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Good day and welcome to the Sea Limited First Quarter 2023 Results Conference Call. All participants will be in listen-only mode. [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. Min Ju Song. Please go ahead.
Hello, everyone, and welcome to Sea's 2023 first quarter earnings conference call. I am Min Ju Song from Sea's Group Chief Corporate Officer's office. 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 a 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 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 with me Sea's Chairman and Group Chief Executive Officer, Forrest Li; Group Chief Financial Officer, Tony Hou; and Group Chief Corporate Officer, Yanjun Wang. Our management will share strategy and business updates, operating highlights and financial performance for the fourth quarter and full year of 2023. 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.
Hello, everyone, and thank you for joining today's call. On May 8, we celebrated our 14th birthday. It is a chance to remind ourselves of our humble beginnings and the culture of entrepreneurship, creativity and adaptability that has made Sea what we are today. It also gives us an opportunity to reflect on the year gone by.
The last year has been testing for our teams and I want to take this opportunity to thank all of our employees for their dedication and the determination they have shown. I'm proud of how our teams pivoted rapidly in difficult circumstances to achieve our goal of self-sufficiency. We have innovated to do more with fewer resources, while never losing sight of our commitment to our users and never letting our service vendors fall. Our results for the quarter are testament to their commitment and creativity. I also want to take this opportunity to thank our investors and partners for your ongoing support over the last 14 years.
The first quarter of 2023 was another strong quarter for us across our businesses. We're focused on maximizing operational efficiency and improving user experiences. We continued to make meaningful progress on both fronts. We deepened our commitment to achieving strong cost leadership for our ecosystem. We believe this will reinforce our structural advantages in driving profitable long-term growth in our markets. As a result, we continued to see significant year-on-year improvement in profitability of both Shopee and SeaMoney.
We also achieved positive total cash flow for the quarter. Our cash, cash equivalents, short-term investments, and other treasury investments increased by $258 million from the previous quarter. In addition, we made solid progress in elevating user experiences across our businesses. At Shopee, we're driving improvements in both logistics service level and speed, while enhancing experiences at the key points of the customer journey.
As a result, user engagement deepened. At Garena, we're working to optimize various suspects of gameplay and game mechanics based on user feedback, ensuring that players continue to enjoy the highly engaging and highly social experiences they associate with our games.
In the quarter and into April, we started to see some initial signs of recovery in the active user base of our largest game, Free Fire. At SeaMoney we are expanding the product offerings and the features within each product, so that our users can enjoy a more comprehensive suite of products and services that meet their underserved financial needs.
We are pleased with the progress we have made so far to strengthen the fundamentals of our business. As we continue to fine tune our operations and navigate near-term micro uncertainties, we remain highly confident in the long-term opportunities in our markets and our ability to capture those profitably.
Now, let's discuss each business segment in more detail. Beginning with e-commerce, we are very pleased to report that Shopee has delivered another strong quarter. Despite micro volatility, Shopee business remained resilient and we have made significant progress in deepening our competitive mode by strengthening our cost leadership and uplifting the user experience.
In the first quarter of 2023, GAAP revenue was $2.1 billion up 36% year-on-year driven by deeper monetization. Core marketplace revenue increased by 54% year-over-year to $1.2 billion due to an increase in transaction based fees and advertising revenue. And adjusted EBITDA was $208 million, improving from a loss of $743 million from last year. The improvement was driven by increased monetization and a greater operating cost efficiency,
For our Asia markets, we achieved an adjusted EBITDA of $276 million during the quarter, improving substantially from a loss of $408 million in the same period last year. In our other markets, the adjusted EBITDA loss was $58 [ph] million narrowing meaningfully from last year when losses were $335 million. Contribution margin loss per order in Brazil improved by 77% year-over-year to reach $0.34, reflecting better monetization and higher efficiency in our sales and marketing spend. As we see significant opportunities in the market, we plan to continue to invest in capturing more of these opportunities in Brazil.
Let me talk through a few specific areas we focused on during the quarter. Firstly, we continue to enhance our logistics cost leadership and the delivery experience by improving the capacity and integration of our in-house logistics arm, while continuing to work closely with our third-party logistics partners. We introduced more automation to our delivery services. Thanks to these efforts, we have managed to bring down average delivery time by more than half a day across our markets within the first quarter.
We are also expanding the buyer coverage of our logistics services across our markets. In our largest market, Indonesia, which consists of more than 10,000 islands, 95% of our buyer base is now covered by our delivery services. In Brazil, we already have eight distribution and sorting centers. With the most recent expansion in Northeast Brazil, we have also been working to expand our first and last mile hubs in the market.
In recent months, we opened 15 new hubs to further strengthen our logistics capabilities. In addition, we are looking carefully at every stage of the customer journey and improving our processes, policies, and the services to enhance the user experience. We started to pilot on the spot returns in some markets for better services to our buyers. We have also started handling returns on behalf of some sellers with our teams directly engaging with the buyers instead of putting this burden on the sellers. This improves the experience for our buyers who can deal with our teams and free up our sellers to focus on growing their business.
We are deepening our AI capabilities to drive a better user experience and operational efficiency. AI helps us recommend more relevant and personalized offerings to our users. This has driven higher order conversion as users discover products more quickly and easily. We have also adopted large language models to improve our AI powered chatbots ability to understand users in different languages and return the most relevant solutions, giving the contest this improved resolution rates and helped reduce wait times.
On top of that, AI is being leveraged to more comprehensively screen and filter items to comply with our marketplace policies. More recently, we have further stepped up consumer protection efforts to ensure our buyers enjoying a safe, reliable and hassle-free experience. For example, in Singapore, we launched the shop safe with Shopee initiative through the adoption of the Consumer's Association of Singapore's standard dispute management framework among other initiatives. This and other related initiatives are vital in ensuring that we offer all our buyers and the sellers the best possible experience on Shopee.
As we enhance these key differentiators, we attract more buyers and sellers, strengthening our overall ecosystem and widening our competitive moat. Indeed, despite the more uncertain microenvironment, we continue to diversify our local seller base and strengthen our relationship with other ecosystem participants such as influencers. In Brazil, we have reached more than 3 million registered local Brazilian sellers on our platform who now account for around 85% of our Brazil orders.
We have also seen strong traction in our Shopee affiliate program as we worked to empower influencers and content creators to be part of our ecosystem. This program invites social media influencers to promote our products sold on Shopee across our markets. We have more than 4 million registered influencers participating in our affiliate program today. In our largest market, Indonesia, orders generated by our affiliate partners more than tripled in 2022.
Across our markets, we'll continue to see growth in the number of brands joining Shopee shop more and in the percentage contribution of GMV from our more sellers. As a leader in our market, we have remained focused on creating value for our brand partners through our technological capabilities. Recently, we announced enhancements to shop seller tools that help brands track and understand key trends and the buyer behavior, enhance consumer loyalty and protect their IP rights. All these efforts have further strengthened our relationships with brands.
In Thailand, we partnered with the Embassy of Italy and the Italian Commercial Office to bring Made in Italy brands closer to Thai consumers. In Vietnam, we have become the exclusive partner of the Government of Canada in launching a campaign to bring high quality Canadian food products to the local consumers.
Looking ahead, while there may be near-term fluctuations, driven by the underlying market environment and our fine tuning of operations, we continue to focus on building up our long-term structural advantages in our e-commerce ecosystem. We believe this strategy will be key in unlocking future growth opportunities and making sure that we have a growing and a wide reaching positive impact across our local communities.
Now let's discuss digital entertainment. As previously shared, Garena, continued to focus on improving gameplay and creating a stronger community for our games first and foremost. While there was some weakening in monetization, mainly as a result of a lower paying user ratio, we saw some initial signs of improvement in our quarterly active user base, which increased from $485 million last quarter to $492 million in the first quarter.
In April, we also observed positive user trends with Free Fire achieving a new peak in monthly active users in the last eight months period. While we are mindful of seasonality impacts, we're pleased to see this as a positive sign for Free Fire, which remains one of the largest mobile games in the world. We will continue to monitor closely for trends going forward. As we strengthen our efforts in enhancing gameplay and user engagement, we have received positive responses from our user community on a number of initiatives we launched to make the game experience smoother.
This initiative include game package size optimization and the gameplay like reduction with an emphasis on devices commonly used in our markets. Our users have indicated that these recent changes are highly responsive to their feedback and shared that they are enjoying a better gameplay experience as a result.
Our second largest game Arena of Valor showed strong performance, especially during the Lunar New Year period. The game once again achieved a new peak in quarterly active users and bookings after more than six years since its launch. We believe this is a further indication of our ability to engage users for the long-term with solid monetization.
At the same time, our pipeline remains healthy and we will be launching some new titles in the coming months. We have opened pre-registrations Undawn, an open-world survival game, which we will publish across Southeast Asia in the coming months. We will also be publishing Black Cloud Mobile, an action RPG mobile title based on the popular anime series Black Clover across a number of markets globally. Pre registrations are expected to open within the first half of the year following the conclusion of a closed beta test held last year.
As with other business segments, we have been very focused on enhancing our operations at Garena with AI. Our current capabilities have allowed us to improve the overall efficiency of our game operations. For example, we are exploring opportunities to leverage AI to localize some of our game content and to further advance our operational capabilities for higher efficiencies. We are confident that these initiatives combined with our strong track record in execution and the localization will help drive the long-term success of Garena.
Lastly, moving on to our digital financial services business. We're enhancing our operations and the risk management capabilities while improving the user experience for SeaMoney. We have also been working to diversify our fintech product offerings, both on and off the Shopee platform and across different markets to enhance user thickness.
SeaMoney's GAAP revenue was $413 million in the first quarter of 2023, up 75% year-on-year, and adjusted EBITDA was $99 million during the quarter, a substantial improvement from a loss of $125 million in the first quarter of 2022. This was driven by both strong top line growth and our ongoing effort to optimize costs and improve efficiency, particularly around sales and marketing expenses.
On digital wallet, we continued to expand Shopee pace use cases. For instance, it recently became a payment method for Apple Services in our Southeast Asia market. On credit, as of the end of the first quarter of 2023, the total loans receivable on our balance sheet was $2 billion, net of allowance for credit loss of $281 million. Nonperforming loans passed due by more than 90 days as a percentage of our total gross loans receivable remained stable at around 2%.
During the quarter, we continued to diversify the sources of funding for our credit business. In addition to funding through our own bank deposits, we have seen increased volume funded through channeling arrangements or electoral asset backed facilities with local and regional banks. We are working to further diversify our funding sources to broader financial investors.
Currently, a large part of our loan book is already funded by alternative sources as opposed to cash on our balance sheet. To further strengthen our risk management capabilities, we are using AI to help us to assess the fraud risk and credit risk of our users, as well as to enhance the KYC process of our products. This enables us to offer our financial products to more users while tightly controlling risk. We're also diversifying and enriching our product offerings at SeaMoney. We piloted new InsurTech products and expanded use cases, features, and services in our banking apps. This has provided even greater convenience and accessibility to financial products for our users.
In addition, we have further integrated many of these products into our broader ecosystem, making the user experience seamless across Shopee and SeaMoney. We remain focused on evaluating opportunities in digital financial services across our market and enriching our product and service offerings. We are confident in SeaMoney's long-term potential and are very carefully managing the business amid the macro uncertainties. We believe we are well positioned to capture significant and underserved opportunities available in our markets.
To conclude, our results for the quarter once again, demonstrate the fundamental strength and the resilience of our business model, and our ability to drive efficiency improvements while maintaining our leadership position. We are confident that we can continue to create value for our ecosystem participants as well as delivering long-term growth and sustainable returns to our shareholders.
Separately, as we noted in our press release earlier today, David Ma has joined our Board of Directors as of May 15th and will no longer serve as the Chief Investment Officer of Sea Capital. David has played an invaluable role as a member of our leadership team. I would like to express our sincere thanks to him for his contributions in this position. I'm very glad that we'll continue to benefit from his expertise and experience in his new role as a Member of our Board.
With that, I will invite Tony to discuss our financials.
Thank you, Forrest and thanks to everyone for joining the call. We have included detailed 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 relevant metrics.
For Sea overall total GAAP revenue increased 5% year-on-year to $3 billion. This was primarily driven by the improved monetization in our e-commerce and digital financial service businesses partially offset by lower GAAP revenue in our digital entertainment business. On e-commerce, our first quarter GAAP revenue of $2.1 billion included GAAP marketplace revenue of $1.8 billion, up 46% year-on-year and GAAP product revenue of $0.2 billion.
Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction based fees and advertising revenues was $1.2 billion, whereas value added services revenue, mainly consisting of revenues related to logistic services was $0.7 billion. E-commerce adjusted EBITDA was $208 million in the first quarter of 2023 compared to an adjusted EBITDA loss of $743 million in the first quarter of 2022.
Digital entertainment bookings were $462 million, and GAAP revenue was $540 million. Adjusted EBITDA was $230 million. Digital financial services GAAP revenue was up by 75% year-on-year to $413 million. This was mainly driven by the growth in our credit business. Adjusted EBITDA was $99 million in the first quarter of 2023 compared to an adjusted EBITDA loss of $125 million in the first quarter of 2022.
Improvements in the bottom line were driven by both strong top line growth and optimization of sales and marketing spend. We recognized a net non-operating income of $23 million in the first quarter of 2023 compared to a net non-operating loss of $6 million in the quarter of 2022. The higher net non-operating income was mainly due to higher interest income from higher yields.
We had a net income tax expense of $62 million in the first quarter of 2023 compared to net income tax expense of $82 million in the first quarter of 2022. As a result, net income was $87 million in the first quarter of 2023 as compared to net loss of $580 million in the first quarter of 2022.
With that, let me turn the call to Min Ju.
Thank you, Forrest and Tony. We are now ready to open the call for questions. As usual, our Group Chief Corporate Officer, Yanjun Wang will lead this part. Operator?
Thank you. [Operator Instructions] Our first question comes from Pang Vitt from Goldman Sachs. Please go ahead.
Good afternoon everyone, and thank you very much for the opportunity. Four questions from my side. Number one on Shopee. Can you provide more color on the current trend that you see? Are we seeing any further slowdown in GMV momentum in the quarter? And what kind of takeaway trend do we see now?
Number two, also related to Shopee. Can you comment on the current strategy for Shopee going into the rest of the year? Should we expect to see Shopee reinvesting to grow more into the later part or you will focus on further expanding on the margins? What type of growth should we expect and if we if you plan to reinvest, where will you spend money on?
And number three, it will be related to gaming, cross booking fees, further pressure, but we see margins continue to expand nicely. What's the current strategy for the division with the recent peak in monthly upkeep user for Free Fire? Are we already seeing some stabilized train for the game? When should we expect bottom line to bottom out, sorry, the top line to bottom out in the year?
And lastly, for US SeaMoney business, why revenue continued to increase despite seeing your loan book largely flat quarter-on-quarter? Why do we also see the provision for credit loss on SeaMoney increase quarter-on-quarter as well?
Thank you, Pang for the questions. In terms of the Shopee growth, while we don't disclose GMV quarter-on-quarter, generally overall the trend has been consistent in terms of seasonality trends we are seeing quarter-on-quarter with last year's first quarter. And if we look at more details at the different markets, Indonesia showed relatively strong performance in Asia and Thailand and Malaysia also showed quarter-on-quarter growth. Of course we also see, continue to see tough year-on-year comps for the markets and in the rest of the markets in line with overall seasonality trends we are observing for Asia as we -- what we saw last year.
And Brazil of course remained a gross market for us. As we mentioned earlier, Brazil is a -- we see significant opportunities there. We are only in Brazil for four years. So it's a relatively earlier market for us. However, we have achieved very significant scale being one of the leading e-commerce players especially on the local-to-local e-commerce marketplace targeting mass market segments in that country. And given our scale and operational efficiency we already achieved there, we believe we can breakeven any time, but we may continue to choose to invest in the market to capture the significant long-term opportunities we observe in the market. So that's a quick capture of the overall trends.
In terms of the strategies for e-commerce, as we shared before, we think the long-term opportunities for both our Asian markets, as well as Latin American markets are very significant given the strong and positive demographic features, digital penetration, underdevelopment of infrastructure and long-term sorry, offline retail which gave more opportunity for digital penetration to go even further beyond some of the what we might have seen in some of the developed markets. And the early stage in terms of e-commerce penetration, these markets are at with a lot more of the services that we can provide to, especially the underserved mass markets that our model has strong, very strong advantages in targeting.
So we continue to invest in the long-term growth of our markets, and the investment will focus on both in terms of the quality of the user experiences and services. As we shared on the call earlier, we're very focused on bringing larger assortment products with, in partnership with brands and SMEs in our communities and bring better search and discovery experience, more personalized shopping experience, better customer services enabled by AI and other technologies, better returns and logistics experience to further bring the convenience to our buyers.
And on the same -- at the same time, we also focus on the cost of the ecosystem and we many times have shared before that we are very much working towards continue to bring down the cost of the entire ecosystem in terms of logistics, payments, and other infrastructure. And that has been a very clear focus for us in terms of the long-term ecosystem construction. And we also believe that this will allow us to capture and strengthen our long-term competitive mode. In the immediate term, in terms of the investment in the market and growth trends, you might see a lot will depend on the specific market condition market-by-market and period-to-period.
We remain very nimble and very focused from a bottom-up perspective, looking at each market conditions both macro, user behavior, competitive landscape and other trends seasonality, holiday season, et cetera. And also from a period-to-period in terms of week-by-week, day-by-day review of the markets to see what be the best investment and in what areas we should be making. So overall I think, the long-term execution direction is very clear. In short term, we also closely monitor the market. I think our past track record has shown that we can execute growth and managing bottom line at the same time as well. So that remains our competitive strength in the long run we believe. In terms of game trends, we are very pleased to see that there's some initial sign of quarterly active user increase “quarter” for our games.
And in particular for Free Fire, our largest game and that increase was also broadly across different markets and not specific to any particular single market. This is as we share on the call, quite in line with our efforts and direction of our focus recently to continue to improve and enhance our user experience to retain and re-attract our users to our game. And this has been our focus and priority in the past periods, and we are pleased to see some initial results. I will continue to observe the trends going forward. Moreover, we also mentioned that our second largest game Arena of Valor also enjoyed a very strong performance in the past quarter. In fact, it was a new high, both in terms of quarterly active user base and bookings.
So all in all, we are very pleased with the results so far, and we'll continue to work towards the set direction of improving user experience. And monetization, I think, is not an immediate priority. However, our margin remained -- EBITDA margin remained high compared to industry standards and actually improved quarter-on-quarter. We will remain very disciplined in terms of the bottom line and efficiency of an investment into the segment. And we also mentioned some new launches that might come up in the coming months and we also will closely observe the trends in those new games.
In terms of SeaMoney, as we shared on the call, we have been diversifying the sources of our funding and in collaboration with third-party financial institutions to fund growth of the loan book. And therefore, you observe a revenue increase that actually exceeded the loan book increase. In terms of provisions increase, I think the provisions similar trends quarter-on-quarter. But if you look at year-on-year, the products have expanded in terms of the features and tenure and types of loans we offer. So there is a shift in product as well as the loan book expansion. So there is some shift, but overall, if you look at our NPL, it has remained very stable and low.
Our next question comes from Piyush Choudhary from HSBC. Please go ahead.
Yes, hi. Good evening and thanks for the call and opportunity to ask questions. Congratulations on a good set of numbers. Three questions. Firstly, on the e-commerce, could you tell us on the industry GMV growth trends across the markets in Asia and Brazil. Has it started to improve in 2Q so far? If not, then when do you expect acceleration in growth? And just some color on the competitive environment, what's the impact of TikTok and how you're trying to defend the market share there?
Secondly, on the logistics, what percentage of -- if you can talk about your strategy over there what percentage of orders are fulfilled by Shopee Express and orders fulfilled within 24-hours. Is there a target which you have in mind? And thirdly, company is generating free cash flow now. So what would be your capital allocation priorities for growth investments? Would you restart growth investment in Brazil and Latin America or the markets or what level will make -- give that confidence to restart growth investments? Thank you.
Yes. Thank you, Piyush. In terms of industry trends, given Shopee's relative size and we believe, generally, industry trends are in line with our trends that we've been observing for our own e-commerce platform, as I shared earlier. And it's hard to say what we're going to see immediately because on the one hand, I think our economies in Southeast Asia remained relatively resilient so far.
And we haven't seen -- while the inflation trend is still ongoing. It hasn't caused major disruptions to the economy. And at the same time, we continue to see reopening trends. But on the other hand, there are still global macro uncertainty. And many of our economies are export-driven, which might be exposed to risks in global and uncertainties in global economies as well. So we remain -- we have to observe ongoing trends closely.
It's a market-by-market and period-by-period assessment. As I shared earlier, some markets, for example, Indonesia, in particular, for us, which is also the largest market for us, performed quite well and remained relatively strong. In some other markets, there might be more year-on-year tough comps and then there will be other markets where we saw a start to some pickup and as reopening effects right now. On the other hand, it's still early to tell.
So we'll -- again, our strategy is we remain very nimble and flexible we observed market very closely. And this has been our strength. We've been very close to each market. And having operational strength and profitability across all our markets allow us much more flexibility to invest from period to period of market and from market to market based on what makes the most sense at any particular point in time in that market. And that will be our immediate focus going forward.
But long-term focus of investment, as I shared, it's going to be in all the infrastructure, as I mentioned. When people think about investments, sometimes people oversight -- overemphasized subsidies shipping subsidies. I don't think that's a fair characterization of our focus of investment. Rather, our focus will be on investing in the long-term infrastructure that will provide better services to our customers and the lower the cost of the ecosystem that will significantly expand the profitable TAM of e-commerce in our region. And also build much stronger competitive moat in the long run for us.
In terms of the Shopee logistics, we -- again, this is -- we adopt a very pragmatic approach to it. We look at it based on the user experience and the cost of service to users. If we can do it in any market more effectively, efficiently at any point of time ourselves, we will allocate more to our own logistics services. One and in markets where has been competitive. We're happy very -- to allocate also more to 3PL. And it's a highly dynamic process. We don't have a particular KPI that we must target -- it's all based on the quality of services and the cost of services to our users and to continue to optimize over the long run, and we are very keen to work with all the partners who are happy to work with us in that front.
And in terms of Free Fire -- sorry, free cash flow generation and allocation, as I mentioned, investment across different markets actually, again, it's going to be a market-by-market assessment. Long-term potential across different markets quite strong and therefore, we won't say, oh, we deprioritize any market and prioritize any other market. Obviously, short term, Brazil is a relatively younger market for us. As I shared, we've been in Southeast Asia for doing e-commerce for close to a decade. And we are only there for about four years. But even within four years, we achieved a strong position and scale, significant enough scale to allow us to break even as we choose to.
So that is a very good position to be in, but we also want to continue to focus on capturing more of the market opportunities there, which has a very large underserved user segment and is even compared to Southeast Asia, we believe e-commerce as underpenetrated in Brazil. And we have a unique advantage coming from serving underserved segments and mass market segments in Southeast Asia, dealing with highly complex infrastructure and regulatory challenges. We believe that gives us -- prepare us quite well to also continue to focus on the similar segment in Brazil.
As we shared on the earnings call earlier, we opened more centers and sorting hubs as well as other last mile hubs closer to our by-communities [ph] especially in some of the more underpenetrated regions in Brazil. So we believe there's significant opportunity there. But again, our investment and cash flow in terms of investing the cash flow, we will remain highly vigilant and disciplined and highly focused on the cost efficiency because as I mentioned again, again, cost of the ecosystem and cost to serve our consumers is a key focus of our operations, and we'll continue to improve on that.
Our next question comes from Alicia Yap from Citigroup. Please go ahead.
Hello, hi. Yes. Good evening. Thanks for taking my questions. So I have a couple of quick ones. One is the follow-up on the quarterly active user growth. Do you think the trend that we saw this quarter will continue into the future quarter and if we can get a little bit qualitative comment in terms of the profile, of these new users? And is this driven by your effective marketing campaign? Or is it more driven by your content update?
And then second question is, I think we still wanted to get more comfortable and the sense about the sustainable EBITDA margins and also how you would balance between we invest strategically to drive your top line growth while also maintaining a certain, expenses level and the margin level. So if you can elaborate what's your strategy over there will be helpful. Thank you.
Yes. Thank you, Alicia. In terms of the trends for Free Fire, I think that looking at the active user base, we saw some initial signs, but also, as I mentioned, we continue to observe the trends going forward. We hope to stabilize also the active user base and as soon as we can as well, that's the effort the team is also focused on.
In terms of the – again, this has not been the immediate focus. But as I shared, before that usually for a large DAU game, once you get a large user base, money follows. And in our past track record, we have shown very strong capability in monetizing across different user segments and periods. And in terms of the user profile and what's driving these initial positive signs. So I think the user profile hasn't really changed much the same target users we have originally because Free fire is a very massive DAU game. It's more of the largest games – mobile games in the world by – so it's a very broadly targeting general population and enjoy the highly diverse communities.
And so in terms of the way we target them, as we shared earlier, it's by focusing on better user engagement, user experience, community building, and responding to user feedback on features, et cetera, as opposed to through marketing efforts. As you can see, our EBITDA margin actually hasn't really changed that much and actually improved a little bit quarter-on-quarter. So we're very careful about the sustainability of our long-term engagement with users all the efforts being directed at making Free fire into a long-term franchise and a large significant platform on which we can build on more new content and attract more users. We think that there's a very good chance this can be made into a strong evergreen game.
And in terms of the margin for e-commerce, I think that, as I shared while we're not immediately targeting to push the envelope to maximize margin, we think there's – as a leading marketplace player, the margin you generally see in different markets or a leading marketplace player can also be achievable by us. And in different markets, we have seen even at this early stage where we just turned it profitable for only a couple of quarters. We have seen a very healthy EBITDA over revenue margin even towards like more than 30%, 40% in some of the markets. So that is – the margin is not the biggest concern for us. If we want to achieve high margin, I think it's doable.
The question is, how do we maximize the long-term profitability and maximize the opportunity we can capture in this region and in all our markets because we really continue to see significant opportunity. So our focus is on the long term and not immediate margin expansion. But having the support of healthy margins also give us more resources to allocate across different markets and from period-to-period, into investing in different markets and to even further strengthen our ecosystem.
As I shared, both for our long-term goals of expanding the profitable TAM and build strengthening our competitive, and also in the near-term to respond to market dynamics within each market, so again, we're not particularly worried about the margin. I think it's more about how we build a healthy long-term ecosystem that will maximize the long-term profitable growth of our business.
Our next question comes from Jiong Shao from Barclays. Please go ahead.
Thank you very much for taking my questions. First, I want to make sure I heard you correctly. I think earlier, you mentioned that GMV for Q1 this year was consistent with Q1 last year. Did you mean by U.S. dollar terms or by constant currency?
Could you also talk about the FX impact on your GMV or revenue for this quarter? And anything you can share about the number of orders for both Asia and Brazil. And lastly, any comments about your headquarter costs both year-over-year or quarter-over-quarter, anything even qualitatively would be great. Thank you.
Thank you, Jiong. In terms of GMV, as I mentioned, we don't discuss quarter-on-quarter GMV numbers specifically. And what I mentioned though was that the trend we're observing, the general trend Q-on-Q, observed for this quarter versus last quarter is in line as what we observed in Q1 last year versus Q4 2021.
And in terms of ForEx impact, we disclosed that for our GAAP revenue in e-commerce on the constant currency basis, the GAAP revenue would be up 41.7% year-on-year. And on a USD basis, 6.3% year-on-year, so I think that probably gives you a sense of what the ForEx impact is. And in terms of our order number, again, we don't discuss specific order numbers quarter-on-quarter, but you can assume that our basket size doesn't change dramatically quarter-on-quarter anyway so roughly in line with GMV trends. In terms of HQ costs for the quarter, we continue to see improvement on the cost and of course, adjusting for any onetime accrual reversal that we had in the previous quarter.
Our next question comes from Varun Ahuja from Credit Suisse. Please go ahead.
Yes. Hi, management. Thanks for the opportunity. I've got quick four questions. First, on the gaming side, can you provide an update on tenant site of first refusal. So it's coming up for September, October. So how should we think about that agreement and its impact potential?
Secondly, on the sticking to Garena, on the margin side, it looks like going to launch some gains in the second half. So how should we think about margins given you may need to invest on marketing of the game? So it should trend down from current 50% that we have shown in the quarter.
Third, on the e-commerce side, as kind of mentioned earlier, that you have now turned free cash flow positive on the overall company level, what's your aspiration on the overall Latin America markets. I understand you're still operating in some of the countries as or an export basis. So how should we think about it? Are you going to reinvest in those markets you have cut back once you have sizable cash flow. So how should we think about overall Latin over concern given now that you've turned free cash flow positive? Lastly, I'm not too sure if you have given that number. What is the total loan book size? I understand two is on your own balance sheet, but overall, what is the loan book side of CSS [ph]. Thank you.
Yes. Thank you, Varun. And in terms of the – I believe your first question is regarding our agreement -- commercial agreement with Tencent for our game publishing. And I think we mentioned before, it's over renewal unless either party terminates it. We are not aware of any changing circumstances and the agreement is publicly filed, so you can refer to the terms there.
And in terms of the margin for the new game launches. Now I think there will be some initial marketing spend, but again, we will remain highly disciplined and will be commensurate with the performance of the game overall and remain tight on that. So we do not, at this point, anticipate a major impact on marketing because of the marketing spend related to the new game launch. And in terms of the LatAm plans for Shopee, our focus is still on Brazil, which is the largest market in the region and where we already established a significant scale and leadership in the segment that we target.
With respect to -- and then Brazil, obviously, is a local commerce market for us. And it's predominantly local sellers selling to local buyers on our platform. For the other Lat Am markets that we still retain some presence, we don't have an immediate plan to aggressively grow those markets and we'll remain efficient about those markets at this time. I think our loan book size disclosed is the amount on our balance sheet. And therefore, it doesn't reflect the entire loan book size, but you can refer to the past disclosure for reference.
And we don't anticipate a significant increase in loan book size quarter-on-quarter immediately. Given, as I shared before, overall, our approach to the credit business is focused on risk management building up a resilient underwriting capabilities and also better user experiences.
Our next question comes from Venugopal Garre from Bernstein. Please go ahead.
Hi, thanks a lot for the opportunity. Just very quick three small questions. On gaming, you mentioned about some new games in the second half of the year. I don't know whether I missed out on the comment, but are you talking about self-developed games? Or is it more related with publishing for others? That's the first question.
The second thing is I'm sort of for whatever reason, not very sure around the strategy for e-commerce and growth versus profitability. While I do appreciate that a lot of comments have been made in this call. But what I want to understand is that the focus would be more centered around sustenance of market share and defending share. Or the focus would probably be at some stage about stimulating the market to deliver growth and deliver market share growth.
The third question for me is on fintech. What do we see from here on the contribution from Singapore, Digibank given that it's still in early stages. But as I understand, a lot of your regulatory capital requirements would kick in over time. So is it something which is a priority in terms of the focus area? Thanks.
Yes. Thank you. The new games we mentioned in the pipeline are third-party published game for us, not self-developed. In terms of the Shopee strategy of growth versus profitability, as I mentioned earlier, I think at this point, longer term, we think we will continue to invest in the long-term growth opportunities being a profitable, sustainable way that also, hopefully, we can expand the profitable TAM for our region by focusing on user experience and the cost to service. But short-term, in terms of the profitability versus growth, again, we already achieved profitability. We're not focused on trying to maximize profitability in every market for every period. We are focusing on closely observing the market trends and allocate resources nimbly and adapt to the local market conditions from period to period, and from market to market.
It's going to be a very bottom-up decision-making. And we are doing so to again strengthen our market leadership, but more importantly, for the long run to expand the total profitable TAM in our markets as a strong market leader. And I think that's a significant opportunity that we are really seeing. And in terms of the Marriott Bank in Singapore, it's still very early stage and so I want to have any material contribution whether the top line or bottom line. Yes…
In the interest of time, this concludes our question-and-answer session. I would like to turn the conference back over to Min Ju Song for any closing remarks.
Thank you. And thank you all for joining today's call. We look forward to speaking to all of you again next quarter.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.