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Sea Limited (NYSE:SE)Q4 2018 Earnings Conference CallFeb. 26, 2019, 7:00 p.m. ET
Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:Operator
Good day, everyone, and welcome to the Sea Limited Fourth Quarter and Full Year 2018 Results Conference Call. (Operator Instructions) And please note that today's event is being recorded.
And I would now like to turn the conference over to Howard Soh. Please go ahead.
Howard Soh -- Director of Corporate Development and Strategy
Thank you very much. Good morning, and good evening, everyone, and welcome to Sea's 2018 fourth quarter earnings conference call. I'm Howard Soh, Director of Corporate Development and Strategy at Sea.
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 adjusted net loss. We believe these measures can enhance our investors' understanding of 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.
Let me begin by introducing the management team on the call. We have our Chairman and Group Chief Executive Officer, Forrest Li; our Group Chief Financial Officer, Tony Hou, and our Group General Counsel, Yanjun Wang. 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.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thanks, Howard. Hello, everyone, and thank you for joining today's call. I'm very pleased to announce that we closed out 2018 well ahead of our ambitious target. Building on our strong results in the fourth quarter we exceeded the high end of each of the projections we provided in our latest guidance last year.
Let me start by quoting our Garena success. Our digital entertainment adjusted revenue for the full year of 2018 reached $661 million exceeding the high end of our guidance by $41 million. In the fourth quarter, we recorded adjusted revenue of $231.4 million, up 50% from the third quarter, and it is expected to show further robust growth in the first quarter of 2018. And our adjusted EBITDA margin for the quarter rose to 45.5% compared to 37.2% for the previous quarter. It is expected to improve further in the first quarter of 2019.
We believe Garena's sustained strong performance underlies our success in executing our core strategy to materially expand our digital entertainment business from being a PC-focused regional publisher to a global developer and the publisher, with a core strength in mobile games, and a key focus on emerging markets which greatly expands our total addressable market size. Free Fire is now one of the most popular battle royale game in the work. We recently hit a new record high of more that 350 million registered users and more that 40 million peak daily active users.
According to App Annie, for the full year of 2018 Free Fire was the fourth most downloaded mobile game in the world across Apple App Store and the Google Play Store combined. It has also hit the milestone of recording more than 100 million monthly active users. Importantly, we are also making excellent progress on monetizing Free Fire's massive and highly active user base and this is reflected in our adjusted revenue growth and EBITDA margin improvement.
One of the crucial factors in Free Fire's growth is the fast growing and engaged global community of players. Building on this strong community sentiment from late 2018, we have been rolling out the Free Fire World Cup, the global eSports tournament. We believe this global tournament will help to drive sustained excitement and solidify Free Fire position as one of the leading games in the genre globally.
As Free Fire's success has demonstrated, we believe that Garena has built a unique set of capabilities in developing and the publishing global hit games that also address the needs of gamers in faster growth emerging markets. We have a deep understanding of the unique profiles and the needs of gamers in such market and unrivalled access to data and insights about these gamers because of our Q2 user base. We are also deeply rooted in this market with strong local operations capabilities and not only in our core markets, but also in other major markets like Latin America.
More importantly, with our strong technology and execution capabilities, we are able to quickly identify and take advantage of market opportunities. We now have a strong and growing game development team. With more than 200 developers in our games studio in Shanghai, we are working on enhancing Free Fire and on building out our self developed games pipeline.
Free Fire is a great example of how quickly we are able to identify and tap into new market opportunities. It was one of the first mobile battle royale games to come to market. At the same time, our game publishing business continues to grow from strength to strength, as global IP holders recognize our unrivaled ability to tap into the faster growing game communities in our region.
For instance we have begun rolling out Speed Drifters, as the first the game that we are publishing under our right of first refusal arrangement with Tencent that we announced last quarter. And I'm pleased to say that we have agreed with PUBG Corporation to bring into our key markets in Southeast Asia PUBG Light, a PC game adapt from their global hit game PUBG tailored for our region.
Looking to the year ahead, we intend to continue to drive growth in our digital entertainment business as we continue to build out a world-class in-house game development arm and strengthening our publishing capability. Turning to e-commerce our goals for Shopee in 2018 were to continue to strengthen its market leadership position across its key markets, with increasing efficiency and to ramp up monetization. And I'm pleased to say that we have delivered on all fronts.
E-commerce GMV for the fourth quarter was $3.4 billion, representing 27% growth on the $2.7 billion in the third quarter. During the quarter we recorded 206.9 million orders up 31% from the third quarter. Meanwhile during the 24 hours of our Double 11 sales in 2018, we see the new record for Shopee of over 11 million orders in a single day. And just one month later, during our double 12 sale, we broke that again, recording over 12 million orders in 24 hours on December 12. Out of those 12 million orders approximately 5.4 million came from our largest market, Indonesia. Shopee's continuing certification of leadership in Indonesia is a powerful demonstration of the strong flywheel (ph) effect it enjoys.
In the fourth quarter, Shopee recorded total orders of 83.8 million or a daily average of 0.9 million in Indonesia, further extending its leadership as the largest e-commerce platform here. For the full year of 2018, Shopee achieved $10.3 billion in GMV which was above the high end of the recent guidance of $9.7 billion we provided in the third quarter. Breaking $10 billion in annual GMV, was an important milestone for Shopee and an impressive achievement for platform that is just three years sold. You can see the sustained improvement in the efficiency of our sales and the marketing spend.
In the fourth quarter, sales and marketing expenses as a percentage of GMV, fell once again to 5.4%, down from 5.7% last quarter and 8.5% for the same period a year ago. In fact, shipping subsidies declined in absolute dollar term in the fourth quarter compared to the third quarter. It is important to note that Shopee achieved this sustained improvement in marketing efficiency while its GMV grew by 27% and orders grew by 31% quarter-on-quarter, demonstrating that we are able to both grow our platform while increasing efficiency at the same time.
We are able to do this, because of the durable leadership position we have achieved. We expect sales and marketing expenses to start trending down in absolute dollar terms this year. As we continue to scale with greater efficiency, benefit from strong organic user growth and solidify our market leadership in the region.
On the monetization front, e-commerce adjusted revenue grew over 16 times year-on-year to $290.7 million for 2018, as we ramped up our monetization efforts during the year. And in the fourth quarter, adjusted revenue grew more than 78% compared to the third quarter to $126.9 million. Moreover, we expect Shopee to record a positive quarterly adjusted EBITDA before allocation of the headquarters' common expenses for the first time in the first quarter of 2018 in Taiwan.
We see the same dynamics around network effects that accrued to Clear Leader (ph) in a two sided marketplace model starting to play out in our other markets. Shopee's ability to grow rapidly over a short period of time to achieve regional market leadership is a testament to its successful strategy and ability to execute that strategy efficiently and effectively. Shopee has been focusing on building a mobile-centric, socially engaging marketplace with emphasis on high margin products from a highly diverse seller base.
In addition to that, Shopee has also combined its marketplace offering with integrated payments, logistics infrastructure and a comprehensive set of services. And looking to the year ahead, we believe this strategic focus and our proven track record of successfully executing on our strategies will continue to drive growth at Shopee. In 2019, we intend to focus on growing with efficiency while looking to further ramp up monetization through deeper engagement with our sellers and buyers.
To sum up, I'm very proud of our performance in the fourth quarter and the full year of 2018. Across the business 2018 was a transformative year as Shopee extended its lead in e-commerce and Garena emerged as a leading global game developer and the publisher. We enter into 2019 in a stronger position than ever before poised for growth on all fronts. We are hugely excited for the year ahead and have once again set ambitious growth targets for ourselves as reflected in our guidance for 2019.
With that, I will invite Tony to share more about the financials.
Tony Hou -- Group Chief Financial Officer
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. So I'll focus my comments on the key financial metrics. For Sea, overall, our fourth quarter total adjusted revenue was $389.3 million, an increase of 137% year-on-year and 60% quarter-on-quarter.
This was mainly driven by the growth of our digital entertainment business, especially for our self developed game, Free Fire and our continuous monetization efforts in our e-commerce business in the past quarters. Digital entertainment adjusted revenue was $231.4 million, an increase of 63% year-on-year and 60% quarter-on-quarter. The growth was primarily driven by the enlarged user base and the improvement in the monetization of our portfolio games, especially Free Fire.
Digital entertainment adjusted EBITDA was $105.2 million, doubled year-on-year and an increase of 96% quarter-on-quarter, thanks to the strong topline growth and our self developed game accounting for an increased share of revenue.
E-commerce adjusted revenue was $126.9 million, up 78% quarter-on-quarter from the third quarter of 2018. Of this $126.9 million in adjusted revenue, marketplace revenue was $87.6 million, up 884% year-on-year and 74% quarter-on-quarter, while product revenue was $39.3 million, up 9,725% year-on-year and 88% for quarter-on-quarter. E-commerce adjusted EBITDA loss was $277.5 million as we continued our investment to fully capture the market opportunity in the region.
We will continue driving the high quality growth by serving users' needs better and improving the operational efficiency. Digital Financial Services adjusted revenue was $3.1 million, a decrease of 25% year-on-year from $4.1 million in the first quarter of last year as we focused our efforts on strengthening the infrastructure to support our existing platforms. Adjusted EBITDA loss was $9.8 million in the fourth quarter of 2018 compared to a loss of $7.6 million in the same period of 2017.
Returning to our consolidated numbers, we recognized a net non-operating income of $53 million in the fourth quarter of 2018. This was primarily due to a fair value accounting driven valuation gain of $61.2 million from the convertible notes, we issued before our IPO. We had a net income tax expense of $3 million in the fourth quarter of 2018, which was primarily due to corporate income tax and withholding tax recognized in our digital entertainment segment.
Finally, our adjusted net loss, which is net loss adjusted to exclude share-based compensation expenses and the fair value change for the pre-IPO convertible notes was $321.2 million in the fourth quarter of 2018, as compared to $199.6 million for the same period in 2017.
I will conclude with our guidance for the full year of 2019. We currently expect digital entertainment adjusted revenue to be between $1.2 billion to $1.3 billion, representing year-on-year growth of 82% to 97%. In addition, we expect e-commerce adjusted revenue for the full year of 2019 to be between $630 million and $660 million, representing year-on-year growth of 117% to 127%.
With that let me turn the call back to Howard.
Howard Soh -- Director of Corporate Development and Strategy
Thank you, Forrest and Tony. We are now ready to open the call for questions. Operator please proceed.
Questions and Answers:Operator
Thank you. And we will now begin the question-and-answer session. (Operator Instructions) And the first questioner today will be Miang Chuen Koh with Goldman Sachs. Please go ahead.
Miang Chuen Koh -- Goldman Sachs -- Analyst
Hi, good morning. Congrats on the strong results. Few questions from me, for games, the pay (ph) ratio was up significantly, Q-over-Q. I presume this is mainly Free Fire but has the monetization started already at the end of second quarter, why is there such a big jump I guess in 4Q?
And for games as well, in terms of your FY19 revenue guidance, is the expected growth just coming from Free Fire and Speed Drifters, or does it include other new games from Tencent or even your own? And then a couple of question our e-commerce if I may as well -- sorry. So the cost of services for e-commerce continues to rise quite a bit more than revenues? I know there are some explanation in the press release on the cost items that contribute to that.
However, could there be more color on that? Maybe more specifics on other perhaps cost increases there or cost buckets that we should be aware of? And when can we see revenues trend more in line with the increase in cost of services as well? And then finally on the e-commerce revenue guidance for FY19, is the Y-o-Y growth expected to come more from the higher take rate or from GMV increase? Thank you.
Howard Soh -- Director of Corporate Development and Strategy
Sure. Thanks for all your questions. Let me start from the first one, on the game ratio (ph), I think. So you talked about overall pay ratio for -- has blended upward, that's right. Yes, it is actually reflected a reflection of the fact that the pay ratio for Free Fire has gone up. You're right that we have started monetizing the game a bit earlier on, but recall that during the previous call, I actually mentioned that whenever we get a high potential game, our first protocol, our first duty is really to make sure that as many people as possible are playing the game.
Now that we have the numbers, and Forrest shared more than 350 million registered users over 100 million MAUs and peak day use of over 40 million. Now that we're in that position and we think that we are able to turn on the monetization little bit more strongly. So what you're seeing is that a lot of efforts in terms of our fourth quarter has really been focused in terms of converting free users becoming paying users. As a result that has affected the pay ratio and subsequently adjusted revenues for the fourth quarter.
If we think about the 2019 guidance on the Garena side of things, yes, it's true. It's actually quite robust in terms of where we think we're going to land in terms of the overall guidance being $1.2 billion to $1.3 billion in adjusted revenue potential for 2019. It is coming off the back of a couple of things. You mentioned like Free Fire, as well as some of our new titles like Speed Drifters. But it's really a reflection of reaping the dividends of a shift in our overall strategy.
When we set out several years ago we were primarily a PC-based pay pure publisher focus on Southeast Asia and Taiwan. And now we successfully made a transition toward being a lot more mobile centric from being a pure publisher to going into self development. And of course with the success of Free Fire that's really given us a passport to spread our wings beyond Southeast Asia and Taiwan to a lot of global emerging markets.
So access to places like Latin America where Free Fire was the top-ranked game in Brazil in 2018 by MAUs downloads and consumer spend, and the top five for each of these categories in Mexico and Argentina. Needless to say that really has great implications in terms of our total addressable market for the future.
I'll let Tony weigh in, in terms of the questions with regard to Shopee on the cost of services.
Tony Hou -- Group Chief Financial Officer
For the cost of services. Yes, you're right, it's mainly the volume driven thing. As you look at the cost component it is mainly our bank transaction fees and also the cause of value-add services like logistics services and as the volume ramping up the cost of sales also ramping up as well.
Miang Chuen Koh -- Goldman Sachs -- Analyst
Finally, and sorry, do you mind running this true that last question, again as well in terms of like EC revenue guidance? Yes. So I'm just wondering whether the Y-o-Y growth in EC revenues, is it coming more from higher take rates that you expect or more from GMV increase, Y-o-Y?
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Yes. So we actually think that it's going to be a combination of both. GMV wise it's still going to continue to grow very, very robustly. At the same time we've also indicated that once we gain a good measure in terms of being the market leader, we can also look -- it's within our ability to start looking at monetization a bit more deeply and that's something that we've started to do already in the first quarter and you see continue to echo out throughout 2019. So come from a combination of commissions, as well as advertising as well value-added services.
Miang Chuen Koh -- Goldman Sachs -- Analyst
Got it. Thank you.
Operator
And our next question today will be Alicia Yap with Citigroup. Please go ahead.
Alicia Yap -- Citigroup -- Analyst
Hi, good morning. Forrest, Tony, Howard. Congratulations on the strong quarter and also the strong guidance. I have some follow-up questions on the digital entertainment, regarding the fourth quarter and also the guidance. On the quarter can you share with us, outside of the Southeast Asia regions, how much is the Free Fire now contribute?
And then regarding in terms of the guidance, I think how confident are you and then what sort of scenario that you are baking in to come out with the guidance, in more detail? What I mean is, can you share with us is this coming from the gross (ph) billing and obviously the deferred that you have, and then also you assuming Free Fire will continue to improve, right on the user front and also the monetization? And then also if you can give some color on the QQC (ph) that will be helpful?
Then second question is on e-commerce, also wanted to follow up, realize at this time you guys are giving the adjusted revenue guidance rather than the GMV which I think is indicative of your much more confidence in terms of the monetization. But then, could you share with us maybe the implied GMV guidance from the net revenue guidance that you have?
And also if you can also give a little bit color in terms of let's say the growth rate on revenue, on e-commerce, if we were to rank by country, as they come from, let's say, Indonesia or other country, if you can kind of give us some color in terms of the ranking on terms of the growth rate, that will be helpful? Thank you.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Okay, thank you, Alicia. So let's start on the digital entertainment thing, so outside of the core markets right of Southeast Asia and Taiwan, we actually disclosed that in terms of, like our revenue -- adjusted revenue coming in from our global emerging markets, so I mean outside of that core region, it was 28% in the fourth quarter.
So -- and then when we are talking about things such as the overall scenario that we mapped out in terms of the new guidance for 2019, it comes down to a combination of factors. First of all, in terms of continued success on the Free Fire front, I think that's true. We have already started very successfully converting a lot of the free users becoming paying users, but at the same time there we believe that there is also some optimization work that can happen in terms of trying to upscale the amount of ARPU, or the average revenue per paying user on the Free Fire front.
At the same time, keep in mind that our publishing efforts continue to be very robust and that has materialized, most recently in terms of PUBG Elite. At the same time, we also have a very strong pipeline of games coming in from our right of first refusal arrangement with Tencent, again culminating in Speed Drifters. I would say that in combination to all of these different growth factors, we also have our own self development studio. In terms of 200 developers that we have in our studio, all of them have continued to work, not just in terms of building new content for Free Fire but also they are experimenting with new genres, new features, new game titles. So we are quite optimistic about the fact that we continue to have a very robust pipeline that will fuel growth looking forward.
If we think about -- shifting gears to the e-commerce side of things, implied GMV guidance you are probably -- you're right that in terms of the way how we've chosen to guide, in 2019, we are focusing very much in terms of adjusted revenues and we paint a picture of landing between $630 million to $660 million for the year. We believe that, that's a pretty direct indicator of overall performance of e-commerce businesses. As a result, we've chosen to guide on that.
We probably won't provide guidance in regard to GMV per se, but we continue to report it, just as we have during this quarter. Unfortunately we can't dive too much into the specific nuances of each market, but suffice to say we are seeing continued strong robust results in terms of Indonesia. We actually on previous call, you might recall that we claimed that -- we believe we were the market leader in Indonesia by virtue of our several hundred thousand orders per day on average. And what we have done since then is we built on that leadership position and closed in at 83.8 million orders in the fourth quarter, or an average of 900,000 orders per day. For 12/12, during the December 12 festival, we actually saw 5.4 million orders coming in from Indonesia alone in that single day. So I think it's pretty safe to say, and we hope you agree, that not only are we a leader in Indonesia but we also built on that lead quite substantially.
Alicia Yap -- Citigroup -- Analyst
That's very helpful. Can I follow up, just quickly on the digital entertainment guidance. So is it fair to interpret correctly from your comments just now that you have baked in PUBG LITE and also some new games that you are planning in the rest of the year from the Tencent portfolio? Thank you.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
That is correct. Alicia. It's pretty much a holistic view of the performance of our digital entertainment effort.
Alicia Yap -- Citigroup -- Analyst
Okay, thank you, congrats again.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thank you.
Operator
And our next questioner today will be Mike Olson with Piper Jaffray. Please go ahead.
Mike Olson -- Piper Jaffray -- Analyst
Hi, good morning. I was wondering if there are any additional details you can share about 2019 profitability expectations. For example, just from a high level, are your early thoughts on EBITDA for the year, for the EBITDA loss to improve or worsen in 2019 compared to 2018? And then when could we potentially expect additional self developed titles? I'm sure you're really focusing resources on Free Fire at this point, but could you provide any thoughts on the pipeline for self developed titles like will we potentially see one new self developed title in 2019 or is that more of a 2020 event? Thanks.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Great. Thanks for your question. So let's discuss first in terms of profitability for 2019. So what we have observed is really on terms of the Shopee side of things, sales and marketing has really declined, and it was like coming in from like 8.5% as a percentage of GMV, a year ago to 5.7% in the third quarter of 2018% to 5.4% most recently in the fourth quarter of 2018.
At the same time we see the twin effect on the other side of things, we see adjusted revenues as a percentage of GMV really rose to 3.7% in the fourth quarter. So we're seeing a narrowing in terms of both lines coming to this effect.
And while we can't paint a picture with regard to precisely when the Shopee business will achieve breakeven, I think the Taiwan case study actually paints a pretty good picture. When we sit there you can see the results really in terms of our Taiwan, the successful execution of the Shopee strategy in Taiwan, specifically when it was the first market we started to monetize about 2 years ago. And when we mentioned earlier that we expect Shopee to record a positive quarterly adjusted EBITDA, before the allocation of HQ costs, for the first time for us in the first quarter of 2019.
So we do believe that the greater trends of EBITDA (ph) monetization, lowering of shipping subsidies and sales and marketing expenses that we are witnessing in Taiwan. We're actually seeing a lot of that echo out into the other markets as well. So we're quite pleased and positive about that.
In terms of shifting gears to Garena, in term of self developed titles, it's pretty early to tell and we don't disclose our game pipeline for competitive reasons. But needless to say you can be assured that we are hard at work in terms of trying to develop new genres, new titles and new features for the future.
Mike Olson -- Piper Jaffray -- Analyst
Thank you.
Operator
And our next questioner today will be Varun Ahuja with Credit Suisse Singapore. Please go ahead.
Varun Ahuja -- Credit Suisse -- Analyst
Yeah, hi, good morning, everyone, and congrats on a great set of numbers. First, I just wanted on the digital entertainment, can you provide little bit color on the margin front because the fourth quarter looks pretty strong margin than first quarter, you're guiding for a much better margin than the fourth quarter. So for full year, how should we think about, because your revenue guidance on digital entertainment is very strong? So how should we think about the margin profile? Any color will be helpful.
Secondly, in terms of guidance for e-commerce, can you just provide little bit color, what -- how much is product revenue, how much is marketplace revenue that you're looking at in the guidance for the revenue for e-commerce business. And if you look at your sales and marketing, you had mentioned that the absolute amount for the shipping subsidies have come off -- for the fourth quarter, but if you look at on a quarter-on-quarter basis, the sales and marketing has increased.
So it means you're spending in somewhere else, some other promotions and stuff, so just wanted to understand how much of the sales and marketing in fourth quarter is free shipping, or the subsidies on shipping front, as a percentage. Is it coming off, while the other expenses are going up, so wanted to understand that thing?
Then the number fourth is, can you talk about little bit about the fund raising if you may have to put in for Shopee? I understand there were last year comments being made that you may look at raising at the Shopee level. So, given you're burning not burning you're investing cash every quarter which may not last beyond 2019. So any plans on that front, will be helpful. Thank you.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thanks, Varun, good morning (ph). So let's take it from the top, in terms of your first question on margins. So yes, you're right, in terms of the EBITDA margins on the digital entertainment side of things, third quarter, we had 37.2%. That has improved pretty substantially to 45.5% in the fourth quarter.
In terms of just giving more color there, it's really a combination of, we would say, three factors. First of all, just overall strong topline growth coming in from Free Fire, as well as some of the other game titles. There is also the fact that self developed games, so in this case Free Fire accounted for a greater share of revenue and that has led to an improvement in terms of EBITDA margins.
And of course, we've also seen greater efficiency in terms of our marketing efforts. And that helps just to stretch that dollar. This will be the color that we can provide in terms of EBITDA margins. In terms of e-commerce guidance, unfortunately, we probably cannot breakdown into any more granularity with regard to the guidance in terms of marketplace product versus product revenue. But that's something that we disclose in our earnings. So if we look at the composition of the fourth quarter particularly, if we look at where we end up with %126.9 million, roughly $87.6 million was marketplace and roughly 39.3% was product.
In terms of the sales and marketing, let me try to contextualize and frame your question. So if we look at it from a big picture kind of view, sales and marketing overall as a percentage of GMV fell from 5.7% in the previous quarter, the 5.4% in the fourth quarter. And something else that we said with the sales and marketing in terms of absolute dollars, we expect that to trend down this year.
And part of our ability to do that really stems from the fact that we are now the market leader. We're continuing to get outsized benefits from the flywheel effects where more and more buyers inside the block with the Shopee ecosystem, what this means is actually that we get a lot in terms of organic user growth.
So we don't actually need to continue to invest as much in terms of sales and marketing in order to post very robust growth rates. One thing that you pointed out, particularly on this question was that shipping subsidies, what we'll see here the shipping subsidies have ready fallen in terms of absolute dollar terms, if we look at the fourth quarter relative to the third quarter.
But keep in mind that although we've pulled that back at the same time GMV grew by 27% quarter-on-quarter and orders grew by 31% quarter-on-quarter. This really proves that we can grow with increasing efficiency and you're right, we have redeployed some of that budget toward more discretionary type of marketing activities, but over time what we found is that initially when buyers are a bit less well acquainted with any particular e-commerce platform perhaps frees hipping or subsidized shipping becomes an important tool for them to try out the platform for the first time.
Now when you are in a position where Shopee is, where people are very familiar with you then other factors become very important, things like product assortment, ease of discovery, deeper engagement and very high quality fulfillment and customer service, all of which are pretty much hallmarks of the Shopee experience.
And then finally in terms of your question on fund raising, as of the end of the fourth quarter we have over $1 billion in cash and cash equivalents. We are very encouraged by our most recent results in terms of Shopee. At the same time, we also have Garena, it continues to exceed our expectations. We have great accomplishment on the adjusted revenue front, with over $661 million in 2018. We think all of this puts us in a very, very strong position.
At the same time as a management team, we are very committed to growing our business and market leadership and what we think is a very large and attractive market opportunity. To that end, we will continue to evaluate our fund raising option and may access the capital markets as appropriate.
Varun Ahuja -- Credit Suisse -- Analyst
Thank you.
Operator
(Operator Instructions) Thank you. And our next questioner today will be Conrad Werner with Macquarie. Please go ahead.
Conrad Werner -- Macquarie Securities -- Analyst
Hi, there. Thanks, it's Conrad from Macquarie. First question is just in the past -- and I'm sorry if you already disclosed this, you also mentioned what percentage of adjusted revenues in the games business was directly coming from Free Fire. So I'm wondering if you could provide that again. And then just a follow-up on some of the previous questions. I mean, everything in the results looks great.
I think the market would still have that one outstanding question around the cadence of EBITDA losses in the e-commerce business. Would it be fair to say that the fourth quarter EBITDA loss might represent a high watermark going forward on a quarterly basis, given all of the positive revenue trends that you're calling for, plus some of the efficiency that we're seeing on the sales and marketing side, at least in terms of shipping subsidies?
I think any color around that would be very useful and tied to that. Is there any seasonality to expect in the business? I mean you had a couple of big sales events in the fourth quarter for the e-commerce business, they were very successful, does that sort of impact the quarter-over-quarter trends in the first quarter for e-commerce.
And then just lastly on the shareholders' equity, is there a plan or a need from your perspective to move that more into a positive number over the course of 2019 and how would you do that? Thank you.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Hey Conrad, thanks for your question. So your first question is on the percentage of adjusted revenue from Free Fire. Yes, we did disclose this. We said that for the fourth quarter. It accounted for 45 -- excuse me, 44.5% of adjusted results.
Conrad Werner -- Macquarie Securities -- Analyst
Sorry, missed that, thanks.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Yeah. It's great. So the second one is in terms of the cadence of EBITDA losses. Would it be fair to say fourth quarter EBITDA losses represents a watermark in our in terms of EBITDA losses. I think that it's fair to characterize it that way. If we think about what we've disclosed. We've kind of said that we expect overall sales and marketing in terms of absolute dollars to continue to trend down starting from this year. So I think that characterization is accurate.
The third question on seasonality, I think that's true. We have seen quite an outsized response in terms of great consumer demand leading in from our 10/10, 11/11 and 12/12 festivals. And so like there is some in places (ph) and that would be in the e-commerce business, just as there is as well for the games business. Now coming to the shareholders equity question perhaps I'll let Tony weigh in on this.
Tony Hou -- Group Chief Financial Officer
Yeah. So you well pointed out, and as shared by Howard earlier, we have $1 billion on the balance sheet of net cash and we have seen very strong performance in our game business and also strong pickup in our e-commerce business as well. And meanwhile, as we shared, we are open-minded about the option and are closely monitoring the market position.
Conrad Werner -- Macquarie Securities -- Analyst
Thanks for that. Maybe just a follow-up on the seasonality question. I mean, given the strong just organic growth in this business, even with the seasonality, should we still expect the revenue metrics to be up sequentially in the first quarter just by not as much, or is there a chance that we could see them come down sequentially, before they start rising again over the course of 2019. Thank you.
Tony Hou -- Group Chief Financial Officer
And the expectation is that it will rise and that is also reflected in our adjusted revenue guidance for the year.
Conrad Werner -- Macquarie Securities -- Analyst
And that applies to the first quarter as well.
Tony Hou -- Group Chief Financial Officer
That's right.
Conrad Werner -- Macquarie Securities -- Analyst
Thank you so much.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thank you.
Operator
(Operator Instructions) Our next questioner will be John Blackledge with Cowen. Please go ahead.
Bill -- Cowen -- Analyst
Hi, this is Bill on for John. Congrats on the strong quarter and thanks for the questions. I had a couple, if I could. Just tell us little bit more about what you see as the drivers of GMV and monetization in the first quarter. And then just a little bit more color on the logistics services and value-added services, how those performed versus your expectations. And what you kind of see as the long-term view for those businesses over the next few years. Thank you.
Howard Soh -- Director of Corporate Development and Strategy
Bill, thanks for your question. So in terms of the e-commerce drivers of GMV and monetization, couple of things to say here. I think that when I was asked on the previous call, what accounted for the great GMV acceleration in third quarter, I kind of said that Shopee is really coming to its own as the number one e-commerce platform in the region. And I think that's more true today even as short as three months ago. If we just look at the fact, moving from $0 of GMV to over $10 billion of GMV inventory timeframe, our success in terms of Indonesia where we had 900,000 orders per day.
And when -- I need to declare that we were the most downloaded app in the shopping category in Southeast Asia and Taiwan for the entire of 2018. I think all of this provides really strong evidence that we are the number one player in Indonesia, in Taiwan, and the region as a whole. if we think about our ability to continue to monetize, there are number of key drivers behind this growth. First of all, Shopee continues to experience robust platform growth and we've expanded our leadership position across the region and market by market.
Secondly, we are observing a deepening of user engagement on the platform, as we continue to enhance our service offerings to both buyers and sellers lead to a wide assortment of our service offerings, as well as innovative gamification elements, other tools and value-added services. But we are not rolling out the full spectrum of monetization avenues since January this year, and we plan to continue rolling out even more of these over the course of 2019.
For example, we recently rolled out commissions for more sellers in Thailand and Indonesia, and we've rolled out handling fees across multiple markets. So looking ahead, we continue to grow the offering (ph) with efficiency on the e-commerce front. We will leverage our organic user acquisition opportunity and will wrap up monetization, as we deepen our engagement with both buyers and sellers.
In terms of your question on VAS, it's pretty much performing in line with our expectations. As you can imagine, it is -- we are really solving a fundamental need here that has been unaddressed by -- largely unaddressed by any sort of player in our region. So you can imagine there has been outsize demand coming in for those value added services that we provide.
Bill -- Cowen -- Analyst
Okay, great, thank you so much.
Operator
(Operator Instructions) And our next questioner will be Andrew Orchard with Nomura. Please go ahead.
Andrew Orchard -- Nomura -- Analyst
Hi guys, thanks for taking my question. Question on e-commerce, can you give us some color on what percentage of your orders is from organic lead generation, and how much is coming from affiliate websites such as ISA (ph) or other websites. And then on the gaming front, can you give us some color on where you expect the split between self developed and non-self developed games to be eventually, maybe not necessarily for this year but how do you view (ph) it at some point. These are my two questions. Thanks.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thanks, Andrew. So we probably can't provide more color in terms of the exact split in terms of orders. What we will say is that we've got -- we're very pleased in terms of the overall trajectory of our orders. We see an acceleration in terms of orders and going from zero to more than 600 million orders in a timeframe of three years, we think is a pretty remarkable accomplishment.
On the other hand, when we talk about the split between self developed and non-self developed games, recall during one of the previous calls, we actually did paint a picture where we said, about 50% of that's going to come in from self developed games and 50% of that is going to be published. What we've seen on Free Fire side particularly is that now Free Fire ready accounts for 44.5% of our total assets for the fourth quarter.
So we're well on our way to -- with those targets.
Andrew Orchard -- Nomura -- Analyst
You think that it might exceed that more significantly if you ever get to a stage where you maybe 60-40 or by 65-35.
Howard Soh -- Director of Corporate Development and Strategy
We do think that's possible. And we wouldn't necessarily say that, that's negative, given the fact that it is -- our self developed title it does lead to better EBITDA margins for the business and we've seen how that has been a real -- has really resonated with a global audience. We are seeing how it's done really well, not just in our core market, but also across all sorts of different markets such as India, where it continues to get a very strong user base.
Andrew Orchard -- Nomura -- Analyst
Okay, thank you.
Operator
(Operator Instructions) And our next questioner today will be Conrad Werner with Macquarie. Please go ahead.
Conrad Werner -- Macquarie Securities -- Analyst
Sorry for the follow-up. But just to follow up on that previous question around the additional color, around the monetization and e-commerce. Is it fair to say that the guidance for 2019 it still does not assume much in terms of commissions outside of the mall business. In other words, the commissions of the marketplace business would be sort of something that happens in 2020 and beyond or are you already assuming some of that in 2019?
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thanks Conrad. So we are assuming some of that occurring. So it will be different levers that we activate in different markets. We had to almost take it on a market by market basis. But what you're seeing in terms of the guidance for 2019, adjusted revenues for e-commerce that's an all-in holistic view in terms of all the different monetization levels that we will pursue for the year.
Andrew Orchard -- Nomura -- Analyst
Okay, thanks, and sorry again if I missed this before, was there a split provided between PC and mobile-adjusted revenues in the release or is it possible to get that on this call?
Tony Hou -- Group Chief Financial Officer
Yes it was provided so...
Conrad Werner -- Macquarie Securities -- Analyst
Okay, I'll look it up there.
Tony Hou -- Group Chief Financial Officer
It's just 85.1%, just for your quicker reference.
Conrad Werner -- Macquarie Securities -- Analyst
Thanks. Sorry I was late to look at the release. Thanks.
Operator
And our next questioner today will be Miang Chuen Koh with Goldman Sachs. Please go ahead.
Miang Chuen Koh -- Goldman Sachs -- Analyst
Hi, couple of follow up as well. On Free Fire, can you elaborate a bit more on what sort of monetization tools you actually deployed in fourth quarter and how should we think about those monetization tools this year as well? I know you mentioned of course deepening debt, but I just would like some specifics. And as you go into orders -- or see great success in orders global markets, Latin America et cetera, would you be expanding our adding headcount in those areas as well?
And are there other geographies that you see similar opportunities besides Latin America? And then finally, should we expect a few more games from Tencent? I guess this year as well.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thank you. All right, great, thanks, Miang Chuen. So first question in terms of monetization tools and deployed in the fourth quarter on the Free Fire front. Recall that the one of the most effective tools in terms of us converting free users to paying users has really been the subscription process that pushed up. So this subscription process, they are very affordable and in terms of like the transition from being a free user, becoming a paying user, it's very, very low ticket, being about an average of $5 per month.
If there is a lot of repeat behavior in terms of being a subscription type of tool and it gives you access to a whole host of content that you wouldn't otherwise get as a free users. So that's been a very attractive pool and once individuals start investing in the game then is a higher propensity for them to participate in other avenues such as buying costumes and skins and so on.
One thing that I will mention is that the subscription process are also team based. So we tend to push out monthly sort of teams around the subscription partners and that leads to a lot of opportunities for deeper localization and engagement with users. In terms of success in global markets and if we are seeing any sort of other countries, yeah I question -- your next couple of questions are kind of interrelated. S
o we will say that we've seen a lot of great success in terms of our initial foray into Latin America but at the same time we are seeing great user traction and Group numbers in markets like India, Russia, Turkey. According to App Annie for throughout the month of January Free Fire, was consistently ranked at the to three grossing action game on the Google Play Store in India and Russia and within the top six grossing action game on the Google play store in 30.
So we believe that Free Fire's unique position as a premium battle royal title, which is optimized for emerging market users has allowed the game to achieve popularity and success in other global markets, as well. Does this lead to an investment in terms of on the ground infrastructure and personnel, Sure, we will make those investments in order to make sure that we deliver the best game experience to our users.
Miang Chuen Koh -- Goldman Sachs -- Analyst
Yes, and then will we expect more Tencent games as well, besides Speed Drifters for the remainder of the year?
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Sure. So I think the short answer is to you is stay tuned in terms of our announcements. We obviously can't speak about our game pipeline, but where we're quite excited about what we see where we look across the Tencent portfolio.
Miang Chuen Koh -- Goldman Sachs -- Analyst
Got it. Thank you very much.
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Thank you.
Operator
And this will conclude our question and answer session. I would now like to turn the conference back over to Howard Soh, for any closing remarks.
Howard Soh -- Director of Corporate Development and Strategy
Thank you very much everyone for your time. We look forward to speaking with you again on the next call.
Operator
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect your lines.
Duration: 54 minutes
Call participants:Howard Soh -- Director of Corporate Development and Strategy
Forrest Xiaodong Li -- Chairman and Group Chief Executive Officer
Tony Hou -- Group Chief Financial Officer
Miang Chuen Koh -- Goldman Sachs -- Analyst
Alicia Yap -- Citigroup -- Analyst
Mike Olson -- Piper Jaffray -- Analyst
Varun Ahuja -- Credit Suisse -- Analyst
Conrad Werner -- Macquarie Securities -- Analyst
Bill -- Cowen -- Analyst
Andrew Orchard -- Nomura -- Analyst
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