Yahoo Finance

Hou Tianyu

Thank you, Forrest, and thanks to everyone for joining the call. For overall, total GAAP revenue increased 37% year-on-year to $5 billion in the fourth quarter of 2024 and 29% year-on-year to $16.8 billion for the full year of 2024. This was primarily driven by GMV growth of our e-commerce business and the growth of our digital financial services business.
Our total adjusted EBITDA was $591 million in the fourth quarter of 2024, compared to an adjusted EBITDA of $127 million in the fourth quarter of 2023. For the full year of 2024, our total adjusted EBITDA was $2 billion compared to an adjusted EBITDA of $1.2 billion for the full year of 2023.
On e-commerce, Shopee's gross orders grew 20% year-on-year to $3 billion in the fourth quarter of 2024, and GMV increased by 23% year-on-year to $28.6 billion. in the fourth quarter of 2024.
Our fourth quarter GAAP revenue of $3.7 billion included GAAP marketplace revenue of $3.2 billion up 41% year-on-year, and GAAP product revenue of $0.5 million. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues was $2.4 billion, up 50% year-on-year.
Value-added services revenue, mainly consisting of revenues related to logistics services was $0.8 billion, up 21% year-on-year.
For the full year of 2024, GAAP revenue of $12.4 billion included GAAP marketplace revenue of $10.9 billion, up 38% year-on-year and GAAP product revenue of $1.6 billion.
E-commerce adjusted EBITDA was $152 million in the fourth quarter of 2024 compared to an adjusted EBITDA loss of $225 million in the fourth quarter of 2023.
For 2024, full year adjusted EBITDA we achieved positive adjusted EBITDA of $156 million compared to an adjusted EBITDA loss of $214 million for the full year of 2023. Both Asia and other markets recorded positive adjusted EBITDA for the fourth quarter of 2024.
Digital financial services GAAP revenue was up by 55% year-on-year to $733 million in the fourth quarter, and up by 35% year-on-year to $2.4 billion for the full year of 2024.
Adjusted EBITDA was up by 42% year-on-year to $211 million in the fourth quarter of 2024, and up by 29% year-on-year to $712 million for the full year of 2024.
As of the end of December, our consumer and SME loans principal outstanding reached $5.1 billion, up 64% year-on-year. This consists of $4.2 billion on book and $0.9 billion off book loans principal outstanding. Nonperforming loans past due by more than 90 days, as a percentage of total consumer and SME loans was 1.2% at the end of the quarter.
Digital entertainment bookings were $543 million in the fourth quarter up 19% year-on-year and $2.1 billion for the full year of 2024, up 19% year-on-year.
GAAP revenue was $519 million in the fourth quarter and $1.9 billion for the full year of 2024. Adjusted EBITDA was $290 million in the fourth quarter and $1.2 billion for the full year of 2024.
Returning to our consolidated numbers. We recognized a net nonoperating income of $28 million in the fourth quarter of 2024, compared to a net nonoperating income of $32 million in the fourth quarter of 2023. For the full year, our nonoperating income was $117 million compared to an income of $208 million for the full year of 2023.
We had a net income tax expense of $89 million in the fourth quarter of 2024 compared to net income tax expense of $77 million in the fourth quarter of 2023. For the full year, our net income tax expense was $321 million compared to $263 million for the full year of 2023. As a result, net income was $238 million in the fourth quarter of 2024, as compared to a net loss of $112 million in the fourth quarter of 2023.
For the full year, net income was $448 million as compared to net income of $163 million for the full year of 2023.

Wang Yanjun

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

Question and Answer Session

Operator

(Operator Instructions) Pang Vitt, Goldman Sachs

Pang Vitt

Congratulations for a solid performance. Two questions from me. Number one, on e-commerce. Could you help us provide more color on your 2025 20% GMV growth guidance? What is the underlying assumption you put in place in terms of competitive landscape, marketing spending, service quality investment? And is this already factored in the FX impact in the numbers? On top of this, could you help us understand how profitability will trend in the upcoming quarter as well? That's number one.
Number two, on Fintech, Strong performance across the board, both on the top line and on the bottom line and on the user train as well. Could you help explain the driver behind, especially on the country mix and product mix? And can you help us also contextualize what do you mean by loan book to grow meaningfully faster than Shopee GMV?

Hou Tianyu

Thank you. On the first one, for Shopee. In 2025, as Paris mentioned in the opening, we expect to grow around 20% on the GMV basis, we are assuming the ForEx rate to be similar to the current rate. So we are not taking a decision on the ForEx forecast for now. If there's a big fluctuation in ForEx, we will look at other situations.
And in terms of the things we are doing to drive the growth, the growth driven by both the user number growth and also the purchase frequencies as we are executing our key operational priorities. If we look at Asia and Brazil, we expect those markets will grow quite well. Although as we have Brazil as a newer market, Brazil probably have a slightly faster growth pace than the Asian market.
On the possibility side, we do expect the profitability for 2025 to be better than 2024 as a trend. However, as you might know, e-commerce does have some seasonality from time to time. So there might be some fluctuation due to seasonal -- on the CMO side of the businesses, the off-market grows very well in terms of the loan outstanding on both the Shopee PayLater and the offshore part of the businesses.
In terms of the country mix, as you probably know, we grow the loan outstanding from a country like Indonesia and Philippines first, and other contribute later. So in terms of the coming quarters, we will probably see the newer country has slightly faster growth pace than the older market. for the possibility of the loan book. We do believe that because of the country mix, and as we expand to a more prime segment of user bases, there might be some impact to the return of retail assets, our IA rate, driven the country mix and some of the user mix that we come in. But overall, we do believe that the absolute EBITDA will grow well in 2025.
Just now you mentioned that the outstanding growth meaningfully faster than the shopping GMV. I think that's partially because we will expect our escalated penetration on Shopee will further expand even in the older country like Indonesia, Philippines, we will still expect the penetration of escalator to further expand. At the same time, the offshore part of the businesses, the cash loan part and the SPayLater of Shopee, we're also going to further expand. So this will adding together makes our outstanding of the Shopee grow meaningfully faster than the Shopee GMV.

Operator

Alicia Yap, Citigroup.

Alicia Yap

Congrats on the strong results. Two questions. First is that I wanted to follow up on the assumption behind the GMV guidance. So if management could provide a little bit like how much would be driven by the growth of the new users, the increase of the purchasing frequency and also the wallet and by user. And if management can also comment if there's any change of the consumer behavior that you have observed and how will any change affect our marketing strategy and also the category mix.
The second question very quickly on the gaming Garena guidance. When you mentioned you are expecting the active or the user base to also experience double-digit growth. Just wondering, because I think you're already in 150 markets. So just wondering -- are you expecting more deepening penetration in the existing market? Or are you actually looking for some of the new markets like you mentioned, for example, the Nigeria where you saw some fast growth. So any color in terms of the drivers for the bookings and also the active user growth for gaming would be appreciated.

Hou Tianyu

The -- on the first question on the e-commerce side, our GMV growth, driven both by the purchase frequencies and the new users, I don't think that's a particular one thing, dominate one another from Boise.
On the consumer behavior, we don't see any particular big shift on the consumer behavior. There were a meaningful shift after COVID -- during COVID , et cetera. if you compare 2021 versus next quarter, the current quarter, we don't see anything that stand out. Although, as we shared that one of our priority for Shopee is to improve our service quality. By doing so over time, we do observe that we attract more high-quality buyers to our platform which will help us to expand our categories coverage as well not only in Asia but also in Brazil.
If we take Brazil, for example, here, in Brazil, we have been working very hard to not only low down the cost power delivery, but also improve the delivery speed. We have seen a meaningful reduction on delivery speed in Brazil, which would help us essentially be able to serve highly high-end users and be able to serve the categories we historically had to penetrate and all those things will help us essentially reach out to the better quality segment of users and serve them with a better retention over time. I think that's probably less the behavior change, more just as a consequence of we execute our strategy.

Li Xiaodong

On the Garena guidance, let me start, the guidance we offer here is pretty much based on our existing portfolio. This is including our self-developed game Free Fire and our publishing game portfolio like by working together with the third-party game developers. And we -- at this moment, we don't count in too much in terms of the new games, although we do have the plan to launch new games this year, but the current guidance is more focused on the existing game which we have a lot of historical data to project the forecast.
And the growth, like actually, probably we can do mean Free Fire, which play a very, very big role in the entire portfolio. And we have observed actually the growth is across all the markets, it's including both our existing markets and some new markets, which for example, we talked about -- we highlight some Africa, like countries like specifically large market like Nigeria. So by adding in putting some specific work like effort in that market, for example, we set up a local server like for (inaudible) gamers to improve the connection qualities -- and the result is very, very obvious. Like in December, we see 90% growth in terms of the user base. So we see that similar trend in some other markets, a lot of part of the work.
I think like overall, our guidance reflects our confidence of the -- both of the market. Like we -- like throughout the entire 2024, we see after like a few years kind of headwinds after COVID and we see users like the gamers start to back to the -- to kind of like spend more time to play games and it's kind of back to the after normal time compared to the -- during the post COVID time, a lot of people kind of still burn out during the COVID and they try to do other things instead of playing games.
And I think it also reflects our confidence about what we have done with the Free Fire in the past few years. We mentioned that before, we have been very, very focused on the market feed of the product. And specifically on the sensibility of the game, we want to make the game is not just offer a great gaming experience, but it's more inclusive, is to make the more gamer to play.
And I think we're probably one of the best company like to focus on this and to execute this as well. And this is -- to us, it's a great formula. So we still see there is a lot of part in this work, and the gamers still not get a great game experience and the Free Fire will be a natural fit for them to offer them a wonderful experience. And other things we see have been really helpful is considering the scale of Free Fire and continually like as I mentioned just now, we continually focus on to capture the local trends and capture the local kind of the hot topic and into the game, and to make them more relevant and to -- both on a global level and on the local level.
So Free Fire is not just a game anymore, it's become a phenomenon like from a hot topic, trending topic always across the social media. And this will help us continually adding kind of attractive more users, right, and to play the game and also keep our existing gamers very, very engaging for the content we offer through the game. I think I put all those things together, that gave us the confidence into continued growth of this year and also already have a pretty decent -- very decent growth in 2024. And so far, we have observed the momentum is continuing into Q1 this year, which give us a very good start of the year.

Operator

Sofia Ratio, Morgan Stanley.

Divya Kothiyal

Two questions from me. One on logistics and the other is on Brazil. On logistics, we're seeing that Shopee is selectively participating in fulfillment now in some countries like Brazil as well as Singapore. Can you elaborate more on the benefits of engaging this? And does this require more CapEx or even subsidies, which would mean wider logistics losses in the near term? And do we plan to do fulfillment in more markets? That's the first question.
And my second question is on Brazil. Could you talk about the profitability in this market, given the high growth we've seen -- but last time, you mentioned that the profitability could be choppy quarter-to-quarter. So I would be keen to know how profitability in this market, what the guidance for 2025 is and also, if you could comment on the latest AOV in this market and the growth of the fintech business?

Hou Tianyu

On Brazil, for the fulfillment, it's -- we are in a very early stage of complement businesses in Brazil, it's a proven model that some of our competitors has been engaging with in the market. The purpose of finding fulfillment is to serve sellers and especially brand sellers from the categories we were historically are not very strong at. They are group of sellers who prefer to be focused by the platform rather in themselves or without the capability we're not able to serve them.
This will also help us to improve the by-experience with the shorter delivery times because this will shorten the fulfillment time from the seller side. We don't expect this will meaningfully impact our profitability too much, at least in the near term because, as I said, it's still in the early stage, so it's a pretty small size. And number two is we run -- we don't own the procurement centers. We rented and we operate in a pretty CapEx-light fashion.
Regarding whether we will do fulfillment other markets -- actually, we do have equipment in other in Asia quite a while. We do serve the brand sellers, especially in many of our markets for those sellers who prefer someone else (inaudible) them or -- and they could not find anyone who can do it well for them. So we to have the (inaudible) business slow down. And again, we don't expect this will meaningfully impact our CapEx or profitabilities in the foreseeable future for this. The -- on the (inaudible) trend in Brazil, we do see increase in average order size in Brazil because of the effort we are taking.
Part of that is we have a better delivery quality delivery speed. So people are willing to buy a higher basket item from us and part of that comes from the expansion to new categories that I mentioned just now. The -- in terms of the profitability in Brazil, I think for Q4, both Asia and Brazil are profitable. I think we are able to grow Brazil in a pretty good way with a profitable EBITDA, and whether we would further impact to grow or not, I think something we will observe and decide. But with the current profitability, EBITDA for Brazil, we are able to grow in a pretty fast pace already.
For the fintech part of the business is in Brazil, we do have quite good growth in Brazil in the past few quarter. Actually, a few quarters -- two, three quarters ago, we are able to find a way to credit rate our user in Brazil in a pretty stable fashion. After that, we are able to increase the penetration of SPayLater in Shopee quarter-over-quarter. At the same time, we also launched (inaudible) cash loan in Brazil as well. Actually, we customize the product for Brazil in the way the cash loan user and aspirate user shares the same pool of limit, which is different from Asia.
In Brazil, we also incorporate a lot more data as they are more data available in the market. And in Brazil, we're also putting quite a lot of different way of engaging the users on the SPayLater and cash loan side. So all this helped us to grow the fintech businesses in Brazil. quite well in the past few quarters. And we would expect Brazil will be one of our faster growing market as the overall money businesses.

Operator

Piyush Choudhary, HSBC.

Piyush Choudhary

Congratulations to the team on a great set of results. Two questions, both on e-commerce. Firstly, as 50% of your orders are now delivered through Shoppe Express in Asia in less than two days. Are there any operational targets or priorities for delivery of orders in less than one day. And are you seeing any kind of meaningful increase in order frequency as delivery speed has been improving. If you can give some examples of any examples of the country where that material difference is coming? That's the first question.
Secondly, on Shoppe core marketplace take rate, which has increased to 8.5% now, what is the outlook on the take rate? And any seasonality we should expect in take rate trend going forward as ad revenue has become a larger portion

Hou Tianyu

On the first question on the deliveries, as you mentioned, we do have about half of our orders delivered for SPX within two days. Within that, there is a meaningful growth of same-day delivery as well. But it's a little bit sort of -- it depends on different countries on the same deliveries. For example, in Indonesia, we have a sizable standard deliveries around the Jakarta regions, Greater Jakarta regions.
In Thailand and Malaysia as well in Vietnam as well, we also started same-day delivery business services. In country like Singapore, same day is still quite rare in the market due to the cost structure. I think it's going to be a country-by-country view for how much do we push the same day versus the next-day deliveries. It's correlated with the cost structure. It correlates with the -- how the center behaves in the market as well.
But as a general direction, we do -- would like to improve the service quality and the delivery business part of it. And part of the speed to have more share of same day or next day, where possible is something we would like to achieve and grow over time. As a consequence of that, I think you're absolutely right, we do see improvement on order frequencies for the user who enjoy the same next-day delivery services. The -- and it's not only the speed but also the cost as well in many markets, while we are reducing delivery costs, this will also help the retention rate and will translate to the other frequencies as well.
Regarding the take rate, the take rate has two main parts. One is the commission part. Another part is at take rates. And -- so on the both fronts, we do see that the potential room to grow. And I think as you pointed out, over time, become a bigger part of the take rate and probably the bigger part of the growth drivers. The (inaudible) in this, like, for example, in a certain period of time, if they send a holiday for a long period of time, it does impact the take rate.
But we do believe that there's still quite a lot of room to grow our ad take rate quarter-to-quarter or year-to-year. And the seasonality probably would not -- the fluctuation of elites will not impact the trend so much. but it does impact. But it's just like it's still -- we can still grow it even with the easy for the ad part.

Operator

Sachin Salgaonkar, BofA.

Sachin Salgaonkar

Congrats on a great set of numbers. Two questions from my side. First question, we've seen your competitors in Southeast Asia increased take rates in last few quarters and the gap between your and their take rate has narrowed. So directly, I want to understand how do you think about slightly increasing take rates. And I know there are the levers like ad and others, but any thoughts on charging merchants slightly more.
And second, given the fact that every business is now throwing a good amount of cash, you also have a good amount of cash on the balance sheet. Any directional thoughts on proceeds on uses of cash? Is there a thought to go internationally at some point in the future? Be dividends apart from any debt repayment, which is there out there? So would love to know your thoughts on this.

Hou Tianyu

On the first question, the -- I think we talked a lot about some of the active rates just now.
On the commission side, the feedback from our ecosystem, our take rate is still quite healthy. We review our commission take rate from time to time, actually month-to-month, taking into account the factors, the seller margins, how is the competition is, as you mentioned, and also the overall economical situation for the countries. So I think it's in a dynamic process. We still believe there is a potential to grow it over time, although probably in a slower speed, as you probably observed in the last year on the commission side.

Li Xiaodong

And in terms of the -- yes, in terms of the usage and the deployment of our cash reserves, yes. So you are absolutely right. And at this moment, we have -- we see our cash position is getting stronger quarter after quarter. And I think that it's a very good position to be. I think this is still some capability of our -- not just on the financial side, but in terms of our -- how we want to execute our day-to-day operations, right, and with enough resources and financial resources on Hindi give us more levers give us more like room to execute our day-to-day operations.
And on top of operations, and we remain open-minded. And by the end of the day, we will see what is the best way, what is the better return we can generate through the -- through our cash. And as for certain things, I think it's definitely on the table, as you mentioned, is could be the dividend that could be the share buyback. So we are actively reviewing all the possibilities.
And at the same time, we are also like to see how our financial results can help us to serve our customers better, right, in terms of the catching up and building up a new capabilities, say, for example, like there is a lot of initiatives that there's a lot of thinking for us is like how we how we continually improve our service qualities and our efficiency through using the AI, right? And there is a certain requirement, capital requirement in terms of the -- and deploy and develop the AI capabilities.
But at this moment, this doesn't mean we have a working plan in terms of the CapEx investments, like some our industry peers doing at this moment very -- we want to be in a critical and a cautious way. But I think with certain level of cash on hand is give us more flexibility as well.
And in terms of the -- maybe some acquisition opportunity, we are -- in our history, where we always focus on like a self kind of like organic growth, and I think increasingly, with our cash on hand, we also remain open-minded to kind of continue to build up. Like by the other day, it's how -- what is the way in organic way we can improve our capability and to serve our customers better. I think that will be a key consideration as well.

Operator

Thomas Chong, Jefferies.

Thomas Chong

My question is about AI. I think management talks quite a lot on how AI reshaping our business across a different segment. I just wanted to get some color with regard the benefit from AI. Are we actually seeing cost efficiency, i.e., the use of AI actually save a lot of the manual labor cost? So that helps to achieve a lot of cost savings or are we actually seeing the monetization is getting better coming from AI?

Hou Tianyu

Yes. On the -- thanks for the question. We have seen growth, in fact, for example, in our search and recommendations, we actually use the large language model to better understand user queries, making certain discovery a lot more accurate and helping users find relevant faster. So essentially, when the user make a query, the new technology can help us expand what it means from the query, not only just from the tax but also from the work knowledge.
We are also using the AI to understand the product a lot better like historically, it was a fintech matching, but now we can use existing pictures and the descriptions and the reviews to generate a lot more richer understanding of the product. And all those help us essentially matching our product users' intention a lot better.
We are also having a lot of AI DC, AI-generated content in our platform. We provide that as a tool to our sellers to be able to produce image, a description of the product or the videos, especially a lot better compared to what they had before. And both of this increased our conversion meaningfully in our platform.
On the other side, on the cost savings side, I think in Forest opening, we talked about the chat board, the -- if you look at our queries, about 80% of the queries are answered by the chatbot already, which is a meaningful cost savings for the -- for our operations. I think that's also why you can see that our cost management for e-commerce is doing quite well. Even for the 20% answer by the agent, we have an AI tool for the agent to be able to understand the context of (inaudible), so can help them to respond a lot faster to the customers, which help us to manage the total population of our agent for customer service.
Another example is we're using AI model to better -- to make better judgment on the return refund decision. Typically, when there's a return refund happening comes to the platform, sometimes the platform historically to use the people to make judgment, or when there's escalation on disagreement between the buy and sellers that will come to us. we built an AI engine to be able to make a lot better judgment on this and make it a lot faster.
This contributed to the resolution time reductions as we mentioned earlier, and also reduced the number of agent required to intervene for our return refund. I think there are many other things that we can talk about if we have time. But yes, back to your question, we see the impact on businesses on both sides.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Ms. Rebecca Lee for any closing remarks.

Rebecca Lee

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

Operator

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