Good morning and good evening. Welcome to the Sea Limited First Quarter 2020 Results Conference Call. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. 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. These are times of significant change and disruptions 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 socialize with their friends 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 staple, daily essentials and other consumption needs. At the same time, more sellers are migrating to or relying more on Shopee to sell and grow their business. As our economies become more online and contactless, the digital payments and the financial services that SeaMoney provide are becoming an ever more important part of the infrastructure in our region. The coronavirus crisis is driving a step change in the growth of the digital economy globally, particularly in the market and the segments, where Sea operates. 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 segment 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 strong balance sheet and the cash flow from operations and we will…

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. At Sea overall, our 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 in 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 user’s needs better in the long run. Digital financial service’s 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.…

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

[Operator Instructions] The first question comes from Miang Chuen Koh of Goldman Sachs. Please go ahead.

Thank you. Good evening. Congrats on the results. A 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 why did pay ratio fall QoQ? Secondly, on e-commerce, it was mentioned cross-border was the reason for the decline, decrease. Can I confirm that this has hit your commission revenues more quarter-to-quarter than advertising and VAS? And given merchant supply 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? Thank you.

Thanks, Miang Chuen. And I will address the game question first. As Tony mentioned earlier, there has been some foreign exchange related fluctuations and that means 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, that we assess difference not to be material and we will continue to monitor the situation if we think there is 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 they are confined at home in social isolation, they tend 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 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 same time for example, another country, in India, where people usually do not see as a a big esports 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…

[Operator Instructions] The next question comes from Thomas Chong of Jefferies. Please go ahead.

Hi, good evening. Thanks management for taking my questions. 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 their 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 multi-year or five 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 impact of coronavirus in different geographies, i.e., Indonesia, Taiwan, Malaysia, Vietnam, 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.

Thank you. I’ll start with Free Fire. I think, we see very positive trend. As you mentioned, we recently hit a peak daily active user 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 playing 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 this game, that also means more of your friends, family, other people are 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 that we are 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 increasingly social platform. As you can see that we introduced a new map, new contents 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 videos. So these are all these features we are introducing that are very welcomed and very well received by our users, who are engaging with us in the game and also outside of game in online forums through live streamings 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 more than 80 million people interacting with each other…

[Operator Instructions] The next question comes from Alicia Yap of Citigroup. Please go ahead.

Hi, good evening Forrest, Tony, Yanjun and other management. Thanks for taking my questions. 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 the macro outlook gets, I mean 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-term merchants? Thank you.

Thank you, Alicia. In terms of the macro outlook, of course, this is – the situation is evolving daily, it really depends on how long the lockdown might be and how well we can address a pandemic and the impact on the economies market by market. But overall, I think, we do see game business generally to be quite counter cyclical, even during the 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 subscription of streaming services, etcetera., it is – that’s the reason we call it micro transaction. I think this is something that’s highly affordable to people’s still. And also for games where it’s not targeting a very small our game, especially as a large esports highly social game, we are targeting a very broad base of consumers. And therefore, having a very large user base and we focus on QAU, QPUs, daily active users etcetera 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 and Taiwan, LatAm, 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 are 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 the COVID started and as well as…

[Operator Instructions] The next question comes from John Blackledge of Cowen. Please go ahead.

Great. Thanks. On Shopee, any particular shopping categories that drove the [Technical Difficulty] and further accelerated in April and on April on the 140% growth in April, I was curious how growth is tracking...

Sorry, you’re breaking out. Can you repeat the question, please?

Yes, can you hear me?

Yes, better.

On Shopee any particular shopping categories that drove the acceleration in 1Q and further acceleration in April and then [Technical Difficulty] growth that you are seeing that you maybe 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? Thank you.

Yes. Thank you. So in terms of GMV growth, well I think if you look at our traditional segment that are – categories that are largest in our platform include fashion, health and beauty, home and living, baby products. We see very strong growth, accelerated growth, particularly in home and living, health and beauty, baby products. We also see strong accelerated growth in FMCG, other FMCG goods, staple 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 markets, this will probably continue for a while. After the lockdown, we’ll have to observe, when life is 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 for – 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 our markets, we are not talking about alternative wallet share, we are actually talking about increase in terms of the baseline of new users coming naturally keen to be educated how to use e-commerce, and we are there – 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 health products or FMCG or staple food, we try to as much as possible serve their needs well, and with our engaging experience as well as the 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 increase in active buyers, sellers as well…

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

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

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.