Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced
its financial results for the first quarter ended March 31,
2020.
“Our company’s mission is to better the lives of consumers and
small businesses through technology - and I believe that this
mission is more important now than ever given the disruptions we
are all facing as a result of the coronavirus crisis,” said Forrest
Li, Sea’s Chairman and Group Chief Executive Officer.
“We are fortunate to be in a strong position to play a part in
helping our communities navigate these challenging times and get
back on the road to recovery. In addition to contributing funds and
essential medical equipment to the frontline fight against the
virus, we are doing everything we can to support economic recovery
across our markets, leveraging the strengths of our platforms as
market leaders in the digital economy. Among many other efforts we
made to empower our communities, we launched SME recovery programs,
including providing special assistance to small businesses to
onboard our platforms, accelerated the growth of the staple and
essential goods segment of our e-commerce platform to meet
increased consumer demand, and quickened the pace of the rollout of
our mobile wallet services to facilitate our users’ growing need
for online transactions. Through these efforts to harness the
benefits of the digital economy, we are helping our communities
better navigate near-term turbulence and, at the same time,
building even stronger bonds with consumers and merchants across
our platforms and the broader communities in our ecosystem.
“The coronavirus crisis is driving a step change in the growth
of the digital economy globally, materially accelerating a shift to
online lifestyles that is broad, deep, and, in our view,
irreversible. We believe that Sea, as a market leader in some of
the key sectors of the digital economy, is gaining and will
continue to gain a disproportionate share of the resulting growth
in our markets. Like all businesses, Sea has been stress-tested by
the crisis. Our robust performance through the first quarter and
beyond, as we responded to surges in user demands and navigated
significant disruption, underlines the fundamental strength,
resilience, and adaptability of our business. We believe this will,
in the long run, enable us to capture the further accelerated and
expanded growth opportunities presented to all of our core
businesses across our markets.”
First Quarter 2020 Highlights
- Group
- Total adjusted revenue was US$913.9 million, up 57.9%
year-on-year from US$578.8 million for the first quarter of
2019.
- Total gross profit was US$206.8 million, up 424.1% year-on-year
from US$39.5 million for the first quarter of 2019.
- Total adjusted EBITDA was US$(69.9) million compared to
US$(32.0) million for the first quarter of 2019.
- Digital Entertainment
- Adjusted revenue was US$512.4 million, up 30.3% year-on-year
from US$393.3 million for the first quarter of 2019.
- Adjusted EBITDA was US$298.4 million, up 32.2% year-on-year
from US$225.8 million for the first quarter of 2019.
- Adjusted EBITDA margin increased to 58.2% for the first quarter
of 2020 from 57.4% for the first quarter of 2019.
- Quarterly active users (“QAUs”) reached 402.1 million, an
increase of 48.0% year-on-year from 271.6 million for the first
quarter of 2019.
- Quarterly paying users grew by 72.5% year-on-year to 35.7
million, accounting for 8.9% of QAUs for the first quarter of 2020,
increasing from 7.6% for the same period in 2019.
- Average revenue per user was US$1.3 compared to US$1.4 for the
first quarter of 2019.
- Our self-developed global hit game, Free Fire, recently hit a
new record high of over 80 million peak daily active users and,
according to App Annie1, was the highest grossing mobile game in
Latin America and in Southeast Asia in the first quarter of 2020.
Free Fire was also ranked third globally by downloads for Google
Play in the mobile games category in the first quarter of 2020,
according to App Annie1.
- In April 2020, Free Fire hit another record high in monthly
paying users, which more than doubled year-on-year, and in India,
monthly paying users already accounted for over 10% of monthly
active users.
- We continue to focus on esports and community building
activities to engage with our rapidly expanding user base. In the
first quarter of 2020, we organized more than double the number of
esports tournaments online for Free Fire compared to the first
quarter of 2019, with these tournaments accumulating over 90
million views.
- E-commerce
- Gross merchandise value (“GMV”) growth accelerated to 74.3%
year-on-year to reach US$6.2 billion for the first quarter,
compared to 64.8% year-on-year in the fourth quarter of 2019.
- Gross orders totaled 429.8 million, an increase of 111.2%
year-on-year from 203.5 million for the first quarter of 2019.
- Gross orders growth further accelerated to more than 140%
year-on-year in April 2020.
- Adjusted revenue was US$314.0 million, up 110.5% year-on-year
from US$149.2 million for the first quarter of 2019.
- Adjusted revenue included US$236.7 million of marketplace
revenue2, up 132.1% year-on-year from US$102.0 million for the
first quarter of 2019, and US$77.3 million of product revenue3, up
63.6% year-on-year from US$47.2 million for the first quarter of
2019.
- Adjusted revenue as a percentage of total GMV increased to 5.1%
in the first quarter of 2020, up from 4.2% for the same period a
year ago. Adjusted marketplace revenue as a percentage of total GMV
was 3.8 % in the first quarter of 2020.
- Sales and marketing expenses were US$206.0 million, compared to
US$147.9 million for the first quarter of 2019.
- Adjusted EBITDA was US$(260.0) million compared to US$(235.3)
million for the first quarter of 2019. Adjusted EBITDA loss per
order decreased by 48.3% to US$0.60, compared to US$1.16 for the
first quarter of 2019.
- In Indonesia, where Shopee is the largest e-commerce platform
by orders, it registered over 185 million orders for the market in
the first quarter, or a daily average of over 2 million orders, an
increase of 122.6% year-on-year. Shopee also ranked first in
Indonesia by average monthly active users, downloads, and total
time spent in app on Android, in the Shopping category in the first
quarter of 2020, according to App Annie1.
- Both in Southeast Asia and in Taiwan, Shopee ranked number one
in the Shopping category by average monthly active users, and total
time spent in app on Android, for first quarter of 2020, according
to App Annie1.
- Shopee also ranked number one in the Shopping category by
downloads in Southeast Asia, and was among the top three worldwide
by downloads in the same category for first quarter of 2020,
according to App Annie1.
Digital Financial Services Update
Our digital financial services offerings experienced accelerated
growth in the first quarter, spurred by the rapid and accelerating
adoption of digital options by consumers and businesses in our
region, as well as Shopee’s sustained, fast growth and deepening
integration with SeaMoney.
Our mobile wallet total payment volume (“TPV”) for the first
quarter exceeded US$1 billion, a milestone we achieved about a year
after we started to integrate the mobile wallet service with our
Shopee platform. Moreover, quarterly paying users for our mobile
wallet services surpassed 10 million for the first quarter of 2020.
In the month of April 2020, more than 40% of Shopee’s gross orders
in Indonesia, our largest market for SeaMoney, were paid using our
mobile wallet service. We continued to rapidly expand our suite of
online and offline third-party use cases and partnerships. For
instance, in March 2020, we joined forces with Google to offer our
mobile wallet as a payment option for the Google Play Store in
Thailand.
As a result of the accelerating expansion of the digital
economy, and rising demand for online and contactless payments, we
believe SeaMoney’s long-term market opportunities are rapidly
expanding. We are therefore highly confident in SeaMoney’s growth
prospects, and fully focused on maximizing the significant
long-term growth potential of SeaMoney.
1 Rankings data for App Annie is based on combined data from the
Google Play and iOS App Stores, unless otherwise stated. Southeast
Asia rankings are based on Indonesia, Malaysia, Philippines,
Singapore, Thailand and Vietnam. Latin America rankings are based
on Argentina, Brazil, Chile, Colombia, Mexico and Uruguay. 2
Marketplace revenue mainly consists of transaction-based fees and
advertising income and revenue generated from other value-added
services. 3 Product revenue mainly consists of revenue generated
from direct sales.
Unaudited Summary of Financial
Results
(Amounts are expressed in thousands of US
dollars “$” except for per share data)
For the Three Months ended
March 31,
2019
2020
$
$
YOY%
Revenue
Service revenue
Digital Entertainment
173,399
369,683
113.2%
E-commerce and other services
130,663
266,545
104.0%
Sales of goods
47,804
78,692
64.6%
351,866
714,920
103.2%
Cost of revenue
Cost of service
Digital Entertainment
(84,642)
(142,692)
68.6%
E-commerce and other services
(174,365)
(285,524)
63.8%
Cost of goods sold
(53,403)
(79,904)
49.6%
(312,410)
(508,120)
62.6%
Gross profit
39,456
206,800
424.1%
Other operating income
3,453
25,316
633.2%
Sales and marketing expenses
(177,978)
(308,316)
73.2%
General and administrative expenses
(75,628)
(126,933)
67.8%
Research and development expenses
(28,509)
(64,586)
126.5%
Total operating expenses
(278,662)
(474,519)
70.3%
Operating loss
(239,206)
(267,719)
11.9%
Non-operating (loss) income, net
(442,780)(1)
11,235
(102.5)%
Income tax expense
(7,205)
(23,237)
222.5%
Share of results of equity investees
(418)
(1,070)
156.0%
Net loss
(689,609)
(280,791)
(59.3)%
Net loss excluding share-based
compensation and changes in fair value of the 2017 convertible
notes (2)
(237,290)
(239,388)
0.9%
Basic and diluted loss per share based on
net loss excluding share-based compensation and changes in fair
value of the 2017 convertible notes attributable to Sea Limited’s
ordinary shareholders (2)
(0.64)
(0.52)
(18.8)%
Adjusted revenue of Digital Entertainment
(2)
393,306
512,424
30.3%
Adjusted revenue of E-commerce (2)
149,191
313,973
110.5%
Adjusted revenue of Digital Financial
Services (2)
2,836
10,707
277.5%
Adjusted revenue of Other Services (2)
33,485
76,816
129.4%
Total adjusted revenue (2)
578,818
913,920
57.9%
Adjusted EBITDA for Digital Entertainment
(2)
225,816
298,435
32.2%
Adjusted EBITDA for E-commerce (2)
(235,253)
(260,019)
10.5%
Adjusted EBITDA for Digital Financial
Services (2)
(11,912)
(101,583)
752.8%
Adjusted EBITDA for Other Services (2)
(8,484)
(2,582)
(69.6)%
Unallocated expenses (3)
(2,130)
(4,117)
93.3%
Total adjusted EBITDA (2)
(31,963)
(69,866)
118.6%
(1) This was primarily due to fair value loss of $436.1 million
on the 2017 convertible notes as our share prices during the
quarter significantly exceeded the conversion prices of the 2017
convertible notes. (2) For a discussion of the use of non-GAAP
financial measures, see “Non-GAAP Financial Measures.” (3)
Unallocated expenses are mainly related to share-based compensation
and general and corporate administrative costs such as professional
fees and other miscellaneous items that are not allocated to
segments. These expenses are excluded from segment results as they
are not reviewed by the Chief Operating Decision Maker (“CODM”) as
part of segment performance.
Three Months Ended March 31, 2020 Compared to Three Months
Ended March 31, 2019
Revenue
The table below sets forth revenue and adjusted revenue
generated from our reported segments. Amounts are expressed in
thousands of US dollars (“$”).
For the Three Months ended
March 31,
2019
2020
$
% of
revenue
$
% of
revenue
YOY%
Revenue
Service revenue
Digital Entertainment
173,399
49.3
369,683
51.7
113.2%
E-commerce and other services
130,663
37.1
266,545
37.3
104.0%
Sales of goods
47,804
13.6
78,692
11.0
64.6%
Total revenue
351,866
100.0
714,920
100.0
103.2%
2019
2020
$
% of total adjusted revenue
$
% of total adjusted revenue
YOY%
Adjusted revenue
Service revenue
Digital Entertainment
393,306
67.9
512,424
56.1
30.3%
E-commerce and other services
137,615
23.8
322,804
35.3
134.6%
Sales of goods
47,897
8.3
78,692
8.6
64.3%
Total adjusted revenue
578,818
100.0
913,920
100.0
57.9%
Our total revenue increased by 103.2% to US$714.9 million in the
first quarter of 2020 from US$351.9 million in the first quarter of
2019. Our total adjusted revenue increased by 57.9% to US$913.9
million in the first quarter of 2020 from US$578.8 million in the
first quarter of 2019. These increases were mainly driven by the
growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue increased by 113.2% to US$369.7
million in the first quarter of 2020 from US$173.4 million in the
first quarter of 2019. Adjusted revenue increased by 30.3% to
US$512.4 million in the first quarter of 2020 from US$393.3 million
in the first quarter of 2019. This increase was primarily due to
the increase in our active user base as well as the deepened paying
user penetration, and in particular, the continued success of our
self-developed game Free Fire.
- E-commerce and other services: Revenue increased by 104.0% to
US$266.5 million in the first quarter of 2020 from US$130.7 million
in the first quarter of 2019. Adjusted revenue increased by 134.6%
to US$322.8 million in the first quarter of 2020 from US$137.6
million in the first quarter of 2019. This increase was primarily
driven by the growth of our e-commerce marketplace, and positive
developments in each of our marketplace revenue streams –
transaction-based fees, value-added services, and advertising. It
is a result of our commitment to continuously enhance our service
offerings as we seek to create greater value for our platform
users.
- Sales of goods: Revenue and adjusted revenue increased by 64.6%
and 64.3% respectively to US$78.7 million in the first quarter of
2020, primarily due to the increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 62.6% to US$508.1 million
in the first quarter of 2020 from US$312.4 million in the first
quarter of 2019.
- Digital Entertainment: Cost of revenue increased by 68.6% to
US$142.7 million in the first quarter of 2020 from US$84.6 million
in the first quarter of 2019. The increase was largely in line with
revenue growth in our digital entertainment business. Improvement
in gross profit margins was largely due to higher revenue
contribution from our self-developed game.
- E-commerce and other services: Cost of revenue for our
e-commerce and other services combined increased by 63.8% to
US$285.5 million in the first quarter of 2020 from US$174.4 million
in the first quarter of 2019. The increase was primarily due to
costs incurred in line with growth of our e-commerce marketplace,
including, among other costs, higher bank transaction fees driven
by GMV growth, higher costs associated with value-added services
and other ancillary services we provided to our e-commerce platform
users, as well as higher staff compensation and benefit costs.
- Cost of goods sold: Cost of goods sold increased by 49.6% to
US$79.9 million in the first quarter of 2020 from US$53.4 million
in the first quarter of 2019. The increase was largely in line with
the increase in our product offerings.
Other Operating Income
Our other operating income increased by 633.2% to US$25.3
million in the first quarter of 2020 from US$3.5 million in the
first quarter of 2019. The increase in our other operating income
was mainly due to the rebates from e-commerce related logistic
services provided by third parties.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 73.2% to
US$308.3 million in the first quarter of 2020 from US$178.0 million
in the first quarter of 2019. The table below sets forth the
breakdown of the sales and marketing expenses of our two major
reporting segments. Amounts are expressed in thousands of US
dollars (“$”).
For the Three Months ended
March 31,
2019
2020
YOY%
Sales and Marketing Expenses
$
$
Digital Entertainment
19,989
26,815
34.1%
E-commerce
147,897
206,044
39.3%
- Digital Entertainment: Sales and marketing expenses increased
by 34.1% to US$26.8million in the first quarter of 2020 from
US$20.0 million in the first quarter of 2019. The increase was
primarily due to esports and other user engagement activities for
the enlarged user base of the existing games.
- E-commerce: Sales and marketing expenses increased by 39.3% to
US$206.0 million in the first quarter of 2020 from US$147.9 million
in the first quarter of 2019. The increase in marketing efforts was
aligned with our strategy to fully capture the market growth
opportunity and was primarily attributable to the ramping up of
brand marketing as well as higher staff compensation and benefit
costs.
General and Administrative Expenses
Our general and administrative expenses increased by 67.8% to
US$126.9 million in the first quarter of 2020 from US$75.6 million
in the first quarter of 2019. This increase was primarily due to
higher staff compensation and benefit costs as well as increase in
office facilities and related expenses.
Research and Development Expenses
Our research and development expenses increased by 126.5% to
US$64.6 million in the first quarter of 2020 from US$28.5 million
in the first quarter of 2019, primarily due to the increase in
research and development staff force.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income,
interest expense, investment gain (loss), fair value change for the
2017 convertible notes and foreign exchange gain (loss). We
recorded a net non-operating income of US$11.2 million in the first
quarter of 2020, compared to a net non-operating loss of US$442.8
million in the first quarter of 2019. The net non-operating loss in
the first quarter of 2019 was primarily due to a fair value loss of
US$436.1 million arising from the fair value accounting treatment
for the 2017 convertible notes.
Income Tax Expense
We had a net income tax expense of US$23.2 million and US$7.2
million in the first quarter of 2020 and 2019, respectively. The
income tax expense in the first quarter of 2020 was primarily due
to withholding tax and corporate income tax expenses incurred by
our digital entertainment segment.
Net Loss
As a result of the foregoing, we had net losses of US$280.8
million and US$689.6 million in the first quarter of 2020 and 2019,
respectively.
Net Loss Excluding Share-based Compensation and Changes in
Fair Value of the 2017 Convertible Notes
Net loss excluding share-based compensation and changes in fair
value of the 2017 convertible notes, was US$239.4 million and
US$237.3 million in the first quarter of 2020 and 2019,
respectively.
Basic and Diluted Loss Per Share Based on Net Loss Excluding
Share-based Compensation and Changes in Fair Value of the 2017
Convertible Notes Attributable to Sea Limited’s Ordinary
Shareholders
Basic and diluted loss per share based on net loss excluding
share-based compensation and changes in fair value of the 2017
convertible notes, was US$0.52 and US$0.64 in the first quarter of
2020 and 2019, respectively.
Webcast and Conference Call Information
The Company’s management will host a conference call today to
review Sea’s business and financial performance.
Details of the conference call and webcast are as follows:
Date and time:
7:30 AM U.S. Eastern Time on May 18,
2020
7:30 PM Singapore / Hong Kong Time on May
18, 2020
Webcast link:
https://services.choruscall.com/links/se200518.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:
7099128
A replay of the conference call will be available at the
Company’s investor relations website
(https://www.seagroup.com/investor/financials). An archived webcast
will be available at the same link above.
About Sea Limited
Sea Limited (NYSE: SE) is a leading global consumer internet
company founded in Singapore in 2009. Our mission is to better the
lives of consumers and small businesses with technology. We operate
three core businesses across digital entertainment, e-commerce, as
well as digital payments and financial services, known as Garena,
Shopee, and SeaMoney, respectively. Garena is a leading global
online games developer and publisher. Shopee is the largest
pan-regional e-commerce platform in Southeast Asia and Taiwan.
SeaMoney is a leading digital payments and financial services
provider in Southeast Asia.
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 markets where it operates, including segments
within those industries; changes in its revenue, costs or
expenditures; its ability to continue to source, develop and offer
new and attractive online games and to offer other engaging digital
entertainment content; the growth of its digital entertainment,
e-commerce and digital financial services businesses and platforms;
the growth in its user base, level of user engagement, and
monetization; its ability to continue to develop new technologies
and/or upgrade its existing technologies; growth and trends of its
markets and competition in its industries; government policies and
regulations relating to its industries; general economic and
business conditions in its markets; and the impact of widespread
health developments, including the recent global coronavirus
pandemic, and the responses thereto (such as voluntary and in some
cases, mandatory quarantines as well as shut downs and other
restrictions on travel and commercial, social and other activities)
which could materially and adversely affect, among other things,
the business and manufacturing activities of its sellers, merchants
and logistics providers, the global supply chain including those of
its sellers’ and merchants’, and consumer discretionary spending.
Further information regarding these and other risks is included in
Sea’s filings with the SEC. All information provided in this press
release and in the attachments is as of the date of this press
release, and Sea undertakes no obligation to update any
forward-looking statement, except as required under applicable
law.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with U.S. GAAP, we use the
following non-GAAP financial measures to help evaluate our
operating performance:
- “Adjusted revenue” of our digital entertainment segment
represents revenue of the digital entertainment segment plus change
in digital entertainment deferred revenue. This financial measure
is used as an approximation of cash spent by our users in the
applicable period that is attributable to our digital entertainment
segment. Although other companies may present such measures related
to gross billings differently or not at all, we believe that the
adjusted revenue of our digital entertainment segment provides
useful information to investors about the segment’s core operating
results, enhancing their understanding of our past performance and
future prospects.
- “Adjusted revenue” of our e-commerce segment represents revenue
of the e-commerce segment (currently consisting of marketplace
revenue and product revenue) plus certain revenues that were
net-off against their corresponding sales incentives. This
financial measure enables our investors to follow trends in our
e-commerce monetization capability over time and is a useful
performance measure.
- “Adjusted revenue” of our digital financial services segment
represents revenue of the digital financial services segment plus
certain revenues that were net-off against their corresponding
sales incentives.
- “Adjusted revenue” of our other services segment represents
revenue of the other services segment plus certain revenues that
were net-off against their corresponding sales incentives.
- “Total adjusted revenue” represents the sum of adjusted revenue
of all our segments combined. This financial measure enables our
investors to follow trends in our overall group monetization
capability over time and is a useful performance measure.
- “Net loss excluding share-based compensation and changes in
fair value of the 2017 convertible notes” represents net loss
before share-based compensation and changes in fair value of
convertible notes. This financial measure 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 this measure has its limitations in that it does not
include all items that impact the net loss or income for the
period, and share-based compensation and changes in fair value of
convertible notes are significant expenses.
- “Net loss excluding share-based compensation and changes in
fair value of the 2017 convertible notes attributable to Sea
Limited’s ordinary shareholders” represents net loss attributable
to Sea Limited’s ordinary shareholders before share-based
compensation and changes in fair value of convertible notes. This
financial measure 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 this measure has
its limitations in that it does not include all items that impact
the net loss or income for the period, and share-based compensation
and changes in fair value of convertible notes are significant
expenses.
- “Basic and diluted loss per share based on net loss excluding
share-based compensation and changes in fair value of the 2017
convertible notes attributable to Sea Limited’s ordinary
shareholders” represents net loss excluding share-based
compensation and changes in fair value of the 2017 convertible
notes attributable to Sea Limited’s ordinary shareholders divided
by the weighted average number of shares outstanding during the
period.
- “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 (a) depreciation
and amortization expenses, and (b) intersegment sales incentives.
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 (“$”) except for number of
shares & per share data.
For the Three Months ended
March 31, 2020
Digital Entertainment
E-commerce
Digital Financial Services
Other Services(3)
Unallocated expenses(4)
Consolidated
$
$
$
$
$
$
Revenue
369,683
263,195(1)
10,345
71,697
-
714,920
Changes in deferred revenue
142,741
-
-
-
-
142,741
Sales incentives net-off
-
50,778
362
5,119
-
56,259
Adjusted revenue
512,424
313,973(2)
10,707
76,816
-
913,920
Operating income (loss)
174,037
(291,699)
(94,385)
(10,239)
(45,433)
(267,719)
Net effect of changes in deferred revenue
and its related cost
118,543
-
-
-
-
118,543
Intersegment sales incentives
-
4,097
(8,514)
4,417
-
-
Depreciation and Amortization
5,855
27,583
1,316
3,240
-
37,994
Share-based compensation
-
-
-
-
41,316
41,316
Adjusted EBITDA
298,435
(260,019)
(101,583)
(2,582)
(4,117)
(69,866)
For the Three Months ended
March 31, 2019
Digital Entertainment
E-commerce
Digital Financial Services
Other Services(3)
Unallocated expenses(4)
Consolidated
$
$
$
$
$
$
Revenue
173,399
142,694(1)
2,288
33,485
-
351,866
Changes in deferred revenue
219,907
-
-
-
-
219,907
Sales incentives net-off
-
6,497
548
-
-
7,045
Adjusted revenue
393,306
149,191(2)
2,836
33,485
-
578,818
Operating income (loss)
56,470
(253,473)
(12,461)
(11,413)
(18,329)
(239,206)
Net effect of changes in deferred revenue
and its related cost
165,501
-
-
-
-
165,501
Depreciation and Amortization
3,845
18,220
549
2,929
-
25,543
Share-based compensation
-
-
-
-
16,199
16,199
Adjusted EBITDA
225,816
(235,253)
(11,912)
(8,484)
(2,130)
(31,963)
(1) For the first quarter of 2020, revenue of $263,195 included
marketplace revenue of $185,930 and product revenue of $77,265 net
of sales incentives. For the first quarter of 2019, revenue of
$142,694 included marketplace revenue of $95,566 and product
revenue of $47,128 net of sales incentives. (2) For the first
quarter of 2020, adjusted revenue of $313,973 included marketplace
revenue of $236,708 and product revenue of $77,265. For the first
quarter of 2019, adjusted revenue of $149,191 included marketplace
revenue of $101,970 and product revenue of $47,221. (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. These
expenses are excluded from segment results as they are not reviewed
by the CODM as part of segment performance.
For the Three Months ended
March 31,
2019
2020
$
$
Net loss
(689,609)
(280,791)
Share-based compensation
16,199
41,316
Changes in fair value of the 2017
convertible notes
436,120
87
Net loss excluding share-based
compensation and changes in fair value of the 2017 convertible
notes
(237,290)
(239,388)
Net profit attributable to non-controlling
interests
(746)
(722)
Net loss excluding share-based
compensation and changes in fair value of the 2017 convertible
notes attributable to Sea Limited’s ordinary shareholders
(238,036)
(240,110)
Weighted average shares used in loss per
share computation:
Basic and diluted
370,724,164
462,194,052
Basic and diluted loss per share based on
net loss excluding share-based compensation and changes in fair
value of the 2017 convertible notes attributable to Sea Limited’s
ordinary shareholders
(0.64)
(0.52)
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,
2019
2020
$
$
Revenue
Service revenue
Digital Entertainment
173,399
369,683
E-commerce and other services
130,663
266,545
Sales of goods
47,804
78,692
Total revenue
351,866
714,920
Cost of revenue
Cost of service
Digital Entertainment
(84,642)
(142,692)
E-commerce and other services
(174,365)
(285,524)
Cost of goods sold
(53,403)
(79,904)
Total cost of revenue
(312,410)
(508,120)
Gross profit
39,456
206,800
Operating income (expenses):
Other operating income
3,453
25,316
Sales and marketing expenses
(177,978)
(308,316)
General and administrative expenses
(75,628)
(126,933)
Research and development expenses
(28,509)
(64,586)
Total operating expenses
(278,662)
(474,519)
Operating loss
(239,206)
(267,719)
Interest income
4,012
9,291
Interest expense
(10,066)
(24,609)
Investment gain, net
2,047
5,111
Changes in fair value of convertible
notes
(436,120)(1)
(87)
Foreign exchange (loss) gain
(2,653)
21,529
Loss before income tax and share of
results of equity investees
(681,986)
(256,484)
Income tax expense
(7,205)
(23,237)
Share of results of equity investees
(418)
(1,070)
Net loss
(689,609)
(280,791)
Net profit attributable to non-controlling
interests
(746)
(722)
Net loss attributable to Sea Limited’s
ordinary shareholders
(690,355)
(281,513)
Loss per share:
Basic and diluted
(1.86)
(0.61)
Weighted average shares used in loss per
share computation:
Basic and diluted
370,724,164
462,194,052
(1) Fair value loss of $436.1 million on the 2017 convertible
notes was recorded as our share prices significantly exceeded the
conversion prices of the 2017 convertible notes.
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of December 31,
As of March 31,
2019
2020
$
$
ASSETS
Current assets
Cash and cash equivalents
3,118,988
2,599,702
Restricted cash
434,938
505,396
Accounts receivable, net
187,035
160,003
Prepaid expenses and other assets
535,187
717,243
Inventories, net
26,932
34,222
Short-term investments
102,324
30,468
Amounts due from related parties
4,735
3,549
Total current assets
4,410,139
4,050,583
Non-current assets
Property and equipment, net
318,620
301,314
Operating lease right-of-use assets,
net
182,965
185,550
Intangible assets, net
15,020
39,925
Long-term investments
113,797
143,175
Prepaid expenses and other assets
65,684
192,576
Restricted cash
16,652
18,207
Deferred tax assets
70,340
78,152
Goodwill
30,952
223,342
Total non-current assets
814,030
1,182,241
Total assets
5,224,169
5,232,824
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of December 31,
As of March 31,
2019
2020
$
$
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities
Accounts payable
69,370
50,956
Accrued expenses and other payables
980,805
1,136,018
Advances from customers
65,062
78,635
Amounts due to related parties
34,990
36,802
Short-term borrowings
1,258
2,382
Operating lease liabilities
56,320
56,456
Deferred revenue
1,097,868
1,032,593
Convertible notes
29,481
–
Income tax payable
27,212
34,775
Total current liabilities
2,362,366
2,428,617
Non-current liabilities
Accrued expenses and other payables
25,802
19,602
Long-term borrowings
358
111
Operating lease liabilities
144,000
142,132
Deferred revenue
160,708
298,834
Convertible notes
1,356,332
1,374,724
Deferred tax liabilities
975
857
Unrecognized tax benefits
976
972
Total non-current liabilities
1,689,151
1,837,232
Total liabilities
4,051,517
4,265,849
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of December 31,
As of March 31,
2019
2020
$
$
Shareholders’ equity
Class A Ordinary shares
154
156
Class B Ordinary shares
76
76
Additional paid-in capital
4,687,284
4,758,964
Accumulated other comprehensive income
5,449
(26,543)
Statutory reserves
46
46
Accumulated deficit
(3,530,585)
(3,812,098)
Total Sea Limited shareholders’
equity
1,162,424
920,601
Non-controlling interests
10,228
46,374
Total shareholders’ equity
1,172,652
966,975
Total liabilities and shareholders’
equity
5,224,169
5,232,824
UNAUDITED INTERIM CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts expressed in thousands of US
dollars (“$”)
For the Three Months ended
March 31,
2019
2020
$
$
Net cash used in operating activities
(17,815)
(223,679)
Net cash used in investing activities
(91,250)
(147,066)
Net cash generated from (used in)
financing activities
1,527,875
(24,757)
Effect of foreign exchange rate changes on
cash, cash equivalents and restricted cash
1,843
(51,771)
Net increase (decrease) in cash, cash
equivalents and restricted cash
1,420,653
(447,273)
Cash, cash equivalents and restricted cash
at beginning of the period
1,259,312
3,570,578
Cash, cash equivalents and restricted cash
at end of the period
2,679,965
3,123,305
UNAUDITED SEGMENT INFORMATION
The Company has three reportable segments, namely digital
entertainment, e-commerce and digital financial services. The Chief
Operating 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, 2020
Digital Entertainment
E-commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
369,683
263,195
10,345
71,697
-
714,920
Operating income (loss)
174,037
(291,699)
(94,385)
(10,239)
(45,433)
(267,719)
Non-operating income, net
11,235
Income tax expense
(23,237)
Share of results of equity investees
(1,070)
Net loss
(280,791)
For the Three Months ended
March 31, 2019
Digital Entertainment
E-commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
173,399
142,694
2,288
33,485
-
351,866
Operating income (loss)
56,470
(253,473)
(12,461)
(11,413)
(18,329)
(239,206)
Non-operating loss, net
(442,780)
Income tax expense
(7,205)
Share of results of equity investees
(418)
Net loss
(689,609)
(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. These
expenses are excluded from segment results as they are not reviewed
by the CODM as part of segment performance.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200518005302/en/
Martin Reidy Investors / analysts: ir@seagroup.com Media:
media@seagroup.com
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