SINGAPORE, Aug. 21, 2018 /PRNewswire/ -- Sea Limited (NYSE:
SE) ("Sea" or the "Company") today announced its financial results
for the quarter ended June 30,
2018.
"Sea again delivered strong results in the second quarter of
2018 as we capitalized on our ability to anticipate and quickly
adapt to evolving industry dynamics," said Forrest Li, Chairman and Group Chief Executive
Officer of Sea. "Shopee continued to expand rapidly across all
markets, strengthening its leadership in the region. Our
monetization strategy for Shopee is delivering ahead of
expectations, even at this early stage. Marketplace revenue surged
by more than 69% sequentially to US$37.3
million, as more merchants invested in our value-added
services to deepen engagement with their customers. GMV increased
more than 14% sequentially to US$2.2
billion, while sales and marketing expenses as a percentage
of GMV continued to decline as our growing scale enabled further
cost efficiencies."
Mr. Li continued, "In digital entertainment, our efforts to
deepen our diversification into mobile games, self-development, and
new markets globally are yielding encouraging results. In the month
of June, self-developed game revenue accounted for approximately
13% of adjusted digital entertainment revenue, a new record high,
driven by the breakout success of our first self-developed global
hit, Free Fire."
Second Quarter 2018 Key Metrics
- Group
- Total adjusted revenue was US$219.6
million, up 71.0% year-on-year from US$128.4 million for the second quarter of 2017
and up 11.4% quarter-on-quarter from US$197.0 million for the first quarter of
2018.
- Total adjusted EBITDA was US$(161.9)
million, compared to US$(50.9)
million for the second quarter of 2017 and US$(144.7) million for the first quarter of
2018.
- Digital Entertainment
- Adjusted revenue was US$139.1
million, up 19.0% year-on-year from US$116.9 million for the second quarter of 2017
and a decrease of 4.7% quarter-on-quarter from US$146.0 million for the first quarter of 2018.
The quarter-on-quarter drop was primarily attributable to a
decrease in the number of paying users in Vietnam, as a result of measures launched in
April by Vietnam's leading mobile
operators to restrict the use of prepaid telco cards for online
game top-ups. We are actively strengthening alternative top-up
channels to assist our paying users in Vietnam.
- Adjusted EBITDA was US$48.6
million, up 20.8% year-on-year from US$40.2 million for the second quarter of 2017
and decreased 11.6% quarter-on-quarter from US$55.0 million for the first quarter of
2018.
- Quarterly active users ("QAUs") reached 160.6 million, an
increase of 150.2% year-on-year from 64.2 million for the second
quarter of 2017 and up 26.8% quarter-on-quarter from 126.7 million
for the first quarter of 2018.
- Average revenue per user ("ARPU") was US$0.9 compared to US$1.8 for the second quarter of 2017 and
US$1.2 for the first quarter of
2018.
- E-commerce
- Gross merchandise value ("GMV") was US$2.2 billion, an increase of 170.6%
year-on-year from US$821.2 million
for the second quarter of 2017 and up 14.4% quarter-on-quarter
from US$1.9 billion for the first
quarter of 2018.
- Gross orders for the quarter totaled 127.8 million, an increase
of 180.9% year-on-year from 45.5 million for the second quarter of
2017 and up 14.7% quarter-on-quarter from 111.4 million for the
first quarter of 2018.
- Adjusted revenue was US$58.8
million, up 2,164.7% year-on-year from US$2.6 million for the second quarter of 2017 and
up 74.3% quarter-on-quarter from US$33.7
million for the first quarter of 2018. Adjusted revenue
included US$37.3 million of
marketplace revenue1 and US$21.5
million of product revenue2.
- Adjusted EBITDA was US$(188.3)
million, compared to US$(76.2)
million for the second quarter of 2017 and US$(179.6) million for the first quarter of
2018.
- Sales and marketing as a percentage of GMV stood at 6.2%, and
improved from 6.8% for the second quarter of 2017 and 6.6% for the
first quarter of 2018.
- Digital Financial Services
- Gross transaction value of our digital financial services as a
whole ("GTV") was US$2.5 billion, an
increase of 608.0% year-on-year from US$348.0 million for the second quarter of 2017
and up 44.7% quarter-on-quarter from US$1.7
billion for the first quarter of 2018. 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.
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.
|
Strategic Business Updates
Digital Entertainment
As growing smartphone penetration continues to improve access to
online games globally, Garena has taken steps to leverage our
leading position in the industry and our clear competitive
strengths to capture the growth opportunities ahead. In particular,
we have focused on three key strategic initiatives – moving from
PC-only to mobile-first, moving from pure game publishing to both
game publishing and development, and expanding from a regional
footprint to a global presence.
These efforts continue to generate positive results. In
June 2018, approximately 73% of our
adjusted revenue for digital entertainment was derived from mobile
games, approximately 13% was generated by our self-developed game,
and approximately 7% was derived from outside the seven core
markets in our region.
Free Fire, our first self-developed hit game, remains one
of the leading games in the battle royale category in our region,
and during the quarter was among the top-ranked games in its
category in the App Store and on the Google Play Store in several
non-core markets, including Brazil
and Mexico. Its daily active user
("DAU") count has reached a record high of more than 16 million.
With the development of various monetization features in the game
such as the season pass concept, we see encouraging results from
monetizing the game, which accounted for an increasingly
significant share of our adjusted revenue for digital
entertainment.
Moreover, we continue to explore opportunities to expand the
focus of our game business to capture new trends and opportunities,
including those related to esports and game streaming, to further
enhance our user engagement and develop additional avenues of
income.
For example, Garena was one of the organizers of the Arena of
Valor World Cup ("AOV World Cup") held in Los Angeles in late July. Garena organized a
series of tournaments across the region leading to the final. In
our markets, the competitions in aggregate attracted over 33
million views online across all streaming platforms, with the final
attracting over 5 million views. We believe the enthusiasm
generated by the esports and streaming activities further enhanced
the user engagement of the game, which has recently achieved a
record high DAU count of more than 14 million.
Our efforts to foster strong community engagement around our key
titles on streaming platforms continued to gain traction. According
to research by Newzoo on the global esports streaming market, two
of our esports channels – Garena and Vietnam Esports TV – ranked in
the top five Youtube channels globally in terms of esports hours
viewed during the first quarter of 2018.
E-commerce
In the second quarter of 2018, Shopee continued to demonstrate
robust growth in GMV, gross orders, and adjusted revenue,
complemented by continuing efficiency improvements.
We also recorded significant growth in marketplace revenue of
69.3% quarter-on-quarter, well ahead of the GMV growth rate, as a
larger number of sellers made use of our expanding suite of
offerings, from advertising tools to value-added services such as
fulfilment and logistics.
Shopee is also benefiting from ever-improving economies of scale
as the number of buyers and sellers on the platform grows, and
users build greater loyalty to the platform. During the quarter,
sales and marketing expenses as a percentage of GMV fell once again
to 6.2%, compared to 6.6% in the first quarter of 2018.
Other Developments
Convertible Notes Offering
In June 2018, we raised
US$575 million in aggregate principal
amount of 2.25% convertible senior notes due 2023. The offering
size was increased from the original US$400
million to US$500 million to
address investor demand, and the subsequent full exercise by the
initial purchasers of a 15% 'greenshoe' option brought the total
offering to US$575 million.
The additional capital further bolsters our balance sheet, and
strengthens our ability to address the evolving needs of the users
in our region, be they in digital entertainment, e-commerce, or
digital financial services. The net proceeds from this offering
will be used for business expansion and other general corporate
purposes.
Unaudited Summary
of Financial Results
|
(Amounts are
expressed in thousands of US dollars "$")
|
|
|
For the Three
Months
ended June
30,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
YOY%
|
|
|
|
|
Revenue
|
|
|
|
Digital
Entertainment
|
91,459
|
108,029
|
18.1%
|
Others
|
10,088
|
75,750
|
650.9%
|
|
101,547
|
183,779
|
81.0%
|
|
|
|
|
Cost of
revenue
|
|
|
|
Digital
Entertainment
|
(52,892)
|
(61,981)
|
17.2%
|
Others
|
(22,814)
|
(113,216)
|
396.3%
|
|
(75,706)
|
(175,197)
|
131.4%
|
Gross
profit
|
25,841
|
8,582
|
(66.8)%
|
Other operating
income
|
163
|
1,707
|
947.2%
|
Sales and marketing
expenses
|
(74,087)
|
(165,075)
|
122.8%
|
General and
administrative expenses
|
(27,644)
|
(51,849)
|
87.6%
|
Research and
development expenses
|
(6,739)
|
(12,882)
|
91.2%
|
Total operating
expenses
|
(108,307)
|
(228,099)
|
110.6%
|
Operating
loss
|
(82,466)
|
(219,517)
|
166.2%
|
Non-operating loss,
net
|
(7,193)
|
(30,752)
|
327.5%
|
Income tax (expense)
credit
|
(2,230)
|
170
|
(107.6)%
|
Share of results of
equity investees
|
(230)
|
(689)
|
199.6%
|
Net
loss
|
(92,119)
|
(250,788)
|
172.2%
|
Adjusted net
loss (1)
|
(86,871)
|
(198,715)
|
128.7%
|
|
|
|
|
Adjusted revenue of
Digital Entertainment (1)
|
116,892
|
139,102
|
19.0%
|
Adjusted revenue of
E-commerce (1)
|
2,597
|
58,815
|
2,164.7%
|
Adjusted revenue of
Digital Financial Services (1)
|
5,342
|
3,413
|
(36.1)%
|
Revenue of Other
Services
|
3,596
|
18,229
|
406.9%
|
Total adjusted
revenue (1)
|
128,427
|
219,559
|
71.0%
|
|
|
|
|
Adjusted EBITDA for
Digital Entertainment (1)
|
40,243
|
48,612
|
20.8%
|
Adjusted EBITDA for
E-commerce (1)
|
(76,233)
|
(188,315)
|
(147.0)%
|
Adjusted EBITDA for
Digital Financial Services (1)
|
(11,044)
|
(6,780)
|
38.6%
|
Adjusted EBITDA for
Other Services (1)
|
(2,664)
|
(12,937)
|
(385.6)%
|
Unallocated expenses
(2)
|
(1,165)
|
(2,510)
|
(115.5)%
|
Total adjusted
EBITDA (1)
|
(50,863)
|
(161,930)
|
(218.4)%
|
|
|
|
|
(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 June 30,
2018 Compared to Three Months Ended June 30, 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 June 30,
|
|
|
2017
|
|
2018
|
|
|
$
|
% of
revenue
|
|
$
|
% of
revenue
|
YOY%
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Digital
Entertainment
|
91,459
|
90.1
|
|
108,029
|
58.8
|
18.1%
|
E-commerce
|
1,150
|
1.1
|
|
54,655
|
29.7
|
4,652.6%
|
Digital Financial
Services
|
5,342
|
5.3
|
|
2,866
|
1.6
|
(46.3)%
|
Other
Services
|
3,596
|
3.5
|
|
18,229
|
9.9
|
406.9%
|
|
101,547
|
100.0
|
|
183,779
|
100.0
|
81.0%
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
$
|
% of total
adjusted
revenue
|
|
$
|
% of total
adjusted
revenue
|
YOY%
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue of
Digital Entertainment
|
116,892
|
91.0
|
|
139,102
|
63.4
|
19.0%
|
Adjusted revenue of
E-commerce
|
2,597
|
2.0
|
|
58,815
|
26.8
|
2,164.7%
|
Adjusted revenue of
Digital Financial Services
|
5,342
|
4.2
|
|
3,413
|
1.6
|
(36.1)%
|
Revenue of Other
Services
|
3,596
|
2.8
|
|
18,229
|
8.2
|
406.9%
|
Total adjusted
revenue
|
128,427
|
100.0
|
|
219,559
|
100.0
|
71.0%
|
Our total revenue increased by 81.0% to US$183.8 million in the second quarter of 2018
from US$101.5 million in the second
quarter of 2017. Our total adjusted revenue increased by 71.0% to
US$219.6 million in the second
quarter of 2018 from US$128.4 million
in the second quarter of 2017. These increases were mainly driven
by the growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue increased by 18.1% to
US$108.0 million in the second
quarter of 2018 from US$91.5 million
in the second quarter of 2017. Adjusted revenue increased by 19.0%
to US$139.1 million in the second
quarter of 2018 from US$116.9 million
in the second quarter of 2017. This increase was primarily due to
improvements in monetization of our existing games and the launch
of new games.
- E-commerce: Revenue increased by 4,652.6% to
US$54.7 million in the second quarter
of 2018 from US$1.2 million in the
second quarter of 2017. Adjusted revenue increased by 2,164.7% to
US$58.8 million in the second quarter
of 2018 from US$2.6 million in the
second quarter of 2017. This increase was primarily due to the
growth of our GMV and 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.
- Digital Financial Services: Revenue decreased by 46.3%
to US$2.9 million in the second
quarter of 2018 from US$5.3 million
in the second quarter of 2017. Adjusted revenue decreased by 36.1%
to US$3.4 million in the second
quarter of 2018 from US$5.3 million
in the second quarter of 2017, as we switched to focus our efforts
on strengthening our infrastructure to support our existing
platforms. The decrease was also in part due to the restrictive
measures imposed by Vietnam's
leading mobile operators on using prepaid telco cards for online
game top-ups.
- Other Services: Revenue increased by 406.9% to
US$18.2 million in the second quarter
of 2018 from US$3.6 million in the
second 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 131.4% to US$175.2 million in the second quarter of 2018
from US$75.7 million in the second
quarter of 2017.
- Digital Entertainment: Cost of revenue increased by
17.2% to US$62.0 million in the
second quarter of 2018 from US$52.9
million in the second quarter of 2017. The increase was
primarily due to the increase in royalty payments to game
developers as well as in 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 396.3% to US$113.2
million in the second quarter of 2018 from US$22.8 million in the second 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 122.8% to
US$165.1 million in the second
quarter of 2018 from US$74.1 million
in the second quarter of 2017. The table below sets forth the
breakdown of our sales and marketing expenses of our two major
reporting segments. Amounts are expressed in thousands of US
dollars ("$").
|
For the Three
Months
ended June 30,
|
|
|
2017
|
|
2018
|
YOY%
|
Sales and
Marketing Expenses
|
$
|
|
$
|
|
Digital
Entertainment
|
11,858
|
|
18,916
|
59.5%
|
E-commerce
|
55,906
|
|
138,042
|
146.9%
|
- Digital Entertainment: Sales and marketing expenses
increased by 59.5% to US$18.9 million
in the second quarter of 2018 from US$11.9
million in the second quarter of 2017. The increase was
primarily due to the launch of new games and our continued efforts
to expand the user bases of our existing games.
|
For the Three
Months
ended June
30,
|
|
2017
|
|
2018
|
Digital
Entertainment
|
$
|
|
$
|
Sales and marketing
expenses
|
11,858
|
|
18,916
|
Adjusted
revenue
|
116,892
|
|
139,102
|
Sales and marketing
expenses as a percentage of adjusted revenue
|
10.1%
|
|
13.6%
|
Sales and marketing expenses as a percentage of adjusted revenue
increased to 13.6% in the second quarter of 2018 from 10.1% in the
second quarter of 2017. This was mainly due to increased expenses
on the launching of new games, while the monetization impact of
these new games was not fully captured within the same period.
- E-commerce: Sales and marketing expenses increased by
146.9% to US$138.0 million in the
second quarter of 2018 from US$55.9
million in the second 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
shipping and other promotions on our platform that were designed to
increase our user base and enhance user engagement.
|
For the Three
Months
ended June
30,
|
|
2017
|
|
2018
|
E-commerce
|
$
|
|
$
|
Sales and marketing
expenses
|
55,906
|
|
138,042
|
GMV
|
821,175
|
|
2,221,789
|
Sales and marketing
expenses as a percentage of GMV
|
6.8%
|
|
6.2%
|
Sales and marketing expenses as a percentage of GMV was 6.2% in
the second quarter of 2018 and improved from 6.8% in the second
quarter of 2017.
General and Administrative Expenses
Our general and administrative expenses increased by 87.6% to
US$51.8 million in the second quarter
of 2018 from US$27.6 million in the
second 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 professional fees and
other expenses.
Research and Development Expenses
Our research and development expenses increased by 91.2% to
US$12.9 million in the second quarter
of 2018 from US$6.7 million in the
second 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 debts and foreign exchange gain (loss). The amount was
a net non-operating loss of US$30.8
million in the second quarter of 2018, compared to a net
non-operating loss of US$7.2 million
in the second quarter of 2017. This was primarily due to a fair
value loss of US$37.2 million
recognized in the quarter arising from the fair value accounting
treatment for the convertible debts raised before our initial
public offering.
Income Tax Expense
We had a net income tax benefit of US$0.2
million in the second quarter of 2018, which was primarily
due to the deferred tax assets we recognized in our digital
entertainment segment in the second quarter of 2018.
Share of Results of Equity Investees
We had share of losses of equity investees of US$0.7 million in the second quarter of 2018,
compared with US$0.2 million in the
second quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$250.8 million and US$92.1 million in the second 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 debts, was US$198.7
million and US$86.9 million in
the second quarter of 2018 and 2017, respectively.
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 21 August 2018
|
|
8:00 AM Singapore /
Hong Kong Time on 22 August 2018
|
|
|
Webcast
link:
|
https://services.choruscall.com/links/se180821.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:
|
1518348
|
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 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 before share-based
compensation and changes in fair value of convertible debts. 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 debts 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 June 30, 2018
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(3)
|
Unallocated
expenses(4)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
108,029
|
54,655(1)
|
2,866
|
18,229
|
-
|
183,779
|
Changes in deferred
revenue
|
31,073
|
-
|
-
|
-
|
-
|
31,073
|
Sales incentives
net-off
|
-
|
4,160
|
547
|
-
|
-
|
4,707
|
Adjusted
revenue
|
139,102
|
58,815(2)
|
3,413
|
18,229
|
-
|
219,559
|
|
|
|
|
|
|
|
Operating income
(loss)
|
15,137
|
(195,034)
|
(7,297)
|
(14,900)
|
(17,423)
|
(219,517)
|
Net effect of changes
in deferred
revenue and
its related cost
|
24,872
|
-
|
-
|
-
|
-
|
24,872
|
Depreciation and
amortization
|
8,603
|
6,719
|
517
|
1,963
|
-
|
17,802
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
14,913
|
14,913
|
Adjusted
EBITDA
|
48,612
|
(188,315)
|
(6,780)
|
(12,937)
|
(2,510)
|
(161,930)
|
|
|
|
For the Three
Months ended June 30, 2017
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(3)
|
Unallocated
expenses(4)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
91,459
|
1,150(1)
|
5,342
|
3,596
|
-
|
101,547
|
Changes in deferred
revenue
|
25,433
|
-
|
-
|
-
|
-
|
25,433
|
Sales incentives
net-off
|
-
|
1,447
|
-
|
-
|
-
|
1,447
|
Adjusted
revenue
|
116,892
|
2,597(2)
|
5,342
|
3,596
|
-
|
128,427
|
|
|
|
|
|
|
|
Operating income
(loss)
|
16,020
|
(77,438)
|
(11,309)
|
(3,326)
|
(6,413)
|
(82,466)
|
Net effect of changes
in deferred
revenue and
its related cost
|
17,336
|
-
|
-
|
-
|
-
|
17,336
|
Depreciation and
amortization
|
6,887
|
1,205
|
265
|
662
|
-
|
9,019
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
5,248
|
5,248
|
Adjusted
EBITDA
|
40,243
|
(76,233)
|
(11,044)
|
(2,664)
|
(1,165)
|
(50,863)
|
|
|
(1) For
the second quarter of 2018, revenue of $54,655 included marketplace
revenue of $33,160 and product revenue of $21,495, net of sales
incentives. For the second quarter of 2017, revenue of $1,150 was
entirely marketplace revenue.
|
(2) For
the second quarter of 2018, adjusted revenue of $58,815 included
marketplace revenue of $37,320 and product revenue of $21,495. For
the second quarter of 2017, revenue of $2,597 was entirely
marketplace revenue.
|
(3) A
combination of multiple business activities that does not meet the
quantitative thresholds to qualify as reportable segments are
grouped together as "Other Services."
|
(4)
Unallocated expenses are mainly related to share-based compensation
and general and corporate administrative costs such as professional
fees and other miscellaneous items that are not allocated to
segments. The expenses are excluded from segment results as they
are not reviewed by the CODM as part of segment
performance.
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
Amounts expressed
in thousands of US dollars ("$") except for number of shares &
per share data
|
|
|
|
For the Six
Months
ended June
30,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
Revenue
|
|
|
|
Digital
Entertainment
|
|
179,045
|
218,687
|
Others
|
|
16,447
|
120,136
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
195,492
|
338,823
|
|
|
|
|
Cost of
revenue
|
|
|
|
Digital
Entertainment
|
|
(102,169)
|
(125,553)
|
Others
|
|
(40,375)
|
(196,163)
|
|
|
|
|
|
|
|
|
Total cost of
revenue
|
|
(142,544)
|
(321,716)
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
52,948
|
17,107
|
|
|
|
|
|
|
|
|
Operating income
(expenses):
|
|
|
|
Other operating
income
|
|
381
|
2,436
|
Sales and marketing
expenses
|
|
(137,985)
|
(317,224)
|
General and
administrative expenses
|
|
(52,852)
|
(96,336)
|
Research and
development expenses
|
|
(12,991)
|
(23,594)
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
|
(203,447)
|
(434,718)
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(150,499)
|
(417,611)
|
Interest
income
|
|
473
|
5,350
|
Interest
expense
|
|
(8,997)
|
(11,555)
|
Investment (loss)
gain
|
|
(359)
|
8,478
|
Changes in fair value
of convertible debts
|
|
-
|
(55,956)
|
Foreign exchange
(loss) gain
|
|
(789)
|
4,684
|
|
|
|
|
|
|
|
|
Loss before income
tax and share of results of equity investees
|
|
(160,171)
|
(466,610)
|
Income tax (expense)
credit
|
|
(4,162)
|
925
|
Share of results of
equity investees
|
|
(862)
|
(1,272)
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(165,195)
|
(466,957)
|
|
|
|
|
Net loss attributable
to non-controlling interests
|
|
51
|
641
|
|
|
|
|
|
|
|
|
Net loss
attributable to Sea Limited's ordinary shareholders
|
|
(165,144)
|
(466,316)
|
|
|
|
|
|
|
|
|
Adjusted net
loss (1)
|
|
(153,834)
|
(385,417)
|
|
|
|
|
Loss per
share:
|
|
|
|
Basic and
diluted
|
|
(0.94)
|
(1.39)
|
|
|
|
|
|
|
|
|
Shares used in loss
per share computation:
|
|
|
|
Basic and
diluted
|
|
174,988,779
|
336,531,721
|
|
|
|
|
(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
of
December
31,
|
As
of
June
30,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
|
1,347,361
|
1,477,140
|
Restricted
cash
|
|
95,300
|
154,207
|
Accounts receivable,
net
|
|
61,846
|
55,114
|
Prepaid expenses and
other assets
|
|
186,181
|
270,026
|
Inventories,
net
|
|
9,790
|
16,906
|
Short-term
investment
|
|
18,000
|
−
|
Amounts due from
related parties
|
|
2,235
|
5,904
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
1,720,713
|
1,979,297
|
|
|
|
|
Non-current
assets
|
|
|
|
Property and
equipment, net
|
|
74,348
|
121,920
|
Intangible assets,
net
|
|
37,333
|
29,591
|
Long-term
investments
|
|
28,216
|
71,006
|
Prepaid expenses and
other assets
|
|
46,297
|
63,801
|
Restricted
cash
|
|
2,317
|
2,369
|
Deferred tax
assets
|
|
48,104
|
56,428
|
Goodwill
|
|
30,952
|
30,952
|
|
|
|
|
|
|
|
|
Total non-current
assets
|
|
267,567
|
376,067
|
|
|
|
|
|
|
|
|
Total
assets
|
|
1,988,280
|
2,355,364
|
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
As
of
December
31,
|
As
of
June
30,
|
|
2017
|
2018
|
|
$
|
$
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
8,644
|
33,920
|
Accrued expenses and
other payables
|
285,248
|
404,900
|
Advances from
customers
|
27,155
|
24,716
|
Amount due to related
parties
|
36,790
|
32,668
|
Short-term bank
borrowings
|
2,013
|
−
|
Deferred
revenue
|
268,241
|
273,688
|
Income taxes
payable
|
9,614
|
8,031
|
|
|
|
|
|
|
Total current
liabilities
|
637,705
|
777,923
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
Accrued expenses and
other payables
|
7,547
|
8,429
|
Deferred
revenue
|
133,481
|
184,841
|
Convertible
debts
|
726,950
|
1,145,836
|
Deferred tax
liabilities
|
4,378
|
3,954
|
Unrecognized tax
benefits
|
3,088
|
2,938
|
|
|
|
|
|
|
Total non-current
liabilities
|
875,444
|
1,345,998
|
|
|
|
|
|
|
Total
liabilities
|
1,513,149
|
2,123,921
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
Class A ordinary
shares
|
91
|
94
|
Class B ordinary
shares
|
76
|
76
|
Additional paid-in
capital
|
1,564,656
|
1,776,246
|
Accumulated other
comprehensive income
|
10,701
|
24,984
|
Statutory
reserves
|
46
|
46
|
Accumulated
deficit
|
(1,106,545)
|
(1,572,861)
|
|
|
|
|
|
|
Total Sea Limited
shareholders' equity
|
469,025
|
228,585
|
Non-controlling
interests
|
6,106
|
2,858
|
|
|
|
|
|
|
Total
shareholders' equity
|
475,131
|
231,443
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
1,988,280
|
2,355,364
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
For the Six
Months
ended June
30,
|
|
2017
|
2018
|
|
$
|
$
|
|
|
|
Net cash used in
operating activities
|
(115,731)
|
(283,113)
|
Net cash used in
investing activities
|
(17,393)
|
(61,851)
|
Net cash generated from
financing activities
|
626,976
|
544,791
|
Effect of foreign
exchange rate changes on cash, cash equivalents and restricted
cash
|
3,486
|
(11,089)
|
Net increase in cash,
cash equivalents and restricted cash
|
497,338
|
188,738
|
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
|
688,162
|
1,633,716
|
|
|
|
|
|
|
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 June 30, 2018
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial S
ervices
|
Other
Services(1)
|
Unallocated
expenses(2)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
108,029
|
54,655
|
2,866
|
18,229
|
-
|
183,779
|
|
|
|
|
|
|
|
Operating income
(loss)
|
15,137
|
(195,034)
|
(7,297)
|
(14,900)
|
(17,423)
|
(219,517)
|
Non-operating loss,
net
|
|
|
|
|
|
(30,752)
|
Income tax
credit
|
|
|
|
|
|
170
|
Share of results of
equity investees
|
|
|
|
|
|
(689)
|
Net
loss
|
|
|
|
|
|
(250,788)
|
|
|
|
|
|
For the Three
Months ended June 30, 2017
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(1)
|
Unallocated
expenses(2)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
91,459
|
1,150
|
5,342
|
3,596
|
-
|
101,547
|
|
|
|
|
|
|
|
Operating income
(loss)
|
16,020
|
(77,438)
|
(11,309)
|
(3,326)
|
(6,413)
|
(82,466)
|
Non-operating loss,
net
|
|
|
|
|
|
(7,193)
|
Income tax
expense
|
|
|
|
|
|
(2,230)
|
Share of results of
equity investees
|
|
|
|
|
|
(230)
|
Net
loss
|
|
|
|
|
|
(92,119)
|
|
(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 March 31,
2018
|
|
For the Three
Months
ended June 30,
2018
|
|
|
|
|
|
|
Digital
Entertainment
|
Unit
|
|
|
|
|
|
|
|
|
|
|
Quarterly active
users
|
millions
|
|
126.7
|
|
160.6
|
Monthly active users
(last month)
|
millions
|
|
77.4
|
|
90.6
|
Quarterly paying
users
|
millions
|
|
7.2
|
|
6.6
|
Average revenue per
user
|
US$
|
|
1.2
|
|
0.9
|
Average revenue per
paying user
|
US$
|
|
20.3
|
|
21.1
|
|
|
|
|
|
|
E-commerce
|
|
|
|
|
|
|
|
|
|
|
|
Gross GMV
|
US$
millions
|
|
1,941.4
|
|
2,221.8
|
Gross
orders
|
millions
|
|
111.4
|
|
127.8
|
|
|
|
|
|
|
Digital Financial
Services
|
|
|
|
|
|
|
|
|
|
|
|
GTV
|
US$
millions
|
|
1,702.2
|
|
2,463.9
|
View original
content:http://www.prnewswire.com/news-releases/sea-limited-reports-second-quarter-2018-results-300700244.html
SOURCE Sea Limited