SINGAPORE, Nov. 20, 2018
/PRNewswire/ -- Sea Limited (NYSE: SE) ("Sea" or the
"Company") today announced its financial results for the quarter
ended September 30, 2018.
"We once again achieved strong growth in the third quarter of
2018," said Forrest Li, Chairman and
Group Chief Executive Officer of Sea. "Shopee posted its best ever
quarterly gross merchandise value and number of orders as it
extended its lead as the largest e-commerce platform in our region.
Building on this momentum, our recent annual 'Shopee 11.11 Big
Sale' also set a historical high record for Shopee, helping to
cement its reputation as the go-to online destination for consumers
in our region."
"In digital entertainment, our self-developed game, Free
Fire, is now one of the world's most popular online games,
recently achieving its record high peak daily active user count of
over 27 million and surpassing 200 million registered users
globally," Forrest continued. "We are also excited about our
strong game pipeline, boosted by the new publishing arrangement
with Tencent, our long-term investor
and strategic partner. The strong momentum across our e-commerce
and digital entertainment businesses is reflected in our revised
full year outlook."
Third Quarter 2018 Key Metrics
- Group
- Total adjusted revenue was US$242.8
million, up 60.1% year-on-year from US$151.7 million for the third quarter of 2017
and up 10.6% quarter-on-quarter from US$219.6 million for the second quarter of
2018.
- Total adjusted EBITDA was US$(183.8)
million, compared to US$(99.7)
million for the third quarter of 2017 and US$(161.9) million for the second quarter of
2018.
- Digital Entertainment
- Adjusted revenue was US$144.6
million, up 7.4% year-on-year from US$134.5 million for the third quarter of 2017
and an increase of 3.9% quarter-on-quarter from US$139.1 million for the second quarter of
2018.
- Adjusted EBITDA was US$53.7
million, up 19.2% year-on-year from US$45.1 million for the third quarter of 2017 and
increased 10.5% quarter-on-quarter from US$48.6 million for the second quarter of
2018.
- Quarterly active users reached 176.1 million, an increase of
155.2% year-on-year from 69.0 million for the third quarter of 2017
and up 9.7% quarter-on-quarter from 160.6 million for the second
quarter of 2018.
- Average revenue per user was US$0.8 compared to US$2.0 for the third quarter of 2017 and
US$0.9 for the second quarter of
2018.
- E-commerce
- Gross merchandise value ("GMV") was US$2.7 billion, an increase of 152.7%
year-on-year from US$1.1 billion for
the third quarter of 2017 and up 21.1% quarter-on-quarter from
US$2.2 billion for the second quarter
of 2018.
- Gross orders for the quarter totaled 158.5 million, an increase
of 140.5% year-on-year from 65.9 million for the third quarter of
2017 and up 24.0% quarter-on-quarter from 127.8 million for the
second quarter of 2018.
- Adjusted revenue was US$71.2
million, up 1,156.5% year-on-year from US$5.7 million for the third quarter of 2017 and
up 21.1% quarter-on-quarter from US$58.8
million for the second quarter of 2018. Adjusted revenue
included US$50.3 million of
marketplace revenue[1] and US$20.9 million of product
revenue[2].
- Adjusted EBITDA was US$(214.9)
million, compared to US$(130.0)
million for the third quarter of 2017 and US$(188.3) million for the second quarter of
2018.
- Sales and marketing as a percentage of GMV stood at 5.7%, and
improved from 9.7% for the third quarter of 2017 and 6.2% for the
second quarter of 2018.
- In Indonesia, Shopee's largest
market, total orders for the quarter reached 63.7 million, or a
daily average of 0.7 million orders, which we believe made Shopee
the largest e-commerce platform in Indonesia. Sales and marketing as a percentage
of GMV for Indonesia was even
lower than the ratio for Shopee as a whole, as Shopee achieved
greater marketing efficiency in its largest market.
[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
Driven by the strong performance of our key game titles, Garena
continued to deliver robust growth in the third quarter of
2018.
Our self-developed game, Free Fire, continues to grow
quickly, recently surpassing 200 million registered users globally
and achieving a peak daily active user count of over 27 million,
compared to our previously disclosed peak of over 16 million daily
active users. Our monetization programs for Free Fire are
also generating results. Throughout the month of October, Free
Fire was consistently the highest grossing game on the Google
Play Store in Brazil, Argentina, and Mexico, according to App Annie. It is also building traction in our
core markets in Southeast Asia,
becoming the highest grossing game on the Google Play Store in
Indonesia in late October, based
on App Annie's rankings.
On November 19, we announced a
binding letter of intent with Tencent
for it to grant us a right of first refusal to publish its mobile
and PC games in Indonesia,
Taiwan, Thailand, the
Philippines, Malaysia, and
Singapore.
We believe our strategic partnership with Tencent will enhance our continual efforts to
bring top quality content to our region.
E-commerce
Shopee continued to scale rapidly in the third quarter, driven
by robust GMV and order growth across all our markets. Its
marketplace revenue grew by 34.8% quarter-on-quarter as more
sellers made use of Shopee's suite of advertising and value added
services to reach its fast-growing consumer community.
During the quarter, Shopee also continued to benefit from
improved economies of scale and greater marketing efficiencies,
with sales and marketing expenses as a percentage of GMV falling
further to 5.7%, compared to 6.2% in the second quarter of
2018.
This strong momentum was driven by robust user engagement on the
platform. At the culmination of the Shopee 11.11 Big Sale, an
annual shopping festival held from late October to mid-November,
Shopee set its new record with over 11 million orders recorded on
the platform over the 24 hours of November
11, 2018. This represented approximately 4.5 times the
number of orders recorded on the same date last year.
Other Developments
The Company announced today that Terry
Zhao has been appointed President of Garena. Terry has been
with the Company since its inception in 2009 and has served in a
number of senior roles in our digital entertainment business across
several key markets, most recently running our games studio in
Shanghai. He has been heavily
involved in our push into self-developed games and mobile games
and, in his new role, will focus on further extending our offering
in these important strategic areas.
The Company also announced that Group Chief Strategy Officer,
Alan Hellawell, will depart the
Company effective November 23, 2018.
Drawing on his prior experience as a seasoned equity analyst in the
technology sector, Alan made important contributions to the
Company's successful initial public offering and its transition
through the initial stage as a publicly listed company during his
tenure. "On behalf of Sea, I would like to thank Alan for his
service to the Company, and wish him all the best in his future
endeavors," said Forrest, Sea's Chairman and Group Chief Executive
Officer.
Alan's responsibilities have been assumed by the Company's
corporate development and strategy team under the oversight of its
Group General Counsel, Yanjun Wang.
In addition to the legal function, Yanjun also oversees the
corporate development, investor relations, public policy, and
public relations functions of the Company. Yanjun has been with the
Company since early 2014 and, as a member of the Company's
leadership team, worked closely with the board and Group Chief
Executive Officer on all key strategic and corporate matters of the
Company in the past few years.
Unaudited Summary
of Financial Results
|
|
|
(Amounts are
expressed in thousands of US dollars "$")
|
|
|
|
|
|
|
For the Three
Months
ended September
30,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
YOY%
|
|
|
|
|
Revenue
|
|
|
|
Digital
Entertainment
|
79,799
|
112,520
|
41.0%
|
Others
|
14,295
|
92,401
|
546.4%
|
|
94,094
|
204,921
|
117.8%
|
|
|
|
|
Cost of
revenue
|
|
|
|
Digital
Entertainment
|
(55,577)
|
(63,960)
|
15.1%
|
Others
|
(27,698)
|
(135,351)
|
388.7%
|
|
(83,275)
|
(199,311)
|
139.3%
|
Gross
profit
|
10,819
|
5,610
|
(48.1)%
|
Other operating
income
|
959
|
3,072
|
220.3%
|
Sales and marketing
expenses
|
(131,571)
|
(180,304)
|
37.0%
|
General and
administrative expenses
|
(33,262)
|
(57,285)
|
72.2%
|
Research and
development expenses
|
(7,661)
|
(17,293)
|
125.7%
|
Total operating
expenses
|
(171,535)
|
(251,810)
|
46.8%
|
Operating
loss
|
(160,716)
|
(246,200)
|
53.2%
|
Non-operating income,
net
|
25,802
|
30,903
|
19.8%
|
Income tax credit
(expense)
|
2,147
|
(2,020)
|
(194.1)%
|
Share of results of
equity investees
|
(64)
|
(702)
|
996.9%
|
Net
loss
|
(132,831)
|
(218,019)
|
64.1%
|
Adjusted net
loss (1)
|
(127,133)
|
(237,568)
|
86.9%
|
|
|
|
|
Adjusted revenue of
Digital Entertainment (1)
|
134,548
|
144,558
|
7.4%
|
Adjusted revenue of
E-commerce (1)
|
5,669
|
71,233
|
1,156.5%
|
Adjusted revenue of
Digital Financial Services (1)
|
4,792
|
3,113
|
(35.0)%
|
Revenue of Other
Services
|
6,717
|
23,934
|
256.3%
|
Total adjusted
revenue (1)
|
151,726
|
242,838
|
60.1%
|
|
|
|
|
Adjusted EBITDA for
Digital Entertainment (1)
|
45,083
|
53,724
|
19.2%
|
Adjusted EBITDA for
E-commerce (1)
|
(129,964)
|
(214,861)
|
(65.3)%
|
Adjusted EBITDA for
Digital Financial Services (1)
|
(8,198)
|
(7,001)
|
14.6%
|
Adjusted EBITDA for
Other Services (1)
|
(5,327)
|
(13,850)
|
(160.0)%
|
Unallocated expenses
(2)
|
(1,276)
|
(1,764)
|
(38.2)%
|
Total adjusted
EBITDA (1)
|
(99,682)
|
(183,752)
|
(84.3)%
|
|
|
|
|
|
|
|
|
(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 September 30,
2018 Compared to Three Months Ended September 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 September 30,
|
|
|
2017
|
|
2018
|
|
|
$
|
% of
revenue
|
|
$
|
% of
revenue
|
YOY%
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
Digital
Entertainment
|
79,799
|
84.8
|
|
112,520
|
54.9
|
41.0%
|
E-commerce
|
2,786
|
3.0
|
|
65,919
|
32.2
|
2,266.1%
|
Digital Financial
Services
|
4,792
|
5.1
|
|
2,548
|
1.2
|
(46.8)%
|
Other
Services
|
6,717
|
7.1
|
|
23,934
|
11.7
|
256.3%
|
|
94,094
|
100.0
|
|
204,921
|
100.0
|
117.8%
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
$
|
% of total
adjusted
revenue
|
|
$
|
% of total
adjusted
revenue
|
YOY%
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue of
Digital Entertainment
|
134,548
|
88.7
|
|
144,558
|
59.5
|
7.4%
|
Adjusted revenue of
E-commerce
|
5,669
|
3.7
|
|
71,233
|
29.3
|
1,156.5%
|
Adjusted revenue of
Digital Financial Services
|
4,792
|
3.2
|
|
3,113
|
1.3
|
(35.0)%
|
Revenue of Other
Services
|
6,717
|
4.4
|
|
23,934
|
9.9
|
256.3%
|
Total adjusted
revenue
|
151,726
|
100.0
|
|
242,838
|
100.0
|
60.1%
|
Our total revenue increased by 117.8% to US$204.9 million in the third quarter of 2018
from US$94.1 million in the third
quarter of 2017. Our total adjusted revenue increased by 60.1% to
US$242.8 million in the third quarter
of 2018 from US$151.7 million in the
third quarter of 2017. These increases were mainly driven by the
growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue increased by 41.0% to
US$112.5 million in the third quarter
of 2018 from US$79.8 million in the
third quarter of 2017. Adjusted revenue increased by 7.4% to
US$144.6 million in the third quarter
of 2018 from US$134.5 million in the
third quarter of 2017. This increase was primarily due to
improvements in the monetization of our existing games and the
launch of new games.
- E-commerce: Revenue increased by 2,266.1% to
US$65.9 million in the third quarter
of 2018 from US$2.8 million in the
third quarter of 2017. Adjusted revenue increased by 1,156.5% to
US$71.2 million in the third quarter
of 2018 from US$5.7 million in the
third quarter of 2017. This increase was primarily due to the
growth of our GMV and our sellers' use of our services and product
offerings under 'Service by Shopee,' 'Shopee Logistics Service,' as
well as our other value-added services.
- Digital Financial Services: Revenue decreased by 46.8%
to US$2.5 million in the third
quarter of 2018 from US$4.8 million
in the third quarter of 2017. Adjusted revenue decreased by 35.0%
to US$3.1 million in the third
quarter of 2018 from US$4.8 million
in the third 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 continuation of
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 256.3% to
US$23.9 million in the third quarter
of 2018 from US$6.7 million in the
third quarter of 2017. The increase was primarily due to the growth
of the ancillary services we provide to our e-commerce platform
users.
Cost of Revenue
Our total cost of revenue increased by 139.3% to US$199.3 million in the third quarter of 2018
from US$83.3 million in the third
quarter of 2017.
- Digital Entertainment: Cost of revenue increased by
15.1% to US$64.0 million in the third
quarter of 2018 from US$55.6 million
in the third quarter of 2017. The increase was largely in line with
revenue growth in our digital entertainment business.
- Others: Cost of revenue for our other segments combined
increased by 388.7% to US$135.4
million in the third quarter of 2018 from US$27.7 million in the third 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 37.0% to
US$180.3 million in the third quarter
of 2018 from US$131.6 million in the
third quarter of 2017. The table below sets forth the breakdown of
our sales and marketing expenses of our two major reporting
segments. Amounts are expressed in thousands of US dollars
("$").
|
For the Three
Months
ended September 30,
|
|
|
2017
|
|
2018
|
YOY%
|
|
$
|
|
$
|
|
Sales and
Marketing Expenses
|
|
|
|
|
Digital
Entertainment
|
21,724
|
|
19,046
|
(12.3)%
|
E-commerce
|
102,996
|
|
152,934
|
48.5%
|
- Digital Entertainment: Sales and marketing expenses
decreased by 12.3% to US$19.0 million
in the third quarter of 2018 from US$21.7
million in the third quarter of 2017. The decrease was
primarily due to higher marketing pushes around the competition
back in 2017.
|
For the Three
Months
ended September
30,
|
|
2017
|
|
2018
|
|
$
|
|
$
|
Digital
Entertainment
|
|
|
|
Sales and marketing
expenses
|
21,724
|
|
19,046
|
Adjusted
revenue
|
134,548
|
|
144,558
|
Sales and marketing
expenses as a percentage of adjusted revenue
|
16.1%
|
|
13.2%
|
Sales and marketing expenses as a percentage of adjusted revenue
decreased to 13.2% in the third quarter of 2018 from 16.1% in the
third quarter of 2017 as we continue to improve the efficiency of
our marketing efforts.
- E-commerce: Sales and marketing expenses increased by
48.5% to US$152.9 million in the
third quarter of 2018 from US$103.0
million in the third 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 September
30,
|
|
2017
|
|
2018
|
|
$
|
|
$
|
E-commerce
|
|
|
|
Sales and marketing
expenses
|
102,996
|
|
152,934
|
GMV
|
1,064,759
|
|
2,690,927
|
Sales and marketing
expenses as a percentage of GMV
|
9.7%
|
|
5.7%
|
Sales and marketing expenses as a percentage of GMV was 5.7% in
the third quarter of 2018 and improved from 9.7% in the third
quarter of 2017 as we continue to improve the efficiency of our
marketing efforts.
General and Administrative Expenses
Our general and administrative expenses increased by 72.2% to
US$57.3 million in the third quarter
of 2018 from US$33.3 million in the
third 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 125.7% to
US$17.3 million in the third quarter
of 2018 from US$7.7 million in the
third 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 income of US$30.9
million and US$25.8 million in
the third quarter of 2018 and 2017, respectively. This was
primarily due to a fair value gain of US$36.0 million recognized in this quarter on the
convertible debts issued before our initial public offering, while
the net non-operating income in 2017 was primarily attributable to
a gain on disposal and re-measurement of our investments.
Income Tax Expense
We had a net income tax expense of US$2.0
million in the third quarter of 2018, compared with a net
income tax benefit of US$2.1 million
in the third quarter of 2017, which was primarily due to corporate
income tax and withholding tax recognized for our digital
entertainment segment in the third quarter of 2018. The net income
tax benefit in the third quarter of 2017 was primarily due to
deferred tax assets recognized on deferred revenue arising from our
digital entertainment segment.
Share of Results of Equity Investees
We had share of losses of equity investees of US$0.7 million in the third quarter of 2018,
compared with US$0.1 million in the
third quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$218.0 million and US$132.8 million in the third 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$237.6
million and US$127.1 million
in the third quarter of 2018 and 2017, respectively.
Updated Guidance
For the full year of 2018, we now expect total adjusted revenue
to be between US$930 million and
US$970 million, representing 68.0% to
75.2% growth from 2017. This compares to the previously disclosed
guidance of between US$780 million
and US$820 million, representing
40.9% to 48.1% growth. We expect adjusted revenue for digital
entertainment for the full year of 2018 to be between US$600 million and US$620
million, representing year-on-year growth of 21.0% to
25.0%.
We are also revising our e-commerce GMV guidance for the full
year of 2018. We now expect e-commerce GMV for the full year of
2018 to be between US$9.2 billion and
US$9.7 billion, representing 123.7%
to 135.9% growth from 2017. This compares to the previously
disclosed guidance of between US$8.2
billion and US$8.7 billion,
representing 99.4% to 111.5% growth.
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 November 20, 2018
|
|
8:00 AM Singapore /
Hong Kong Time on November 21, 2018
|
Webcast
link:
|
https://services.choruscall.com/links/se181120.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: 1600352
|
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 September 30, 2018
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(3)
|
Unallocated
expenses(4)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
112,520
|
65,919(1)
|
2,548
|
23,934
|
-
|
204,921
|
Changes in deferred
revenue
|
32,038
|
-
|
-
|
-
|
-
|
32,038
|
Sales incentives
net-off
|
-
|
5,314
|
565
|
-
|
-
|
5,879
|
Adjusted
revenue
|
144,558
|
71,233(2)
|
3,113
|
23,934
|
-
|
242,838
|
|
|
|
|
|
|
|
Operating income
(loss)
|
19,403
|
(223,787)
|
(7,387)
|
(16,186)
|
(18,243)
|
(246,200)
|
Net effect of changes
in deferred
revenue and its related cost
|
26,192
|
-
|
-
|
-
|
-
|
26,192
|
Depreciation and
amortization
|
8,129
|
8,926
|
386
|
2,336
|
-
|
19,777
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
16,479
|
16,479
|
Adjusted
EBITDA
|
53,724
|
(214,861)
|
(7,001)
|
(13,850)
|
(1,764)
|
(183,752)
|
|
|
|
For the Three
Months ended September 30, 2017
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(3)
|
Unallocated
expenses(4)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
79,799
|
2,786(1)
|
4,792
|
6,717
|
-
|
94,094
|
Changes in deferred
revenue
|
54,749
|
-
|
-
|
-
|
-
|
54,749
|
Sales incentives
net-off
|
-
|
2,883
|
-
|
-
|
-
|
2,883
|
Adjusted
revenue
|
134,548
|
5,669(2)
|
4,792
|
6,717
|
-
|
151,726
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(6,874)
|
(132,292)
|
(8,561)
|
(6,015)
|
(6,974)
|
(160,716)
|
Net effect of changes
in deferred
revenue and its related cost
|
44,873
|
-
|
-
|
-
|
-
|
44,873
|
Depreciation and
amortization
|
7,084
|
2,328
|
363
|
688
|
-
|
10,463
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
5,698
|
5,698
|
Adjusted
EBITDA
|
45,083
|
(129,964)
|
(8,198)
|
(5,327)
|
(1,276)
|
(99,682)
|
|
|
|
|
|
|
|
(1) For
the third quarter of 2018, revenue of $65,919 included marketplace
revenue of $45,147 and product revenue of
$20,772, net of sales incentives. For the third quarter of 2017,
revenue of $2,786 was entirely marketplace revenue.
|
(2) For
the third quarter of 2018, adjusted revenue of $71,233 included
marketplace revenue of $50,303 and product
revenue of $20,930. For the third quarter of 2017, adjusted revenue
of $5,669 was entirely marketplace revenue.
|
(3) A
combination of multiple business activities that does not meet the
quantitative thresholds to qualify as reportable
segments are grouped together as "Other Services."
|
(4)
Unallocated expenses are mainly related to share-based compensation
and general and corporate administrative costs
such as professional fees and other miscellaneous items that are
not allocated to segments. The expenses are excluded
from segment results as they are not reviewed by the CODM as part
of segment performance.
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
Amounts expressed
in thousands of US dollars ("$") except for number of shares &
per share data
|
|
|
|
For the Nine
Months
ended September
30,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
Revenue
|
|
|
|
Digital
Entertainment
|
|
258,844
|
331,207
|
Others
|
|
30,742
|
212,537
|
|
|
|
|
|
|
|
|
Total
revenue
|
|
289,586
|
543,744
|
|
|
|
|
Cost of
revenue
|
|
|
|
Digital
Entertainment
|
|
(157,746)
|
(189,513)
|
Others
|
|
(68,073)
|
(331,514)
|
|
|
|
|
|
|
|
|
Total cost of
revenue
|
|
(225,819)
|
(521,027)
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
63,767
|
22,717
|
|
|
|
|
|
|
|
|
Operating income
(expenses):
|
|
|
|
Other operating
income
|
|
1,340
|
5,508
|
Sales and marketing
expenses
|
|
(269,556)
|
(497,528)
|
General and
administrative expenses
|
|
(86,114)
|
(153,621)
|
Research and
development expenses
|
|
(20,652)
|
(40,887)
|
|
|
|
|
|
|
|
|
Total operating
expenses
|
|
(374,982)
|
(686,528)
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
(311,215)
|
(663,811)
|
Interest
income
|
|
2,162
|
8,567
|
Interest
expense
|
|
(17,458)
|
(21,413)
|
Investment gain
(loss)
|
|
33,943
|
9,374
|
Changes in fair value
of convertible debts
|
|
−
|
(19,928)
|
Foreign exchange
(loss) gain
|
|
(2,517)
|
5,304
|
|
|
|
|
|
|
|
|
Loss before income
tax and share of results of equity
investees
|
|
(295,085)
|
(681,907)
|
Income tax (expense)
credit
|
|
(2,015)
|
(1,095)
|
Share of results of
equity investees
|
|
(926)
|
(1,974)
|
|
|
|
|
|
|
|
|
Net
loss
|
|
(298,026)
|
(684,976)
|
|
|
|
|
Net loss attributable
to non-controlling interests
|
|
201
|
358
|
|
|
|
|
|
|
|
|
Net loss
attributable to Sea Limited's ordinary shareholders
|
|
(297,825)
|
(684,618)
|
|
|
|
|
|
|
|
|
Adjusted net
loss (1)
|
|
(280,967)
|
(622,985)
|
|
|
|
|
Loss per
share:
|
|
|
|
Basic and
diluted
|
|
(1.69)
|
(2.03)
|
|
|
|
|
|
|
|
|
Shares used in loss
per share computation:
|
|
|
|
Basic and
diluted
|
|
175,970,648
|
337,804,410
|
|
|
|
|
(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
September
30,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
|
1,347,361
|
1,209,235
|
Restricted
cash
|
|
95,300
|
247,773
|
Accounts receivable,
net
|
|
61,846
|
61,220
|
Prepaid expenses and
other assets
|
|
186,181
|
265,342
|
Inventories,
net
|
|
9,790
|
19,565
|
Short-term
investment
|
|
18,000
|
−
|
Amounts due from
related parties
|
|
2,235
|
5,328
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
1,720,713
|
1,808,463
|
|
|
|
|
Non-current
assets
|
|
|
|
Property and
equipment, net
|
|
74,348
|
147,379
|
Intangible assets,
net
|
|
37,333
|
25,668
|
Long-term
investments
|
|
28,216
|
118,188
|
Prepaid expenses and
other assets
|
|
46,297
|
59,981
|
Restricted
cash
|
|
2,317
|
2,370
|
Deferred tax
assets
|
|
48,104
|
59,418
|
Goodwill
|
|
30,952
|
30,952
|
|
|
|
|
|
|
|
|
Total non-current
assets
|
|
267,567
|
443,956
|
|
|
|
|
|
|
|
|
Total
assets
|
|
1,988,280
|
2,252,419
|
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
As
of
December
31,
|
As
of
September
30,
|
|
2017
|
2018
|
|
$
|
$
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
8,644
|
25,168
|
Accrued expenses and
other payables
|
285,248
|
503,336
|
Advances from
customers
|
27,155
|
26,456
|
Amount due to related
parties
|
36,790
|
34,802
|
Short-term bank
borrowings
|
2,013
|
−
|
Deferred
revenue
|
268,241
|
348,663
|
Income taxes
payable
|
9,614
|
8,114
|
|
|
|
|
|
|
Total current
liabilities
|
637,705
|
946,539
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
Accrued expenses and
other payables
|
7,547
|
10,548
|
Deferred
revenue
|
133,481
|
144,366
|
Convertible
debts
|
726,950
|
1,116,384
|
Deferred tax
liabilities
|
4,378
|
3,501
|
Unrecognized tax
benefits
|
3,088
|
2,913
|
|
|
|
|
|
|
Total non-current
liabilities
|
875,444
|
1,277,712
|
|
|
|
|
|
|
Total
liabilities
|
1,513,149
|
2,224,251
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
Class A ordinary
shares
|
91
|
94
|
Class B ordinary
shares
|
76
|
76
|
Additional paid-in
capital
|
1,564,656
|
1,793,010
|
Accumulated other
comprehensive income
|
10,701
|
23,042
|
Statutory
reserves
|
46
|
46
|
Accumulated
deficit
|
(1,106,545)
|
(1,791,163)
|
|
|
|
|
|
|
Total Sea Limited
shareholders' equity
|
469,025
|
25,105
|
Non-controlling
interests
|
6,106
|
3,063
|
|
|
|
|
|
|
Total
shareholders' equity
|
475,131
|
28,168
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
1,988,280
|
2,252,419
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
For the Nine
Months
ended September
30,
|
|
2017
|
2018
|
|
$
|
$
|
|
|
|
Net cash used in
operating activities
|
(170,840)
|
(357,029)
|
Net cash used in
investing activities
|
(67,474)
|
(158,938)
|
Net cash generated from
financing activities
|
696,442
|
545,106
|
Effect of foreign
exchange rate changes on cash, cash equivalents
and restricted cash
|
4,228
|
(14,739)
|
Net increase in cash,
cash equivalents and restricted cash
|
462,356
|
14,400
|
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
|
653,180
|
1,459,378
|
|
|
|
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 September 30, 2018
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(1)
|
Unallocated
expenses(2)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
112,520
|
65,919
|
2,548
|
23,934
|
-
|
204,921
|
|
|
|
|
|
|
|
Operating income
(loss)
|
19,403
|
(223,787)
|
(7,387)
|
(16,186)
|
(18,243)
|
(246,200)
|
Non-operating income,
net
|
|
|
|
|
|
30,903
|
Income tax
expense
|
|
|
|
|
|
(2,020)
|
Share of results of
equity investees
|
|
|
|
|
|
(702)
|
Net
loss
|
|
|
|
|
|
(218,019)
|
|
|
For the Three
Months ended September 30, 2017
|
|
Digital
Entertainment
|
E-
commerce
|
Digital
Financial
Services
|
Other
Services(1)
|
Unallocated e
xpenses(2)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
Revenue
|
79,799
|
2,786
|
4,792
|
6,717
|
-
|
94,094
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(6,874)
|
(132,292)
|
(8,561)
|
(6,015)
|
(6,974)
|
(160,716)
|
Non-operating income,
net
|
|
|
|
|
|
25,802
|
Income tax
credit
|
|
|
|
|
|
2,147
|
Share of results of
equity investees
|
|
|
|
|
|
(64)
|
Net
loss
|
|
|
|
|
|
(132,831)
|
|
|
|
|
|
|
|
(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 June 30,
2018
|
|
For the Three
Months
ended September 30,
2018
|
|
|
|
|
|
|
Digital
Entertainment
|
Unit
|
|
|
|
|
|
|
|
|
|
|
Quarterly active
users
|
millions
|
|
160.6
|
|
176.1
|
Monthly active users
(last month)
|
millions
|
|
90.6
|
|
104.5
|
Quarterly paying
users
|
millions
|
|
6.6
|
|
7.2
|
Average revenue per
user
|
US$
|
|
0.9
|
|
0.8
|
Average revenue per
paying user
|
US$
|
|
21.1
|
|
20.1
|
|
|
|
|
|
|
E-commerce
|
|
|
|
|
|
|
|
|
|
|
|
Gross GMV
|
US$
millions
|
|
2,221.8
|
|
2,690.9
|
Gross
orders
|
millions
|
|
127.8
|
|
158.5
|
View original
content:http://www.prnewswire.com/news-releases/sea-limited-reports-third-quarter-2018-results-300753712.html
SOURCE Sea Limited