Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced
its financial results for the fourth quarter and full year ended
December 31, 2018.
Highlights
- Group
- Total adjusted revenue for the full
year of 2018 reached US$1,048.7 million, more than 10.4% above the
midpoint of our previous guidance, which was revised upwards twice
during 2018.
- Digital Entertainment
- Adjusted revenue for the full year of
2018 reached US$661.0 million, more than 8.4% above the midpoint of
our previous guidance.
- Adjusted revenue was up 60.0% from the
third quarter to the fourth quarter of 2018 to reach US$231.4
million, and is expected to show further robust growth in the first
quarter of 2019.
- Adjusted EBITDA margin increased to
45.5% for the fourth quarter of 2018 from 37.2% for the third
quarter of 2018, and is expected to improve further in the first
quarter of 2019.
- Our first fully self-developed game,
Free Fire, continued to see good momentum and recently achieved
more than 350 million registered users and more than 40 million
peak daily active users, and was the world’s fourth most downloaded
game across the Apple App Store and the Google Play Store combined
in 2018, according to App Annie.
- Free Fire is also one of the most
popular games in Latin America. According to App Annie, Free Fire
was the top ranked game in Brazil in 2018 by average monthly active
users, downloads and consumer spend, and ranked in the top five in
each category in both Mexico and Argentina. We believe this
demonstrates our ability to penetrate fast growing emerging markets
globally, which greatly expands our total addressable market base
beyond just our core markets.
- We also recently launched Speed
Drifters, a localized version of Tencent’s hit game QQ Speed, and
the first game published under our right of first refusal
arrangement with Tencent.
- We have partnered with PUBG Corporation
to bring PUBG LITE to several of our key markets in Southeast
Asia.
- E-commerce
- Gross merchandise value (“GMV”) for the
full year of 2018 reached US$10.3 billion, more than 8.8% above the
midpoint of our previous guidance.
- GMV was US$3.4 billion for the fourth
quarter of 2018, up 27.3% quarter-on-quarter from US$2.7 billion
for the third quarter of 2018.
- Gross orders for the fourth quarter of
2018 totaled 206.9 million, up 30.5% quarter-on-quarter from 158.5
million for the third quarter of 2018.
- Annual active buyers for 2018 totaled
49.9 million, up 130.0% year-on-year from 21.7 million for
2017.
- According to App Annie, Shopee was the
most downloaded app in the Shopping category in Southeast Asia and
Taiwan in 2018.
- Adjusted revenue for the full year of
2018 reached US$290.7 million, up 1,540.8% year-on-year. In the
fourth quarter of 2018, adjusted revenue was up 78.2% from the
third quarter of 2018, to reach US$126.9 million.
- Adjusted revenue as a percentage of GMV
increased to 3.7% in the fourth quarter of 2018, up from 2.6% in
the previous quarter and 0.6% for the same period a year ago.
- Sales and marketing expenses as a
percentage of GMV fell once again to 5.4% in the fourth quarter of
2018, down from 5.7% in the previous quarter and 8.5% for the same
period a year ago.
- Shipping subsidies declined in absolute
dollar terms in the fourth quarter compared to the third quarter,
even as order numbers grew by 30.5% during the same period.
- We expect sales and marketing expenses
to start trending downwards in absolute dollar terms in 2019, as
Shopee continues to scale with increasing efficiency, benefiting
from strong organic user growth, and solidify its market leadership
in our region.
- 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 2019 in
Taiwan.
- In Indonesia, Shopee’s largest market,
Shopee recorded 83.8 million orders in the fourth quarter of 2018,
or a daily average of 0.9 million, further extending its leadership
as the largest e-commerce platform in the market.
Guidance
For the full year of 2019, we currently expect adjusted revenue
for digital entertainment to be between US$1.2 billion and US$1.3
billion, representing 81.5% to 96.7% growth from 2018.
We currently expect adjusted revenue for e-commerce for the full
year of 2019 to be between US$630 million and US$660 million,
representing year-on-year growth of 116.7% to 127.0%.
Fourth Quarter 2018 Key Metrics
- Group
- Total adjusted revenue was US$389.3
million, up 136.6% year-on-year from US$164.5 million for the
fourth quarter of 2017 and up 60.3% quarter-on-quarter from
US$242.8 million for the third quarter of 2018.
- Total adjusted EBITDA was US$(203.6)
million, compared to US$(140.2) million for the fourth quarter of
2017 and US$(183.8) million for the third quarter of 2018.
- Digital Entertainment
- Adjusted revenue was US$231.4 million,
up 63.1% year-on-year from US$141.9 million for the fourth quarter
of 2017 and an increase of 60.0% quarter-on-quarter from US$144.6
million for the third quarter of 2018.
- Adjusted EBITDA was US$105.2 million,
up 100.0% year-on-year from US$52.6 million for the fourth quarter
of 2017 and an increase of 95.9% quarter-on-quarter from US$53.7
million for the third quarter of 2018.
- Quarterly active users reached 216.2
million, an increase of 146.2% year-on-year from 87.8 million for
the fourth quarter of 2017 and up 22.8% quarter-on-quarter from
176.1 million for the third quarter of 2018.
- Average revenue per user was US$1.1
compared to US$1.6 for the fourth quarter of 2017 and US$0.8 for
the third quarter of 2018.
- E-commerce
- GMV was US$3.4 billion, an increase of
117.0% year-on-year from US$1.6 billion for the fourth quarter of
2017 and up 27.3% quarter-on-quarter from US$2.7 billion for the
third quarter of 2018.
- Gross orders for the quarter totaled
206.9 million, an increase of 110.5% year-on-year from 98.3 million
for the fourth quarter of 2017 and up 30.5% quarter-on-quarter from
158.5 million for the third quarter of 2018.
- Adjusted revenue was US$126.9 million,
up 1,261.9% year-on-year from US$9.3 million for the fourth quarter
of 2017 and up 78.2% quarter-on-quarter from US$71.2 million for
the third quarter of 2018.
- Adjusted revenue included US$87.6
million of marketplace revenue1, up 884.3% year-on-year from US$8.9
million for the fourth quarter of 2017 and up 74.2%
quarter-on-quarter from US$50.3 million for the third quarter of
2018, and US$39.3 million of product revenue2, up 9,725.0%
year-on-year from US$0.4 million for the fourth quarter of 2017 and
up 88.0% quarter-on-quarter from US$20.9 million in the third
quarter of 2018.
- Adjusted revenue as a percentage of GMV
increased to 3.7% in the fourth quarter of 2018, up from 2.6% in
the previous quarter and 0.6% for the same period a year ago.
- Adjusted EBITDA was US$(277.5) million,
compared to US$(175.4) million for the fourth quarter of 2017 and
US$(214.9) million for the third quarter of 2018.
- Sales and marketing expenses as a
percentage of GMV declined to 5.4% from 8.5% for the fourth quarter
of 2017 and 5.7% for the third quarter of 2018, while Shopee
achieved record-breaking transaction volumes in its 11.11 and 12.12
sales events during the fourth quarter.
Full Year 2018 Key Metrics
- Group
- Total adjusted revenue was US$1,048.7
million, up 89.4% year-on-year from US$553.6 million for the full
year of 2017.
- Total adjusted EBITDA was US$(694.0)
million, compared to US$(332.1) million for the full year of
2017.
- Digital Entertainment
- Adjusted revenue was US$661.0 million,
up 33.3% year-on-year from US$495.9 million for the full year of
2017.
- Adjusted EBITDA was US$262.5 million,
an increase of 50.1% year-on-year from US$174.9 million for the
full year of 2017.
- E-commerce
- GMV was US$10.3 billion, an increase of
149.9% year-on-year from US$4.1 billion for the full year of
2017.
- Gross orders totaled 604.5 million, an
increase of 146.9% year-on-year from 244.8 million for the full
year of 2017.
- Adjusted revenue was US$290.7 million,
up 1,540.8% year-on-year from US$17.7 million for the full year of
2017. Adjusted revenue included US$197.3 million of marketplace
revenue1, up 1,040.5% year-on-year from US$17.3 million for the
full year of 2017, and US$93.4 million of product revenue2, up
23,250.0% year-on-year from US$0.4 million for the full year of
2017.
- Adjusted revenue as a percentage of GMV
increased to 2.8%, up from 0.4% in the previous year.
- Adjusted EBITDA was US$(860.3) million,
compared to US$(444.3) million for the full year of 2017.
- Sales and marketing expenses as a
percentage of GMV was 5.9% compared to 8.3% for the full year of
2017..
Strategic Business Updates
Digital Entertainment
In 2018, Garena recorded strong results and materially expanded
our digital entertainment business from being a PC-focused regional
publisher to a leading global developer and publisher, with core
strengths in mobile games and a key focus on emerging markets. In
the fourth quarter of 2018, our adjusted revenue from mobile games,
self-developed game, and regions outside our current core markets
accounted for 85.1%, 44.5% and 28.0% of our total digital
entertainment adjusted revenue, respectively.
Our game development studio in Shanghai now has more than 200
developers focused on enhancing our existing game and building out
our pipeline of self-developed games. Our first global
self-developed hit game, Free Fire, is now one of the world’s most
popular mobile battle royale titles. According to App Annie, for
the full year of 2018, Free Fire was the fourth most downloaded
game across the Apple App Store and the Google Play Store combined.
It has also hit the milestone of recording more than 100 million
monthly active users. Moreover, since late 2018, we have been
rolling out our first global eSports tournament for Free Fire, the
Free Fire World Cup.
Meanwhile, we continued to strengthen our relationships with our
long-term game publishing partners and leading global developers to
enhance Garena’s portfolio of top quality content. In January 2019,
we launched Speed Drifters, a localized version of Tencent’s hit
game QQ Speed. Speed Drifters is the first game from the Tencent
portfolio published under our recently announced right of first
refusal arrangement with Tencent. Furthermore, we have agreed with
PUBG Corporation to bring into several of our key markets in
Southeast Asia PUBG LITE, a PC game adapted from their global hit
game PUBG.
E-commerce
Shopee saw sustained strong growth in the fourth quarter and
full year of 2018, with GMV, orders, and adjusted revenue each
increasing sharply, and sales and marketing expenses as a
percentage of GMV continuing to decline.
Just three years since the launch of the platform, Shopee’s
annual GMV has exceeded US$10 billion. We believe that Shopee’s
rapid growth and ascent to regional market leadership over such a
short period of time reflects the success of our strategy to build
a mobile-centric, socially engaging marketplace with the right
product category focus and with integrated and comprehensive user
services – as well as our ability to execute this strategy
efficiently and effectively.
Shopee continues to scale with increasing efficiency as it
enjoys the increasingly powerful flywheel effects of an e-commerce
marketplace. During the fourth quarter, we saw robust consumer
engagement in our large-scale sales events for 11.11 and 12.12. We
set a new record for orders in a single day with more than 12
million orders recorded over the 24 hours of December 12, 2018.
Approximately 5.4 million of those orders were recorded in
Indonesia alone.
While the level of user engagement in the fourth quarter of 2018
broke all previous records, Shopee’s sales and marketing expenses
as a percentage of GMV declined further during the fourth quarter
to 5.4%, compared to 5.7% in the third quarter of 2018. Moreover,
shipping subsidies fell in absolute dollar terms in the fourth
quarter compared to the third quarter, even as GMV and order
numbers continued to grow sharply.
Our focus on engaging with sellers and enhancing the online
shopping experience for buyers is also delivering strong financial
results for Shopee. During the fourth quarter, e-commerce adjusted
revenue reached US$126.9 million, up 1,261.9% year-on-year from
US$9.3 million for the fourth quarter of 2017 and up 78.2%
quarter-on-quarter from US$71.2 million for the third quarter of
2018. This strong growth in revenue was primarily driven by the
expansion of our e-commerce marketplace, as we deepened our
relationships and engagement with sellers and buyers, and enhanced
our e-commerce ecosystem. Ramping up monetization in tandem with
promoting the efficient growth of the Shopee ecosystem will
continue to be our key focus for 2019.
1 Marketplace revenue mainly consists of commission and
advertising income and revenue generated from other value-added
services. 2 Product revenue mainly consists of revenue generated
from direct sales.
Unaudited Summary of Financial
Results
(Amounts are expressed in thousands of US
dollars “$”)
For the Three Monthsended
December 31,
For the Full Yearended December
31,
2017 2018 2017 2018 $
$ YOY% $ $ YOY% (unaudited) (unaudited) (unaudited)
(unaudited)
Revenue Service revenue Digital Entertainment
106,323 131,257 23.5% 365,167 462,464 26.6% E-commerce and other
services 17,754 112,356 532.8% 47,444 270,049 469.2% Sales of goods
527 39,611 7,416.3% 1,579 94,455 5,882.0% 124,604
283,224 127.3% 414,190 826,968 99.7%
Cost of revenue
Cost of service Digital Entertainment (60,240) (77,846) 29.2%
(217,986) (267,359) 22.6% E-commerce and other services (40,257)
(171,229) 325.3% (107,260) (446,281) 316.1% Cost of goods sold
(562) (42,108) 7,392.5% (1,632) (98,570) 5,939.8%
(101,059) (291,183) 188.1% (326,878) (812,210) 148.5%
Gross profit 23,545 (7,959) (133.8)% 87,312
14,758 (83.1)% Other operating income 2,157 4,291 98.9% 3,497 9,799
180.2% Sales and marketing expenses (156,418) (207,487) 32.6%
(425,974) (705,015) 65.5% General and administrative expenses
(51,754) (87,160) 68.4% (137,868) (240,781) 74.6% Research and
development expenses (8,671) (26,642) 207.3% (29,323)
(67,529) 130.3%
Total operating expenses (214,686)
(316,998) 47.7% (589,668) (1,003,526) 70.2%
Operating
loss (191,141) (324,957) 70.0% (502,356) (988,768) 96.8%
Non-operating (loss) income, net (62,283) 52,984 (185.1)% (46,153)
34,888 (175.6)% Income tax expense (8,730) (2,993) (65.7)% (10,745)
(4,088) (62.0)% Share of results of equity investees (986)
(1,092) 10.8% (1,912) (3,066) 60.4%
Net loss
(263,140) (276,058) 4.9% (561,166) (961,034) 71.3%
Adjusted net loss (1) (199,613) (321,187) 60.9%
(480,580) (944,172) 96.5% Adjusted revenue of Digital
Entertainment (1)
141,883 231,352 63.1%
495,878
661,042 33.3% Adjusted revenue of E-commerce (1) 9,319 126,914
1,261.9% 17,717 290,706 1,540.8% Adjusted revenue of Digital
Financial
Services (1)
4,102 3,063 (25.3)% 16,270 13,512 (17.0)% Revenue of Other Services
9,213 27,963 203.5% 23,719 83,468 251.9%
Total
adjusted revenue (1) 164,517 389,292 136.6% 553,584
1,048,728 89.4% Adjusted EBITDA for Digital
Entertainment (1)
52,607 105,198 100.0% 174,939 262,538 50.1% Adjusted EBITDA for
E-commerce (1) (175,414) (277,497) (58.2)% (444,280) (860,322)
(93.6)% Adjusted EBITDA for Digital
Financial Services (1)
(7,551) (9,805) (29.9)% (36,697) (32,156) 12.4% Adjusted EBITDA for
Other
Services (1)
(7,276) (17,403) (139.2)% (18,190) (54,058) (197.2)% Unallocated
expenses (2) (2,579) (4,138) (60.4)% (7,887) (10,003)
(26.8)%
Total adjusted EBITDA (1) (140,213) (203,645)
(45.2)% (332,115) (694,001) (109.0)% (1) For a
discussion of the use of non-GAAP financial measures, see “Non-GAAP
Financial Measures.” The 2017 comparative numbers for adjusted net
loss were restated due to a change in computation basis in 2018 to
exclude impact from changes in fair value of convertible notes. (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 December 31, 2018 Compared to Three Months
Ended December 31, 2017
Revenue
The table below sets forth revenue generated from our reported
segments. Amounts are expressed in thousands of US dollars
(“$”).
For the Three Months ended December 31,
2017 2018 $
% ofrevenue
$
% ofrevenue
YOY%
Revenue Service revenue Digital Entertainment
106,323 85.3 131,257 46.3 23.5% E-commerce and other services
17,754 14.3 112,356 39.7 532.8% Sales of goods 527 0.4 39,611 14.0
7,416.3%
Total revenue 124,604 100.0 283,224 100.0 127.3%
2017 2018 $
% of totaladjustedrevenue
$
% of totaladjustedrevenue
YOY%
Adjusted revenue Service revenue Digital Entertainment
141,883 86.3 231,352 59.4 63.1% E-commerce and other services
22,107 13.4 118,210 30.4 434.7% Sales of goods 527 0.3 39,730 10.2
7,438.9%
Total adjusted revenue 164,517 100.0 389,292 100.0
136.6%
Our total revenue increased by 127.3% to US$283.2 million in the
fourth quarter of 2018 from US$124.6 million in the fourth quarter
of 2017. Our total adjusted revenue increased by 136.6% to US$389.3
million in the fourth quarter of 2018 from US$164.5 million in the
fourth quarter of 2017. These increases were mainly driven by the
growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue
increased by 23.5% to US$131.3 million in the fourth quarter of
2018 from US$106.3 million in the fourth quarter of 2017. Adjusted
revenue increased by 63.1% to US$231.4 million in the fourth
quarter of 2018 from US$141.9 million in the fourth quarter of
2017. This increase was primarily due to our enlarged user base and
continued efforts to improve the monetization of our games.
- E-commerce and other services: Revenue
increased by 532.8% to US$112.4 million in the fourth quarter of
2018 from US$17.8 million in the fourth quarter of 2017. Adjusted
revenue increased by 434.7% to US$118.2 million in the fourth
quarter of 2018 from US$22.1 million in the fourth quarter of 2017.
This increase was primarily driven by the expansion of our
e-commerce marketplace. As we deepened our relationships and
engagement with sellers and buyers, and enhanced our e-commerce
ecosystem, more users are using our integrated and value-added
services, as well as ancillary services we provide.
- Sales of goods: Revenue increased by
7,416.3% to US$39.6 million in the fourth quarter of 2018 from
US$0.5 million in the fourth quarter of 2017. Adjusted revenue
increased by 7,438.9% to US$39.7 million in the fourth quarter of
2018 from US$0.5 million in the fourth quarter of 2017. The
increase was primarily due to the increase in our product
offerings.
Cost of Revenue
Our total cost of revenue increased by 188.1% to US$291.2
million in the fourth quarter of 2018 from US$101.1 million in the
fourth quarter of 2017.
- Digital Entertainment: Cost of revenue
increased by 29.2% to US$77.8 million in the fourth quarter of 2018
from US$60.2 million in the fourth quarter of 2017. The increase
was largely in line with revenue growth in our digital
entertainment business.
- E-commerce and other services: Cost of
revenue for our e-commerce and other services combined increased by
325.3% to US$171.2 million in the fourth quarter of 2018 from
US$40.3 million in the fourth quarter of 2017. The increase was
primarily due to costs incurred in line with the expansion of our
e-commerce marketplace, 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.
- Cost of goods sold: Cost of goods sold
increased by 7,392.5% to US$42.1 million in the fourth quarter of
2018 from US$0.6 million in the fourth quarter of 2017. The
increase was primarily due to the increase in our product
offerings.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 32.6% to
US$207.5 million in the fourth quarter of 2018 from US$156.4
million in the fourth quarter of 2017. The table below sets forth
the breakdown of our sales and marketing expenses of our two major
reporting segments. Amounts are expressed in thousands of US
dollars (“$”).
For the Three Monthsended
December 31,
2017 2018 YOY%
Sales and Marketing
Expenses $ $ Digital Entertainment 16,854 14,016 (16.8)%
E-commerce 134,961 184,477 36.7%
- Digital Entertainment: Sales and
marketing expenses decreased by 16.8% to US$14.0 million in the
fourth quarter of 2018 from US$16.9 million in the fourth quarter
of 2017. Spending on marketing efforts in 2017 was higher as we
expanded our games into new markets and launched new games.
For the Three Months
ended December 31,
2017 2018 Digital Entertainment $ $
Sales and marketing expenses 16,854 14,016 Adjusted revenue 141,883
231,352 Sales and marketing expenses as a percentage of adjusted
revenue 11.9% 6.1%
Sales and marketing expenses as a percentage
of adjusted revenue decreased to 6.1% in the fourth quarter of 2018
from 11.9% in the fourth quarter of 2017 as we continue to improve
the efficiency of our marketing efforts.
- E-commerce: Sales and marketing
expenses increased by 36.7% to US$184.5 million in the fourth
quarter of 2018 from US$135.0 million in the fourth quarter of
2017. The increase in marketing efforts was aligned with our
strategy to fully capture the market growth opportunity and was
primarily attributable to the ramping up of offline and online
digital marketing and other promotions on our platform that were
designed to increase our user base and enhance user engagement,
particularly during the festive seasons in the fourth quarter.
For the Three Monthsended
December 31,
2017 2018 E-commerce $ $ Sales and
marketing expenses 134,961 184,477 GMV 1,578,599 3,425,158 Sales
and marketing expenses as a percentage of GMV 8.5% 5.4%
Sales and marketing expenses as a percentage
of GMV decreased to 5.4% in the fourth quarter of 2018 from 8.5% in
the fourth quarter of 2017 as we continue to improve the efficiency
of our marketing efforts and leverage organic user acquisition
opportunities.
General and Administrative Expenses
Our general and administrative expenses increased by 68.4% to
US$87.2 million in the fourth quarter of 2018 from US$51.8 million
in the fourth quarter of 2017. This increase was primarily due to
the expansion of our staff force, the increase in office facilities
and related expenses, impairment loss on our assets, as well as the
increase in professional fees and other expenses.
Research and Development Expenses
Our research and development expenses increased by 207.3% to
US$26.6 million in the fourth quarter of 2018 from US$8.7 million
in the fourth quarter of 2017, primarily due to the increase in our
research and development staff force as we expanded and enriched
our product offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consists of interest income,
interest expense, investment gain (loss), fair value change for
convertible notes and foreign exchange gain (loss). The amount was
a net non-operating income of US$53.0 million in the fourth quarter
of 2018, compared to a net non-operating loss of US$62.3 million in
the fourth quarter of 2017. The non-operating gain in 2018 was
primarily due to a fair value gain of US$61.2 million in this
quarter on the convertible notes issued before our initial public
offering partially offset by interest expense on our convertible
notes issued in 2018, while the net non-operating loss in 2017 was
primarily due to a fair value loss of US$52.0 million in the
quarter on the convertible notes issued before our initial public
offering coupled with interest expense on these convertible
notes.
Income Tax Expense
We had a net income tax expense of US$3.0 million and US$8.7
million despite a group net loss position in the fourth quarter of
2018 and 2017, respectively. This was primarily due to withholding
tax and corporate income tax expenses incurred by our digital
entertainment segment, partially offset by deferred tax assets
recognized during the period.
Share of Results of Equity Investees
We had share of losses of equity investees of US$1.1 million in
the fourth quarter of 2018, compared with a loss of US$1.0 million
in the fourth quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$276.1
million and US$263.1 million in the fourth quarter of 2018 and
2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove
share-based compensation expenses and fair value change for
convertible notes, was US$321.2 million and US$199.6 million in the
fourth quarter of 2018 and 2017, respectively.
Full Year Ended December 31, 2018 Compared to Full Year Ended
December 31, 2017
Revenue
The table below sets forth revenue generated from our reported
segments. Amounts are expressed in thousands of US dollars
(“$”).
For the Full Year ended December 31,
2017 2018 $
% ofrevenue
$
% ofrevenue
YOY%
Revenue Service revenue Digital Entertainment
365,167 88.2 462,464 55.9 26.6% E-commerce and other services
47,444 11.4 270,049 32.7 469.2% Sales of goods 1,579 0.4 94,455
11.4 5,882.0%
Total revenue 414,190 100.0 826,968 100.0
99.7%
2017 2018 $
% of totaladjustedrevenue
$
% of totaladjustedrevenue
YOY%
Adjusted revenue Service revenue Digital Entertainment
495,878 89.6 661,042 63.0 33.3% E-commerce and other services
56,127 10.1 292,954 27.9 421.9% Sales of goods 1,579 0.3 94,732 9.1
5,899.4%
Total adjusted revenue 553,584 100.0 1,048,728
100.0 89.4%
Our total revenue increased by 99.7% to US$827.0 million for the
full year ended December 31, 2018 from US$414.2 million for the
full year ended December 31, 2017. Our total adjusted revenue
increased by 89.4% to US$1,048.7 million for the full year ended
December 31, 2018 from US$553.6 million for the full year ended
December 31, 2017. These increases were mainly driven by the growth
in each of the segments detailed as follows:
- Digital Entertainment: Revenue
increased by 26.6% to US$462.5 million for the full year ended
December 31, 2018 from US$365.2 million for the full year ended
December 31, 2017. Adjusted revenue increased by 33.3% to US$661.0
million for the full year ended December 31, 2018 from US$495.9
million in the full year ended December 31, 2017. This increase was
primarily due to the growth of our user base in 2018, as we
launched new games and increased the number of paying users.
- E-commerce and other services: Revenue
increased by 469.2% to US$270.0 million for the full year ended
December 31, 2018 from US$47.4 million for the full year ended
December 31, 2017. Adjusted revenue increased by 421.9% to US$293.0
million for the full year ended December 31, 2018 from US$56.1
million in the full year ended December 31, 2017. This increase was
primarily driven by the expansion of our e-commerce marketplace. As
we deepened our relationships and engagement with our sellers and
buyers, and enhanced our e-commerce ecosystem, more users are using
our integrated and value-added services, as well as ancillary
services we provide.
- Sales of goods: Revenue increased by
5,882.0% to US$94.5 million for the full year ended December 31,
2018 from US$1.6 million for the full year ended December 31, 2017.
Adjusted revenue increased by 5,899.4% to US$94.7 million for the
full year ended December 31, 2018 from US$1.6 million in the full
year ended December 31, 2017. The increase was primarily due to
increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 148.5% to US$812.2
million for the full year ended December 31, 2018 from US$326.9
million for the full year ended December 31, 2017. This increase
was in line with the overall growth of our businesses:
- Digital Entertainment: Cost of revenue
increased by 22.6% to US$267.4 million for the full year ended
December 31, 2018 from US$218.0 million for the full year ended
December 31, 2017. The increase was largely in line with revenue
growth in our digital entertainment business.
- E-commerce and other services: Cost of
revenue for our e-commerce and other services combined increased by
316.1% to US$446.3 million for the full year ended December 31,
2018 from US$107.3 million for the full year ended December 31,
2017. The increase was primarily due to costs incurred in line with
the expansion of our e-commerce marketplace, 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.
- Cost of goods sold: Cost of goods sold
increased by 5,939.8% to US$98.6 million for the fill year ended
December 31, 2018 from US$1.6 million for the full year ended
December 31, 2017. The increase was primarily due to the increase
in our product offerings.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 65.5% to
US$705.0 million for the full year ended December 31, 2018 from
US$426.0 million for the full year ended December 31, 2017. The
table below set forth the breakdown of our sales and marketing
expenses of our two major reporting segments. Amounts are expressed
in thousands of US dollars (“$”).
For the Full Yearended December
31,
2017 2018 YOY%
Sales and Marketing
Expenses $ $ Digital Entertainment 61,472 68,222 11.0%
E-commerce 339,768 602,651 77.4%
- Digital Entertainment: Sales and
marketing expenses increased by 11.0% to US$68.2 million for the
full year ended December 31, 2018 from US$61.5 million for the full
year ended December 31, 2017. The increase was primarily due to our
continued efforts to expand our existing games into new markets and
the launch of new games.
For the Full Yearended December
31
2017 2018 Digital Entertainment $ $
Sales and marketing expenses 61,472 68,222 Adjusted revenue 495,878
661,042 Sales and marketing expenses as a percentage of adjusted
revenue 12.4% 10.3%
Sales and marketing expenses as a percentage
of adjusted revenue decreased to 10.3% for the full year ended
December 31, 2018 from 12.4% for the full year ended December 31,
2017 as we continue to improve the efficiency of our marketing
efforts.
- E-commerce: Sales and marketing
expenses increased by 77.4% to US$602.7 million for the full year
ended December 31, 2018 from US$339.8 million for the full year
ended December 31, 2017. The increase in marketing efforts was
aligned with our strategy to fully capture the market growth
opportunity and was primarily attributable to the ramping up of
offline and online digital marketing and other promotions on our
platform that were designed to increase our user base and enhance
user engagement.
For the Full Yearended December
31,
2017 2018 E-commerce $ $ Sales and
marketing expenses 339,768 602,651 GMV 4,112,732 10,279,276 Sales
and marketing expenses as a percentage of GMV 8.3% 5.9%
Sales and marketing expenses as a percentage
of GMV decreased to 5.9% for the full year ended December 31, 2018
from 8.3% for the full year ended December 31, 2017 as we continue
to improve the efficiency of our marketing efforts and leverage
organic user acquisition opportunities.
General and Administrative Expenses
Our general and administrative expenses increased by 74.6% to
US$240.8 million for the full year ended December 31, 2018 from
US$137.9 million for the full year ended December 31, 2017. This
increase was primarily due to the expansion of our staff force, the
increase in office facilities and related expenses, impairment loss
on our assets, as well as the increase in professional fees and
other expenses.
Research and Development Expenses
Our research and development expenses increased by 130.3% to
US$67.5 million for the full year ended December 31, 2018 from
US$29.3 million for the full year ended December 31, 2017,
primarily due to an 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 consists of interest income,
interest expense, investment gain (loss), fair value change for
convertible notes and foreign exchange gain (loss). The amount was
a net non-operating income of US$34.9 million for the full year
ended December 31, 2018, compared to a net non-operating loss of
US$46.2 million for the full year ended December 31, 2017. The net
non-operating income in 2018 was primarily due to a fair value gain
of US$41.3 million on the convertible notes issued before our
initial public offering partially offset by interest expenses on
our convertible notes, while the net non-operating loss in 2017 was
primarily due to a fair value loss of US$52.0 million and interest
expenses on the convertible notes, partially offset by an
investment gain arising from the disposal of and a net gain arising
from re-measurement of our investments.
Income Tax Expense
We had an income tax expense of US$4.1 million and US$10.7
million despite a group net loss position for the full year ended
December 31, 2018 and 2017, respectively. This was primarily due to
withholding tax and corporate income tax expenses incurred on our
digital entertainment segment, partially offset by deferred tax
assets recognized during the year.
Share of Results of Equity Investees
We had share of losses of equity investees of US$3.1 million for
the full year ended December 31, 2018, compared with US$1.9 million
for the full year ended December 31, 2017.
Net Loss
As a result of the foregoing, we had net losses of US$961.0
million and US$561.2 million for the full year ended December 31,
2018 and 2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove
share-based compensation expenses and fair value change for
convertible notes, was US$944.2 million and US$480.6 million for
the full year ended December 31, 2018 and 2017, respectively.
Webcast and Conference Call Information
The Company’s management 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: 7:00 PM U.S. Eastern Time on February 26,
2019
8:00 AM Singapore / Hong Kong Time on
February 27, 2019
Webcast link:
https://services.choruscall.com/links/se190226.html
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: 7169346
A replay of the conference call will be available at the
Company’s investor relations website
(https://www.seagroup.com/investor/financials). An archived webcast
will be available at the same link above.
For enquiries, please contact:
Investors / analysts: ir@seagroup.com
Media: media@seagroup.com
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 certain
revenues that were net-off against their corresponding 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 certain revenues that were net-off
against their corresponding 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
before share-based compensation and changes in fair value of
convertible notes. 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 and changes in fair
value of convertible notes are significant expenses.
- “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 December 31, 2018
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $
Revenue 131,257 121,660(1) 2,344 27,963 - 283,224
Changes in deferred revenue 100,095 - - - - 100,095 Sales
incentives net-off - 5,254 719 - -
5,973
Adjusted revenue 231,352 126,914(2)
3,063 27,963 - 389,292
Operating income (loss) 16,121 (290,616) (10,314) (19,952)
(20,196) (324,957) Net effect of changes in deferred revenue and
its related cost 78,659 - - - - 78,659 Depreciation and
amortization 10,418 13,119 509 2,549 - 26,595 Share-based
compensation - - - - 16,058
16,058
Adjusted EBITDA 105,198 (277,497)
(9,805) (17,403) (4,138) (203,645)
For the Three Months ended December 31, 2017
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated
$ $ $ $ $ $
Revenue 106,323 4,966(1) 4,102 9,213 -
124,604 Changes in deferred revenue 35,560 - - - - 35,560 Sales
incentives net-off - 4,353 - - -
4,353
Adjusted revenue 141,883 9,319(2) 4,102
9,213 - 164,517
Operating income
(loss) 18,102 (178,780) (8,038) (8,269) (14,156) (191,141) Net
effect of changes in deferred revenue and its related cost
26,724
- - - -
26,724
Depreciation and amortization 7,781 3,366 487 993 - 12,627
Share-based compensation - - - - 11,577
11,577
Adjusted EBITDA 52,607 (175,414)
(7,551) (7,276) (2,579) (140,213) (1)
For the fourth quarter of 2018, revenue of $121,660 included
marketplace revenue of $82,483 and product revenue of $39,177 net
of sales incentives. For the fourth quarter of 2017, revenue of
$4,966 included marketplace revenue of $4,558 and product revenue
of $408, net of sales incentives. (2) For the fourth quarter of
2018, adjusted revenue of $126,914 included marketplace revenue of
$87,618 and product revenue of $39,296. For the fourth quarter of
2017, adjusted revenue of $9,319 included marketplace revenue of
$8,911 and product revenue of $408, net of sales incentives. (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.
For the Year
ended December 31, 2018
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $
Revenue 462,464 269,578(1) 11,458 83,468 - 826,968
Changes in deferred revenue 198,578 - - - - 198,578 Sales
incentives net-off - 21,128 2,054 - -
23,182
Adjusted revenue 661,042 290,706(2)
13,512 83,468 - 1,048,728
Operating income (loss) 69,449 (893,489) (34,056) (62,548)
(68,124) (988,768) Net effect of changes in deferred revenue and
its related cost 157,918 - - - - 157,918 Depreciation and
amortization 35,171 33,167 1,900 8,490 - 78,728 Share-based
compensation - - - - 58,121
58,121
Adjusted EBITDA 262,538 (860,322)
(32,156) (54,058) (10,003) (694,001)
For the Year ended December 31, 2017
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $
Revenue 365,167
9,034(1) 16,270 23,719 - 414,190 Changes in deferred revenue
130,711 - - - - 130,711 Sales incentives net-off - 8,683
- - - 8,683
Adjusted revenue
495,878 17,717(2) 16,270 23,719 -
553,584
Operating income (loss) 45,637
(452,233) (38,038) (21,199) (36,523) (502,356) Net effect of
changes in deferred revenue and its related cost
100,678
- - - -
100,678
Depreciation and amortization 28,624 7,953 1,341 3,009 - 40,927
Share-based compensation - - - - 28,636
28,636
Adjusted EBITDA 174,939 (444,280)
(36,697) (18,190) (7,887) (332,115) (1)
For the year of 2018, revenue of $269,578 included
marketplace revenue of $176,434 and product revenue of $93,144, net
of sales incentives. For the year of 2017, revenue of $9,034
included marketplace revenue of $8,626 and product revenue of $408,
net of sales incentives. (2) For the year of 2018, adjusted revenue
of $290,706 included marketplace revenue of $197,285 and product
revenue of $93,421. For the year of 2017, adjusted revenue of
$17,717 included marketplace revenue of $17,309 and product revenue
of $408, net of sales incentives. (3) A combination of multiple
business activities that does not meet the quantitative thresholds
to qualify as reportable segments are grouped together as “Other
Services.” (4) Unallocated expenses are mainly related to
share-based compensation and general and corporate administrative
costs such as professional fees and other miscellaneous items that
are not allocated to segments. The expenses are excluded from
segment results as they are not reviewed by the CODM as part of
segment performance.
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS Amounts expressed in thousands of US
dollars (“$”) except for number of shares & per share data
For the Three Monthsended
December 31,
For the Yearended December
31,
2017 2018 2017
2018 $ $ $ $ (unaudited) (unaudited)
(unaudited) (unaudited)
Revenue Service revenue Digital
Entertainment 106,323 131,257 365,167 462,464 E-commerce and other
services 17,754 112,356 47,444 270,049 Sales of goods 527
39,611 1,579 94,455
Total
revenue 124,604 283,224 414,190 826,968
Cost of
revenue Cost of service Digital Entertainment (60,240) (77,846)
(217,986) (267,359) E-commerce and other services (40,257)
(171,229) (107,260) (446,281) Cost of goods sold (562)
(42,108) (1,632) (98,570) Total cost of
revenue (101,059) (291,183) (326,878)
(812,210)
Gross profit 23,545 (7,959)
87,312 14,758
Operating income
(expenses): Other operating income 2,157 4,291 3,497 9,799
Sales and marketing expenses (156,418) (207,487) (425,974)
(705,015) General and administrative expenses (51,754) (87,160)
(137,868) (240,781) Research and development expenses (8,671)
(26,642) (29,323) (67,529)
Total
operating expenses (214,686) (316,998) (589,668)
(1,003,526)
Operating loss Interest
income 760 2,953 2,922 11,520 Interest expense (9,043) (9,882)
(26,501) (31,295) Investment (loss) gain, net (352) (771) 33,591
8,603 Changes in fair value of convertible notes (51,950) 61,187
(51,950) 41,259 Foreign exchange (loss) gain (1,698) (503)
(4,215) 4,801
Loss before income tax and
share of results of equity investees (253,424) (271,973)
(548,509) (953,880) Income tax expense (8,730) (2,993) (10,745)
(4,088) Share of results of equity investees (986) (1,092)
(1,912) (3,066)
Net loss (263,140)
(276,058) (561,166) (961,034) Net loss (profit) attributable
to non-controlling interests 480 (565) 681
(207)
Net loss attributable to Sea Limited’s ordinary
shareholders (262,660) (276,623) (560,485)
(961,241) Adjusted net loss (1) (199,613) (321,187)
(480,580) (944,172) Loss per share: Basic and diluted (0.90)
(0.81) (2.72) (2.84) Weighted average
shares used in loss per share computation: Basic and diluted
293,324,598 340,397,564 205,727,195 338,472,987 (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,
As ofDecember 31,
2017 2018 $ $ (unaudited)
ASSETS
Current assets Cash and cash equivalents 1,347,361 1,002,841
Restricted cash 95,300 254,100 Accounts receivable, net 61,846
97,782 Prepaid expenses and other assets 186,181 312,387
Inventories, net 9,790 37,689 Short-term investment 18,000 690
Amounts due from related parties 2,235 5,224
Total current assets 1,720,713 1,710,713
Non-current
assets Property and equipment, net 74,348 192,357 Intangible
assets, net 37,333 12,887 Long-term investments 28,216 111,022
Prepaid expenses and other assets 46,297 69,065 Restricted cash
2,317 2,371 Deferred tax assets 48,104 63,302 Goodwill 30,952
30,952 Total non-current assets 267,567
481,956
Total assets 1,988,280 2,192,669
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As ofDecember 31,
As ofDecember 31,
2017 2018 $ $ (unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY Current
liabilities Accounts payable 8,644 37,163 Accrued expenses and
other payables 285,248 636,880 Advances from customers 27,155
29,355 Amount due to related parties 36,790 46,025 Short-term bank
borrowings 2,013 856 Deferred revenue 268,241 426,675 Income taxes
payable 9,614 9,539 Total current liabilities
637,705 1,186,493
Non-current
liabilities Accrued expenses and other payables 7,547
7,894 Long-term bank borrowings
-
1,026 Deferred revenue 133,481 171,262 Convertible notes 726,950
1,061,796 Deferred tax liabilities 4,378 679 Unrecognized tax
benefits 3,088 2,974 Total non-current
liabilities 875,444 1,245,631
Total
liabilities 1,513,149 2,432,124
Shareholders’ equity Class A Ordinary shares 91 94
Class B Ordinary shares 76 76 Additional paid-in capital 1,564,656
1,809,232 Accumulated other comprehensive income 10,701 15,199
Statutory reserves 46 46 Accumulated deficit (1,106,545)
(2,067,786)
Total Sea Limited shareholders’ equity
(deficit) 469,025 (243,139) Non-controlling interests 6,106
3,684
Total shareholders’ equity
(deficit) 475,131 (239,455)
Total liabilities and shareholders’
equity (deficit)
1,988,280 2,192,669
UNAUDITED INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS Amounts expressed in thousands of
US dollars (“$”)
For the Three months
endedDecember 31,
For the Year endedDecember
31,
2017 2018 2017
2018 $ $ $ $ (unaudited) (unaudited)
(unaudited) Net cash used in operating activities (88,388)
(138,191) (259,228) (495,220) Net cash used in investing activities
(51,140) (65,590) (118,614) (224,528) Net cash generated from
financing activities 927,401 1,522 1,623,843 546,628 Effect of
foreign exchange rate changes on cash, cash equivalents and
restricted cash 3,925 2,193 8,153 (12,546) Net increase (decrease)
in cash, cash equivalents and restricted cash 791,798 (200,066)
1,254,154 (185,666) Cash, cash equivalents and restricted cash at
beginning of the period 653,180 1,459,378 190,824
1,444,978 Cash, cash equivalents and
restricted cash at end of the period 1,444,978 1,259,312
1,444,978 1,259,312
1
UNAUDITED 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 December 31, 2018
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $
Revenue 131,257 121,660 2,344 27,963 - 283,224
Operating income (loss) 16,121 (290,616)
(10,314) (19,952) (20,196) (324,957)
Non-operating income, net 52,984 Income tax expense (2,993) Share
of results of equity investees (1,092)
Net loss (276,058)
For the Three Months ended December 31, 2017
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $
Revenue 106,323 4,966
4,102 9,213 - 124,604
Operating income (loss)
18,102 (178,780) (8,038) (8,269)
(14,156) (191,141) Non-operating loss, net (62,283) Income
tax expense (8,730) Share of results of equity investees (986)
Net loss (263,140)
For the Year ended December 31,
2018
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $
Revenue 462,464 269,578 11,458 83,468 - 826,968
Operating income (loss) 69,449
(893,489) (34,056) (62,548) (68,124)
(988,768) Non-operating income, net 34,888 Income tax expense
(4,088) Share of results of equity investees (3,066)
Net
loss (961,034)
For the Year ended December 31,
2017
DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $
Revenue 365,167 9,034
16,270 23,719 - 414,190
Operating income (loss)
45,637 (452,233) (38,038) (21,199)
(36,523) (502,356) Non-operating loss, net (46,153) Income
tax expense (10,745) Share of results of equity investees (1,912)
Net loss (561,166) (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
September 30,2018
For the Three Monthsended
December 31,2018
Digital Entertainment Unit Quarterly
active users millions 176.1 216.2 Monthly active users (last month)
millions 104.5 135.7 Quarterly paying users millions 7.2 11.9
Average revenue per user US$ 0.8 1.1 Average revenue per paying
user US$ 20.1 19.4
E-commerce Gross GMV US$
millions 2,690.9 3,425.2 Gross orders millions 158.5 206.9
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