Press-Releases

Sea Limited Reports Third Quarter 2023 Results


SINGAPORE–(BUSINESS WIRE)–Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the third quarter ended September 30, 2023.

“Our strategy for e-commerce is driven by the principle that maximizing the long-term profitability of the business will generate the greatest returns to our shareholders in the long run,” said Forrest Li, Sea’s Chairman and Group Chief Executive Officer. “And maximizing long-term profitability requires scale and strong market leadership. To achieve this long-term objective, we look at three key operational factors: growth, current profitability, and market share gain.”

“In this current period, we will prioritize investing in the business to increase our market share and further strengthen our market leadership. We now have scale, a deep understanding of our markets, and strong localized execution across diverse geographies. This gives us a wide competitive moat, and we intend to grow it further. Our move to self-sufficiency and profitability in the past quarters has significantly improved both our cash reserves and operational efficiency and we see a very good opportunity to build our e-commerce content ecosystem efficiently especially in live streaming.”

“We are committed to maintaining a strong cash position, not relying on external funding, and investing within our means at a time and pace of our choosing. At the same time, given that e-commerce penetration remains low in most of our markets, we as the market leader have a responsibility to help grow the whole e-commerce ecosystem. Shopee will remain committed to doing so in a healthy and sustainable way and driving value creation for all stakeholders.”

Third Quarter 2023 Highlights

  • Group

    • Total GAAP revenue was US$3.3 billion, up 4.9% year-on-year.
    • Total gross profit was US$1.4 billion, up 17.4% year-on-year.
    • Total net loss was US$(144.0) million, as compared to total net loss of US$(569.3) million for the third quarter of 2022.
    • Total adjusted EBITDA1 was US$35.3 million, as compared to a loss of US$(357.7) million for the third quarter of 2022.
    • As of September 30, 2023, cash, cash equivalents, short-term and other treasury investments2 were US$7.9 billion, representing a net increase of US$274.0 million from June 30, 2023.

  • E-commerce

    • GAAP revenue was US$2.2 billion, up 16.2% year-on-year.
    • GAAP revenue included US$1.9 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 18.2% year-on-year.

      • Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 31.7% year-on-year to US$1.3 billion.
      • Value-added services revenue, mainly consisting of revenues related to logistics services, was down 4.2% year-on-year to US$592.8 million.
    • Adjusted EBITDA1 was US$(346.5) million, as compared to US$(495.7) million for the third quarter of 2022.

      • Asia markets recorded adjusted EBITDA of US$(306.2) million in the quarter, as compared to US$(216.8) million for the third quarter of 2022.
      • Other markets recorded adjusted EBITDA of US$(40.3) million in the quarter, as compared to US$(279.0) million for the third quarter of 2022.
      • In Brazil, unit economics continued to improve, with contribution margin loss per order improving 90.7% year-on-year to reach US$0.10 for the quarter.
    • Gross orders totaled 2.2 billion for the quarter, increasing by 13.2% year-on-year and 23.6% quarter-on-quarter.
    • GMV was US$20.1 billion for the quarter, increasing by 5.1% year-on-year and 11.2% quarter-on quarter.

  • Digital Entertainment

    • GAAP revenue was US$592.2 million, up 11.9% quarter-on-quarter.
    • Bookings3 were US$447.9 million, as compared to US$443.1 million for the previous quarter.
    • Adjusted EBITDA1 was US$234.0 million, as compared to US$239.5 million for the previous quarter.
    • Adjusted EBITDA represented 52.2% of bookings for the third quarter of 2023, as compared to 54.0% for the previous quarter.
    • Quarterly active users were 544.1 million, as compared to 544.5 million for the previous quarter.
    • Quarterly paying users were 40.5 million, as compared to 43.1 million for the previous quarter. Paying user ratio was 7.5%, as compared to 7.9% for the previous quarter.
    • Average bookings per user were US$0.82, increased slightly quarter-on-quarter.

          

  • Digital Financial Services

    • GAAP revenue was US$446.2 million, up 36.5% year-on-year.
    • Adjusted EBITDA1 was US$165.7 million, as compared to a loss of US$(67.7) million for the third quarter of 2022.
    • As of September 30, 2023, gross loans receivable increased by 5.3% sequentially to US$2.4 billion, before netting off allowance for credit losses of US$288.1 million. Non-performing loans past due by more than 90 days as a percentage of our gross loans receivable was 1.6%, improving quarter-on-quarter.

1

 

For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”.

2  

Other treasury investments currently consist of available-for-sale sovereign bonds and corporate bonds excluding those at our banking entities, with maturities over one year, classified as part of long-term investments.

3  

GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment.

Unaudited Summary of Financial Results

(Amounts are expressed in thousands of US dollars “$” except for per share data)

 

 

For the Three Months

ended September 30,

 

 

2022

2023

 

 

$

$

YOY%

Revenue

 

 

 

Service revenue

 

 

 

Digital Entertainment

892,879

 

592,153

 

(33.7

)%

E-commerce and other services

1,976,743

 

2,417,036

 

22.3

%

Sales of goods

286,329

 

300,979

 

5.1

%

 

3,155,951

 

3,310,168

 

4.9

%

 

 

 

 

Cost of revenue

 

 

 

Cost of service

 

 

 

Digital Entertainment

(264,833

)

(177,086

)

(33.1

)%

E-commerce and other services

(1,405,749

)

(1,403,975

)

(0.1

)%

Cost of goods sold

(257,651

)

(287,815

)

11.7

%

 

(1,928,233

)

(1,868,876

)

(3.1

)%

Gross profit

1,227,718

 

1,441,292

 

17.4

%

Other operating income

65,972

 

46,614

 

(29.3

)%

Sales and marketing expenses

(816,662

)

(918,046

)

12.4

%

General and administrative expenses

(405,177

)

(273,575

)

(32.5

)%

Provision for credit losses

(146,523

)

(143,514

)

(2.1

)%

Research and development expenses

(420,972

)

(280,511

)

(33.4

)%

Total operating expenses

(1,723,362

)

(1,569,032

)

(9.0

)%

Operating loss

(495,644

)

(127,740

)

(74.2

)%

Non-operating (loss) income, net

(9,173

)

45,875

 

(600.1

)%

Income tax expense

(65,279

)

(61,676

)

(5.5

)%

Share of results of equity investees

821

 

(437

)

(153.2

)%

Net loss

(569,275

)

(143,978

)

(74.7

)%

 

 

 

 

Basic and diluted loss per share

   attributable to Sea Limited’s ordinary shareholders

 

(1.01

 

)

(0.26

)

(74.3

)%

 

 

 

 

Change in deferred revenue of Digital Entertainment

(228,207

)

(144,253

)

(36.8

)%

 

 

 

 

Adjusted EBITDA for Digital Entertainment (1)

289,879

 

233,998

 

(19.3

)%

Adjusted EBITDA for E-commerce (1)

(495,735

)

(346,495

)

(30.1

)%

Adjusted EBITDA for Digital Financial Services (1)

(67,746

)

165,731

 

(344.6

)%

Adjusted EBITDA for Other Services (1)

(76,530

)

(8,771

)

(88.5

)%

Unallocated expenses (2)

(7,520

)

(9,179

)

22.1

%

Total adjusted EBITDA (1)

(357,652

)

35,284

 

(109.9

)%

(1)

For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”.

(2)

Unallocated expenses within total adjusted EBITDA are mainly related to 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 September 30, 2023 Compared to Three Months Ended September 30, 2022

Revenue

Our total GAAP revenue increased by 4.9% to US$3.3 billion in the third quarter of 2023 from US$3.2 billion in the third quarter of 2022.

  • Digital Entertainment: GAAP revenue was US$592.2 million compared to US$892.9 million in the third quarter of 2022, primarily attributable to moderation in user engagement and monetization year-on-year.
  • E-commerce and other services: GAAP revenue increased by 22.3% to US$2.4 billion in the third quarter of 2023 from US$2.0 billion in the third quarter of 2022, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business year-on-year.
  • Sales of goods: GAAP revenue increased by 5.1% to US$301.0 million in the third quarter of 2023 from US$286.3 million in the third quarter of 2022.

Cost of Revenue

Our total cost of revenue was US$1.9 billion in the third quarter of 2023, flat year-on-year.

  • Digital Entertainment: Cost of revenue decreased by 33.1% to US$177.1 million in the third quarter of 2023 from US$264.8 million in the third quarter of 2022.
  • E-commerce and other services: Cost of revenue for e-commerce and other services segment combined was US$1.4 billion in the third quarter of 2023, flat year-on-year. Improvement in gross profit margins was driven by increased monetization and greater cost efficiencies in our e-commerce and digital financial services business.
  • Cost of goods sold: Cost of goods sold increased by 11.7% to US$287.8 million in the third quarter of 2023 from US$257.7 million in the third quarter of 2022.

Other Operating Income

Other operating income was US$46.6 million and US$66.0 million in the third quarter of 2023 and 2022, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers.

Sales and Marketing Expenses

Our total sales and marketing expenses increased by 12.4% to US$918.0 million in the third quarter of 2023 from US$816.7 million in the third quarter of 2022. The table below sets forth breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”).

 

For the Three Months

ended September 30,

 

 

2022

 

2023

YOY%

Sales and Marketing Expenses

$

 

$

 

Digital Entertainment

60,521

 

24,712

(59.2

)%

E-commerce

575,676

 

861,540

49.7

%

Digital Financial Services

130,824

 

25,152

(80.8

)%

General and Administrative Expenses

Our general and administrative expenses decreased by 32.5% to US$273.6 million in the third quarter of 2023 from US$405.2 million in the third quarter of 2022.

Provision for Credit Losses

Our provision for credit losses decreased by 2.1% to US$143.5 million in the third quarter of 2023 from US$146.5 million in the third quarter of 2022.

Research and Development Expenses

Our research and development expenses decreased by 33.4% to US$280.5 million in the third quarter of 2023 from US$421.0 million in the third quarter of 2022.

Non-operating Income or Losses, Net

Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss) and foreign exchange gain (loss). We recorded a net non-operating income of US$45.9 million in the third quarter of 2023, as compared to a net non-operating loss of US$9.2 million in the third quarter of 2022. The year-on-year improvement was mainly due to higher interest income in the third quarter of 2023.

Income Tax Expense

We had a net income tax expense of US$61.7 million and US$65.3 million in the third quarter of 2023 and 2022, respectively.

Net Loss

As a result of the foregoing, we had net losses of US$144.0 million and US$569.3 million in the third quarter of 2023 and 2022, respectively.

Basic and Diluted Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders

Basic and diluted loss per share attributable to Sea Limited’s ordinary shareholders was US$0.26 in the third quarter of 2023, as compared to US$1.01 in the third quarter of 2022.

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 November 14, 2023

8:30 PM Singapore / Hong Kong Time on November 14, 2023

 

Webcast link:

https://events.q4inc.com/attendee/547645719

A replay of the conference call will be available at the Company’s investor relations website (www.sea.com/investor/home). 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. Its mission is to better the lives of consumers and small businesses with technology. Sea operates 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 “may,” “could,” “will,” “expect,” “anticipate,” “aim,” “future,” “intend,” “plan,” “believe,” “estimate,” “likely to,” “potential,” “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 expected 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; expected changes or guidance 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 expected growth of its digital entertainment, e-commerce and digital financial services businesses; its expectations regarding growth in its user base, level of engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; its expectations regarding the use of proceeds from its financing activities, including its follow-on equity offerings and convertible notes offerings; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries, including the effects of any government orders or actions on its businesses; general economic, political, social and business conditions in its markets; and the impact of widespread health developments, including the COVID-19 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, and the availability of effective vaccines or treatments) and the impact of economies reopening further to the COVID-19 pandemic. 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 EBITDA” for our digital entertainment segment represents operating income (loss) 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. 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) plus depreciation and amortization expenses. 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. 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 September 30, 2023

 

Digital

Entertainment

E-

commerce

Digital

Financial

Services

Other

Services(1)

Unallocated

expenses(2)

Consolidated

 

$

$

$

$

$

$

Operating income (loss)

345,760

 

(428,183

)

150,470

 

(11,704

)

(184,083

)

(127,740

)

Net effect of changes in deferred

revenue and its related cost

(119,058

)

 

 

 

 

(119,058

)

Depreciation and Amortization

7,296

 

81,688

 

15,261

 

2,933

 

 

107,178

 

Share-based compensation

 

 

 

 

174,904

 

174,904

 

Adjusted EBITDA

233,998

 

(346,495

)

165,731

 

(8,771

)

(9,179

)

35,284

 

 

 

For the Three Months ended September 30, 2022

 

Digital

Entertainment

E-

commerce

Digital

Financial

Services

Other

Services(1)

Unallocated

expenses(2)

Consolidated

 

$

$

$

$

$

$

Operating income (loss)

456,952

 

(586,148

)

(82,462

)

(80,711

)

(203,275

)

(495,644

)

Net effect of changes in deferred

revenue and its related cost

(177,874

)

 

 

 

 

(177,874

)

Depreciation and Amortization

10,801

 

90,413

 

14,716

 

4,181

 

 

120,111

 

Share-based compensation

 

 

 

 

195,755

 

195,755

 

Adjusted EBITDA

289,879

 

(495,735

)

(67,746

)

(76,530

)

(7,520

)

(357,652

)

(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.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data

 

 

For the Nine Months

ended September 30,

 

2022

2023

 

$

$

Revenue

 

 

Service revenue

 

 

Digital Entertainment

2,928,306

 

1,661,236

 

E-commerce and other services

5,232,040

 

6,999,109

 

Sales of goods

837,775

 

786,587

 

 

 

 

 

 

 

Total revenue

8,998,121

 

9,446,932

 

 

 

 

Cost of revenue

 

 

Cost of service

 

 

Digital Entertainment

(834,547

)

(511,121

)

E-commerce and other services

(3,911,891

)

(3,908,825

)

Cost of goods sold

(763,719

)

(718,126

)

 

 

 

 

 

 

Total cost of revenue

(5,510,157

)

(5,138,072

)

 

 

 

 

 

 

Gross profit

3,487,964

 

4,308,860

 

 

 

 

 

 

 

Operating income (expenses)

 

 

Other operating income

210,731

 

162,497

 

Sales and marketing expenses

(2,795,603

)

(1,811,790

)

General and administrative expenses

(1,085,291

)

(902,121

)

Provision for credit losses

(338,587

)

(473,954

)

Research and development expenses

(1,132,306

)

(884,320

)

Impairment of goodwill

(177,280

)

(117,875

)

 

 

 

 

 

 

Total operating expenses

(5,318,336

)

(4,027,563

)

 

 

 

 

 

 

Operating (loss) income

(1,830,372

)

281,297

 

Interest income

61,179

 

240,361

 

Interest expense

(34,587

)

(30,946

)

Investment loss, net

(84,327

)

(45,377

)

Foreign exchange gain

9,737

 

11,924

 

 

 

 

(Loss) Income before income tax and share of results of equity

   investees

 

(1,878,370

 

)

 

457,259

 

 

Income tax expense

(211,856

)

(185,786

)

Share of results of equity investees

9,616

 

2,824

 

 

 

 

Net (loss) income

(2,080,610

)

274,297

 

 

 

 

Net loss (income) attributable to non-controlling interests

2,391

 

(13,831

)

 

 

 

Net (loss) income attributable to Sea Limited’s ordinary shareholders

(2,078,219

)

260,466

 

 

 

 

(Loss) Earnings per share:

 

 

Basic

(3.73

)

0.46

 

Diluted

(3.73

)

0.44

 

 

 

 

Weighted average shares used in (loss) earnings per share computation:

 

 

Basic

557,376,415

 

565,630,521

 

Diluted

557,376,415

 

597,718,238

 

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

Amounts expressed in thousands of US dollars (“$”)

 

 

 

As of

December 31,

As of

September 30,

 

 

2022

2023

 

 

$

$

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

 

6,029,859

3,219,873

Restricted cash

 

1,549,574

1,515,596

Accounts receivable, net of allowance for credit losses of

   $12,818 and $7,382, as of December 31, 2022 and

   September 30, 2023 respectively

 

268,814

190,788

Prepaid expenses and other assets

 

1,798,651

2,046,368

Loans receivable, net of allowance for credit losses of

   $236,797 and $286,250, as of December 31, 2022 and

   September 30, 2023 respectively

 

2,053,767

2,110,587

Inventories, net

 

109,668

116,320

Short-term investments

 

864,258

2,762,748

Amounts due from related parties

 

13,421

11,666

Total current assets

 

12,688,012

11,973,946

 

 

 

 

Non-current assets

 

 

 

Property and equipment, net

 

1,387,895

1,229,015

Operating lease right-of-use assets, net

 

957,840

1,014,768

Intangible assets, net

 

65,019

61,455

Long-term investments

 

1,253,593

3,162,710

Prepaid expenses and other assets

 

135,616

114,172

Loans receivable, net of allowance for credit losses of $2,022

   and $1,886, as of December 31, 2022 and September 30,

   2023 respectively

 

21,663

19,841

Restricted cash

 

17,724

26,207

Deferred tax assets

 

245,226

311,044

Goodwill

 

230,208

111,952

Total non-current assets

 

4,314,784

6,051,164

Total assets

 

17,002,796

18,025,110

Contacts

For enquiries:
Investors / analysts: [email protected]
Media: [email protected]

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