Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced
its financial results for the quarter ended March 31, 2019.
First Quarter 2019 Highlights
- Group
- Total adjusted revenue was US$578.8
million, up 193.8% year-on-year from US$197.0 million for the first
quarter of 2018 and up 48.7% quarter-on-quarter from US$389.3
million for the fourth quarter of 2018.
- Total adjusted EBITDA was US$(32.0)
million, compared to US$(144.7) million for the first quarter of
2018 and US$(203.6) million for the fourth quarter of 2018.
- Digital Entertainment
- Adjusted revenue was US$393.3 million,
up 169.3% year-on-year from US$146.0 million for the first quarter
of 2018 and an increase of 70.0% quarter-on-quarter from US$231.4
million for the fourth quarter of 2018.
- Adjusted EBITDA was US$225.8 million,
up 310.5% year-on-year from US$55.0 million for the first quarter
of 2018 and an increase of 114.7% quarter-on-quarter from US$105.2
million for the fourth quarter of 2018.
- Adjusted EBITDA margin increased to
57.4% for the first quarter of 2019, from 37.7% for the first
quarter of 2018 and 45.5% for the fourth quarter of 2018.
- Quarterly active users (“QAUs”) reached
271.6 million, an increase of 114.4% year-on-year from 126.7
million for the first quarter of 2018 and up 25.6%
quarter-on-quarter from 216.2 million for the fourth quarter of
2018.
- Quarterly paying users grew strongly,
accounting for 7.6% of QAUs for the first quarter of 2019,
increasing from 5.7% for the same period in 2018, and 5.5% in the
fourth quarter of 2018.
- Average revenue per user was US$1.4
compared to US$1.2 for the first quarter of 2018 and US$1.1 for the
fourth quarter of 2018.
- Free Fire continued to grow and
recently achieved more than 450 million registered users and more
than 50 million peak daily active users from over 130 markets
worldwide. According to App Annie, in the first quarter of 2019,
Free Fire was the second most downloaded mobile game globally
across the Apple App Store and Google Play Store combined and the
top mobile game in Latin America by monthly active users and
downloads1.
- Our inaugural Free Fire World Cup
attracted more than 27 million online views in total and recorded
peak concurrent viewers of over 1.1 million on YouTube.
- In April 2019, we held Garena World
2019, our region’s largest eSports event, in Bangkok, Thailand. The
event attracted approximately 270 thousand visitors, with total
online views for the various tournaments topping 30 million.
- We recently announced that we will be
publishing Call of Duty®: Mobile, a mobile version of the classic
action game developed jointly by Activision and Tencent Games,
under our right of first refusal arrangement with Tencent.
1 Latin America rankings data for App Annie is based on
Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay. No monthly
active user data available for Uruguay.
- E-commerce
- Adjusted revenue was US$149.2 million,
up 342.1% year-on-year from US$33.7 million for the first quarter
of 2018. It was also up 17.6% quarter-on-quarter from US$126.9
million for the fourth quarter of 2018.
- Adjusted revenue included US$102.0
million of marketplace revenue1, up 362.6% year-on-year from
US$22.0 million for the first quarter of 2018 and up 16.4%
quarter-on-quarter from US$87.6 million for the fourth quarter of
2018, and US$47.2 million of product revenue2, up 303.6%
year-on-year from US$11.7 million for the first quarter of 2018 and
up 20.2% quarter-on-quarter from US$39.3 million in the fourth
quarter of 2018.
- Gross merchandise value (“GMV”) was
US$3.5 billion, an increase of 81.8% year-on-year from US$1.9
billion for the first quarter of 2018 and up 3.0%
quarter-on-quarter from US$3.4 billion for the fourth quarter of
2018.
- Adjusted revenue as a percentage of GMV
increased to 4.2% in the first quarter of 2019, up from 3.7% in the
previous quarter and 1.7% for the same period a year ago.
- Gross orders for the quarter totaled
203.5 million, an increase of 82.7% year-on-year from 111.4 million
for the first quarter of 2018 and on par with the 206.9 million for
the fourth quarter of 2018.
- Sales and marketing as a percentage of
GMV further decreased to 4.2% in the first quarter of 2019, down
from 5.4% in the previous quarter and 6.6% for the same period a
year ago. Sales and marketing expenses in absolute dollar terms
decreased quarter-on-quarter in the first quarter of 2019 to
US$147.9 million compared to US$184.5 million in the fourth quarter
of 2018.
- Adjusted EBITDA was US$(235.3) million,
compared to US$(179.6) million for the first quarter of 2018 and
US$(277.5) million for the fourth quarter of 2018.
- In Taiwan, Shopee recorded a positive
quarterly adjusted EBITDA before allocation of the headquarters’
common expenses in the first quarter of 2019.
- In Indonesia, Shopee’s largest market,
Shopee recorded 83.5 million orders in the first quarter of 2019,
or a daily average of 0.9 million, further extending its leadership
as the largest e-commerce platform in the market.
- According to App Annie, in the first
quarter of 2019, Shopee was the most downloaded app in the Shopping
Category in Southeast Asia and in Taiwan.
1 Marketplace revenue mainly consists of transaction-based fees
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 Months
ended March 31,
2018 2019 $ $ YOY%
Revenue Service revenue Digital Entertainment 110,658
173,399 56.7 % E-commerce and other services 32,451 130,663 302.6 %
Sales of goods 11,935 47,804 300.5 %
155,044 351,866 126.9 %
Cost of revenue Cost of
service Digital Entertainment (63,572 ) (84,642 ) 33.1 % E-commerce
and other services (70,793 ) (174,365 ) 146.3 % Cost of goods sold
(12,154 ) (53,403 ) 339.4 % (146,519 )
(312,410 ) 113.2 %
Gross profit 8,525
39,456 362.8 % Other operating income 729 3,453 373.7 %
Sales and marketing expenses (152,149 ) (177,978 ) 17.0 % General
and administrative expenses (44,487 ) (75,628 ) 70.0 % Research and
development expenses (10,712 ) (28,509 ) 166.1 %
Total operating expenses (206,619 ) (278,662 )
34.9 %
Operating loss (198,094 ) (239,206 ) 20.8 %
Non-operating loss, net (18,247 ) (442,780 )(1) 2,326.6 % Income
tax credit (expense) 755 (7,205 ) (1,054.3 )% Share of results of
equity investees (583 ) (418 ) (28.3 )%
Net
loss (216,169 ) (689,609 ) 219.0 %
Net loss
excluding share-based compensation and changes in fair value of the
2017 convertible notes (186,702 ) (237,290 ) 27.1
% Adjusted revenue of Digital Entertainment (2) 146,030
393,306 169.3 % Adjusted revenue of E-commerce (2) 33,744 149,191
342.1 % Adjusted revenue of Digital Financial Services (2) 3,923
2,836 (27.7 )% Revenue of Other Services 13,342
33,485 151.0 %
Total adjusted revenue (2)
197,039 578,818 193.8 % Adjusted
EBITDA for Digital Entertainment (2) 55,004 225,816 310.5 %
Adjusted EBITDA for E-commerce (2) (179,649 ) (235,253 ) 31.0 %
Adjusted EBITDA for Digital Financial Services (2) (8,570 ) (11,912
) 39.0 % Adjusted EBITDA for Other Services (2) (9,868 ) (8,484 )
(14.0 )% Unallocated expenses (3) (1,591 ) (2,130 )
33.9 %
Total adjusted EBITDA (2) (144,674 )
(31,963 ) (77.9 )%
(1) This was primarily due to fair value loss of $436.1 million
on the 2017 convertible notes as our share prices during the
quarter significantly exceeded the conversion prices of the 2017
convertible notes.
(2) For a discussion of the use of non-GAAP financial measures,
see “Non-GAAP Financial Measures.”
(3) Unallocated expenses are mainly related to share-based
compensation and general and corporate administrative costs such as
professional fees and other miscellaneous items that are not
allocated to segments. These expenses are excluded from segment
results as they are not reviewed by the Chief Operation Decision
Maker (“CODM”) as part of segment performance.
Three Months Ended March 31, 2019 Compared to Three Months
Ended March 31, 2018
Revenue
The table below sets forth revenue and adjusted revenue
generated from our reported segments. Amounts are expressed in
thousands of US dollars (“$”).
For the Three Months ended March 31,
2018 2019 $ % of
revenue
$ % of
revenue
YOY%
Revenue Service revenue Digital Entertainment
110,658 71.4 173,399 49.3 56.7 % E-commerce and other services
32,451 20.9 130,663 37.1 302.6 % Sales of goods 11,935 7.7 47,804
13.6 300.5 %
Total revenue 155,044 100.0 351,866 100.0 126.9
%
2018 2019 $
% of total
adjusted
revenue
$
% of total
adjusted
revenue
YOY%
Adjusted revenue Service revenue Digital
Entertainment 146,030 74.1 393,306 67.9 169.3 % E-commerce and
other services 39,074 19.8 137,615 23.8 252.2 % Sales of goods
11,935 6.1 47,897 8.3 301.3 %
Total adjusted revenue 197,039
100.0 578,818 100.0 193.8 %
Our total revenue increased by 126.9% to US$351.9 million in the
first quarter of 2019 from US$155.0 million in the first quarter of
2018. Our total adjusted revenue increased by 193.8% to US$578.8
million in the first quarter of 2019 from US$197.0 million in the
first quarter of 2018. These increases were mainly driven by the
growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue
increased by 56.7% to US$173.4 million in the first quarter of 2019
from US$110.7 million in the first quarter of 2018. Adjusted
revenue increased by 169.3% to US$393.3 million in the first
quarter of 2019 from US$146.0 million in the first quarter of 2018.
This increase was primarily due to the increase of our active user
base as well as the deepened paying user penetration as we continue
to bring new and engaging content to our users and enhance the game
and monetization features based on a deep understanding of local
preferences and conditions as well as our strong efforts in eSports
and community-building.
- E-commerce and other services: Revenue
increased by 302.6% to US$130.7 million in the first quarter of
2019 from US$32.5 million in the first quarter of 2018. Adjusted
revenue increased by 252.2% to US$137.6 million in the first
quarter of 2019 from US$39.1 million in the first quarter of 2018.
This increase was primarily driven by the growth of our e-commerce
marketplace, and development in each of our marketplace revenue
streams – transaction-based fees, value-added services, and
advertising. 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
300.5% to US$47.8 million in the first quarter of 2019 from US$11.9
million in the first quarter of 2018. Adjusted revenue increased by
301.3% to US$47.9 million in the first quarter of 2019 from US$11.9
million in the first quarter of 2018. The increase was primarily
due to the increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 113.2% to US$312.4
million in the first quarter of 2019 from US$146.5 million in the
first quarter of 2018.
- Digital Entertainment: Cost of revenue
increased by 33.1% to US$84.6 million in the first quarter of 2019
from US$63.6 million in the first quarter of 2018. The increase was
largely in line with revenue growth in our digital entertainment
business. Improvement in gross profit margins was largely due to
higher share from our self-developed game.
- E-commerce and other services: Cost of
revenue for our e-commerce and other services combined increased by
146.3% to US$174.4 million in the first quarter of 2019 from
US$70.8 million in the first quarter of 2018. 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 339.4% to US$53.4 million in the first quarter of 2019
from US$12.2 million in the first quarter of 2018. The increase was
largely in line with the increase in our product offerings.
Other Operating Income
Our other operating income increased by 373.7% to US$3.5 million
in the first quarter of 2019 from US$0.7 million in the first
quarter of 2018. The increase was primarily due to an increase in
sponsorship from partners who participated in our events and
tournaments.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 17.0% to
US$178.0 million in the first quarter of 2019 from US$152.1 million
in the first quarter of 2018. The table below sets forth the
breakdown of the sales and marketing expenses of our two major
reporting segments. Amounts are expressed in thousands of US
dollars (“$”).
For the Three Months
ended March 31,
2018 2019 YOY%
Sales
and Marketing Expenses $ $ Digital Entertainment
16,243 19,989 23.1% E-commerce 127,198 147,897 16.3%
- Digital Entertainment: Sales and
marketing expenses increased by 23.1% to US$20.0 million in the
first quarter of 2019 from US$16.2 million in the first quarter of
2018. The increase was primarily due to the new game launch.
For the Three Months
ended March 31,
2018 2019 Digital Entertainment
$ $ Sales and marketing expenses 16,243 19,989 Adjusted
revenue 146,030 393,306 Sales and marketing expenses as a
percentage of adjusted revenue 11.1% 5.1%
Sales and marketing expenses as a percentage of adjusted revenue
decreased to 5.1% in the first quarter of 2019 from 11.1% in the
first quarter of 2018 as we continue to improve the efficiency of
our marketing efforts.
- E-commerce: Sales and marketing
expenses increased by 16.3% to US$147.9 million in the first
quarter of 2019 from US$127.2 million in the first quarter of 2018.
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 as well as higher staff compensation and benefit
costs.
For the Three Months
ended March 31,
2018 2019 E-commerce $ $
Sales and marketing expenses 127,198 147,897 GMV 1,941,403
3,529,326 Sales and marketing expenses as a percentage of GMV 6.6%
4.2%
Sales and marketing expenses as a percentage of GMV decreased to
4.2% in the first quarter of 2019 from 6.6% in the first quarter of
2018 as we continue to improve the efficiency of our marketing
efforts.
General and Administrative Expenses
Our general and administrative expenses increased by 70.0% to
US$75.6 million in the first quarter of 2019 from US$44.5 million
in the first quarter of 2018. This increase was primarily due to
the expansion of our staff force and the increase in office
facilities and related expenses.
Research and Development Expenses
Our research and development expenses increased by 166.1% to
US$28.5 million in the first quarter of 2019 from US$10.7 million
in the first quarter of 2018, primarily due to the increase in
research and development staff force.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income,
interest expense, investment gain (loss), fair value change for the
2017 convertible notes and foreign exchange gain (loss). We
recorded a net non-operating loss of US$442.8 million in the first
quarter of 2019, compared to a net non-operating loss of US$18.2
million in the first quarter of 2018. This was primarily due to
fair value loss of US$436.1 million on the 2017 convertible notes
as our share prices during the quarter significantly exceeded the
conversion prices of the 2017 convertible notes.
Income Tax Expense
We had a net income tax expense of US$7.2 million in the first
quarter of 2019 and net income tax credit of US$0.8 million in the
first quarter of 2018. The income tax expense in the first quarter
of 2019 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 loss of equity investees of US$0.4 million in
the first quarter of 2019, compared with US$0.6 million in the
first quarter of 2018.
Net Loss
As a result of the foregoing, we had net losses of US$689.6
million and US$216.2 million in the first quarter of 2019 and 2018,
respectively. The higher net losses were primarily due to fair
value loss of US$436.1 million recognized in the quarter arising
from fair value accounting treatment for the 2017 convertible notes
issued before our IPO.
Net Loss Excluding Share-based Compensation and Changes in
Fair Value of the 2017 Convertible Notes
Net loss excluding share-based compensation and changes in fair
value of the 2017 convertible notes, was US$237.3 million and
US$186.7 million in the first quarter of 2019 and 2018,
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: 8:00 PM U.S. Eastern Time on May 21, 2019
8:00 AM Singapore / Hong Kong Time on May 22, 2019
Webcast link:
https://services.choruscall.com/links/se190521.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: 9462467
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.
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 businesses
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 businesses and 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 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 unaudited 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, 2019
Digital
Entertainment
E-
commerce
Digital
Financial
Services
Other
Services(3)
Unallocated
expenses(4)
Consolidated $ $ $ $ $ $
Revenue 173,399 142,694(1) 2,288 33,485 -
351,866 Changes in deferred revenue 219,907 - - - - 219,907 Sales
incentives net-off - 6,497 548 - -
7,045
Adjusted revenue 393,306 149,191(2)
2,836 33,485 - 578,818
Operating income (loss) 56,470 (253,473) (12,461) (11,413)
(18,329) (239,206) Net effect of changes in deferred
revenue and its related cost
165,501
-
-
-
-
165,501
Depreciation and Amortization 3,845 18,220 549 2,929 - 25,543
Share-based compensation - - - - 16,199
16,199
Adjusted EBITDA 225,816 (235,253)
(11,912) (8,484) (2,130) (31,963)
For the Three Months ended March 31, 2018
Digital
Entertainment
E-
commerce
Digital
Financial
Services
Other
Services(3)
Unallocated
expenses(4)
Consolidated $ $ $ $ $ $
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 deferred
revenue 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)
(1) For the first quarter of 2019, revenue of $142,694 included
marketplace revenue of $95,566 and product revenue of $47,128 net
of sales incentives. For the first quarter of 2018, revenue of
$27,344 included marketplace revenue of $15,644 and product revenue
of $11,700 net of sales incentives.
(2) For the first quarter of 2019, adjusted revenue of $149,191
included marketplace revenue of $101,970 and product revenue of
$47,221. For the first quarter of 2018, adjusted revenue of $33,744
included 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 ended
March 31,
2018 2019 $ $
Revenue
Service revenue Digital Entertainment 110,658 173,399 E-commerce
and other services 32,451 130,663 Sales of goods 11,935 47,804
Total revenue 155,044 351,866
Cost of revenue Cost of service Digital Entertainment
(63,572) (84,642) E-commerce and other services (70,793) (174,365)
Cost of goods sold (12,154) (53,403)
Total cost of revenue (146,519) (312,410)
Gross profit 8,525 39,456
Operating income (expenses): Other operating income
729 3,453 Sales and marketing expenses (152,149) (177,978) General
and administrative expenses (44,487) (75,628) Research and
development expenses (10,712) (28,509)
Total operating expenses (206,619) (278,662)
Operating loss (198,094) (239,206) Interest
income 3,091 4,012 Interest expense (8,582) (10,066) Investment
gain, net 7,515 2,047 Changes in fair value of the 2017 convertible
notes (18,796) (436,120)(1) Foreign exchange loss (1,475) (2,653)
Loss before income tax and share of
results of equity investees (216,341) (681,986) Income tax
credit (expense) 755 (7,205) Share of results of equity investees
(583) (418)
Net loss (216,169)
(689,609) Net loss (profit) attributable to non-controlling
interests 556 (746)
Net loss
attributable to Sea Limited’s ordinary shareholders (215,613)
(690,355)
Net loss excluding share-based
compensation and changes in fair
value of the 2017 convertible notes
(186,702) (237,290) Loss per share:
Basic and diluted (0.64) (1.86) Shares used in
loss per share computation: Basic and diluted 335,147,405
370,724,164
(1) Fair value loss of $436.1 million on the 2017 convertible
notes was recorded as our share prices during the quarter
significantly exceeded the conversion prices of the 2017
convertible notes.
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of
December 31,
2018
As of
March 31,
2019
$ $
ASSETS Current assets Cash and cash
equivalents 1,002,841 2,362,523 Restricted cash 254,100 301,049
Accounts receivable, net 97,782 147,603 Prepaid expenses and other
assets 312,387 350,959 Inventories, net 37,689 25,880 Short-term
investments 690 581 Amounts due from related parties 5,224 3,921
Total current assets 1,710,713
3,192,516
Non-current assets Property and equipment,
net 192,357 232,963 Operating lease right-of-use assets, net -
173,326 Intangible assets, net 12,887 13,963 Long-term investments
111,022 107,125 Prepaid expenses and other assets 69,065 90,430
Restricted cash 2,371 16,393 Deferred tax assets 63,302 69,304
Goodwill 30,952 30,952 Total
non-current assets 481,956 734,456
Total assets 2,192,669 3,926,972
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of
December 31,
2018
As of
March 31,
2019
$ $
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
37,163
38,096
Accrued expenses and other payables 636,880 653,975 Advances from
customers 29,355 28,531 Amount due to related parties 46,025 64,816
Short-term bank borrowings 856 981 Operating lease liabilities -
41,332 Deferred revenue 426,675 573,659 Income tax payable 9,539
8,718
Total current
liabilities 1,186,493 1,410,108
Non-current liabilities Accrued expenses and other
payables 7,894 9,408 Long-term bank borrowings 1,026 927 Operating
lease liabilities - 142,521 Deferred revenue 171,262 245,027
Convertible notes 1,061,796 581,770 Deferred tax liabilities 679
578 Unrecognized tax benefits 2,974 2,670
Total non-current liabilities 1,245,631
982,901
Total liabilities
2,432,124 2,393,009
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of
December 31,
2018
As of
March 31,
2019
$ $
Shareholders’ equity Class A Ordinary
shares 94 150 Class B Ordinary shares 76 76 Additional paid-in
capital 1,809,232 4,276,011 Accumulated other comprehensive income
15,199 11,355 Statutory reserves 46 46 Accumulated deficit
(2,067,786) (2,758,141)
Total
Sea Limited shareholders’ (deficit) equity (243,139) 1,529,497
Non-controlling interests 3,684 4,466
Total shareholders’ (deficit) equity (239,455)
1,533,963
Total liabilities
and shareholders’ (deficit) equity 2,192,669
3,926,972
UNAUDITED INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts expressed in thousands of US
dollars (“$”)
For the Three Months ended
March 31,
2018 2019 $ $
Net cash used in operating activities (94,360) (17,815) Net
cash used in investing activities (21,837) (91,250) Net cash (used
in) generated from financing activities (545) 1,527,875 Effect of
foreign exchange rate changes on cash, cash equivalents and
restricted cash
6,166
1,843
Net (decrease) increase in cash, cash equivalents and restricted
cash (110,576) 1,420,653 Cash, cash equivalents and restricted cash
at beginning of the period 1,444,978 1,259,312
Cash, cash equivalents and restricted cash at end of
the period 1,334,402 2,679,965
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 March 31, 2019
Digital
Entertainment
E-
commerce
Digital
Financial
Services
Other
Services(1)
Unallocated
expenses(2)
Consolidated $ $ $ $ $ $
Revenue 173,399 142,694 2,288 33,485 - 351,866
Operating income (loss)
56,470 (253,473) (12,461) (11,413) (18,329) (239,206) Non-operating
loss, net (442,780) Income tax expense (7,205) Share of results of
equity investees (418)
Net loss (689,609)
For the
Three Months ended March 31, 2018
Digital
Entertainment
E-
commerce
Digital
Financial
Services
Other
Services(1)
Unallocated
expenses(2)
Consolidated $ $ $ $ $ $
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 credit 755 Share of results of equity
investees (583)
Net loss (216,169)
(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 Months
ended December 31,
2018
For the Three Months
ended March 31,
2019
Digital Entertainment Unit Quarterly
active users millions 216.2 271.6 Monthly active users (last month)
millions 135.7 170.3 Quarterly paying users millions 11.9 20.7
Average revenue per user US$ 1.1 1.4 Average revenue per paying
user US$ 19.4 19.0
E-commerce Gross GMV US$
millions 3,425.2 3,529.3 Gross orders millions 206.9 203.5
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190521005985/en/
For enquiries:Martin ReidyInvestors / analysts:
ir@seagroup.comMedia: media@seagroup.com
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