SINGAPORE– (BUSINESS WIRE) –Sea Limited (NYSE: SE) (“Sea” or the “Company”) March 31, 2019.

First Quarter 2019 Highlights

  • Group
    • Total adjusted revenue was US $ 578.8 million, up 193.8% year-on-year from US $ 197.0 million for the first quarter of 2018 and up 48.7% quarter-on-quarter from US $ 389.3 million for the fourth quarter of 2018.
    • Total adjusted EBITDA was US $ (32.0) million, compared to US $ (144.7) million for the first quarter of 2018 and US $ (203.6) million for the fourth quarter of 2018.
  • Digital Entertainment
    • Adjusted revenue was US $ 393.3 million, up 169.3% year-on-year from US $ 146.0 million for the first quarter of 2018% quarter-on-quarter from US $ 70.0 million for the fourth quarter of 231.4.
    • Adjusted EBITDA was US $ 225.8 million, up 310.5% year-on-year from US $ 55.0 million for the first quarter of 2018 quarter-on-quarter increase from US $ 114.7 million for the fourth quarter of 105.2.
    • Adjusted EBITDA margin increased to 57.4% for the first quarter of 2019, from 37.7% for the first quarter of 2018 and 45.5
    • Quarterly active users ("QAUs") reached 271.6 million, an increase of 114.4% year-on-year from 126.7 million for the first quarter of 2018 and up 25.6% quarter-on-quarter from 216.2 million for the fourth quarter of 2018.
    • 7.6% of QAUs for the first quarter of 2019, and 5.7% in the fourth quarter of 2018.
    • Average revenue per user was US $ 1.4 compared to US $ 1.2 for the first quarter of 2018 and US $ 1.1 for the fourth quarter of 2018.
    • Free Fire continued to grow and recently achieved more than 450 million registered users and more than 50 million peak daily active users from over 130 markets worldwide. According to the Annie App, in the first quarter of 2019, Free Fire was the second most downloaded mobile game globally across the Apple App Store and Google Play combined and the top mobile game in Latin America by monthly active users and downloads1.
    • Our inaugural Free World Cup attracted more than 27 million online views in total recorded peak viewers of over 1.1 million on YouTube.
    • In April 2019, we held Garena World 2019, our region's largest eSports event, in Bangkok, Thailand. The event attracted approximately 270 million visitors, 30 million.
    • We recently announced that we will be publishing Call of Duty®: Mobile, a mobile version of the classic joint action game developed jointly by Activision and Tencent Games, under our right of first refusal arrangement with Tencent.

1 Latin America rankings data for App is based on Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay. No monthly active user data available for Uruguay.

  • E-commerce
    • Adjusted revenue was US $ 149.2 million, up 342.1% year-on-year from US $ 33.7 million for the first quarter of 2018. It was also up 17.6% quarter-on-quarter from US $ 126.9 million for the fourth quarter of 2018.
    • Adjusted revenue included US $ 102.0 million of marketplace revenue1, up 362.6% year-on-year from US $ 22.0 million for the first quarter of 2018 and up 16.4% quarter-on-quarter from US $ 87.6 million for the fourth quarter of 2018, and US $ 47.2 million of product revenue2, up 303.6% year-on-year from US $ 11.7 million for the first quarter of 2018 and up 20.2% quarter-on-quarter from US $ 39.3 million in the fourth quarter of 2018.
    • Gross merchandise value ("GMV") was US $ 3.5 billion, an increase of 81.8% year-on-year from US $ 1.9 billion for the first quarter 2018 and up 3.0% quarter-on-quarter from US $ 3.4 billion for the fourth quarter of 2018.
    • Adjusted revenue as a percentage of GMV increased to 4.2% in the first quarter of 2019, up from 3.7
    • Gross orders for the quarter total 203.5 million, an increase of 82.7% year-on-year from 111.4 million for the first quarter of 2018 and on the 206.9 million for the fourth quarter of 2018.
    • Sales and marketing as a percentage of GMV further down 4.2 in the first quarter of 2019 Sales and marketing expenses in absolute dollar terms decreased quarter-on-quarter in the first quarter of 5.4 to US $ 6.6 million compared to US $ 2019 million in the fourth quarter of 147.9.
    • Adjusted EBITDA was US $ (235.3) million, compared to US $ (179.6) million for the first quarter of 2018 and US $ (277.5) million for the fourth quarter of 2018.
    • In Taiwan, Shopee recorded a positive quarterly adjusted EBITDA before the common expenses allocation in the first quarter of 2019.
    • In Indonesia, Shopee's largest market, Shopee recorded 83.5 million orders in the first quarter of 2019, or a daily average of 0.9, further extending its leadership as the largest e-commerce platform in the market.
    • According to the Annie App, in the first quarter of 2019, Shopee was the most downloaded app in the Shopping Category in Southeast Asia and in Taiwan.

1 Marketplace revenue consists of transaction-based fees and advertising income and revenue generated from other value-added services.

2 Revenue generated by direct sales.

Unaudited Summary of Financial Results

(Amounts are expressed in thousands of US dollars "$")

For the Three Months

ended March 31,

2018 2019
$ $ YOY%
Revenue
Service revenue
Digital Entertainment 110,658 173,399 56.7 %
E-commerce and other services 32,451 130,663 302.6 %
Sales of goods 11,935 47,804 300.5 %
155,044 351,866 126.9 %
Cost of revenue
Cost of service
Digital Entertainment (63,572 ) (84,642 ) 33.1 %
E-commerce and other services (70,793 ) (174,365 ) 146.3 %
Cost of goods sold (12,154 ) (53,403 ) 339.4 %
(146,519 ) (312,410 ) 113.2 %
Gross profit 8,525 39,456 362.8 %
Other operating income 729 3,453 373.7 %
Sales and marketing expenses (152,149 ) (177,978 ) 17.0 %
General and administrative expenses (44,487 ) (75,628 ) 70.0 %
Research and development expenses (10,712 ) (28,509 ) 166.1 %
Total operating expenses (206,619 ) (278,662 ) 34.9 %
Operating loss (198,094 ) (239,206 ) 20.8 %
Non-operating loss, net (18,247 ) (442,780 )1 2,326.6 %
Income tax credit (expense) 755 (7,205 ) (1,054.3 )%
Share of results of equity investees (583 ) (418 ) (28.3 )%
Net loss (216,169 ) (689,609 ) 219.0 %
Net loss excluding share-based compensation and fair value changes of the 2017 convertible notes (186,702 ) (237,290 ) 27.1 %
Adjusted revenue of Digital Entertainment 2 146,030 393,306 169.3 %
Adjusted revenue of E-commerce 2 33,744 149,191 342.1 %
Adjusted revenue of Digital Financial Services 2 3,923 2,836 (27.7 )%
Revenue of Other Services 13,342 33,485 151.0 %
Total adjusted revenue 2 197,039 578,818 193.8 %
Adjusted EBITDA for Digital Entertainment 2 55,004 225,816 310.5 %
Adjusted EBITDA for E-commerce 2 (179,649 ) (235,253 ) 31.0 %
Adjusted EBITDA for Digital Financial Services 2 (8,570 ) (11,912 ) 39.0 %
Adjusted EBITDA for Other Services 2 (9,868 ) (8,484 ) (14.0 )%
Unallocated expenses 3 (1,591 ) (2,130 ) 33.9 %
Total adjusted EBITDA 2 (144,674 ) (31,963 ) (77.9 )%

1 This was primarily a fair value loss of $ 436.1 million on the 2017 convertible notes to the 2017 convertible notes.

2 For non-GAAP financial measures, see "Non-GAAP Financial Measures."

3 Allocated expenses are mainly related to share-based compensation and general and corporate administrative costs which are not allocated to segments. "CODM" is part of segment performance.

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

Revenue

The table below sets revenue and adjusted revenue generated from our reported segments. Amounts are expressed in thousands of US dollars ("$").

For the Three Months ended March 31,
2018 2019
$ % of

revenue

$ % of

revenue

YOY%
Revenue
Service revenue
Digital Entertainment 110,658 71.4 173,399 49.3 56.7 %
E-commerce and other services 32,451 20.9 130,663 37.1 302.6 %
Sales of goods 11,935 7.7 47,804 13.6 300.5 %
Total revenue 155,044 100.0 351,866 100.0 126.9 %
2018 2019
$

% of total

adjusted

revenue

$

% of total

adjusted

revenue

YOY%
Adjusted revenue
Service revenue
Digital Entertainment 146,030 74.1 393,306 67.9 169.3 %
E-commerce and other services 39,074 19.8 137,615 23.8 252.2 %
Sales of goods 11,935 6.1 47,897 8.3 301.3 %
Total adjusted revenue 197,039 100.0 578,818 100.0 193.8 %

Our total revenue increased by 126.9% to US $ 351.9 million in the first quarter of 2019 from US $ 155.0 million in the first quarter of 2018. Our total adjusted revenue increased by 193.8% to US $ 578.8 million in the first quarter of 2019 from US $ 197.0 million in the first quarter of 2018. These increases were mainly driven by the growth in the segments detailed as follows:

  • Digital Entertainment: Revenue increased by 56.7% to US $ 173.4 million in the first quarter of 2019 from US $ 110.7 million in the first quarter of 2018. Adjusted revenue increased by 169.3% to US $ 393.3 million in the first quarter of 2019 from US $ 146.0 million in the first quarter of 2018. The increase of the first two to the increase of our active user bases as well as the deepened paying user penetrations and to continue to bring new and engaging to the users and enhance the game and monetization based on deep understanding of local preferences and conditions as well as our strong efforts in eSports and community-building.
  • E-commerce and other services: Revenue increased by 302.6% to US $ 130.7 million in the first quarter of 2019 from US $ 32.5 million in the first quarter of 2018. Adjusted revenue increased by 252.2% to US $ 137.6 million in the first quarter of 2019 from US $ 39.1 million in the first quarter of 2018. The increase in our e-commerce marketplaces, and the development of our revenue streams - transaction-based fees, value-added services, and advertising. We have deepened our relationships and engagement with sellers and buyers, and enhanced our e-commerce ecosystem, using our integrated and value-added services, as well as ancillary services we provide.
  • Sales of goods: Revenue increased by 300.5% to US $ 47.8 million in the first quarter of 2019 from US $ 11.9 million in the first quarter of 2018. Adjusted revenue increased by 301.3% to US $ 47.9 million in the first quarter of 2019 from US $ 11.9 million in the first quarter of 2018. The increase was primarily due to the increase in our product offerings.

Cost of Revenue

Our total cost of revenue increased by 113.2% to US $ 312.4 million in the first quarter of 2019 from US $ 146.5 million in the first quarter of 2018.

  • Digital Entertainment: Cost of revenue increased by 33.1% to US $ 84.6 million in the first quarter of 2019 from US $ 63.6 million in the first quarter of 2018. The increase was largely in line with revenue growth in our digital entertainment business. Gross profit improvement margins was largely two to higher share from our self-developed game.
  • E-commerce and other services: 146.3% of US $ 174.4 million in the first quarter of 2019. Higher e-commerce platform due to e-commerce business increase, primarily due to e-commerce business, higher costs associated with e-commerce platform users, as well as higher staff compensation and benefit costs.
  • Cost of goods sold: Cost of goods sold increased by 339.4% to US $ 53.4 million in the first quarter of 2019 from US $ 12.2 million in the first quarter of 2018. The increase was largely in line with the increase in our product offerings.

Other Operating Income

Our other operating income increased by 373.7% to US $ 3.5 million in the first quarter of 2019 in the first quarter of 0.7. The increase was primarily due to an increase in sponsorship from partners who participated in our events and tournaments.

Sales and Marketing Expenses

17.0 million in the first quarter of 178.0 in the first quarter of 2019. The table below sets the breakdown of sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars ("$").

For the Three Months

ended March 31,

2018 2019 YOY%
Sales and Marketing Expenses $ $
Digital Entertainment 16,243 19,989 23.1%
E-commerce 127,198 147,897 16.3%
  • Digital Entertainment: Sales and marketing expenses increased by 23.1% to US $ 20.0 million in the first quarter of 2019 from the US $ 16.2 million in the first quarter of 2018. The increase was primarily two to the new game launch.
For the Three Months

ended March 31,

2018 2019
Digital Entertainment $ $
Sales and marketing expenses 16,243 19,989
Adjusted revenue 146,030 393,306
Sales and marketing expenses as a percentage of adjusted revenue 11.1% 5.1%

Sales and marketing expenses as a percentage of adjusted revenue to 5.1 in the first quarter of 2019

  • E-commerce: Sales and marketing expenses increased by 16.3% to US $ 147.9 million in the first quarter of 2019 from the US $ 127.2 million in the first quarter of 2018. Increase in marketing efforts as well as higher staff compensation and benefits costs.
For the Three Months

ended March 31,

2018 2019
E-commerce $ $
Sales and marketing expenses 127,198 147,897
GMV 1,941,403 3,529,326
Sales and marketing expenses as a percentage of GMV 6.6% 4.2%

Sales and marketing expenses as a percentage of GMV decreased by 4.2 in the first quarter of 2019 from the first quarter of 6.6

General and Administrative Expenses

70.0 million in the first quarter of 75.6 in the first quarter of 2019. The increase was primarily due to the expansion of our staff and the increase in office facilities and related expenses.

Research and Development Expenses

166.1 million in the first quarter of 28.5 in the first quarter of 2019, primarily two in the increase in research and development staff.

Non-operating Income or Losses, Net

Non-operating income or losses consist of interest income, interest expense, investment gain (loss), fair value change for the 2017 convertible notes and foreign exchange gain (loss). We recorded a net non-operating loss of US $ 442.8 in the first quarter of 2019, compared to a net non-operating loss of US $ 18.2 million in the first quarter of 2018. This was primarily a two-way fair value loss of US $ 436.1 million on the 2017 convertible notes

Income Tax Expense

We had a net income tax expense of US $ 7.2 in the first quarter of 2019 million in the first quarter of 0.8. The income tax expense was primarily due to the digital entertainment segment, partially offset by deferred tax assets recognized during the period.

Share of Results of Equity Investees

0.4 million in the first quarter of 2019 had a share in the loss of equity invested by US $ 0.6 in the first quarter of 2018.

Net Loss

As a result of foregoing, we had net losses of US $ 689.6 million and US $ 216.2 million in the first quarter of 2019 and 2018, respectively. The higher net losses were primarily due to fair value loss of US $ 436.1 million recognized in the quarter from fair value accounting treatment for the 2017 convertible notes issued before our IPO.

Net Loss Excluding Share-based Compensation and Changes in Fair Value of the 2017 Convertible Notes

2017 convertible notes, was US $ 237.3 million and US $ 186.7 million in the first quarter of 2019 and 2018, respectively.

Webcast and Conference Call Information

Company management will host a conference call.

Details of the conference call are as follows:

Date and time: 8: 00 PM US Eastern Time on May 21, 2019
8: 00 AM Singapore / Hong Kong Time on May 22, 2019
Webcast link:

https://services.choruscall.com/links/se190521.html

Dial in numbers: US Toll Free: 1-888-317-6003 Hong Kong: 800-963-976
International: 1-412-317-6061 Singapore: 800-120-5863
United Kingdom: 08-082-389-063

Passcode for Participants: 9462467

A replay of the conference call will be available at the Company's investor relations website (https://www.seagroup.com/investor/financials). An archived webcast will be available at the same link above.

About Sea Limited

Sea's mission to better consumers with small businesses of our region with technology. Our region includes the key markets of Indonesia, Taiwan, Vietnam, Thailand, the Philippines, Malaysia and Singapore. Sea operates three businesses across digital entertainment, e-commerce, and digital financial services, known as Garena, Shopee, and AirPay, respectively.

Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the US 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. Amongst other things, statements, including statements about Sea's beliefs and expectations, business, financial outlook, and projections from its management . Sea may also make written or oral statements to the US Securities and Exchange Commission (the “SEC”), 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; growth in e-commerce, e-commerce and digital financial services industries, including segments within those industries; changes in its revenue, costs or expenditures; its ability to continue to source, develop and offer the growth of its digital entertainment, e-commerce and digital financial services businesses and platforms; the growth in its user base, level of user engagement, and monetization; its ability to continue to develop new technologies and / or upgrade its existing technologies; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries; and general economic and business conditions in the region. Further information is included in Sea's filings with the SEC. All information provided in this press release

Non-GAAP Financial Measures

To support our consolidated financial statements, we use the following 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. We need to be able to do something about it. .
  • “Adjusted revenue” of our e-commerce segment represents revenue of the e-commerce segment (currently consisting of revenue and product revenue marketplaces) that were certain net revenues off 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 Revenues" of digital financial services segment which was net-off against their corresponding sales incentives.
  • "Total adjusted revenue" represents the revenue stream for our digital financial services segment and the revenue of our other services. This financial measure enables investors to follow trends in their overall group monetization capability over time and is a useful performance measure.
  • “Adjusted EBITDA” for our digital entertainment segment represents operating income (loss) before share-based compensation plus (a) depreciation and amortization expenses, and (b) the net effect of changes in deferred revenue and its related cost for our digital entertainment segment . Although other companies may calculate adjusted EBITDA differently or not at all, we believe that the segment adjusted EBITDA to identify underlying trends in our operating results, enhancing their understanding of 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 at all, we believe that the segment adjusted EBITDA to identify underlying trends in our operating results, enhancing their understanding of past performance and future prospects.

Contacts

For inquiries:
Martin Reidy
Investors / analysts: ir@seagroup.com
Media: media@seagroup.com

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