Q4 2023 Sea Ltd Earnings Call
Participants
Chris Feng
Hou Tianyu; Group CFO & Director; Sea Limited
Min Ju Song
Xiaodong Li; Founder, Chairman & Group CEO; Sea Limited
Yanjun Wang; Group Chief Corporate Officer, Group General Counsel & Company Secretary; Sea Limited
Alicia Yap; MD & Head of Pan-Asia Internet Research; Citigroup Inc., Research Division
Ellie Jiang; Analyst; Macquarie Research
Jiong Shao; Analyst; Barclays Bank PLC, Research Division
Navin Killa; Analyst; UBS Investment Bank, Research Division
Pang Vittayaamnuaykoon; Research Analyst; Goldman Sachs Group, Inc., Research Division
Piyush Choudhary; Telecoms Analyst, South East Asia; HSBC, Research Division
Ranjan Sharma; Analyst; JPMorgan Chase & Co, Research Division
Sachin Shrikant Salgaonkar; MD in Equity Research & Head of Asia Telecom; BofA Securities, Research Division
Thomas Chong; Equity Analyst; Jefferies LLC, Research Division
Presentation
Operator
Good morning, and good evening to all, and welcome to the Sea Limited Fourth Quarter and Full Year 2023 Results Conference Call. (Operator Instructions) And finally, I would like to advise all participants that this call is being recorded.
Thank you. I'd now like to welcome Ms. Min Ju Song to begin the conference. Please go ahead.
Min Ju Song
Thank you, and hello, everyone, and welcome to Sea's 2023 fourth quarter and full year earnings conference call. I am Min Ju Song from Sea's 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 the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures. For discussion of the use of non-GAAP financial measures and reconciliation with the closest GAAP measures, please refer to the section on non-GAAP financial measures in our press release.
I have with me Sea's Chairman and Chief Executive Officer, Forrest Li; President, Chris Feng; Chief Financial Officer, Tony Hou; and 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.
Xiaodong Li
Hello, everyone, and thank you for joining today's call. I'm happy to share that we have achieved our fourth full year of annual profit since our IPO. In 2023 we achieved profitability, strengthened our market leadership for our e-commerce business, grew our digital financial services business, and stabilized the performance of our digital entertainment business. We have emerged with a much stronger balance sheet with our cash position increasing to $8.5 billion as of the end of 2023, demonstrating the discipline and the prudence we have applied in our investments over the past year. Looking ahead, we expect 2024 to be another profitable year.
Let me recap our performance at the individual business level in 2023 and share the key strategic focus for each business in 2024. Starting with Shopee. First, Shopee's investments since July last year have paid off. I'm pleased to report that despite an environment of intensified competition in Southeast Asia, we believe we had a [meaningful] gain in market share between the start and at the end of 2023. We are happy to have solidified Shopee's market share in the region, and we intend to maintain our market share in 2024. We expect Shopee’s full-year GMV growth to be in the high-teens range and its adjusted EBITDA to turn positive in the second half of this year.
To return and strengthen our competitive advantage, Shopee's 3 operational priorities in 2024 are improving service quality for buyers, enhancing the price competitiveness of our product listings, and the strengthening our content ecosystem. On service quality for buyers, we'll do more to optimize key aspects of the buyers' experience such as the delivery speed and consistency, return and refund processes and customer service.
These are areas we already excel in and we will continue to improve [out]. On keeping our product listings price competitive, we'll continue to work more with sellers who have more upstream supply chain access and provide more fulfillment, marketing and shop management services to our sellers. On content, we will deepen [and the] broader engagement with creators, sellers and the partners across the content ecosystem and better integrate live streaming and the short form video into the shopping experience.
Let me now highlight some of the Shopee's achievements in the fourth quarter. During the quarter, Shopee delivered strong results with both top line growth acceleration and bottom line improvement. Shopee's GMV and orders grew 29% and 46% year-on-year, and 15% and 13% quarter-on-quarter respectively, resulting in solid market share gains across our markets. Meanwhile, Shopee's adjusted EBITDA loss improved by 35% sequentially. Adjusted EBITDA loss per order improved by 43% quarter-on-quarter.
On logistics, we opened 5 new sorting centers and 385 new first and last mile hubs across our Asia market and extended our logistics network further to improve our coverage to [do] more automation, tighter planning, better routing and other operational improvements. Our platform logistics cost per order in Asia decreased by 12% year-on-year in the fourth quarter. This was partly driven by our own logistics network cost per order decreasing by 20% from the same [take] rate last year.
We're also seeing good progress made on delivery speed. In Indonesia in December 2023, more than half of the orders from buyers in Java were delivered within 2 days. We'll continue to improve logistics service quality in terms of both speed and the consistency. At the same time, we're also expanding premium services such as next day delivery and introducing new features. For example, we commenced return on sports services in Indonesia and Vietnam. This initiative has resulted in higher trust and increased product frequency -- purchase frequency from our buyers, particularly those who are new to Shopee.
Our e-commerce logistics network is now one of the most intensive and efficient in our markets and a strong competitive moat for us. We have rapidly ramped up live streaming e-commerce which accounted for around 15% of our physical order volume in Southeast Asia last December.
With the scale and the leadership achieved, unit economics of the segment also improved meaningfully quarter-on-quarter. Shopee Brazil continued its strong performance in the fourth quarter. Its contribution margin loss per order improved by nearly 90% year-on-year. This was driven by improvements in both user monetization and cost efficiency. We believe we have achieved cost leadership in logistics to scale and operational efficiencies, which have been and will be key to our success in the market.
Turing to our Digital Financial Services segment. SeaMoney has delivered a strong year in 2023 primarily attributed to our consumer and SME credit business. Our journey to build the credit business dates back to 2019. We initially started by introducing SPaylater consumption loans in response to Shopee buyers' strong need for such services.
Subsequently, we expanded our offerings to cash loan services to both buyers and sellers on Shopee. This underscores our user centric approach and the unique advantage offered by the Shopee ecosystem for SeaMoney to quickly achieve critical scale and profitability.
2023 was the first year of positive profit for SeaMoney with full year adjusted EBITDA of $550 million as of December 31, 2023. Our consumer and SME loans principal outstanding was $3.1 billion, a 27% increase year-on-year, $2.5 billion of that was on the book.
Consumer and SME loans active users for the fourth quarter [defined] as credit users with loans outstanding by the end of the quarter was over $16 million, a 28% increase year-on-year. In 2024, we will continue to invest in user acquisition for our credit business both on and off Shopee platform as we see significant upside in our markets. As we scale, we will remain prudent on risk management.
In addition to our credit business, SeaMoney is also growing our digital banking and the insurance services to capture future business opportunities in the Digital Financial Services segment. We expect SeaMoney to continue its robust growth in 2024.
In Digital Entertainment, Garena has done well in enhancing and optimizing game experiences for its players. For instance, we have continuously introduced a fresh and highly localized content to Free Fire.
In the fourth quarter we collaborated with Lamborghini to allow players to drive their cars in game. We also recently announced our collaboration with JKT48, an idol group from Jakarta, as our Indonesian brand ambassador. This partnership excite and delight our players and enable us to nurture our local communities.
I am happy to share that we are seeing improved user acquisition and retention trends for Free Fire. In 2023, Free Fire was the most downloaded mobile game globally, according to Sensor Tower. We are pleased that these positive trends are continuing into 2024. In February, Free Fire achieved more than 100 million peak daily active users. It remains one of the largest mobile games in the world. With this positive momentum, we currently expect Free Fire to grow double-digits year-on-year for both user base and bookings in 2024.
To conclude, we are pleased to see positive trends in both growth and profitability for all 3 of our businesses. We will continue to invest for the future with discipline and focus. I would also like to take this opportunity to thank our employees, users, investors and partners for your continued support throughout this journey.
With that, I would invite Tony to discuss our financials.
Hou Tianyu
Thank you, Forrest, and thanks to everyone for joining the call. [We'll] see overall, total GAAP revenue increased 5% year-on-year to $3.6 billion in the fourth quarter, and 5% year-on-year to $13.1 billion for the full year of 2023. This was primarily driven by the improved monetization in our e-commerce and digital financial services businesses.
Our total adjusted EBITDA was $127 million in the first quarter of 2023 compared to an adjusted EBITDA of $496 million in the first quarter of 2022. For the full year of 2023 our total adjusted EBITDA was $1.2 billion compared to an adjusted EBITDA loss of $878 million full year of 2022.
On e-commerce, our fourth quarter GAAP revenue of $2.6 billion included GAAP marketplace revenue of $2.3 billion, up 23% year-on-year, and [GAAP] product revenue of $0.3 billion.
Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues was $1.6 billion, up 41% year-on-year as a result of platform growth and improved monetization.
Value-added services revenue, mainly consisting of revenues related to logistics services was $0.7 billion, down 5% year-on-year as a result of higher revenue netting off against shipping subsidies.
For the full year of 2023, GAAP revenue of $9.0 billion included GAAP marketplace revenue of $7.9 billion, up 27% year-on-year, and GAAP product revenue of $1.1 billion.
E-commerce adjusted EBITDA loss was $225 million in the fourth quarter of 2023 compared to an adjusted EBITDA loss of $196 million in the fourth quarter of 2022. 2023 full year adjusted EBITDA loss improved by 87% year-on-year to $240 million.
For our Asia markets, we had an adjusted EBITDA loss of $193 million during the quarter compared to an adjusted EBITDA of $320 million in the fourth quarter of 2022. In our other markets, the adjusted EBITDA loss was $32 million, narrowing meaningfully from last year when losses were $124 million. Contribution margin loss per order in Brazil improved by nearly 90% year-on-year to reach negative $0.5.
Digital financial services GAAP revenue was up by 24% year-on-year to $472 million in the fourth quarter and up by 44% year-on-year to $1.8 billion for the full year of 2023. Adjusted EBITDA was up by 96% year-on-year to $148 million in the fourth quarter of 2023, and up by 341% year-on-year to $550 million for the full year of 2023.
Digital Entertainment bookings were $456 million in the fourth quarter and $1.8 billion for the full year of 2023. GAAP revenue was $511 million in the fourth quarter and $2.2 billion for the full year of 2023. Adjusted EBITDA was $217 million in the fourth quarter and $921 million for the full year of 2023.
Returning to our consolidated numbers, we recognize a net non-operating income of $32 million in the fourth quarter of 2023 compared to a net non-operating income of $35 million in the fourth quarter of 2022. For the full year, our non-operating income was $208 million compared to a loss of $13 million for the full year of 2022. The improvement was mainly due to higher interest income for the full year of 2023 as compared to the full year of 2022.
We had a net income tax expense of $77 million in the fourth quarter of 2023 compared to net income tax credit $43 million in the fourth quarter of 2022. For the full year, our net income tax expense was $263 million, compared to $168 million for the full year of 2022. As a result, net loss was $112 million in the fourth quarter of 2023 as compared to a net income of $423 million in the fourth quarter of 2022.
For full year, net income was $163 million as compared to a net loss of $1.7 billion for the full year of 2022.
At the end of first quarter of 2023,– cash, cash equivalents, short-term and other treasury investments were $8.5 billion, representing a net increase of $566 million from the previous quarter. The increase includes proceeds of approximately $370 million from lower securities purchased under agreements to resell relating to our banking operations. From the first quarter of 2024 onwards, we will include this as part of our other treasury investments as these are highly-liquid marketable securities.
With that, let me turn the call to Min Ju.
Min Ju Song
Thank you, Forrest and Tony. We are now ready to open the call [to] questions.
Question and Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Pang Vitt from Goldman Sachs.
Pang Vittayaamnuaykoon
Congratulations for the solid set of results. Two questions from me. Firstly, on Shopee. Can you please provide a little bit more color on the guidance you gave out for 2024? What is the assumption [behind] in terms of competitive landscape and market share, especially in Indonesia? When it comes to high-teen growth, how do you plan to achieve this? And on the margin side, what gave you the confidence that we can go back to breakeven by second half of this year? And what kind of EBITDA margin we can expect as well for Shopee to achieve in the near term? That's question number one.
Question number 2 related to SeaMoney. Can you provide some color on why EBITDA was weaker quarter-on-quarter? We noticed that you spend more on marketing this quarter. Should we expect this to be the new run rate? What kind of growth outlook can we expect for 2024? And can we still expect to see EBITDA growth here?
Xiaodong Li
I think -- let me address the first question first. I think in terms of the Shopee, we do believe that we are able to grow high-teens for the full year 2024, as we shared in the opening. For -- [particular] for Indonesia, we do see Indonesia is a good market for us in the Q4 and we believe that the trend likely -- the growth trend, [I] -- can continue in Q1 and in line with the other markets in the following quarters.
If you look at the overall competitive landscape, we have seen a more stable competitive landscape in the past quarters. Again, we cannot sort of control, I guess, what our competitor does. But if you look at the past, we have been competing with the similar set of competitor for quite a while. And even with the most intensive competition during the past few quarters, we are able to gain market share while improving our unit economics.
[We] are contributing by a few factors. I think number one is we are a clear market leader in the market. This translates to the economic scale, benefiting by both having a better monetization capability and also better cost efficiencies. And if you look at the scale, we are in a much better position now compared with 1 year ago. We do believe that we have gained market share in Indonesia if you compare the beginning of the year, or last year and now.
The second one is, I do believe that we have a strong local leadership team and operating team to execute on what we set up to execute and also make the right judgment based on [reaching] the market. I spent probably most of my time -- if you compare all countries, I spent most time in Indonesia. And many of our management team, including myself, learn to speak Bahasa Indonesia over time as well to understand the market better.
Number three is we have built infrastructure for the market over time. For example, our logistic coverage in Indonesia has been a lot larger than before. Our cost has reduced significantly over the past few quarters for shipping one order. Also, the quality has been improved.
But most importantly, by having our own logistics in the market, are able -- enabling us to offer differentiated services. If you follow the market closely, we have recently started the return-on-the-spot for the users, which has very good feedback not only for Indonesia, but also for Vietnam. We also started a differentiated return service that we are going to allow the user to ask for return anytime during the shipping process, and we can intersect the orders even during the shipping, which is not offered by any other one in the market so far.
The -- and also on top of that, we have our strong integration with our digital financial services businesses. This not only enabled us to reduce the cost of transactions, for example, on the payment side, but also allow us to untap a [sizeable] potential by offering the SPaylater to a broader segment that we have never seen in the market before. All of this helped us not only to reduce costs but increase the conversions in the market.
We've been doing all this in the past few quarters. And we do believe across all dimensions we are able to do better over this year so that -- even with whatever competitive landscape that we are facing, we are able to outperform our competitor in the market, be more efficient in the market. I think that's kind of like how we see the market so far and how this is going to evolve in the future.
In terms of the margins, as we shared in the opening, we believe that the overall businesses for Shopee were able to breakeven in the second half of the year, while with the intention to at least maintain our current market share in the market, and this applied to Indonesia as well. I think, as I shared earlier, compared to 1 year ago, we gained sizable market shares, and we are going to execute even better over this year given the foundations we built during the last year.
On top of what I mentioned just now in terms of all the things we are doing, there are a couple of other things we are doing further even over the year. One is the price competitiveness. We do believe we are the most price competitive platform in the market as you can do benchmark externally. We're going to deep dive on that even further over the year, in particular for -- not only for individuals, but for the other markets as well. But yes, Indonesia is the key market for us.
We're also going to further drive the service qualities I shared earlier, not only on the logistics, but also on the after [procurement], like the [return response] services, the customer service quality, et cetera. And all this will essentially put us into an even better position in the future, not only sort of maintaining our growth trajectory, but also improving our EBITDAs.
For the live stream that we talked about in the past earnings call, we are seeing quite a fast growth on the live stream in this quarter as well. As we shared in the opening, we have -- across the region we have -- about 15% of our orders come from live stream. For Indonesia, it's even bigger percentage. Indonesia is the first country we started. The -- in [Southern] market, we believe that we are probably the largest live stream platform in the market, not only the scales, but while [we're] growing it, we [have] reducing the [unit] economics quite significantly in the past few months and continue in Q1, essentially. This also enables us to compete effectively with our competitors and we should say different probably 1 year ago. If you look at 1 year ago, we probably don't have this ecosystem. We have to invest to build this ecosystem that -- we are now in a very different status for that.
I think this sort of probably conclude on the first question for Shopee.
Moving to the second question on the SeaMoney EBITDA for Q4. So I think we probably should put into perspective on the overall SeaMoney businesses. The SeaMoney has seen the first positive profit in 2023, and the trajectory has been doing well if you look at Q1, Q2, Q3 and extend to Q4. We have seen very healthy margin in our SeaMoney businesses.
And given the very healthy margin in the businesses, we -- in Q4, leveraging on this is relative. We spend -- we invest more to acquire new users to the platform. And this essentially will bring us a better profitability in long-term. We measure our user acquisition costs very prudently. Every user acquired will bring positive profit over the time.
Operator
Your next question comes from the line of Navin Killa from UBS.
Navin Killa
Actually, I had a couple of questions. First, I just wanted to understand a little bit about competition in the e-commerce space, particularly in the Indonesia, I suppose Q4 numbers might have benefited from the fact that TikTok was not in the market for a large part of the quarter. So since the relaunch of TikTok and as we probably come close to the end of the trial period, have you seen the intensity from the combined TikTok Tokopedia entity evolve in a different direction over the course of the quarter? So that's my question number one.
And second question, I guess, given the strong cash balance and your expectation of, I guess, positive profit for the full year for the group, how do we think about use and allocation of this cash going forward potentially for buybacks and other use cases?
Xiaodong Li
For the first question, I think I shared quite a bit in the last answer as well. Generally, we compete with both competitors you mentioned for quite long period of time. And you are right that it does benefit us in some extent in Q4 that TikTok wasn't operating for the period of time -- for (inaudible) period of time during the quarter. But I don't think that's the only reason that we'd grow well in Q4. We have seen similar growth trends continue in Q1 as well. Even the landscape have changed.
In a typical e-commerce transactions, as we can see across globally, it might not necessarily 1 plus 1, plus 2 -- greater than 2 situations. I think for us, the most important thing is to focus on what we are great at. As I mentioned earlier, our scale advantage, our local leadership and operating teams, our[investments] build over time, our integration with DFS and all this gave us the competitive advantage in the past few quarters, as you can see, and will continue to give us the advantage in the coming quarters. The -- and with that, I think we have shared that we have -- we're expecting a good growth for Shopee over this coming year in 2024 and in the coming quarters.
Yanjun Wang
And regarding our cash balance, we think for a company of our size, it's prudent to maintain a strong cash balance. And we're also very disciplined and focused in deploying our capital to capture future opportunities to maximize our long-term shareholder return. We do not rule out any options for using our cash balance in this regard.
Operator
Your next question comes from the line of Alicia from Citigroup.
Alicia Yap
Congrats on the solid results. I have 2 questions. First is that, obviously, with the Ramadan coming, do you anticipate your competitors in Indonesia to further step up the spending? And in the event, if your competitors in Indonesia are catching up on the market share, would you step up your spending that might actually prevent your EBITDA to regain profitability in the second half of this year?
Second question is, what are the main reasons for your confidence in growing the Free Fire in double-digit in booking [and] user this year? What have you done or plan to do to regain your user traction and monetization?
Xiaodong Li
For the first question, so in a way, Ramadan [I think] has started already in Indonesia. We have -- we are comfortable with what we're seeing so far, let's put this way. So in a way, we cannot see market share as a [set in] number. Market share is always dynamic. And the most important for us is to make sure that we always have a sizable leadership compared to our next competitor so that we can sustain our scale advantage and -- that's number one.
Number two is, we are able to build up our long-term moat compared to competitors who are more efficient when we compete with the competitor in the market. I think, again, as I said earlier, given all the things we have done, even with the most intensive competition in the past few quarters, we are able to reduce our costs while increase our market shares. I think this reflects of the moat we have been over time, and we do believe that we'll be able to continue in the future.
Yanjun Wang
And regarding Free Fire, as we shared earlier, we are encouraged by the positive trends we have seen so far this year in terms of active user base and monetization across our various markets. As a result, we share that our current expectation is [for the] [game] to achieve double-digit year-on-year growth for both user base and bookings. As a self-developed game, Free Fire also enjoys better margin for us.
In terms of what we have done and will do in the future, I think our focus has been quite consistent. It's on building better user experience such as easy access to our users, file download size and data requirements, introducing more engaging content and strengthen exports communities to further develop the game into a strong evergreen franchise.
Operator
Your next question comes from the line of Piyush Choudhary from HSBC.
Piyush Choudhary
Congratulations to the management team on great set of results. First question is on Shopee. If I annualize your fourth quarter GMV, that itself is implying around 18% year-on-year growth in 2024 GMV. So why does company expect to grow only high-teens range and not more than that? What is driving conservative guidance? And also for Shopee EBITDA, as you expect to turn profitable in second half, would it mean that on a full year basis, adjusted losses for Shopee would narrow year-on-year in '24?
Secondly, on gaming, what led to fourth quarter quarterly pay users decline despite a strong seasonality? And your outlook for Free Fire is strong. Would that mean console Garena will also grow double-digit? And what's the margin outlook for Garena business?
Xiaodong Li
I think for -- in terms of the guidance we gave out, I think the high-teens for the year. We believe that it's a reasonable estimate we've given out based on both the market growth rate and also the EBITDA goal we set up to achieve. And on top of that, the most important thing is, with this we are able to sustain our market leadership while building up all the competitive moat that we've been building over the past years. On top of that, even started the other new initiatives during the year. So we are comfortable with what it is. In a way, we are not chasing [for growth -- for the growth]. We are trying to grow in an efficient and prudent fashion with the long-term profitability in mind.
The -- in terms of the second question, whether the full year will narrow over time, I think this is something we haven't given a guidance on. We probably wouldn't comment too detail on that. But generally, I think what we set to achieve again is to have Shopee as an overall business breakeven over the second half of the year.
Yanjun Wang
Regarding Free Fire, I think the quarter-on-quarter user fluctuation can be many reasons, including seasonality and game launch for Garena as a whole or e-sports events. But for Free Fire overall, I think we are -- we have -- as shared earlier, we are very positive based on the trends we have seen so far. And therefore, we want to give market some indication of what we also have seen.
Regarding the rest of our portfolio which are up -- third-party games published by us, we will continue also to work closely with our partners to bring more content to our game [communities] as well.
Operator
Your next question comes from the line of Thomas Chong from Jefferies.
Thomas Chong
Congratulations on a strong set of results. My question is, first, on Shopee. Just then we are looking for adjusted EBITDA to breakeven in the second half and we have built up our competitive moat. I just want to ask about in terms of the take rate trend for Shopee in 2024, how should we think about the advertising and the commission trend? That's number one.
And then number two, on the fintech side, given the strong growth momentum that we are seeing, I just want to get some color with respect to our user acquisition strategies. What kind of channel are we getting new user other than the organic one? And on that one, how are we thinking about the loan -- performing loans expectations as a percentage of our loan book? How is our technology or our data insights which can make it at a low level?
Xiaodong Li
On the first question regarding the take rate trend, as you have seen that we have adjusted our commission side continuously over the past few quarters, we are actually [review it] every month in terms of what makes sense for our user base in terms of commissions. I think overall, the most important thing is we want to make sure there's a healthy ecosystem that our seller has a reasonable margin to operate, but also are able to support the overall marketplace to grow healthily. So we will probably see some adjustment on the commissions over the year. Some of them can be for specific categories, some of them for specific countries. The -- yes, I think it's probably going to be fine tuning, I guess over the year.
On the second part, on the take rate, we do believe that in a sizeable potential on the [ADS] side for the take rate compared to many global peers, we still have a sizable room to grow there. And we have done quite a few technical revamps in the past few months, and this will be deployed and fine tuned in the coming quarter, which will enable us to further grow our [Ad] take rate.
The second question regarding the SeaMoney growth. If you look at the SeaMoney, the majority of our business are in the credit business at this point in time. Of course, we also have digital banks and insurance but still in the relatively growing stage. There are a few passes we're looking at here. One is to further penetrate our Shopee ecosystem through our Shopee PayLater. The penetration of our e-commerce platform still has a slight room to grow. We started Indonesia first and other countries later. Even for our earliest market, we still see a potential to further penetrate the user base. I think -- that's the first one.
Second one is we also believe that outside of the Shopee ecosystem, there are many users that we can onboard to our digital finance platforms. This is still in a very early stage as we started much later than penetrating the Shopee ecosystem, but I think -- essentially, I think you can imagine that in a big country like Indonesia where credit card penetration are relatively small, single-digit stage, we are probably the first one that are able to offer a credit service to the broader mass market. And of course, this helped by the Shopee penetration in the mass market, but there are still many other users out of the Shopee ecosystem in the mass market that we believe that we can target on. And of course, there are many channels to do that. We have offline [QRIS] payment. We have a very product-based, (inaudible) based consumption loans that we are working on, which is not uncommon in many other markets. So that's another part of the equations in the credit businesses.
The third equation in the credit businesses is to cross-sell after your financial products to our Shopee PayLater user base. I think you asked about NPL as well. The great thing for our business is -- here is that given the data we have from the e-commerce transaction and also over years, we built up the external data besides our Shopee ecosystem that we are able to credit rate user a lot more efficiently and effectively.
And if the user onboarded to our Shopee PayLater platform, we have even better credit data based on their Shopee PayLater performance. This will enable us to sell down many other credit products over time. For example, we mentioned earlier on the cash loans that we offer to the users, which unlock more use case. Basically, user can use the credit for many other use cases besides the Shopee scenarios and other products we are [rolling] out over time.
And I think the -- as we grow, this will -- the scale will also enable us to lower down the cost of service as well. So the economics can be even better. As time goes, this will go to a [positive] cycle that we have a cost-to-serve -- better cost-to-serve, better risk management so that we can -- we are able to target even broader segment in the market, so we can grow even further in the market. I think that's probably how we look at the growth side of the story.
On the NPL side, we are seeing a relatively stable NPL, as Tony has shared in the opening, over the time. Of course, there's -- that's based on the -- number one, the data we have, as I mentioned in the first -- in the previous descriptions. But also because -- I do believe that we have probably the best, if not one of the best credit modeling team in South Asia to utilize the data to be able to credit rate our users.
On top of that, it's also about how we measure this overall. We measure this in a very prudent way. [But] we are not rushing [for growth -- for the growth]. We want to make sure that our financial service businesses not only have a proper business now, but have a proper business in the very long-term, even in the credit cycle situations. So putting all these things together, we will probably see a pretty high -- pretty good upside for our financial service businesses. And 2024, we would like to further grow our user base and maintain our credit risk in the market.
Operator
Your next question comes from the line of Sachin Salgaonkar from Bank of America.
Sachin Shrikant Salgaonkar
I have 2 questions. First question, if you could help get a bit more clarity on improving unit economics at live streaming? Can you give some color in terms of the difference between normal e-commerce and live streaming in terms of AOV, the margin perspective? And also any thoughts on steady state EBITDA margin at live streaming?
Second question, I also wanted to understand a bit more on Free Fire, i.e., is the expected launch of India baked in the expectation of a double-digit growth? And are there any specific markets which is driving your optimism in terms of overall growth?
Hou Tianyu
In terms of unit economic for live stream, it has improved significantly in the past few months. Of course, at this point in time, comparing to the non-live stream part, it has a lower economics simply because we just started, and it takes some effort to invest for the growth. But we do believe in the long-term, the live stream [profitability] wouldn't be too different, will be quite similar to what we see in the other part of the marketplace platform.
In terms of the AOV that you asked earlier, we started live stream with a low AOV compared to the marketplace. As time goes, it will start to converge. And now in some market it's very similar, some markets even a little bit higher, some markets bit lower. So it is mix at this stage. But eventually, in the big market, it will converge as time goes. In the smaller market, it might have different variations, but I don't think it's significant for the purpose of discussion here.
Yanjun Wang
And regarding Free Fire, the -- so far, the positive trends we have seen across various different markets for our global operations. And currently, no material development in India. We are still making changes to the Free Fire India to best accommodate our preference -- users' preference locally, and we'll update the market when there's more material development.
Operator
Our next question comes from the line of Jiong Shao from Barclays.
Jiong Shao
My first question is about your growth trend in the near term. You -- has return back to growth over 20% for the first time in the last 1.5 years. You changed your strategy a couple of times during that period. Usually, this kind of momentum doesn't sort of change very quickly. So based on what you are seeing and also given what you have said so far about Indonesia, could you talk about your near term growth momentum right now in the first quarter? Should we expect sort of similar to what you saw in Q4?
My second question is about your sort of the mix between core marketplace and the VAS. I know you talked about the VAS, which is the logistics sort of decline year-over-year, was at least partially, [not] mostly due to the subsidies for shipping. But over the last few quarters, it looks like your core marketplace growth has been very, very good, right? It's 30%, 40% and your VAS growth has been relatively low, very low and negative in Q4. Other than the subsidies, are there other reasons behind -- or strategic reasons behind these pretty meaningful differences? And if you add subsidies back, would the VAS growth [be] somewhat similar to your core marketplace growth?
Hou Tianyu
I think for the growth trend for the near term, I think we have seen pretty good growth in Q1. I mean you probably can see from the external data as well, although it's not very accurate. The -- but bear in mind that Q1, there's a Ramadan season for Indonesia in particular, and we have [Chinese] New Year in some other markets. So we do take -- we have to take into the consideration for seasonality. But yes -- but all in all, we see -- we're pretty happy with what we see in Q1 so far.
Yanjun Wang
On the VAS versus core marketplace, I would encourage you to look at the core marketplace more closely to measure our overall platform growth as well as monetization. The reason for VAS top line growth to deviate from that is because of accounting treatment that has the contra revenue effect caused by shipping subsidies. So that actually does not only affect the bottom line, but also affect the top line for that revenue segment, causing a departure in overall trend.
We cannot discuss the non-GAAP revenue -- adjusted revenue, but if you add that back, I think the overall growth is consistent with the platform growth.
Operator
Your next question comes from the line of Ranjan Sharma from JPMorgan Singapore.
Ranjan Sharma
Two questions from my side. Firstly, for Chris on live streaming. Is there any cohort analysis that the team has done on the impact to live stream and GMV as incentives are a move for buyers?
And the second question is for Forrest. On Garena, still the discussion is around Free Fire, but are there any developments to move away from a single titled franchise to a more broader studio?
Chris Feng
For the live stream on the cohort, yes, we do look at the cohort for live stream, and we're seeing pretty good retention and repurchase rates for live stream. But on top of that, I think more importantly for us, actually for live stream is we have seen very good new user percentage coming to live stream, which means that it does help us to reach out to a segment that we might not complete -- reach out to before, which help us to grow the marketplace further as time goes. And the -- we also observed that the new user coming from -- coming to live stream also cross purchase from the long live stream platform as well. I think these are the encouraging signs we see. And that's also how actually we have been reducing our -- improving our economics in the past few months.
Yanjun Wang
Yes. Regarding Garena, I think Garena is definitely not a single franchise platform. We have multiple titles, both self-developed and published across different genres, including Battle Royale, MOBA, sports, casual, RPG, et cetera. It's just that the super successful Free Fire franchise seems to [dwarf] in comparison the other titles, which are also highly successful and very long-lasting for Garena so far, thanks to our global team's very strong operations and ability to build a strong pipeline in content, in partnership with our partners as well as self-development and also in growing our global e-sports communities.
I think that being said, we -- as always, we're very focused on building future pipeline in terms of expanding our portfolio of genres and type of content, including more user-generated content, deploy more AI tools in building -- in [furthering] new models of interaction with our users. All of these things are going on in the background that our teams have been very much focused on. So we are very excited about the long-term prospects of Garena, again, as a leading global game company.
Operator
Your final question comes from the line of Ellie Jiang from Macquarie.
Ellie Jiang
I just have kind of few questions on the e-commerce side. Just now management, you talked about our price competitiveness. Just wondering how do we maintain this level of supply chain sustainability and how do we see our merchants general overlap compared to the other e-commerce app in Indonesia?
Also, in a slightly longer term, what is the end game for, I guess, overall e-commerce dynamics? And how do we really evaluate longer-term profitability level on the EBITDA?
Xiaodong Li
Yes. I think -- for the price competitors, I think as a platform we are generally [most] competitive in the market, as you can benchmark from internal numbers. The key to sustain product competitiveness are from few angles. And number one is we have the scale. So scale does bring advantage. So assuming that the same seller sell 100 items, our platform sell 10 on the other platforms, clearly, we have a slightly better [banking] power in terms of how much price that can be set. I think that's number one.
Number two is the cost-to-serve from a seller perspective. The -- we would like to make this -- the process for a seller to transact, to make that business successful on our platform much simpler compared to the other platforms, that come with the tools, policy and the fundamental concept of how the marketplace operates.
I think the third one is to be able to identify the right skills, right sellers through our traffic allocation algorithms and policies, of course. It's about how can we make sure the sellers with a good performance and with a good price competitiveness will be presented -- will be rewarded with the better traffic on our platform. So we can sell more so they can reduce the price further because the scale they achieved. And they can also reduce the operation to -- operation cost to serve the customers and then this will flow to a very positive direction and the win-win for everybody from the -- both buyer and seller perspective. I think that's probably on the price competitive side.
Just to add to that, I think another part of price competitiveness is to be able to different -- to offer differential services to different type of selling in the platform. There are sellers who operate the full value chain, there are sellers who are very specialized in part value chain, for example, on the production side or [whether] importing side. It's very important for us as a marketplace platform to serve this well -- to serve them well, to enable them to sell well on our platform so we can leverage on their strength rather than sort of they need to be better on everything, and it makes a bit harder for many of the sellers to excel in the platform. But again, there are a lot of detailed [operation] matters that we have to work on to make sure that this work out smoothly.
I think that in terms of the long-term profitability, my feeling is that our market is not too different from the other major e-commerce platform that you have seen before. I think similar profit level that is reasonable. In some market a little bit better because of our market position, because of the nature of the retail margin in the market, some market might be a bit more competitive. But in general, we don't see our market too different compared to the other market and the market leader -- as a market leader in the platform. We will be able to achieve similar possibilities as a market leader in the other market.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Min Ju Song for any closing remarks.
Min Ju Song
Thank you all for joining today's call. We look forward to speaking to all of you again next quarter. Thank you.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
