Sea(Minutes): Unable to provide full-year guidance for game revenue, e-commerce profit margin target is 2%~3% of GMV
Below is the earnings call $Sea(SE.US) Minutes for FY25 Q1. For earnings analysis, please refer to《Tencent’s Little Brother Sea: Can Its Explosive Earnings Last After Riding the ‘Naruto’ IP Wave?》
I. Key Earnings Highlights
II. Detailed Earnings Call Content
2.1 Management Presentation Highlights
1. Digital Financial Services Rebranding:
1) The digital financial services business has been rebranded from SeaMoney to “Money,” now one of Southeast Asia’s leading unsecured consumer credit platforms, with expansion into Brazil. The business scope has extended beyond payments and credit to banking, investments, and insurance. Over 4 million first-time borrowers were added in Q1, with new user cohorts generating positive profits over time. Active users of consumer and SME loan products exceeded 28 million by quarter-end, up over 50% YoY. Collaboration between SPayLater and Shopee’s promotional campaigns effectively drove user acquisition and further penetrated Shopee’s platform.
2. E-commerce (Shopee) Performance & Strategy: Ad revenue grew over 50% YoY in Q1, with monthly active buyers up over 15% YoY. The number of sellers using ad products rose 22%, while average ad spend per seller increased 28%. “Instant delivery” was launched in major Indonesian cities, and a paid membership program attracted over 1 million subscribers by end-March. Looking ahead, the company sees significant growth potential in Brazil and is committed to its full-year guidance of 20% GMV growth with sustained profitability improvements.
3. Digital Entertainment (Garena) Performance & Strategy
In January 2025, Garena launched the Free Fire x Naruto crossover event—its largest anime IP collaboration to date, with over two years of preparation. The event featured themed content and gameplay, creating a viral social phenomenon that not only attracted new users but also re-engaged lapsed players. Thanks to its success, Free Fire’s Q1 average DAUs nearly matched pandemic-era peak levels.
Beyond the Naruto event, localized content initiatives boosted engagement. For example, Free Fire designed in-game tasks tied to Indonesia’s Ramadan, resonating strongly with players.
Garena is also expanding its game portfolio. In April 2025, it launched the tactical FPS Delta Force Mobile in Southeast Asia, MENA, and Latin America, surpassing 10 million downloads. Additionally, pre-registration began for its in-house open-world adventure game Free City, with a phased rollout starting in May.
2.2 Q&A Session
Q: What drove Shopee’s sharp profitability improvement this quarter? How will margins trend in future quarters? Amid macro uncertainty, what risks does Shopee’s GMV growth face, and why is the 20% target achievable?
A: Three key drivers: (1) Seasonality—Ramadan fully fell in Q1 for the first time; (2) Higher monetization, with ad take rates up 50 bps YoY; (3) Cost optimization, including lower logistics expenses and AI-driven automation in customer service and product management.
Full-year 20% GMV guidance remains intact. Long-term EBITDA margin target is 2%-3% of GMV, but the focus remains on balancing growth and profitability.
Macro impacts are minimal: Shopee is predominantly a local marketplace (cross-border is minor), price-driven, and less reliant on discretionary spending. Currency fluctuations are the only notable risk, but local operations are largely insulated.
Q: What fueled Monee’s strong loan growth? How do returns and margins look for new loans?
A: Growth came from deeper penetration of Shopee-linked products (e.g., BNPL) and non-Shopee segments like commercial cash loans and motorcycle financing. All markets grew well, with newer ones outpacing larger ones.
Margin trends: Absolute EBITDA will rise long-term, but percentages may dip slightly due to geographic/product mix shifts.
Q: How is incremental capital being allocated? Will Monee rely more on external funding?
A: All three businesses are self-funding. The company prefers diversifying funding sources over deploying excessive internal capital.
Q: Can Garena’s strong bookings growth continue? What’s the full-year outlook?
A: Q1 strength extended 2024’s momentum, aided by the Naruto event and seasonality (Lunar New Year, Ramadan). However, such collaborations are non-recurring, so volatility is expected. No full-year bookings guidance yet.
Q: What drives Shopee’s sustainable rapid growth in Brazil? How long will this phase last?
A: Key advantages: (1) Best-in-class pricing; (2) SPX logistics—cut delivery times by 2-3 days YoY, with same-day service in São Paulo. With Brazil’s low e-commerce penetration, growth runway remains long.
Q: Will Shopee’s membership program pressure VAS monetization?
A: VIP members (1.5 million subs) shop more frequently and have higher retention. VAS revenue (e.g., shipping, ads) isn’t directly impacted. Ad monetization still has upside via efficiency gains.
Q: How does competition (e.g., TikTok Shop) affect margins?
A: Stable competitive landscape. Margin expansion stems from better monetization and ops—not competition. TikTok Shop just launched in Brazil; Sea will monitor but remains focused on pricing and infrastructure.
Q: How does Brazil’s fintech business compare to ASEAN?
A: Brazil’s SPayLater penetration is rising but lags Asia. EBITDA margins are mid-tier among Sea’s markets, with profitability achieved. Open banking integration will further unlock potential.
Q: Timeline for 2%-3% GMV EBITDA margin target? Upside?
A: The range is a benchmark, but outperformance is possible if market conditions allow. Global peers achieve higher margins—this is the aspiration.
Q: Why did VAS take rates decline QoQ? Is shipping subsidy strategy changing?
A: GAAP accounting (net of subsidies) distorted reported rates. Underlying take rates rose. Subsidies are adjusted dynamically based on ROI tests.
Q: How does Monee’s non-Shopee growth impact EBITDA?
A: Cash loans are highly profitable; SPayLater offline requires modest sales team investments. Margin dilution stems from geographic/segment mix, not upfront costs.
Q: AI deployment and ROI?
A: AI enhances search, ads, and seller tools (e.g., auto-generating product videos). Internal use cases (fraud detection, etc.) also show positive ROI.
<End>
Disclosures & Disclaimers: Dolphin Research Disclosures
