly resonate for target markets and enjoyable for everyone else. A good example from the first quarter is our Ramadan campaign. In past years, this campaign was only launched in Ramadan of 2020 into a global event, while markets still recognize this as a festive event catering to them, while players from other markets saw it as a devastating campaign that was new, interesting, and fun to play. During matches, players could find treasure maps featuring his base guiding them to hidden treasure locations. Active campaigns resonated strongly across market. Social media platform impressions exceeded 120 billion from last year's Ramadan campaign. The response we got to this campaign showed growing capability to take culturally rooted events from local markets, expand them into globalizing campaigns, let us show quality and distinctive experiences to our players and supporters in its 10th year of operation. The sustained success of both games, their unique ability to operate games well across in multiple markets and over long periods of time, remain focused on delivering fresh experiences and building the long-term value of our game portfolio. We have started 2026 well, with each business expanding its addressable opportunity while strengthening its competitive position. Meanwhile, across our ecosystem, we see the AI era creating significant opportunities for a company like ours. With established skills, rich cross-vertical data, and deep local expertise, we are investing deliberately to capture the goals when we are confident of continuing to deliver robust top-line goals while improving our adaptability year-on-year. With that, I invite Tony to give. Thank you, Boris, and thanks to everyone for joining the call. So see, overall, total gap revenue increased 47% year-on-year to $7.1 billion in the first quarter of 2000. Primarily driven by growth, our total adjusted EBITDA was 9% year-on-year to $1 billion in the first quarter of 2000. On Shockey, it was 29% year-on-year to $4 billion in the first quarter of 2000. And GME increased by 30% year-on-year. Marketplace revenue. Marketplace revenue. Our marketplace revenue, mainly consisting of transaction-based fees, up 61% year-on-year, mainly consisting of revenues related to logistics services. Shopee adjusted EBITDA was $223 million compared to an adjusted EBITDA of $264 million in the first 25. This year-on-year change, our Shopee VIP membership program and user acquisition partially offset money gap revenue was up by 58% year-on-year to $1.2 billion in the first of 2026. year-on-year to $275 million. As of the end of March, our consumer and FOMC principal outstanding reached $9.9 billion, 71% increase of $8.8 billion on foot and $1.1 billion principal outstanding. Non-performing loans, the percentage of total and SME loans, 1.1%. Serena bookings grew 20% year-on-year to $31 million. That revenue was up to $97 million. Our active user base and deeper paying user planning adjusted EBITDA. by 25% year-on-year, $574 million. Returning to our consortium, we recognized a net non-offering income of $52 million to a net non-offering income of $89 million in 2020. We had a net income tax expense of $414 million in the first quarter of 2036. We had a net income tax expense of $136 million in the first quarter of 2020. Net income was up to $430 million.
Operator (Operator)
Forrest and Tony, we are now ready to open the call to questions. Operator? We will now begin the question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. In the interest of time, we will take a maximum of two questions at a time from each caller. If you wish to ask more questions, please request to join the question queue again after your first questions have been answered.
Alicia Yap, City Group (Analyst)
At this time, we will pause momentarily to assemble our roster. Your first question comes from the line of Alicia Yap of City Group. Your line is open.
Forrest Lee (Chairman and Chief Executive Officer)
um hi good evening management thanks for taking my questions uh congratulations on the strong uh results um i have two questions first of all uh on e-commerce so looking at uh your 30 gme growth 29 order growth uh seems to be suggesting is a decent increase in the asp so could management share uh what you have observed during this past quarter so how much of the strength of the gmv is attributed to your deeper penetration in the higher end user and higher ASP product in Brazil, obviously follow your strategic expansion in your warehouse fulfillment, and how much of that could be attributed to the higher stickiness of your VIP members across the Southeast Asia regions and also Taiwan. And then following up on that is that despite delivering the 30% GNV growth, management still maintains a full year GND growth of 25%. So is that because of the higher base of the second half of 2025, or is it management being conservative in light of the macro uncertainty? So any colors management could share or elaborate would be helpful. And then a second very quick one is on your gaming. A very strong booking growth. So do you expect this... strong rebound of Arena of Valor could set a tone for the continuous strength and rebound of the game for the rest of this year, or is it just more a one-off due to the seasonality and promotion? Thank you. On the growth for Shopee, we see a combination of growth from both Brazil and Texas Asia. Overall, Brazil does grow slightly faster than South Asia, but I think it's probably not only the United States, but also the Brazil side. I think as you already pointed out, we try to... have more procurement businesses in Brazil. We also have more sellers joining us in Brazil, which contributes to a high-end user segment attractiveness. The Shopify VIP has been driven quite a lot of growth in Asia as well, as far as I mentioned in the opening. For the GMB guidance, Q1... has Ramadan and also Chinese New Year fall into the quarter. We see very good seasonality attributed to part of the growth. We also see that many of the initiatives were implemented from last year. including the VIPs, including the instant deliveries, including the AI-enabled product discovery that we roll out to our platform. All this contributes to a kind of better growth than we expected in Q1. As of the future guidance, I think we will observe how the market evolves. It's a bit early to sort of forecast the full year at this stage. We will communicate with the market as we see better indications from the growth trend in the market. Not bad. Q1 is indeed a seasonally stronger quarter for gaming. Benefits from Lunar New Year, which is a key engagement period. So we are mindful of the gaps when looking at the sequential trends. As you know, gaming performance can also vary from quarter to quarter depending on the timing of content release, as in collaborations and seasonal events. The underlying health in terms of user engagement and paying user penetration
Divya Kurthiyal, Morgan Stanley (Analyst)
We remain confident in delivering strong year-on-year bookings for Garena for the full year, and Arena better is reaching new heights in its 10th year. Give us even stronger conviction that we can do the same with Free Fire. Your next question comes from the line of Divya Kurthiyal of Morgan Stanley. Your line is open. Thank you very much. My first question is on Brazil. So the growth in Brazil has been clearly very strong for Shopee. But how should we think about the margin cadence there for this year, especially since we are seeing the market leader has dialed up their own investments in the market? Brazil has been profitable this quarter, but would love to hear your thoughts on how you're thinking about Brazil's profitability when you give the full year guidance for e-commerce EBITDA targets. Also, are there any early learnings from the loan book ramp-up in Brazil, and how different are the returns versus ASEAN? So that's my first question on Brazil. My second question is on e-commerce take rates. We're seeing e-commerce take rates have risen very consistently this quarter, especially in ASEAN. I would like to hear your perspective on how much of these increases are being reinvested back into seller rebates or consumer incentives, and are you seeing ASEAN e-commerce margins actually improve? Also, given the rise in cost inflation, there has been some pushback by sellers in markets like Thailand about these hikes, but are you broadly seeing these increases being well accepted by sellers or are we kind of reaching a cap on commissions per se? Thank you. In terms of the Brazil growth, as Brady pointed out, we see very strong growth in Brazil. If you look at Q1, we grew well ahead of the market growth in the market, which was to gain better market shares, which in turn gave us better sales to drive down our cost to serve in the market. for the last few consecutive quarters. I don't foresee any change towards that at this point in time. We will still continue to grow healthily in Brightville, likely with the possible kind of margins as we see right now. Again, while saying that, we do commit to investing to Brazil, especially for the few areas we mentioned, like the fulfillment network that we are building. We are further expanding our 10-day delivery in Brazil. We also have the BMP program in Brazil as well. I think all those will be rolled out in Brazil over time to drive further growth. In terms of the long-term impact... We're doing very well in Brazil on the loan side. We actually have more than 1 billion outstanding in Brazil already, which is kind of very high growth year to year if you look at last year Q1. I think the key driver for us is to localize the product. We didn't take the Asia product, you know, just take to Brazil. We localized the product. For example, we have a a single applicable limit the user can draw across the accelerator and the personal cash loan. based on what they need. We also spend a lot of effort on localizing the data sources, not only from the Shopee data, but we also draw data from the open banking networks in Brazil, which give us a pretty good impact in terms of the risk profiles. I think that's part of the reason that we see better risks in Brazil, which enable us to expand more user pools while maintaining the profits profile in the market. Overall, we are seeing the very early days of the market penetration in Brazil for the lending businesses. If you compare our sizes versus some of our peers in the market for financial services, there's a huge room ahead of us in terms of growing the businesses in Brazil. In terms of the e-commerce take rate, I think the simple way to look at this was we did increase positive rate. We also have our EBITDA margin relatively similar to previous quarter. So a big part of that will be being invested into. the market to drive the growth. Again, the area we invest in, the few areas mentioned, the fulfillment networks, we're building the VIP programs, et cetera. But generally, we see that... In most of the markets, we see a good margins quarter over quarter for our ASEAN market. On the seller commission reactions from the market, the most important thing for us is to look at how the seller commission impacts the pricing. impact of commission increase on pricing compared to the peers in the online market and we also compare with the pricing compared with the offline market. Pricing is one of the most important things for us as we mentioned over time. We still see a very price competitiveness in our platform. I think going forward, I think we will still kind of look at the dynamic and decide what's the best way to manage the commission part. But again, I think the most important thing is we're able to deliver profit to the sellers. The profit is depending on number one is how much commission we're taking. Number two is how much cost they're running our platform. Number three was the volume we're driving for them, our platforms. With slightly higher commissions, we spend a lot of effort on reducing the cost of running businesses on our platform. For example, we... offer an AI-powered chatbot for the sellers so they can do customer service with their buyers automatically without sort of hiring more customer service agents. For example, we help them technotize their businesses a lot easier with our AI-powered agents in our seller centers, et cetera. And at the same time, as we always share that with
Nevin Killa, UBS (Analyst)
I feel fast growth in our market, you know, seller has a bigger pie to join from. So all this contributes to sort of a healthy ecosystem when we look at the seller submission plan. Your next question comes from the line of Nevin Killa of UBS. Your line is open. Hi, thank you for the opportunity and congrats on the strong results. I have a couple of questions. So if I look at your e-commerce, I guess absolute EBITDA in Q1 this year compared to Q1 last year. You know, there's obviously a moderate decline. I just wanted to understand if you could help us kind of, you know, get a better sense of where this decline is coming from geographically, if it's split between, let's say, Brazil, Taiwan, and Southeast Asia. And also, I think, you know, hopefully improve over the next couple of years. How will the split of that be in terms of... the magnitude of growth in EBITDA coming from each of the regions. And secondly, on FinTech, again, the margins have obviously been inching down. Is there a steady state number that we should be looking at and a timeframe over which you can get there? I think you are actually right on the slightly lower EBITDA year-to-year. I think the other way to look at this was that if you look at last quarter in Q4, 2025, we do see a starting increase on the EBITDA from Q4 last year to Q1 this year. I think there are many reasons driving the dynamics here. Last year was the first year that Ramadan falling through Q1, which is a different analogy that we have for many, many years. I think there were some adjustments that we have to learn from how does this analogy impact the differences. I think we have better spent this year compared to last year. I think part of the reason also because We launched a bunch of initiatives to further drive the growth this year, as we shared across the course, and some of that started from the later part of last year, which kind of continued to Q1 this year. For this near term in 2026, I think we share with our guidance, we expect a pretty good growth of 25% with the bottom line, it is at least not worse than last year. I think we will see how this evolves over the quarter. In terms of the medium to long term, we still maintain our judgment that I would believe that 2 to 3 cents, if it's a margin, is something we target to achieve. In terms of the syntax, The FinTech margin, one thing we look at very closely is our absolute return. When we grow our loan outstanding, we would like to make sure that additional loan will bring a positive EBITDA and absolute return. We do recognize that If you compare with the outstanding as a ratio, it might fluctuate and eventually might go down a bit over time. If you look at over the quarter, I think largely driven by the mix of different countries and different products. Our earlier market, for example, like Indonesia, Philippines. That has a higher ROA compared to the market that's coming in later to the portfolio, if you look at, let's say, Thailand or Malaysia, Vietnam, etc. So this drives, if you look at the ratios, a slightly lower ROA as time goes. I think at this point in time, the business is really early. We see a huge potential in front of us, especially if you look at... some of the new market growth, even if you look at Thailand, Malaysia, or the Brazil we talked about, there is a big potential ahead of us, and if you, just now we talked about Brazil, compared, our outstanding compared to the peers outstanding, there's a huge room for us. Then we also try to develop the non-shopee ecosystems, for example the, I think Boris mentioned, the cell phone stores, the two-wheel stores, I think all this are pretty dynamic, I think
Yong Shao, Barclays (Analyst)
a bit too early to guide a steady state number at this stage. It's pretty much impacted by the country and product mix. Your next question comes from the line of Yong Shao of Barclays. Your line is open. Thank you very much for taking my questions. I have two as well. If I may, I'm going to just ask one at a time. Firstly, would you be able to just talk about the potential impact from a higher... fuel prices? I know that the conflict in Middle East started in March. You probably did not see too much of the impact in Q1, but if the oil price stays at the current level for longer, how would that affect your cost? Would you be able to pass on some of the costs to either the sellers or consumers? Any comments would be helpful. Now I have a second question.
Forrest Lee (Chairman and Chief Executive Officer)
Yeah, it's clearly something we look at very closely in terms of the oil price impact to our businesses. I think there are a few degree of impact when we look at this. The first degree of impact is just absolute oil price. It does impact our operation cost. I think the good thing is that We leverage quite a lot of the subsidies from the government in our country, where it helps us to absorb the cost increase in many countries, especially the last mile delivery, which is the largest part of our delivery cost. We also work closely with our partners, like for example our line hall partners, our airline partners to match the costs together. So, all in all, if you look at actual cost, it does have impact in our cost, but we believe we can manage it within the guidance that we're giving out. And also, in terms of timing, you're actually right that the Q2 will probably see more impact than Q1 in terms of cost. I think that's the first degree of impact. I think the second degree of impact is potentially this might impact the spending powers in some of the countries if they have to spend more money on the end. the gas stations. I think generally, we have seen moderate impact in our platform. I think the most important reason for that is our platform is actually the cheapest platform you can find the product that people essentially needed. So when people are looking for a savings, actually we look at more. Our platform is also a more essential product platform rather than something that people buy a luxury product from or discretionary spending, less spending in our platform compared to the offline spending, et cetera. So all this helps us to show the impact from the second degree impact that we're investing. Okay, great. Very helpful. Thank you for that. My second question is about your fulfillment build-out. You talked about adding three fulfillment centers, I think, in Q1 in Brazil. Could you talk about some of your perhaps near-term targets and long-term targets? For example, as you know, one of your peers in Brazil is adding, I think, over a dozen SCs this year in Brazil. Can share with some of your thoughts both neutral and the longer launcher and on top of that the pace of the investment and is that you're adding, let's say, some fulfillment centers this year, and then next year take a pause to absorb some of the capacity, then perhaps add more after that. So just help us understand the pace when you build out your fulfillment infrastructure from relatively a low base, from timing-wise, compared to competitors, obviously. timetable for getting returns of this investment? Thank you so much. So on the fulfillment businesses, I think especially for Brazil, I think that you referred to, we do have our expectations on growing more percent of businesses from fulfillment as we do it out. Since we started, not too long time ago, we are still in the early stage of building our fulfillment businesses. I think, typically, we actually don't overbuild too much. Our capacity of organization in our fulfillment center is relatively high. And I think the core reason for that is we are able to predict how much of the volume for humans well ahead of the time. then we build our fulfillment center according to the timetable. So it's probably unlikely that we're going to do a lot this year and we stop next year, then we'll do, you know, while waiting for the semester to be filled, then we'll do it again. I think it's more going to be a continuous process while we are building the fulfillment center. And ultimately, we would like to have our fulfillment center overall size bigger than our close competitors in the market in terms of actual volumes. But I think it would take a few years to get there giving, you know, starting later. In terms of the return on investment, if you look at individual fulfillment centers, Typically, the infrastructure, the CAPEC, is actually not that high as we don't own the procurement center itself. We typically rent a procurement center. The CAPEC is actually to make sure the procurement center is well equipped. So if you look at that particular part of investment, the return on investment is pretty fast. It's not that long ahead of the time.
Ranjan Sharma, J.P. Morgan (Analyst)
The other part of investment we're doing for the procurement businesses is more move the seller to be part of the business and advocate the buyers to understand the procurement businesses that we have. So that's part of the ongoing investment we use to drive business growth. Your next question comes from the line of Ranjan Sharma of J.P. Morgan. Your line is open. hi good evening thank you for the presentation and congratulations on the results now three quick questions from my site firstly how do you see the economics of the vip program will you consider optimizing the value offered to consumers or the subscription price charge to the customer the second question is given the momentum on free fire and arena of valor and the content coming in the coming periods How should we think about the growth of the gross bookings this year? The last question is, can you help us understand how you evaluate the intrinsic value of C? We know you have a billion-dollar buyback, but you have only executed $170 million or so, despite the stock price reaching $78 at some point. So we'll help you understand how you're thinking about the buyback going forward. Thank you.
Forrest Lee (Chairman and Chief Executive Officer)
On the VIP program, I think there are two parts of the offering that we are providing to the market. Part of the offering is the Shopee offering. For example, in some markets, if you join the VIP, you can get a free shipping, etc. Part of that is with our partner offer to our users. One of the key things that we're working on is to expand our partner pool. so we can strongly offer the benefits to our users. For example, the ChaiGPT program that we offer to our users, which is very well accepted and liked. There are quite a few other partners we are going to announce not too far away. while working on the system integration, et cetera. So all this work, all these partners offerings will help us in terms of unique knowledge over time. And also for the pricing, we can look at the pricing. There's a potential to have a different tiering as well for the pricing. Depends on how the market reactions and how the economic look at for different spectrum of users and also depends on what we have partner with, et cetera. At this point in time, we were still going to invest a bit more on the VIP program, giving that the retention we see on the user base and also the uplift of the activities from the VIP users. But eventually,
Operator (Operator)
we do see the IP program can be an even more profitable program compared to the non-IP program, giving the significance of the users, giving the ability for us to bring the benefit to our partners. Your next question comes from the line of Ellie Jiang of Aquaree. Your line is open. Sorry, Joe, please go ahead. Thanks. Question of the buy-buy considerations that we share in our activity like the stuff since last November and where to continue and as we shared about businesses. My apologies, Eli Zhang, your line is now open. Great. Thank you so much, management, for taking my questions. I've got two. One is a follow-up on the prior question on Shopee VIP. Just wanted to have a better understanding of the current progress of the VIP members, because clearly you guys have been making pretty good progress on penetrating into many of the core operating markets, and it seems like it has reflected positively on both user frequency as well as for the feature size. So going forward, what would be the key KPIs? Would it be, you know, the percentage of penetration in several key markets over, you know, certain percentage of your total MAUs? Or would it be certain GMB thresholds that you guys will be monitoring? I just wanted to get an understanding of kind of that investment kind of reflection sort of in the next several quarters. first part of the question. The second would be on money. So can you shed some light on the actual breakdown of the business, including, for example, the country mix, also on Shopee and off Shopee percentage point? Ultimately, the latest quarter of 71% of your increase for an SMA loan principal outstanding was very impressive, especially given that you guys can control quality at a very high level. Can you talk about of the key factors uh in the upcoming years uh you know what will be the key figures to continue continuously controlling growth momentum uh for uh for the long-term for the revenue i think there are key uh yeah there are a few key numbers we look at for example um the penetration of our gmv um the retention power users um dm
Forrest Lee (Chairman and Chief Executive Officer)
And also the unit economics for this part of the program. I think there are a few things that are important for us to look at. I think the other key thing we look at is how many partners that we have in the VIP program, as I shared just now. It's important for us to make sure that we bring benefits to our users, not only from Shopee, but also from our partners as well. We started Shopee VIP in Indonesia first. I think we see very good progress there. As we go out to more countries, we learn more from the early countries and go out similar learning to other countries. For the money businesses, As I shared earlier, we started first in the early times like Indonesia, etc. But the newer countries like Thailand, Malaysia, or Brazil have essentially because they are later countries, they grow faster compared to the older countries that are in the way. So the shares in the countries were dynamically adjusted because of the timing of the rollout of our product. I don't think we give a precise country mix to the market. In terms of the on-shopee and off-shopee, the on-shopee, especially the ex-payless on-shopee, was the majority when we started with, and now it's less than half of the business already. And even if you compare with the escalator on Shopee and versus off Shopee, the percentage of escalator off Shopee is about 20% already as a total escalator on Shopee and off Shopee, which is a significant milestone for us. This proves that we're not only be able to drive our escalator or in general lending in the Shopee ecosystem, but also we successfully drive this in the off Shopee ecosystem and in fact we see higher growth in the off Shopee ecosystem versus the on Shopee part of the differences. The key factor driving the growth are again the three elements. One is within our current user base, we still see a possibility to drive more credit adoption. And this will come with more product roll-ups to this group of users and better credit assessment as we accumulate more data over time. And also, deeper integration with Shopee and expanding of our non-Shopee scenarios for this group of users. I think, essentially, even within the same user base. we see a future room for us to deepen the credit penetration. The second one is essentially expanding the new scenarios beyond what we have right now, where the user can spend their credit limit on. This including, for example, we've partnered with more online merchants who... can accept escalator, partner with one more merchant offline so they can accept escalator as well. Even for our... In some of our market where credit card is bigger, we roll out a debit card system leveraging on so they can use our credit through a . So all this will expand the pool, addressable market pool for our user base. I think... The third thing is for us to continue to expand to new user segments. I think that's very important for us as well. I believe Faris mentioned in the opening too. As we started more from a sub-prime market segment, when we accumulated more risk data and also better our risk models, we are able to expand to a more prime user segment with slightly different products in various markets. This user might have a slightly lower ROA, but this gives us a bigger outstanding pool for us.
Operator (Operator)
I think all this will drive the growth of our lending businesses in the coming years across our market. This is our Q&A session. Now let's turn the conference back over to Ms. Rebecca Lee for any closing remarks. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Other transcripts: Q4 FY25 transcript · Q2 FY25 transcript
All SE earnings · Back to SE overview
Transcript produced by Signals.AI from the company's own earnings call audio; speech recognition can mishear a word. Not personalized investment advice.