Sea Limited (NYSE:SE) (“Sea” or the “Company”) today announced
its financial results for the quarter ended March 31, 2018.
“We again saw healthy growth in our digital entertainment
revenue in the first quarter of 2018, and have several new games in
the pipeline for launch this year. Meanwhile, Shopee continues to
grow ahead of expectations as we capture a larger share of our
region’s e-commerce market, and the virtuous cycle created by that
accelerated scaling is driving ever-improving economics on our
platform,” said Forrest Li, Chairman and Group Chief Executive
Officer of Sea. “We will continue to invest in growth, and to focus
on improving our services to our platform users, as well as the
infrastructure supporting our core businesses.”
First Quarter 2018 Key Metrics
- Group
- Total adjusted revenue was US$197.0
million, up 81.2% year-on-year from US$108.8 million for the first
quarter of 2017 and up 19.8% quarter-on-quarter from US$164.5
million for the fourth quarter of 2017.
- Total adjusted EBITDA was US$(144.7)
million, compared to US$(41.4) million for the first quarter of
2017 and US$(140.2) million for the fourth quarter of 2017.
- Digital Entertainment
- Adjusted revenue was US$146.0 million,
up 42.6% year-on-year from US$102.4 million for the first quarter
of 2017 and up 2.9% quarter-on-quarter from US$141.9 million for
the fourth quarter of 2017.
- Adjusted EBITDA was US$55.0 million, an
increase of 48.6% year-on-year from US$37.0 million for the first
quarter of 2017 and up 4.6% quarter-on-quarter from $52.6 million
for the fourth quarter of 2017.
- Quarterly active users (“QAUs”) reached
126.7 million, an increase of 124.6% year-on-year from 56.4 million
for the first quarter of 2017 and up 44.3% quarter-on-quarter from
87.8 million for the fourth quarter of 2017.
- Average revenue per user (“ARPU”) was
US$1.2 compared to US$1.8 for the first quarter of 2017 and US$1.6
for the fourth quarter of 2017.
- E-commerce
- Gross merchandise value (“GMV”) was
US$1.9 billion, an increase of 199.5% year-on-year from US$648.3
million for the first quarter of 2017 and up 23.0%
quarter-on-quarter from US$1.6 billion for the fourth quarter of
2017.
- Gross orders for the quarter totaled
111.4 million, an increase of 217.4% year-on-year from 35.1 million
for the first quarter of 2017 and up 13.3% quarter-on-quarter from
98.3 million for the fourth quarter of 2017.
- Adjusted revenue was US$33.7 million,
up 262.1% quarter-on-quarter from US$9.3 million for the fourth
quarter of 2017. Adjusted revenue included US$22.0 million of
marketplace revenue1 and US$11.7 million of product revenue2. There
was negligible e-commerce adjusted revenue for the first quarter of
2017.
- Adjusted EBITDA was US$(179.6) million,
compared to US$(62.7) million for the first quarter of 2017 and
US$(175.4) million for the fourth quarter of 2017.
- Sales and marketing as a percentage of
GMV stood at 6.6%, and improved from 7.1% for the first quarter of
2017 and 8.5% for the fourth quarter of 2017.
1 Marketplace revenue mainly consists of commission and
advertising income and revenue generated from other value-added
services.2 Product revenue mainly consists of revenue generated
from direct sales.
- Digital Financial Services
- Gross transaction value of our digital
financial services as a whole (“GTV”) was US$1.7 billion, an
increase of 428.6% year-on-year from US$322.0 million for the first
quarter of 2017 and up 65.7% quarter-on-quarter from US$1.0 billion
for the fourth quarter of 2017. The growth was attributable to
the payment processing services provided by AirPay to Shopee in
most of our markets, which, depending on the operational
arrangement in each relevant market, may include payments from
buyers to Shopee accounts under Shopee Guarantee as well as
outgoing payments from Shopee accounts to Shopee seller accounts
that are operationally handled by AirPay.
Strategic Business Updates
Digital Entertainment
Garena enjoyed healthy growth this quarter, buoyed by factors
including the continued expansion of our leading mobile games in
the region, Arena of Valor and Free Fire. Free Fire recently
achieved 13 million daily active users, placing it amongst the
world’s most popular mobile battle royale titles. We continue to
complement our leading franchises through growing e-sports leagues,
video streaming options, and other ancillary services.
We held Garena World 2018, our region’s largest eSports event,
from March 31 to April 1, 2018 in Bangkok, Thailand. We had an
attendance of approximately 240 thousand and attracted over 10.6
million views online for the various tournaments at Garena World.
In total, over 11,000 teams participated in the tournaments leading
up to the event in Bangkok. Garena is well-positioned to ride on
the wave of eSports growth as one of the region’s leading game
platforms. We continue to invest in our eSports operations to
generate user engagement for our games and to promote user
acquisition and retention.
Our pipeline of games for release in 2018 features a series of
highly anticipated PC and mobile titles. These include both classic
and new franchises in different genres.
E-commerce
Shopee achieved robust growth in both GMV and gross orders in
each of our markets in the first quarter of 2018 and saw a decrease
in sales and marketing expenses from US$135.0 million in the fourth
quarter of 2017 to US$127.2 million in the first quarter of 2018.
This was driven primarily by our continuous efforts to attract new
buyers and sellers in our focus categories while improving our cost
efficiency.
Shopee has focused much of its innovation on launching
value-added services to our ever-expanding seller base. We continue
to broaden our ‘Service by Shopee’ offering in select markets,
where we offer sellers a number of value-added services, such as
inventory management, online store operations, and fulfillment
services. We also provide ‘Shopee Logistics Service’ to create a
seamless logistics experience for sellers and buyers. In addition,
we conduct direct sales of certain products. With this diverse
portfolio of services and offerings, depending on the needs and
preferences of our sellers, we can help them manage inventory and
fulfill orders from warehouses leased and operated by us, operate
their stores on our platform, or purchase products from them for
resale on our platform.
Other Development
Appointment of Group Chief Economist
The Company also announced that Santitarn Sathirathai is
expected to join the Company as Group Chief Economist in June 2018.
Mr. Sathirathai will focus on establishing Sea as a key thought
leader in the digital economy and work with policy makers to
promote digital transformation in the region. He will report to
Forrest Li, Chairman and Group Chief Executive Officer.
Mr. Sathirathai will be joining the Company from Credit Suisse,
where he is the head of Emerging Asia Economics Research. He won
the award for best economic forecaster for Indonesia by Consensus
Economics for each of 2013, 2014 and 2015, the very first economist
in Asia to receive such award for three consecutive years, and was
selected as one of Asia’s 21 young leaders in 2017 by Asia Society.
He is a highly ranked economist for ASEAN and was also rated the
best economist for Thailand by Asia Money. Prior to joining Credit
Suisse, Mr. Sathirathai worked at the Ministry of Finance of
Thailand and Government of Singapore Investment Corporation, and
taught macroeconomic courses at Chulalongkorn University in
Thailand. Mr. Sathirathai holds a doctorate degree in Public Policy
and a master’s degree in Public Administration from Harvard
University, as well as a bachelor’s degree in Economics and a
master’s degree in Public Policy from the London School of
Economics and Political Science.
Summary of Financial Results(Amounts are expressed in
thousands of US dollars “$”)
For the Three Months
ended March 31,
2017 2018 $ $ YOY%
(unaudited) (unaudited)
Revenue Digital Entertainment
87,586 110,658 26.3% Others 6,359 44,386 598.0%
93,945 155,044 65.0%
Cost of revenue Digital
Entertainment (49,277) (63,572) 29.0% Others (17,561)
(82,947) 372.3% (66,838) (146,519) 119.2%
Gross
profit 27,107 8,525 (68.6)% Other operating
income 218 729 234.4% Sales and marketing expenses (63,898)
(152,149) 138.1% General and administrative expenses (25,208)
(44,487) 76.5% Research and development expenses (6,252)
(10,712) 71.3%
Total operating expenses (95,140)
(206,619) 117.2%
Operating loss (68,033)
(198,094) 191.2% Non-operating loss, net (2,479) (18,247) 636.1%
Income tax (expense) credit (1,932) 755 (139.1)% Share of results
of equity investees (632) (583) (7.8)%
Net
loss (73,076) (216,169) 195.8%
Adjusted net
loss (1) (66,963) (205,498) 206.9%
Adjusted revenue of Digital Entertainment (1) 102,396 146,030 42.6%
Adjusted revenue of E-commerce (1) 34 33,744 99,147.1% Adjusted
revenue of Digital Financial Services (1) 2,034 3,923 92.9% Revenue
of Other Services 4,291 13,342 210.9%
Total
adjusted revenue (1) 108,755 197,039 81.2%
Adjusted EBITDA for Digital Entertainment (1) 37,006 55,004 48.6%
Adjusted EBITDA for E-commerce (1) (62,669) (179,649) (186.7)%
Adjusted EBITDA for Digital Financial Services (1) (9,904) (8,570)
13.5% Adjusted EBITDA for Other Services (1) (2,923) (9,868)
(237.6)% Unallocated expenses (2) (2,867) (1,591)
44.5%
Total adjusted EBITDA (1) (41,357)
(144,674) (249.8)%
(1) For a discussion of the use of non-GAAP financial measures,
see “Non-GAAP Financial Measures.”(2) Unallocated expenses are
mainly related to share-based compensation and general and
corporate administrative costs such as professional fees and other
miscellaneous items that are not allocated to segments. These
expenses are excluded from segment results as they are not reviewed
by the Chief Operation Decision Maker (“CODM”) as part of segment
performance.
Three Months Ended March 31, 2018 Compared to Three Months
Ended March 31, 2017
Revenue
The table below sets forth revenue and adjusted revenue
generated from our reported segments. Amounts are expressed in
thousands of US dollars (“$”).
For the Three Months ended March
31, 2017 2018 $
% ofrevenue
$
% ofrevenue
YOY% (unaudited) (unaudited)
Revenue Digital Entertainment
87,586 93.2 110,658 71.4 26.3% E-commerce 34 - 27,344 17.6
80,323.5% Digital Financial Services 2,034 2.2 3,700 2.4 81.9%
Other Services 4,291 4.6 13,342 8.6 210.9% 93,945 100.0 155,044
100.0 65.0%
2017 2018 $
% of totaladjustedrevenue
$
% of totaladjustedrevenue
YOY% (unaudited) (unaudited) Adjusted revenue of Digital
Entertainment 102,396 94.2 146,030 74.1 42.6% Adjusted revenue of
E-commerce 34 - 33,744 17.1 99,147.1% Adjusted revenue of Digital
Financial Services 2,034 1.9 3,923 2.0 92.9% Revenue of Other
Services 4,291 3.9 13,342 6.8 210.9%
Total adjusted revenue
108,755 100.0 197,039 100.0 81.2%
Our total revenue increased by 65.0% to US$155.0 million in the
first quarter of 2018 from US$93.9 million in the first quarter of
2017. Our total adjusted revenue increased by 81.2% to US$197.0
million in the first quarter of 2018 from US$108.8 million in the
first quarter of 2017. These increases were mainly driven by the
growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue
increased by 26.3% to US$110.7 million in the first quarter of 2018
from US$87.6 million in the first quarter of 2017. Adjusted revenue
increased by 42.6% to US$146.0 million in the first quarter of 2018
from US$102.4 million in the first quarter of 2017. This increase
was primarily due to the growth of our QAUs to 126.7 million in the
first quarter of 2018 from 56.4 million in the first quarter of
2017, as we launched new games and expanded our existing games into
new markets, which in turn increased the number of our paying
users.
- E-commerce: We began monetizing our
e-commerce business in 2017. In the first quarter of 2018, our
e-commerce revenue was US$27.3 million, including US$15.6 million
of marketplace revenue and US$11.7 million of product revenue. Our
e-commerce adjusted revenue was US$33.7 million in the same period.
There was negligible e-commerce revenue for the first quarter of
2017. The additional services and product offerings we introduced
to sellers under ‘Service by Shopee,’ ‘Shopee Logistics Service,’
as well as the other value-added services we recently started to
offer created additional income streams for our e-commerce
business.
- Digital Financial Services: Revenue
increased by 81.9% to US$3.7 million in the first quarter of 2018
from US$2.0 million in the first quarter of 2017. Adjusted revenue
increased by 92.9% to US$3.9 million in the first quarter of 2018
from US$2.0 million in the first quarter of 2017. The increase was
primarily attributable to the addition of use cases to our AirPay
platform and a further deepening of our market penetration.
- Other Services: Revenue increased by
210.9% to US$13.3 million in the first quarter of 2018 from US$4.3
million in the first quarter of 2017. The increase was primarily
due to ancillary services we provide to our e-commerce platform
users.
Cost of Revenue
Our total cost of revenue increased by 119.2% to US$146.5
million in the first quarter of 2018 from US$66.8 million in the
first quarter of 2017.
- Digital Entertainment: Cost of revenue
increased by 29.0% to US$63.6 million in the first quarter of 2018
from US$49.3 million in the first quarter of 2017. The increase was
primarily due to the increase in royalty payments to game
developers as well as other costs directly associated with our
digital entertainment segment which were largely in line with the
revenue growth of our business.
- Others: Cost of revenue for our other
segments combined increased by 372.3% to US$82.9 million in the
first quarter of 2018 from US$17.6 million in the first quarter of
2017. The increase was primarily due to the costs incurred
following the launch of ‘Service by Shopee,’ ‘Shopee Logistics
Service,’ and direct sales at the end of 2017; higher bank
transaction fees driven by GMV growth from our e-commerce business;
higher costs associated with other ancillary services we provided
to our e-commerce platform users; as well as higher staff
compensation and benefit costs.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 138.1% to
US$152.1 million in the first quarter of 2018 from US$63.9 million
in the first quarter of 2017. The table below sets forth the
breakdown of the sales and marketing expenses of our two major
reporting segments. Amounts are expressed in thousands of US
dollars (“$”).
For the Three Months
ended March 31,
2017 2018 YOY%
Sales and Marketing
Expenses $
(unaudited)
$
(unaudited)
Digital Entertainment 11,036 16,243 47.2% E-commerce 45,905 127,198
177.1%
- Digital Entertainment: Sales and
marketing expenses increased by 47.2% to US$16.2 million in the
first quarter of 2018 from US$11.0 million in the first quarter of
2017. The increase was primarily due to the launch of new games and
our continued efforts to expand our existing games into new
markets, which in turn enlarged our user base and increased the
number of our paying users.
For the Three Months
ended March 31,
2017 2018 Digital Entertainment
$
(unaudited)
$
(unaudited)
Sales and marketing expenses 11,036 16,243 Adjusted revenue 102,396
146,030 Sales and marketing expenses as a percentage of adjusted
revenue 10.8% 11.1%
Sales and marketing expenses as a percentage of adjusted revenue
of 11.1% in the first quarter of 2018 was comparable to the first
quarter of 2017.
- E-commerce: Sales and marketing
expenses increased by 177.1% to US$127.2 million in the first
quarter of 2018 from US$45.9 million in the first quarter of 2017.
The increase in marketing efforts was aligned with our strategy to
fully capture the market growth opportunity and was primarily in
connection with shipping and other promotions on our platform in
order to increase our user base and enhance user engagement.
For the Three Months
ended March 31,
2017 2018 E-commerce $
(unaudited)
$
(unaudited)
Sales and marketing expenses 45,905 127,198 GMV 648,285 1,941,403
Sales and marketing expenses as a percentage of GMV 7.1% 6.6%
Sales and marketing expenses as a percentage of GMV was 6.6% in
the first quarter of 2018 and improved from 7.1% in the first
quarter of 2017.
General and Administrative Expenses
Our general and administrative expenses increased by 76.5% to
US$44.5 million in the first quarter of 2018 from US$25.2 million
in the first quarter of 2017. This increase was primarily due to
the expansion of our staff force, the increase in office facilities
and related expenses, as well as the increase in other
expenses.
Research and Development Expenses
Our research and development expenses increased by 71.3% to
US$10.7 million in the first quarter of 2018 from US$6.3 million in
the first quarter of 2017, primarily due to the increase in
research and development staff force as we expanded and enriched
our product offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income,
interest expense, investment gain (loss), fair value change for
convertible promissory notes and foreign exchange gain (loss). We
recorded a net non-operating loss of US$18.2 million in the first
quarter of 2018, compared to a net non-operating loss of US$2.5
million in the first quarter of 2017. This was primarily due to
fair value loss of US$18.8 million recognized in the quarter
arising from the fair value accounting treatment for convertible
promissory notes and interest expenses on those promissory notes,
partially offset by an investment gain arising from the disposal of
an equity security investment.
Income Tax Expense
We had a net income tax benefit of US$0.8 million in the first
quarter of 2018 which was primarily due to the higher deferred tax
assets we recognized as a result of change in statutory tax rate in
one of the markets we operate in and the increase in deferred
revenue in our digital entertainment segment in the first quarter
of 2018.
Share of Results of Equity Investees
We had share of losses of equity investees of US$0.6 million in
the first quarter of 2018, compared with US$0.6 million in the
first quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$216.2
million and US$73.1 million in the first quarter of 2018 and 2017,
respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove
share-based compensation expenses, was US$205.5 million and US$67.0
million in the first quarter of 2018 and 2017, respectively.
Updated Guidance
For the full year of 2018, we now expect total adjusted revenue
to be between US$780 million and US$820 million, representing 40.9%
to 48.1% growth from 2017. This compares to the previously
disclosed guidance of between US$730 million and US$770 million,
representing 31.9% to 39.1% growth.
We are also revising our e-commerce GMV guidance for the full
year of 2018. We now expect e-commerce GMV for the full year of
2018 to be between US$8.2 billion and US$8.7 billion, representing
99.4% to 111.5% growth from 2017. This compares to the previously
disclosed guidance of between US$7.5 billion and US$8.0 billion,
representing 82.4% to 94.5% growth.
Webcast and Conference Call Information
Mr. Forrest Li, Founder, Chairman and Group Chief Executive
Officer; Mr. Tony Hou, Group Chief Financial Officer; and Mr. Alan
Hellawell, Group Chief Strategy Officer, will host a conference
call today to review Sea’s business and financial performance.
Details of the conference call and webcast are as follows:
Date and time: 8:00 PM U.S. Eastern Time on 15 May 2018 8:00
AM Singapore / Hong Kong Time on 16 May 2018 Webcast link:
http://mms.prnasia.com/se/20180515/default.aspx
Dial in numbers: US Toll Free: 1-888-317-6003 Hong Kong:
800-963-976 International: 1-412-317-6061 Singapore: 800-120-5863
United Kingdom: 08-082-389-063 Passcode for
participants:7961550
A replay of the conference call will be available at the
Company’s investor relations website
(http://www.seagroup.com/investor/financials). An archived webcast
will be available at the same link above.
About Sea Limited
Sea’s mission is to better the lives of the consumers and small
businesses of our region with technology. Our region includes the
key markets of Indonesia, Taiwan, Vietnam, Thailand, the
Philippines, Malaysia and Singapore. Sea operates three platforms
across digital entertainment, e-commerce, and digital financial
services, known as Garena, Shopee, and AirPay, respectively.
Forward-Looking Statements
This announcement contains forward-looking statements. These
statements are made under the “safe harbor” provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
“will,” “expects,” “anticipates,” “future,” “intends,” “plans,”
“believes,” “estimates,” “confident,” “guidance” and similar
statements. Among other things, statements that are not historical
facts, including statements about Sea’s beliefs and expectations,
the business, financial and market outlook and projections from its
management in this announcement, as well as Sea’s strategic and
operational plans, contain forward-looking statements. Sea may also
make written or oral forward-looking statements in its periodic
reports to the U.S. Securities and Exchange Commission (the “SEC”),
in its annual report to shareholders, in press releases and other
written materials and in oral statements made by its officers,
directors or employees to third parties. Forward-looking statements
involve inherent risks and uncertainties. A number of factors could
cause actual results to differ materially from those contained in
any forward-looking statement, including but not limited to the
following: Sea’s goals and strategies; its future business
development, financial condition, financial results, and results of
operations; the growth in, and market size of, the digital
entertainment, e-commerce and digital financial services industries
in the region, including segments within those industries; changes
in its revenue, costs or expenditures; its ability to continue to
source, develop and offer new and attractive online games and to
offer other engaging digital entertainment content; the growth of
its digital entertainment, e-commerce and digital financial
services platforms; the growth in its user base, level of user
engagement, and monetization; its ability to continue to develop
new technologies and/or upgrade its existing technologies; growth
and trends of its markets and competition in its industries;
government policies and regulations relating to its industries; and
general economic and business conditions in the region. Further
information regarding these and other risks is included in Sea’s
filings with the SEC. All information provided in this press
release and in the attachments is as of the date of this press
release, and Sea undertakes no obligation to update any
forward-looking statement, except as required under applicable
law.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with U.S. GAAP, we use the
following non-GAAP financial measures to help evaluate our
operating performance:
- “Adjusted revenue” of our digital
entertainment segment represents revenue of the digital
entertainment segment plus change in digital entertainment deferred
revenue. This financial measure is used as an approximation of cash
spent by our users in the applicable period that is attributable to
our digital entertainment segment. Although other companies may
present such measures related to gross billings differently or not
at all, we believe that the adjusted revenue of our digital
entertainment segment provides useful information to investors
about the segment's core operating results, enhancing their
understanding of our past performance and future prospects.
- “Adjusted revenue” of our e-commerce
segment represents revenue of the e-commerce segment (currently
consisting of marketplace revenue and product revenue) plus
commission income that were net-off against sales incentives. This
financial measure enables our investors to follow trends in our
e-commerce monetization capability over time and is a useful
performance measure.
- “Adjusted revenue” of our digital
financial services segment represents revenue of the digital
financial services segment plus service revenue that were net-off
against sales incentives.
- “Total adjusted revenue” represents the
sum of the adjusted revenue of our digital entertainment segment,
the adjusted revenue of our e-commerce segment, the adjusted
revenue of our digital financial services segment, and the revenue
of our other services. This financial measure enables our investors
to follow trends in our overall group monetization capability over
time and is a useful performance measure.
- “Adjusted net loss” represents net loss
excluding share-based compensation expense. We believe that the
adjusted net loss helps to identify underlying trends in our
business that could otherwise be distorted by the effect of certain
expenses that are included in net loss. The use of adjusted net
loss has its limitations in that it does not include all items that
impact the net loss or income for the period, and share-based
compensation is a recurring significant expense.
- “Adjusted EBITDA” for our digital
entertainment segment represents operating income (loss) before
share-based compensation plus (a) depreciation and amortization
expenses, and (b) the net effect of changes in deferred revenue and
its related cost for our digital entertainment segment. Although
other companies may calculate adjusted EBITDA differently or not
present it at all, we believe that the segment adjusted EBITDA
helps to identify underlying trends in our operating results,
enhancing their understanding of the past performance and future
prospects.
- “Adjusted EBITDA” for our e-commerce
segment, digital financial services segment and other services
segment represents operating income (loss) before share-based
compensation plus depreciation and amortization expenses. Although
other companies may calculate adjusted EBITDA differently or not
present it at all, we believe that the segment adjusted EBITDA
helps to identify underlying trends in our operating results,
enhancing their understanding of the past performance and future
prospects.
- “Total adjusted EBITDA” represents the
sum of adjusted EBITDA of all our segments combined, plus
unallocated expenses. Although other companies may calculate
adjusted EBITDA differently or not present it at all, we believe
that the total adjusted EBITDA helps to identify underlying trends
in our operating results, enhancing their understanding of the past
performance and future prospects.
These non-GAAP financial measures have limitations as analytical
tools. None of the above financial measures should be considered in
isolation or construed as an alternative to revenue, net
loss/income, or any other measure of performance or as an indicator
of our operating performance. These non-GAAP financial measures
presented here may not be comparable to similarly titled measures
presented by other companies. Other companies may calculate
similarly titled measures differently, limiting their usefulness as
comparative measures to Sea’s data. We compensate for these
limitations by reconciling the non-GAAP financial measures to their
nearest U.S. GAAP financial measures, all of which should be
considered when evaluating our performance. We encourage you to
review our financial information in its entirety and not rely on
any single financial measure.
The tables below present selected financial information of our
reporting segments, the non-GAAP financial measures that are most
directly comparable to GAAP financial measures, and the related
reconciliations between the financial measures. Amounts are
expressed in thousands of US dollars (“$”).
For the Three Months ended March 31, 2018
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
(unaudited)
Revenue 110,658 27,344(1) 3,700 13,342 -
155,044 Changes in deferred revenue 35,372 - - - - 35,372 Sales
incentives net-off - 6,400 223 - -
6,623
Adjusted revenue 146,030 33,744(2)
3,923 13,342 - 197,039
Operating income (loss) 18,788 (184,052) (9,058) (11,510)
(12,262) (198,094)
Net effect of changes in deferredrevenue
and its related cost
28,195
-
-
-
-
28,195
Depreciation and Amortization 8,021 4,403 488 1,642 - 14,554
Share-based compensation - - - - 10,671
10,671
Adjusted EBITDA 55,004 (179,649)
(8,570) (9,868) (1,591) (144,674)
For the Three Months ended March 31, 2017
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $ (unaudited) (unaudited) (unaudited)
(unaudited) (unaudited) (unaudited)
Revenue 87,586 34
2,034 4,291 - 93,945 Changes in deferred revenue 14,810 - - - -
14,810 Sales incentives net-off - - - -
- -
Adjusted revenue 102,396 34 2,034
4,291 - 108,755
Operating income
(loss) 18,389 (63,723) (10,130) (3,589) (8,980) (68,033)
Net effect of changes in deferredrevenue
and its related cost
11,745
-
-
-
-
11,745
Depreciation and Amortization 6,872 1,054 226 666 - 8,818
Share-based compensation - - - - 6,113
6,113
Adjusted EBITDA 37,006 (62,669)
(9,904) (2,923) (2,867) (41,357)
(1) Revenue of $27,344 includes marketplace revenue of $15,644
and product revenue of $11,700, net of sales incentives.(2)
Adjusted revenue of $33,744 includes marketplace revenue of $22,044
and product revenue of $11,700.(3) A combination of multiple
business activities that does not meet the quantitative thresholds
to qualify as reportable segments are grouped together as “Other
Services”.(4) Unallocated expenses are mainly related to
share-based compensation and general and corporate administrative
costs such as professional fees and other miscellaneous items that
are not allocated to segments. The expenses are excluded from
segment results as they are not reviewed by the CODM as part of
segment performance.
UNAUDITED INTERIM CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
Amounts expressed in thousands of US
dollars (“$”) except for number of shares & per share
data
For the Three Months endedMarch
31,
2017 2018 $ $ (unaudited)
(unaudited)
Revenue
Digital entertainment
87,586 110,658 Others 6,359 44,386
Total revenue 93,945 155,044
Cost of
revenue Digital entertainment (49,277) (63,572) Others (17,561)
(82,947)
Total cost of revenue
(66,838) (146,519)
Gross profit
27,107 8,525
Operating income
(expenses): Other operating income 218 729 Sales and marketing
expenses (63,898) (152,149) General and administrative expenses
(25,208) (44,487) Research and development expenses (6,252)
(10,712)
Total operating
expenses (95,140) (206,619)
Operating loss (68,033) (198,094) Interest income 144 3,091
Interest expense (2,250) (8,582) Investment (loss) gain (225) 7,515
Changes in fair value of convertible promissory notes – (18,796)
Foreign exchange loss (148) (1,475)
Loss before income tax and share of results of equity
investees (70,512) (216,341) Income tax (expense) credit
(1,932) 755 Share of results of equity investees (632) (583)
Net loss (73,076) (216,169) Net
(gain) loss attributable to non-controlling interests (10) 556
Net loss attributable to Sea
Limited’s ordinary shareholders (73,086) (215,613)
Adjusted net loss (1) (66,963) (205,498)
Loss per share: Basic and diluted
(0.42) (0.64) Shares used in loss per share
computation: Basic and diluted 172,896,906 335,147,405
(1) For a discussion of the use of non-GAAP financial measures,
see “Non-GAAP Financial Measures.”
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As ofDecember
31,2017
As ofMarch
31,2018
$ $ (unaudited)
ASSETS Current assets Cash and
cash equivalents 1,347,361 1,172,426 Restricted cash 95,300 159,521
Accounts receivable, net 61,846 70,899 Prepaid expenses and other
assets 186,181 223,849 Inventories, net 9,790 13,382 Short-term
investment 18,000 − Amounts due from related parties 2,235 2,244
Total current assets 1,720,713
1,642,321
Non-current assets Property and equipment,
net 74,348 93,939 Intangible assets, net 37,333 33,614 Long-term
investments 28,216 58,514 Prepaid expenses and other assets 46,297
53,587 Restricted cash 2,317 2,455 Deferred tax assets 48,104
55,070 Goodwill 30,952 30,952 Total
non-current assets 267,567 328,131
Total assets 1,988,280 1,970,452
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As ofDecember
31,2017
As ofMarch
31,2018
$ $ (unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
8,644
13,937
Accrued expenses and other payables 285,248 375,466 Advances from
customers 27,155 30,450 Amount due to related parties 36,790 39,381
Short-term bank borrowings 2,013 − Deferred revenue 268,241 283,538
Income tax payable 9,614 9,523
Total
current liabilities 637,705 752,295
Non-current liabilities Accrued expenses and other payables
7,547 7,860 Deferred revenue 133,481 162,909 Convertible promissory
notes 726,950 745,746 Deferred tax liabilities 4,378 4,104
Unrecognized tax benefits 3,088 2,985
Total non-current liabilities 875,444 923,604
Total liabilities 1,513,149 1,675,899
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As ofDecember
31,2017
As ofMarch
31,2018
$ $ (unaudited)
Shareholders’ equity Class A Ordinary
shares 91 91 Class B Ordinary shares 76 76 Additional paid-in
capital 1,564,656 1,575,078 Accumulated other comprehensive income
10,701 35,919 Statutory reserves 46 46 Accumulated deficit
(1,106,545) (1,322,158)
Total Sea
Limited shareholders’ equity 469,025 289,052 Non-controlling
interests 6,106 5,501
Total
shareholders’ equity 475,131 294,553
Total liabilities and shareholders' equity 1,988,280
1,970,452
UNAUDITED INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts expressed in thousands of US
dollars (“$”)
For the Three Months ended
March 31,
2017 2018 $ $ (unaudited)
Net cash used in operating activities (59,271) (94,360) Net
cash used in investing activities (6,697) (21,837) Net cash
generated from (used in) financing activities 356,953 (545)
Effect of foreign exchange rate changes on
cash, cash equivalents andrestricted cash
3,052
6,166
Net increase (decrease) in cash, cash equivalents and restricted
cash 294,037 (110,576) Cash, cash equivalents and restricted cash
at beginning of the period 190,824 1,444,978
Cash, cash equivalents and restricted cash at end of the
period 484,861 1,334,402
1 SEGMENT INFORMATION
The Company has three reportable segments, namely digital
entertainment, e-commerce and digital financial services. The Chief
Operation Decision Maker (“CODM”) reviews the performance of each
segment based on revenue and certain key operating metrics of the
operations and uses these results for the purposes of allocating
resources to and evaluating the financial performance of each
segment. Amounts are expressed in thousands of US dollars
(“$”).
For the Three Months ended March 31, 2018
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $
(unaudited)
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenue 110,658 27,344 3,700 13,342 - 155,044
Operating income (loss) 18,788 (184,052)
(9,058) (11,510) (12,262) (198,094)
Non-operating loss, net (18,247) Income tax expense 755 Share of
results of equity investees (583)
Net loss (216,169)
For the Three Months ended March 31, 2017
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
(unaudited)
Revenue 87,586 34 2,034 4,291 - 93,945
Operating income (loss) 18,389 (63,723)
(10,130) (3,589) (8,980) (68,033)
Non-operating loss, net (2,479) Income tax expense (1,932) Share of
results of equity investees (632)
Net loss (73,076)
(1) A combination of multiple business activities that does not
meet the quantitative thresholds to qualify as reportable segments
are grouped together as “Other Services”.(2) Unallocated expenses
are mainly related to share-based compensation and general and
corporate administrative costs such as professional fees and other
miscellaneous items that are not allocated to segments. The
expenses are excluded from segment results as they are not reviewed
by the CODM as part of segment performance.
SUPPLEMENTAL OPERATIONAL
METRICS
For the Three Monthsended
December 31,2017
For the Three Monthsended March
31,2018
Digital Entertainment Unit Quarterly
active users millions 87.8 126.7 Monthly active users (last month)
millions 59.5 77.4 Quarterly paying users millions 7.2 7.2 Average
revenue per user US$ 1.6 1.2 Average revenue per paying user US$
19.7 20.3
E-commerce Gross GMV US$ millions
1,578.6 1,941.4 Gross orders millions 98.3 111.4
Digital
Financial Services GTV US$ millions 1,027.5 1,702.2
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version on businesswire.com: https://www.businesswire.com/news/home/20180515006359/en/
Sea Limited+65 6887 9329Investors / analysts:
ir@seagroup.comMedia: media@seagroup.com or
sea@brunswickgroup.com
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