SINGAPORE, May 15, 2018 /PRNewswire/ -- Sea Limited
(NYSE: SE) ("Sea" or the "Company") today announced its financial
results for the quarter ended March 31,
2018.
"We again saw healthy growth in our digital entertainment
revenue in the first quarter of 2018, and have several new games in
the pipeline for launch this year. Meanwhile, Shopee continues to
grow ahead of expectations as we capture a larger share of our
region's e-commerce market, and the virtuous cycle created by that
accelerated scaling is driving ever-improving economics on our
platform," said Forrest Li, Chairman
and Group Chief Executive Officer of Sea. "We will continue to
invest in growth, and to focus on improving our services to our
platform users, as well as the infrastructure supporting our core
businesses."
First Quarter 2018 Key Metrics
-Group
- Total adjusted revenue was US$197.0
million, up 81.2% year-on-year from US$108.8 million for the first quarter of 2017
and up 19.8% quarter-on-quarter from US$164.5 million for the fourth quarter of
2017.
- Total adjusted EBITDA was US$(144.7)
million, compared to US$(41.4)
million for the first quarter of 2017 and US$(140.2) million for the fourth quarter of
2017.
-Digital Entertainment
- Adjusted revenue was US$146.0
million, up 42.6% year-on-year from US$102.4 million for the first quarter of 2017
and up 2.9% quarter-on-quarter from US$141.9
million for the fourth quarter of 2017.
- Adjusted EBITDA was US$55.0
million, an increase of 48.6% year-on-year from US$37.0 million for the first quarter of 2017 and
up 4.6% quarter-on-quarter from $52.6
million for the fourth quarter of 2017.
- Quarterly active users ("QAUs") reached 126.7 million, an
increase of 124.6% year-on-year from 56.4 million for the first
quarter of 2017 and up 44.3% quarter-on-quarter from 87.8 million
for the fourth quarter of 2017.
- Average revenue per user ("ARPU") was US$1.2 compared to US$1.8 for the first quarter of 2017 and
US$1.6 for the fourth quarter of
2017.
-E-commerce
- Gross merchandise value ("GMV") was US$1.9 billion, an increase of 199.5%
year-on-year from US$648.3 million
for the first quarter of 2017 and up 23.0% quarter-on-quarter
from US$1.6 billion for the fourth
quarter of 2017.
- Gross orders for the quarter totaled 111.4 million, an increase
of 217.4% year-on-year from 35.1 million for the first quarter of
2017 and up 13.3% quarter-on-quarter from 98.3 million for the
fourth quarter of 2017.
- Adjusted revenue was US$33.7
million, up 262.1% quarter-on-quarter from US$9.3 million for the fourth quarter of 2017.
Adjusted revenue included US$22.0
million of marketplace revenue[1] and
US$11.7 million of product
revenue[2]. There was negligible e-commerce adjusted
revenue for the first quarter of 2017.
- Adjusted EBITDA was US$(179.6)
million, compared to US$(62.7)
million for the first quarter of 2017 and US$(175.4) million for the fourth quarter of
2017.
- Sales and marketing as a percentage of GMV stood at 6.6%, and
improved from 7.1% for the first quarter of 2017 and 8.5% for the
fourth quarter of 2017.
-Digital Financial Services
- Gross transaction value of our digital financial services as a
whole ("GTV") was US$1.7 billion, an
increase of 428.6% year-on-year from US$322.0 million for the first quarter of 2017
and up 65.7% quarter-on-quarter from US$1.0
billion for the fourth quarter of 2017. The growth was
attributable to the payment processing services provided by AirPay
to Shopee in most of our markets, which, depending on the
operational arrangement in each relevant market, may include
payments from buyers to Shopee accounts under Shopee Guarantee as
well as outgoing payments from Shopee accounts to Shopee seller
accounts that are operationally handled by AirPay.
[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
Garena enjoyed healthy growth this quarter, buoyed by factors
including the continued expansion of our leading mobile games in
the region, Arena of Valor and Free Fire. Free
Fire recently achieved 13 million daily active users, placing
it amongst the world's most popular mobile battle royale titles. We
continue to complement our leading franchises through growing
e-sports leagues, video streaming options, and other ancillary
services.
We held Garena World 2018, our region's largest eSports event,
from March 31 to April 1, 2018 in
Bangkok, Thailand. We had an
attendance of approximately 240 thousand and attracted over 10.6
million views online for the various tournaments at Garena World.
In total, over 11,000 teams participated in the tournaments leading
up to the event in Bangkok. Garena
is well-positioned to ride on the wave of eSports growth as one of
the region's leading game platforms. We continue to invest in our
eSports operations to generate user engagement for our games and to
promote user acquisition and retention.
Our pipeline of games for release in 2018 features a series of
highly anticipated PC and mobile titles. These include both classic
and new franchises in different genres.
E-commerce
Shopee achieved robust growth in both GMV and gross orders in
each of our markets in the first quarter of 2018 and saw a decrease
in sales and marketing expenses from US$135.0 million in the fourth quarter of 2017 to
US$127.2 million in the first quarter
of 2018. This was driven primarily by our continuous efforts to
attract new buyers and sellers in our focus categories while
improving our cost efficiency.
Shopee has focused much of its innovation on launching
value-added services to our ever-expanding seller base. We continue
to broaden our 'Service by Shopee' offering in select markets,
where we offer sellers a number of value-added services, such as
inventory management, online store operations, and fulfilment
services. We also provide 'Shopee Logistics Service' to create a
seamless logistics experience for sellers and buyers. In addition,
we conduct direct sales of certain products. With this diverse
portfolio of services and offerings, depending on the needs and
preferences of our sellers, we can help them manage inventory and
fulfil orders from warehouses leased and operated by us, operate
their stores on our platform, or purchase products from them for
resale on our platform.
Other Development
Appointment of Group Chief Economist
The Company also announced that Santitarn Sathirathai is
expected to join the Company as Group Chief Economist in
June 2018. Mr. Sathirathai will focus
on establishing Sea as a key thought leader in the digital economy
and work with policy makers to promote digital transformation in
the region. He will report to Forrest
Li, Chairman and Group Chief Executive Officer.
Mr. Sathirathai will be joining the Company from Credit Suisse,
where he is the head of Emerging Asia Economics Research. He won
the award for best economic forecaster for Indonesia by Consensus Economics for each of
2013, 2014 and 2015, the very first economist in Asia to receive such award for three
consecutive years, and was selected as one of Asia's 21 young
leaders in 2017 by Asia Society. He is a highly ranked economist
for ASEAN and was also rated the best economist for Thailand by Asia
Money. Prior to joining Credit Suisse, Mr. Sathirathai
worked at the Ministry of Finance of Thailand and Government of Singapore
Investment Corporation, and taught macroeconomic courses at
Chulalongkorn University in
Thailand. Mr. Sathirathai holds a
doctorate degree in Public Policy and a master's degree in Public
Administration from Harvard University,
as well as a bachelor's degree in Economics and a master's degree
in Public Policy from the London School of
Economics and Political Science.
Summary of Financial Results
(Amounts are expressed
in thousands of US dollars "$")
|
For the Three
Months
ended March
31,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
YOY%
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
Revenue
|
|
|
|
Digital
Entertainment
|
87,586
|
110,658
|
26.3%
|
Others
|
6,359
|
44,386
|
598.0%
|
|
93,945
|
155,044
|
65.0%
|
|
|
|
|
Cost of
revenue
|
|
|
|
Digital
Entertainment
|
(49,277)
|
(63,572)
|
29.0%
|
Others
|
(17,561)
|
(82,947)
|
372.3%
|
|
(66,838)
|
(146,519)
|
119.2%
|
Gross
profit
|
27,107
|
8,525
|
(68.6)%
|
Other operating
income
|
218
|
729
|
234.4%
|
Sales and marketing
expenses
|
(63,898)
|
(152,149)
|
138.1%
|
General and
administrative expenses
|
(25,208)
|
(44,487)
|
76.5%
|
Research and
development expenses
|
(6,252)
|
(10,712)
|
71.3%
|
Total operating
expenses
|
(95,140)
|
(206,619)
|
117.2%
|
Operating
loss
|
(68,033)
|
(198,094)
|
191.2%
|
Non-operating loss,
net
|
(2,479)
|
(18,247)
|
636.1%
|
Income tax (expense)
credit
|
(1,932)
|
755
|
(139.1)%
|
Share of results of
equity investees
|
(632)
|
(583)
|
(7.8)%
|
Net
loss
|
(73,076)
|
(216,169)
|
195.8%
|
Adjusted net
loss (1)
|
(66,963)
|
(205,498)
|
206.9%
|
|
|
|
|
Adjusted revenue of
Digital Entertainment (1)
|
102,396
|
146,030
|
42.6%
|
Adjusted revenue of
E-commerce (1)
|
34
|
33,744
|
99,147.1%
|
Adjusted revenue of
Digital Financial Services (1)
|
2,034
|
3,923
|
92.9%
|
Revenue of Other
Services
|
4,291
|
13,342
|
210.9%
|
Total adjusted
revenue (1)
|
108,755
|
197,039
|
81.2%
|
|
|
|
|
Adjusted EBITDA for
Digital Entertainment (1)
|
37,006
|
55,004
|
48.6%
|
Adjusted EBITDA for
E-commerce (1)
|
(62,669)
|
(179,649)
|
(186.7)%
|
Adjusted EBITDA for
Digital Financial Services (1)
|
(9,904)
|
(8,570)
|
13.5%
|
Adjusted EBITDA for
Other Services (1)
|
(2,923)
|
(9,868)
|
(237.6)%
|
Unallocated expenses
(2)
|
(2,867)
|
(1,591)
|
44.5%
|
Total adjusted
EBITDA (1)
|
(41,357)
|
(144,674)
|
(249.8)%
|
|
|
|
|
|
(1) For a
discussion of the use of non-GAAP financial measures, see "Non-GAAP
Financial Measures."
|
(2)
Unallocated expenses are mainly related to share-based compensation
and general and corporate administrative
costs such as professional fees and other miscellaneous items that
are not allocated to segments. These expenses are
excluded from segment results as they are not reviewed by the Chief
Operation Decision Maker ("CODM") as part
of segment performance.
|
Three Months Ended March 31,
2018 Compared to Three Months Ended March 31, 2017
Revenue
The table below sets forth revenue and adjusted revenue
generated from our reported segments. Amounts are expressed in
thousands of US dollars ("$").
|
For the Three
Months ended March 31,
|
|
|
2017
|
|
2018
|
|
|
$
|
% of
revenue
|
|
$
|
% of
revenue
|
YOY%
|
|
(unaudited)
|
|
(unaudited)
|
|
Revenue
|
|
|
|
|
|
|
Digital
Entertainment
|
87,586
|
93.2
|
|
110,658
|
71.4
|
26.3%
|
E-commerce
|
34
|
-
|
|
27,344
|
17.6
|
80,323.5%
|
Digital Financial
Services
|
2,034
|
2.2
|
|
3,700
|
2.4
|
81.9%
|
Other
Services
|
4,291
|
4.6
|
|
13,342
|
8.6
|
210.9%
|
|
93,945
|
100.0
|
|
155,044
|
100.0
|
65.0%
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
|
$
|
% of total
adjusted
revenue
|
|
$
|
% of total
adjusted
revenue
|
YOY%
|
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
Adjusted revenue of
Digital Entertainment
|
102,396
|
94.2
|
|
146,030
|
74.1
|
42.6%
|
Adjusted revenue of
E-commerce
|
34
|
-
|
|
33,744
|
17.1
|
99,147.1%
|
Adjusted revenue of
Digital Financial Services
|
2,034
|
1.9
|
|
3,923
|
2.0
|
92.9%
|
Revenue of Other
Services
|
4,291
|
3.9
|
|
13,342
|
6.8
|
210.9%
|
Total
adjusted revenue
|
108,755
|
100.0
|
|
197,039
|
100.0
|
81.2%
|
Our total revenue increased by 65.0% to US$155.0 million in the first quarter of 2018
from US$93.9 million in the first
quarter of 2017. Our total adjusted revenue increased by 81.2% to
US$197.0 million in the first quarter
of 2018 from US$108.8 million in the
first quarter of 2017. These increases were mainly driven by the
growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue increased by 26.3% to
US$110.7 million in the first quarter
of 2018 from US$87.6 million in the
first quarter of 2017. Adjusted revenue increased by 42.6% to
US$146.0 million in the first quarter
of 2018 from US$102.4 million in the
first quarter of 2017. This increase was primarily due to the
growth of our QAUs to 126.7 million in the first quarter of 2018
from 56.4 million in the first quarter of 2017, as we launched new
games and expanded our existing games into new markets, which in
turn increased the number of our paying users.
- E-commerce: We began monetizing our e-commerce business
in 2017. In the first quarter of 2018, our e-commerce revenue was
US$27.3 million, including
US$15.6 million of marketplace
revenue and US$11.7 million of
product revenue. Our e-commerce adjusted revenue was US$33.7 million in the same period. There was
negligible e-commerce revenue for the first quarter of 2017. The
additional services and product offerings we introduced to sellers
under 'Service by Shopee,' 'Shopee Logistics Service,' as well as
the other value-added services we recently started to offer created
additional income streams for our e-commerce business.
- Digital Financial Services: Revenue increased by 81.9%
to US$3.7 million in the first
quarter of 2018 from US$2.0 million
in the first quarter of 2017. Adjusted revenue increased by 92.9%
to US$3.9 million in the first
quarter of 2018 from US$2.0 million
in the first quarter of 2017. The increase was primarily
attributable to the addition of use cases to our AirPay platform
and a further deepening of our market penetration.
- Other Services: Revenue increased by 210.9% to
US$13.3 million in the first quarter
of 2018 from US$4.3 million in the
first quarter of 2017. The increase was primarily due to ancillary
services we provide to our e-commerce platform users.
Cost of Revenue
Our total cost of revenue increased by 119.2% to US$146.5 million in the first quarter of 2018
from US$66.8 million in the first
quarter of 2017.
- Digital Entertainment: Cost of revenue increased by
29.0% to US$63.6 million in the first
quarter of 2018 from US$49.3 million
in the first quarter of 2017. The increase was primarily due to the
increase in royalty payments to game developers as well as other
costs directly associated with our digital entertainment segment
which were largely in line with the revenue growth of our
business.
- Others: Cost of revenue for our other segments combined
increased by 372.3% to US$82.9
million in the first quarter of 2018 from US$17.6 million in the first quarter of 2017. The
increase was primarily due to the costs incurred following the
launch of 'Service by Shopee,' 'Shopee Logistics Service,' and
direct sales at the end of 2017; higher bank transaction fees
driven by GMV growth from our e-commerce business; higher costs
associated with other ancillary services we provided to our
e-commerce platform users; as well as higher staff compensation and
benefit costs.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 138.1% to
US$152.1 million in the first quarter
of 2018 from US$63.9 million in the
first quarter of 2017. The table below sets forth the breakdown of
the sales and marketing expenses of our two major reporting
segments. Amounts are expressed in thousands of US dollars
("$").
|
For the Three
Months
ended March
31,
|
|
|
2017
|
|
2018
|
YOY%
|
Sales and
Marketing Expenses
|
$
(unaudited)
|
|
$
(unaudited)
|
|
Digital
Entertainment
|
11,036
|
|
16,243
|
47.2%
|
E-commerce
|
45,905
|
|
127,198
|
177.1%
|
- Digital Entertainment: Sales and marketing expenses
increased by 47.2% to US$16.2 million
in the first quarter of 2018 from US$11.0
million in the first quarter of 2017. The increase was
primarily due to the launch of new games and our continued efforts
to expand our existing games into new markets, which in turn
enlarged our user base and increased the number of our paying
users.
|
For the Three
Months
ended March
31,
|
|
2017
|
|
2018
|
Digital
Entertainment
|
$
(unaudited)
|
|
$
(unaudited)
|
Sales and marketing
expenses
|
11,036
|
|
16,243
|
Adjusted
revenue
|
102,396
|
|
146,030
|
Sales and marketing
expenses as a percentage of adjusted revenue
|
10.8%
|
|
11.1%
|
Sales and marketing expenses as a
percentage of adjusted revenue of 11.1% in the first quarter of
2018 was comparable to the first quarter of 2017.
- E-commerce: Sales and marketing expenses increased by
177.1% to US$127.2 million in the
first quarter of 2018 from US$45.9
million in the first quarter of 2017. The increase in
marketing efforts was aligned with our strategy to fully capture
the market growth opportunity and was primarily in connection with
shipping and other promotions on our platform in order to increase
our user base and enhance user engagement.
|
For the Three
Months
ended March
31,
|
|
2017
|
|
2018
|
E-commerce
|
$
(unaudited)
|
|
$
(unaudited)
|
Sales and marketing
expenses
|
45,905
|
|
127,198
|
GMV
|
648,285
|
|
1,941,403
|
Sales and marketing
expenses as a percentage of GMV
|
7.1%
|
|
6.6%
|
Sales and marketing expenses as a
percentage of GMV was 6.6% in the first quarter of 2018 and
improved from 7.1% in the first quarter of 2017.
General and Administrative Expenses
Our general and administrative expenses increased by 76.5% to
US$44.5 million in the first quarter
of 2018 from US$25.2 million in the
first quarter of 2017. This increase was primarily due to the
expansion of our staff force, the increase in office facilities and
related expenses, as well as the increase in other expenses.
Research and Development Expenses
Our research and development expenses increased by 71.3% to
US$10.7 million in the first quarter
of 2018 from US$6.3 million in the
first quarter of 2017, primarily due to the increase in research
and development staff force as we expanded and enriched our product
offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income,
interest expense, investment gain (loss), fair value change for
convertible promissory notes and foreign exchange gain (loss). We
recorded a net non-operating loss of US$18.2
million in the first quarter of 2018, compared to a net
non-operating loss of US$2.5 million
in the first quarter of 2017. This was primarily due to fair value
loss of US$18.8 million recognized in
the quarter arising from the fair value accounting treatment for
convertible promissory notes and interest expenses on those
promissory notes, partially offset by an investment gain arising
from the disposal of an equity security investment.
Income Tax Expense
We had a net income tax benefit of US$0.8
million in the first quarter of 2018 which was primarily due
to the higher deferred tax assets we recognized as a result of
change in statutory tax rate in one of the markets we operate in
and the increase in deferred revenue in our digital entertainment
segment in the first quarter of 2018.
Share of Results of Equity Investees
We had share of losses of equity investees of US$0.6 million in the first quarter of 2018,
compared with US$0.6 million in the
first quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$216.2 million and US$73.1 million in the first quarter of 2018 and
2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove
share-based compensation expenses, was US$205.5 million and US$67.0 million in the first quarter of 2018 and
2017, respectively.
Updated Guidance
For the full year of 2018, we now expect total adjusted revenue
to be between US$780 million and
US$820 million, representing 40.9% to
48.1% growth from 2017. This compares to the previously disclosed
guidance of between US$730 million
and US$770 million, representing
31.9% to 39.1% growth.
We are also revising our e-commerce GMV guidance for the full
year of 2018. We now expect e-commerce GMV for the full year of
2018 to be between US$8.2 billion and
US$8.7 billion, representing 99.4% to
111.5% growth from 2017. This compares to the previously disclosed
guidance of between US$7.5 billion
and US$8.0 billion, representing
82.4% to 94.5% growth.
Webcast and Conference Call Information
Mr. Forrest Li, Founder, Chairman
and Group Chief Executive Officer; Mr. Tony
Hou, Group Chief Financial Officer; and Mr. Alan Hellawell, Group Chief Strategy Officer,
will host a conference call today to review Sea's business and
financial performance.
Details of the conference call and webcast are as follows:
Date and time:
|
8:00 PM U.S. Eastern
Time on 15 May 2018
|
|
8:00 AM Singapore /
Hong Kong Time on 16 May 2018
|
|
|
Webcast link:
|
http://mms.prnasia.com/se/20180515/default.aspx
|
|
|
|
Dial in numbers:
|
US Toll Free:
1-888-317-6003
|
Hong Kong:
800-963-976
|
|
International:
1-412-317-6061
|
Singapore:
800-120-5863
|
|
United Kingdom:
08-082-389-063
|
|
|
|
Passcode for
participants: 7961550
|
|
A replay of the conference call will be available at the
Company's investor relations website
(http://www.seagroup.com/investor/financials). An archived webcast
will be available at the same link above.
For enquiries, please contact:
Investors / analysts: ir@seagroup.com
Media: media@seagroup.com or sea@brunswickgroup.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 excluding share-based
compensation expense. We believe that the adjusted net loss helps
to identify underlying trends in our business that could otherwise
be distorted by the effect of certain expenses that are included in
net loss. The use of adjusted net loss has its limitations in that
it does not include all items that impact the net loss or income
for the period, and share-based compensation is a recurring
significant expense.
- "Adjusted EBITDA" for our digital entertainment segment
represents operating income (loss) before share-based compensation
plus (a) depreciation and amortization expenses, and (b) the net
effect of changes in deferred revenue and its related cost for our
digital entertainment segment. Although other companies may
calculate adjusted EBITDA differently or not present it at all, we
believe that the segment adjusted EBITDA helps to identify
underlying trends in our operating results, enhancing their
understanding of the past performance and future prospects.
- "Adjusted EBITDA" for our e-commerce segment, digital financial
services segment and other services segment represents operating
income (loss) before share-based compensation plus depreciation and
amortization expenses. Although other companies may calculate
adjusted EBITDA differently or not present it at all, we believe
that the segment adjusted EBITDA helps to identify underlying
trends in our operating results, enhancing their understanding of
the past performance and future prospects.
- "Total adjusted EBITDA" represents the sum of adjusted EBITDA
of all our segments combined, plus unallocated expenses. Although
other companies may calculate adjusted EBITDA differently or not
present it at all, we believe that the total adjusted EBITDA helps
to identify underlying trends in our operating results, enhancing
their understanding of the past performance and future
prospects.
These non-GAAP financial measures have limitations as analytical
tools. None of the above financial measures should be considered in
isolation or construed as an alternative to revenue, net
loss/income, or any other measure of performance or as an indicator
of our operating performance. These non-GAAP financial measures
presented here may not be comparable to similarly titled measures
presented by other companies. Other companies may calculate
similarly titled measures differently, limiting their usefulness as
comparative measures to Sea's data. We compensate for these
limitations by reconciling the non-GAAP financial measures to their
nearest U.S. GAAP financial measures, all of which should be
considered when evaluating our performance. We encourage you to
review our financial information in its entirety and not rely on
any single financial measure.
The tables below present selected financial information of our
reporting segments, the non-GAAP financial measures that are most
directly comparable to GAAP financial measures, and the related
reconciliations between the financial measures. Amounts are
expressed in thousands of US dollars ("$").
|
|
|
For the Three
Months ended March 31, 2018
|
|
Digital
Entertainment
|
E-commerce
|
Digital
Financial
Services
|
Other
Services(3)
|
Unallocated
expenses(4)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
Revenue
|
110,658
|
27,344(1)
|
3,700
|
13,342
|
-
|
155,044
|
Changes in deferred
revenue
|
35,372
|
-
|
-
|
-
|
-
|
35,372
|
Sales incentives
net-off
|
-
|
6,400
|
223
|
-
|
-
|
6,623
|
Adjusted
revenue
|
146,030
|
33,744(2)
|
3,923
|
13,342
|
-
|
197,039
|
|
|
|
|
|
|
|
Operating income
(loss)
|
18,788
|
(184,052)
|
(9,058)
|
(11,510)
|
(12,262)
|
(198,094)
|
Net effect of changes
in 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)
|
|
|
|
For the Three
Months ended March 31, 2017
|
|
Digital
Entertainment
|
E-commerce
|
Digital
Financial
Services
|
Other
Services(3)
|
Unallocated
expenses(4)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
Revenue
|
87,586
|
34
|
2,034
|
4,291
|
-
|
93,945
|
Changes in deferred
revenue
|
14,810
|
-
|
-
|
-
|
-
|
14,810
|
Sales incentives
net-off
|
-
|
-
|
-
|
-
|
-
|
-
|
Adjusted
revenue
|
102,396
|
34
|
2,034
|
4,291
|
-
|
108,755
|
|
|
|
|
|
|
|
Operating income
(loss)
|
18,389
|
(63,723)
|
(10,130)
|
(3,589)
|
(8,980)
|
(68,033)
|
Net effect of changes
in deferred
revenue and
its related cost
|
11,745
|
-
|
-
|
-
|
-
|
11,745
|
Depreciation and
Amortization
|
6,872
|
1,054
|
226
|
666
|
-
|
8,818
|
Share-based
compensation
|
-
|
-
|
-
|
-
|
6,113
|
6,113
|
Adjusted
EBITDA
|
37,006
|
(62,669)
|
(9,904)
|
(2,923)
|
(2,867)
|
(41,357)
|
|
(1)
Revenue of $27,344 includes marketplace revenue of $15,644 and
product revenue of $11,700, net of sales incentives.
|
(2)
Adjusted revenue of $33,744 includes marketplace revenue of $22,044
and product revenue of $11,700.
|
(3) A
combination of multiple business activities that does not meet the
quantitative thresholds to qualify as reportable
segments are grouped together as "Other Services".
|
(4)
Unallocated expenses are mainly related to share-based compensation
and general and corporate administrative costs
such as professional fees and other miscellaneous items that are
not allocated to segments. The expenses are excluded
from segment results as they are not reviewed by the CODM as part
of segment performance.
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
Amounts expressed
in thousands of US dollars ("$") except for number of shares &
per share data
|
|
|
|
For the Three
Months ended March 31,
|
|
2017
|
2018
|
|
$
|
$
|
|
(unaudited)
|
(unaudited)
|
|
|
|
Revenue
|
|
|
Digital
entertainment
|
87,586
|
110,658
|
Others
|
6,359
|
44,386
|
|
|
|
|
|
|
Total
revenue
|
93,945
|
155,044
|
|
|
|
Cost of
revenue
|
|
|
Digital
entertainment
|
(49,277)
|
(63,572)
|
Others
|
(17,561)
|
(82,947)
|
|
|
|
|
|
|
Total cost of
revenue
|
(66,838)
|
(146,519)
|
|
|
|
|
|
|
Gross
profit
|
27,107
|
8,525
|
|
|
|
|
|
|
Operating income
(expenses):
|
|
|
Other operating
income
|
218
|
729
|
Sales and marketing
expenses
|
(63,898)
|
(152,149)
|
General and
administrative expenses
|
(25,208)
|
(44,487)
|
Research and
development expenses
|
(6,252)
|
(10,712)
|
|
|
|
|
|
|
Total operating
expenses
|
(95,140)
|
(206,619)
|
|
|
|
|
|
|
Operating
loss
|
(68,033)
|
(198,094)
|
Interest
income
|
144
|
3,091
|
Interest
expense
|
(2,250)
|
(8,582)
|
Investment (loss)
gain
|
(225)
|
7,515
|
Changes in fair value
of convertible promissory notes
|
–
|
(18,796)
|
Foreign exchange
loss
|
(148)
|
(1,475)
|
|
|
|
|
|
|
Loss before income
tax and share of results of equity investees
|
(70,512)
|
(216,341)
|
Income tax (expense)
credit
|
(1,932)
|
755
|
Share of results of
equity investees
|
(632)
|
(583)
|
|
|
|
|
|
|
Net
loss
|
(73,076)
|
(216,169)
|
|
|
|
Net (gain) loss
attributable to non-controlling interests
|
(10)
|
556
|
|
|
|
|
|
|
Net loss
attributable to Sea Limited's ordinary shareholders
|
(73,086)
|
(215,613)
|
|
|
|
|
|
|
Adjusted net
loss (1)
|
(66,963)
|
(205,498)
|
|
|
|
|
|
|
Loss per
share:
|
|
|
Basic and
diluted
|
(0.42)
|
(0.64)
|
|
|
|
|
|
|
Shares used in loss
per share computation:
|
|
|
Basic and
diluted
|
172,896,906
|
335,147,405
|
|
|
|
|
(1) For a
discussion of the use of non-GAAP financial measures, see "Non-GAAP
Financial Measures."
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
|
As
of
December
31,
|
As
of
March
31,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
|
1,347,361
|
1,172,426
|
Restricted
cash
|
|
95,300
|
159,521
|
Accounts receivable,
net
|
|
61,846
|
70,899
|
Prepaid expenses and
other assets
|
|
186,181
|
223,849
|
Inventories,
net
|
|
9,790
|
13,382
|
Short-term
investment
|
|
18,000
|
−
|
Amounts due from
related parties
|
|
2,235
|
2,244
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
1,720,713
|
1,642,321
|
|
|
|
|
Non-current
assets
|
|
|
|
Property and
equipment, net
|
|
74,348
|
93,939
|
Intangible assets,
net
|
|
37,333
|
33,614
|
Long-term
investments
|
|
28,216
|
58,514
|
Prepaid expenses and
other assets
|
|
46,297
|
53,587
|
Restricted
cash
|
|
2,317
|
2,455
|
Deferred tax
assets
|
|
48,104
|
55,070
|
Goodwill
|
|
30,952
|
30,952
|
|
|
|
|
|
|
|
|
Total non-current
assets
|
|
267,567
|
328,131
|
|
|
|
|
|
|
|
|
Total
assets
|
|
1,988,280
|
1,970,452
|
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
|
As
of
December
31,
|
As
of
March
31,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
|
|
|
(unaudited)
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
|
8,644
|
13,937
|
Accrued expenses and
other payables
|
|
285,248
|
375,466
|
Advances from
customers
|
|
27,155
|
30,450
|
Amount due to related
parties
|
|
36,790
|
39,381
|
Short-term bank
borrowings
|
|
2,013
|
−
|
Deferred
revenue
|
|
268,241
|
283,538
|
Income tax
payable
|
|
9,614
|
9,523
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
637,705
|
752,295
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
Accrued expenses and
other payables
|
|
7,547
|
7,860
|
Deferred
revenue
|
|
133,481
|
162,909
|
Convertible
promissory notes
|
|
726,950
|
745,746
|
Deferred tax
liabilities
|
|
4,378
|
4,104
|
Unrecognized tax
benefits
|
|
3,088
|
2,985
|
|
|
|
|
|
|
|
|
Total non-current
liabilities
|
|
875,444
|
923,604
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
1,513,149
|
1,675,899
|
|
|
|
|
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
|
As
of
December
31,
|
As
of
March
31,
|
|
|
2017
|
2018
|
|
|
$
|
$
|
|
|
|
(unaudited)
|
Shareholders'
equity
|
|
|
|
|
|
|
|
Class A Ordinary
shares
|
|
91
|
91
|
Class B Ordinary
shares
|
|
76
|
76
|
Additional paid-in
capital
|
|
1,564,656
|
1,575,078
|
Accumulated other
comprehensive income
|
|
10,701
|
35,919
|
Statutory
reserves
|
|
46
|
46
|
Accumulated
deficit
|
|
(1,106,545)
|
(1,322,158)
|
|
|
|
|
|
|
|
|
Total Sea Limited
shareholders' equity
|
|
469,025
|
289,052
|
Non-controlling
interests
|
|
6,106
|
5,501
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
475,131
|
294,553
|
|
|
|
|
|
|
|
|
Total liabilities
and shareholders' equity
|
|
1,988,280
|
1,970,452
|
|
|
|
|
|
|
|
|
UNAUDITED INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Amounts expressed
in thousands of US dollars ("$")
|
|
|
|
For the Three
Months ended
March
31,
|
|
2017
|
2018
|
|
$
|
$
|
|
|
(unaudited)
|
|
|
|
Net cash used in
operating activities
|
(59,271)
|
(94,360)
|
Net cash used in
investing activities
|
(6,697)
|
(21,837)
|
Net cash generated from
(used in) financing activities
|
356,953
|
(545)
|
Effect of foreign
exchange rate changes on cash, cash equivalents and restricted
cash
|
3,052
|
6,166
|
Net increase (decrease)
in cash, cash equivalents and restricted cash
|
294,037
|
(110,576)
|
Cash, cash equivalents
and restricted cash at beginning of the period
|
190,824
|
1,444,978
|
|
|
|
|
|
|
Cash, cash equivalents
and restricted cash at end of the period
|
484,861
|
1,334,402
|
|
|
|
|
|
|
1
SEGMENT INFORMATION
The Company has three reportable segments, namely digital
entertainment, e-commerce and digital financial services. The Chief
Operation Decision Maker ("CODM") reviews the performance of each
segment based on revenue and certain key operating metrics of the
operations and uses these results for the purposes of allocating
resources to and evaluating the financial performance of each
segment. Amounts are expressed in thousands of US dollars
("$").
|
For the Three
Months ended March 31, 2018
|
|
Digital
Entertainment
|
E-commerce
|
Digital
Financial
Services
|
Other
Services(1)
|
Unallocated
expenses(2)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
Revenue
|
110,658
|
27,344
|
3,700
|
13,342
|
-
|
155,044
|
|
|
|
|
|
|
|
Operating income
(loss)
|
18,788
|
(184,052)
|
(9,058)
|
(11,510)
|
(12,262)
|
(198,094)
|
Non-operating loss,
net
|
|
|
|
|
|
(18,247)
|
Income tax
expense
|
|
|
|
|
|
755
|
Share of results of
equity investees
|
|
|
|
|
|
(583)
|
Net
loss
|
|
|
|
|
|
(216,169)
|
|
|
|
For the Three
Months ended March 31, 2017
|
|
Digital
Entertainment
|
E-commerce
|
Digital
Financial
Services
|
Other
Services(1)
|
Unallocated
expenses(2)
|
Consolidated
|
|
$
|
$
|
$
|
$
|
$
|
$
|
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|
|
|
|
|
|
|
Revenue
|
87,586
|
34
|
2,034
|
4,291
|
-
|
93,945
|
|
|
|
|
|
|
|
Operating income
(loss)
|
18,389
|
(63,723)
|
(10,130)
|
(3,589)
|
(8,980)
|
(68,033)
|
Non-operating loss,
net
|
|
|
|
|
|
(2,479)
|
Income tax
expense
|
|
|
|
|
|
(1,932)
|
Share of results of
equity investees
|
|
|
|
|
|
(632)
|
Net
loss
|
|
|
|
|
|
(73,076)
|
|
(1) A
combination of multiple business activities that does not meet the
quantitative thresholds to qualify as reportable
segments are grouped together as "Other Services".
|
(2)
Unallocated expenses are mainly related to share-based compensation
and general and corporate administrative
costs such as professional fees and other miscellaneous items that
are not allocated to segments. The expenses are
excluded from segment results as they are not reviewed by the CODM
as part of segment performance.
|
SUPPLEMENTAL OPERATIONAL METRICS
|
|
|
For the Three
Months
ended December 31,
2017
|
|
For the Three
Months
ended March 31,
2018
|
|
|
|
|
|
|
Digital
Entertainment
|
Unit
|
|
|
|
|
|
|
|
|
|
|
Quarterly active
users
|
millions
|
|
87.8
|
|
126.7
|
Monthly active users
(last month)
|
millions
|
|
59.5
|
|
77.4
|
Quarterly paying
users
|
millions
|
|
7.2
|
|
7.2
|
Average revenue per
user
|
US$
|
|
1.6
|
|
1.2
|
Average revenue per
paying user
|
US$
|
|
19.7
|
|
20.3
|
|
|
|
|
|
|
E-commerce
|
|
|
|
|
|
|
|
|
|
|
|
Gross GMV
|
US$
millions
|
|
1,578.6
|
|
1,941.4
|
Gross
orders
|
millions
|
|
98.3
|
|
111.4
|
|
|
|
|
|
|
Digital Financial
Services
|
|
|
|
|
|
|
|
|
|
|
|
GTV
|
US$
millions
|
|
1,027.5
|
|
1,702.2
|
View original
content:http://www.prnewswire.com/news-releases/sea-limited-reports-first-quarter-2018-results-300648781.html
SOURCE Sea Limited