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Name | Symbol | Market | Type |
---|---|---|---|
Sea Limited | NYSE:SE | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
1.28 | 2.04% | 64.00 | 64.14 | 62.46 | 63.33 | 6,113,386 | 00:10:15 |
Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the quarter ended March 31, 2019.
First Quarter 2019 Highlights
1 Latin America rankings data for App Annie is based on Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay. No monthly active user data available for Uruguay.
1 Marketplace revenue mainly consists of transaction-based fees and advertising income and revenue generated from other value-added services.
2 Product revenue mainly consists of revenue generated from direct sales.
Unaudited Summary of Financial Results
(Amounts are expressed in thousands of US dollars “$”)
For the Three Monthsended 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 changes in fair value 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 due to fair value loss of $436.1 million on the 2017 convertible notes as our share prices during the quarter significantly exceeded the conversion prices of the 2017 convertible notes.
(2) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.”
(3) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operation Decision Maker (“CODM”) as part of segment performance.
Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018
Revenue
The table below sets forth revenue and adjusted revenue generated from our reported segments. Amounts are expressed in thousands of US dollars (“$”).
For the Three Months ended March 31, 2018 2019 $ % ofrevenue
$ % ofrevenue
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 each of the segments detailed as follows:
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.
Other Operating Income
Our other operating income increased by 373.7% to US$3.5 million in the first quarter of 2019 from US$0.7 million in the first quarter of 2018. The increase was primarily due to an increase in sponsorship from partners who participated in our events and tournaments.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 17.0% to US$178.0 million in the first quarter of 2019 from US$152.1 million in the first quarter of 2018. The table below sets forth the breakdown of the sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars (“$”).
For the Three Monthsended 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%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 decreased to 5.1% in the first quarter of 2019 from 11.1% in the first quarter of 2018 as we continue to improve the efficiency of our marketing efforts.
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 to 4.2% in the first quarter of 2019 from 6.6% in the first quarter of 2018 as we continue to improve the efficiency of our marketing efforts.
General and Administrative Expenses
Our general and administrative expenses increased by 70.0% to US$75.6 million in the first quarter of 2019 from US$44.5 million in the first quarter of 2018. This increase was primarily due to the expansion of our staff force and the increase in office facilities and related expenses.
Research and Development Expenses
Our research and development expenses increased by 166.1% to US$28.5 million in the first quarter of 2019 from US$10.7 million in the first quarter of 2018, 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 loss of US$442.8 million 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 due to fair value loss of US$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.
Income Tax Expense
We had a net income tax expense of US$7.2 million in the first quarter of 2019 and net income tax credit of US$0.8 million in the first quarter of 2018. The income tax expense in the first quarter of 2019 was primarily due to withholding tax and corporate income tax expenses incurred by our digital entertainment segment, partially offset by deferred tax assets recognized during the period.
Share of Results of Equity Investees
We had share of loss of equity investees of US$0.4 million in the first quarter of 2019, compared with US$0.6 million in the first quarter of 2018.
Net Loss
As a result of the 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 arising 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
Net loss excluding share-based compensation and changes in fair value of the 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
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: 8:00 PM U.S. 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: 08-082-389-063Passcode 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 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 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 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 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 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:
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 unaudited 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, 2019Digital
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 deferredrevenue 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) For the Three Months ended March 31, 2018Digital
Entertainment
E-
commerce
Digital
Financial
Services
Other
Services(3)
Unallocated
expenses(4)
Consolidated $ $ $ $ $ $ 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 deferredrevenue 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)(1) 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. For the first quarter of 2018, revenue of $27,344 included marketplace revenue of $15,644 and product revenue of $11,700 net of sales incentives.
(2) For the first quarter of 2019, adjusted revenue of $149,191 included marketplace revenue of $101,970 and product revenue of $47,221. For the first quarter of 2018, adjusted revenue of $33,744 included 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,
2018 2019 $ $ Revenue Service revenue Digital Entertainment 110,658 173,399 E-commerce and other services 32,451 130,663 Sales of goods 11,935 47,804 Total revenue 155,044 351,866 Cost of revenue Cost of service Digital Entertainment (63,572) (84,642) E-commerce and other services (70,793) (174,365) Cost of goods sold (12,154) (53,403) Total cost of revenue (146,519) (312,410) Gross profit 8,525 39,456 Operating income (expenses): Other operating income 729 3,453 Sales and marketing expenses (152,149) (177,978) General and administrative expenses (44,487) (75,628) Research and development expenses (10,712) (28,509) Total operating expenses (206,619) (278,662) Operating loss (198,094) (239,206) Interest income 3,091 4,012 Interest expense (8,582) (10,066) Investment gain, net 7,515 2,047 Changes in fair value of the 2017 convertible notes (18,796) (436,120)(1) Foreign exchange loss (1,475) (2,653) Loss before income tax and share of results of equity investees (216,341) (681,986) Income tax credit (expense) 755 (7,205) Share of results of equity investees (583) (418) Net loss (216,169) (689,609) Net loss (profit) attributable to non-controlling interests 556 (746) Net loss attributable to Sea Limited’s ordinary shareholders (215,613) (690,355)Net loss excluding share-based compensation and changes in fair
value of the 2017 convertible notes
(186,702) (237,290) Loss per share: Basic and diluted (0.64) (1.86) Shares used in loss per share computation: Basic and diluted 335,147,405 370,724,164(1) Fair value loss of $436.1 million on the 2017 convertible notes was recorded as our share prices during the quarter significantly exceeded the conversion prices of the 2017 convertible notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
2018
As of
March 31,
2019
$ $ ASSETS Current assets Cash and cash equivalents 1,002,841 2,362,523 Restricted cash 254,100 301,049 Accounts receivable, net 97,782 147,603 Prepaid expenses and other assets 312,387 350,959 Inventories, net 37,689 25,880 Short-term investments 690 581 Amounts due from related parties 5,224 3,921 Total current assets 1,710,713 3,192,516 Non-current assets Property and equipment, net 192,357 232,963 Operating lease right-of-use assets, net - 173,326 Intangible assets, net 12,887 13,963 Long-term investments 111,022 107,125 Prepaid expenses and other assets 69,065 90,430 Restricted cash 2,371 16,393 Deferred tax assets 63,302 69,304 Goodwill 30,952 30,952 Total non-current assets 481,956 734,456 Total assets 2,192,669 3,926,972
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
2018
As of
March 31,
2019
$ $ LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilitiesAccounts payable
37,163
38,096
Accrued expenses and other payables 636,880 653,975 Advances from customers 29,355 28,531 Amount due to related parties 46,025 64,816 Short-term bank borrowings 856 981 Operating lease liabilities - 41,332 Deferred revenue 426,675 573,659 Income tax payable 9,539 8,718 Total current liabilities 1,186,493 1,410,108 Non-current liabilities Accrued expenses and other payables 7,894 9,408 Long-term bank borrowings 1,026 927 Operating lease liabilities - 142,521 Deferred revenue 171,262 245,027 Convertible notes 1,061,796 581,770 Deferred tax liabilities 679 578 Unrecognized tax benefits 2,974 2,670 Total non-current liabilities 1,245,631 982,901 Total liabilities 2,432,124 2,393,009
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
2018
As of
March 31,
2019
$ $ Shareholders’ equity Class A Ordinary shares 94 150 Class B Ordinary shares 76 76 Additional paid-in capital 1,809,232 4,276,011 Accumulated other comprehensive income 15,199 11,355 Statutory reserves 46 46 Accumulated deficit (2,067,786) (2,758,141) Total Sea Limited shareholders’ (deficit) equity (243,139) 1,529,497 Non-controlling interests 3,684 4,466 Total shareholders’ (deficit) equity (239,455) 1,533,963 Total liabilities and shareholders’ (deficit) equity 2,192,669 3,926,972
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts expressed in thousands of US dollars (“$”)
For the Three Months endedMarch 31,
2018 2019 $ $ Net cash used in operating activities (94,360) (17,815) Net cash used in investing activities (21,837) (91,250) Net cash (used in) generated from financing activities (545) 1,527,875 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash6,166
1,843
Net (decrease) increase in cash, cash equivalents and restricted cash (110,576) 1,420,653 Cash, cash equivalents and restricted cash at beginning of the period 1,444,978 1,259,312 Cash, cash equivalents and restricted cash at end of the period 1,334,402 2,679,9651 UNAUDITED SEGMENT INFORMATION
The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The Chief Operation Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment. Amounts are expressed in thousands of US dollars (“$”).
For the Three Months ended March 31, 2019Digital
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) For the Three Months ended March 31, 2018Digital
Entertainment
E-
commerce
Digital
Financial
Services
Other
Services(1)
Unallocated
expenses(2)
Consolidated $ $ $ $ $ $ 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 credit 755 Share of results of equity investees (583) Net loss (216,169)(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,
2018
For the Three Months
ended March 31,
2019
Digital Entertainment Unit Quarterly active users millions 216.2 271.6 Monthly active users (last month) millions 135.7 170.3 Quarterly paying users millions 11.9 20.7 Average revenue per user US$ 1.1 1.4 Average revenue per paying user US$ 19.4 19.0 E-commerce Gross GMV US$ millions 3,425.2 3,529.3 Gross orders millions 206.9 203.5
View source version on businesswire.com: https://www.businesswire.com/news/home/20190521005985/en/
For enquiries:Martin ReidyInvestors / analysts: ir@seagroup.comMedia: media@seagroup.com
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