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Name | Symbol | Market | Type |
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Sea Limited | NYSE:SE | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
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-0.49 | -0.74% | 66.17 | 67.0289 | 65.80 | 67.00 | 5,786,558 | 01:00:00 |
Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the fourth quarter and full year ended December 31, 2018.
Highlights
Guidance
For the full year of 2019, we currently expect adjusted revenue for digital entertainment to be between US$1.2 billion and US$1.3 billion, representing 81.5% to 96.7% growth from 2018.
We currently expect adjusted revenue for e-commerce for the full year of 2019 to be between US$630 million and US$660 million, representing year-on-year growth of 116.7% to 127.0%.
Fourth Quarter 2018 Key Metrics
Full Year 2018 Key Metrics
Strategic Business Updates
Digital Entertainment
In 2018, Garena recorded strong results and materially expanded our digital entertainment business from being a PC-focused regional publisher to a leading global developer and publisher, with core strengths in mobile games and a key focus on emerging markets. In the fourth quarter of 2018, our adjusted revenue from mobile games, self-developed game, and regions outside our current core markets accounted for 85.1%, 44.5% and 28.0% of our total digital entertainment adjusted revenue, respectively.
Our game development studio in Shanghai now has more than 200 developers focused on enhancing our existing game and building out our pipeline of self-developed games. Our first global self-developed hit game, Free Fire, is now one of the world’s most popular mobile battle royale titles. According to App Annie, for the full year of 2018, Free Fire was the fourth most downloaded game across the Apple App Store and the Google Play Store combined. It has also hit the milestone of recording more than 100 million monthly active users. Moreover, since late 2018, we have been rolling out our first global eSports tournament for Free Fire, the Free Fire World Cup.
Meanwhile, we continued to strengthen our relationships with our long-term game publishing partners and leading global developers to enhance Garena’s portfolio of top quality content. In January 2019, we launched Speed Drifters, a localized version of Tencent’s hit game QQ Speed. Speed Drifters is the first game from the Tencent portfolio published under our recently announced right of first refusal arrangement with Tencent. Furthermore, we have agreed with PUBG Corporation to bring into several of our key markets in Southeast Asia PUBG LITE, a PC game adapted from their global hit game PUBG.
E-commerce
Shopee saw sustained strong growth in the fourth quarter and full year of 2018, with GMV, orders, and adjusted revenue each increasing sharply, and sales and marketing expenses as a percentage of GMV continuing to decline.
Just three years since the launch of the platform, Shopee’s annual GMV has exceeded US$10 billion. We believe that Shopee’s rapid growth and ascent to regional market leadership over such a short period of time reflects the success of our strategy to build a mobile-centric, socially engaging marketplace with the right product category focus and with integrated and comprehensive user services – as well as our ability to execute this strategy efficiently and effectively.
Shopee continues to scale with increasing efficiency as it enjoys the increasingly powerful flywheel effects of an e-commerce marketplace. During the fourth quarter, we saw robust consumer engagement in our large-scale sales events for 11.11 and 12.12. We set a new record for orders in a single day with more than 12 million orders recorded over the 24 hours of December 12, 2018. Approximately 5.4 million of those orders were recorded in Indonesia alone.
While the level of user engagement in the fourth quarter of 2018 broke all previous records, Shopee’s sales and marketing expenses as a percentage of GMV declined further during the fourth quarter to 5.4%, compared to 5.7% in the third quarter of 2018. Moreover, shipping subsidies fell in absolute dollar terms in the fourth quarter compared to the third quarter, even as GMV and order numbers continued to grow sharply.
Our focus on engaging with sellers and enhancing the online shopping experience for buyers is also delivering strong financial results for Shopee. During the fourth quarter, e-commerce adjusted revenue reached US$126.9 million, up 1,261.9% year-on-year from US$9.3 million for the fourth quarter of 2017 and up 78.2% quarter-on-quarter from US$71.2 million for the third quarter of 2018. This strong growth in revenue was primarily driven by the expansion of our e-commerce marketplace, as we deepened our relationships and engagement with sellers and buyers, and enhanced our e-commerce ecosystem. Ramping up monetization in tandem with promoting the efficient growth of the Shopee ecosystem will continue to be our key focus for 2019.
1 Marketplace revenue mainly consists of commission and advertising income and revenue generated from other value-added services. 2 Product revenue mainly consists of revenue generated from direct sales.Unaudited Summary of Financial Results
(Amounts are expressed in thousands of US dollars “$”)
For the Three Monthsended December 31,
For the Full Yearended December 31,
2017 2018 2017 2018 $ $ YOY% $ $ YOY% (unaudited) (unaudited) (unaudited) (unaudited) Revenue Service revenue Digital Entertainment 106,323 131,257 23.5% 365,167 462,464 26.6% E-commerce and other services 17,754 112,356 532.8% 47,444 270,049 469.2% Sales of goods 527 39,611 7,416.3% 1,579 94,455 5,882.0% 124,604 283,224 127.3% 414,190 826,968 99.7% Cost of revenue Cost of service Digital Entertainment (60,240) (77,846) 29.2% (217,986) (267,359) 22.6% E-commerce and other services (40,257) (171,229) 325.3% (107,260) (446,281) 316.1% Cost of goods sold (562) (42,108) 7,392.5% (1,632) (98,570) 5,939.8% (101,059) (291,183) 188.1% (326,878) (812,210) 148.5% Gross profit 23,545 (7,959) (133.8)% 87,312 14,758 (83.1)% Other operating income 2,157 4,291 98.9% 3,497 9,799 180.2% Sales and marketing expenses (156,418) (207,487) 32.6% (425,974) (705,015) 65.5% General and administrative expenses (51,754) (87,160) 68.4% (137,868) (240,781) 74.6% Research and development expenses (8,671) (26,642) 207.3% (29,323) (67,529) 130.3% Total operating expenses (214,686) (316,998) 47.7% (589,668) (1,003,526) 70.2% Operating loss (191,141) (324,957) 70.0% (502,356) (988,768) 96.8% Non-operating (loss) income, net (62,283) 52,984 (185.1)% (46,153) 34,888 (175.6)% Income tax expense (8,730) (2,993) (65.7)% (10,745) (4,088) (62.0)% Share of results of equity investees (986) (1,092) 10.8% (1,912) (3,066) 60.4% Net loss (263,140) (276,058) 4.9% (561,166) (961,034) 71.3% Adjusted net loss (1) (199,613) (321,187) 60.9% (480,580) (944,172) 96.5% Adjusted revenue of DigitalEntertainment (1)
141,883 231,352 63.1%495,878
661,042 33.3% Adjusted revenue of E-commerce (1) 9,319 126,914 1,261.9% 17,717 290,706 1,540.8% Adjusted revenue of Digital FinancialServices (1)
4,102 3,063 (25.3)% 16,270 13,512 (17.0)% Revenue of Other Services 9,213 27,963 203.5% 23,719 83,468 251.9% Total adjusted revenue (1) 164,517 389,292 136.6% 553,584 1,048,728 89.4% Adjusted EBITDA for DigitalEntertainment (1)
52,607 105,198 100.0% 174,939 262,538 50.1% Adjusted EBITDA for E-commerce (1) (175,414) (277,497) (58.2)% (444,280) (860,322) (93.6)% Adjusted EBITDA for DigitalFinancial Services (1)
(7,551) (9,805) (29.9)% (36,697) (32,156) 12.4% Adjusted EBITDA for OtherServices (1)
(7,276) (17,403) (139.2)% (18,190) (54,058) (197.2)% Unallocated expenses (2) (2,579) (4,138) (60.4)% (7,887) (10,003) (26.8)% Total adjusted EBITDA (1) (140,213) (203,645) (45.2)% (332,115) (694,001) (109.0)% (1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.” The 2017 comparative numbers for adjusted net loss were restated due to a change in computation basis in 2018 to exclude impact from changes in fair value of convertible notes. (2) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operation Decision Maker (“CODM”) as part of segment performance.Three Months Ended December 31, 2018 Compared to Three Months Ended December 31, 2017
Revenue
The table below sets forth revenue generated from our reported segments. Amounts are expressed in thousands of US dollars (“$”).
For the Three Months ended December 31, 2017 2018 $% ofrevenue
$% ofrevenue
YOY% Revenue Service revenue Digital Entertainment 106,323 85.3 131,257 46.3 23.5% E-commerce and other services 17,754 14.3 112,356 39.7 532.8% Sales of goods 527 0.4 39,611 14.0 7,416.3% Total revenue 124,604 100.0 283,224 100.0 127.3% 2017 2018 $% of totaladjustedrevenue
$% of totaladjustedrevenue
YOY% Adjusted revenue Service revenue Digital Entertainment 141,883 86.3 231,352 59.4 63.1% E-commerce and other services 22,107 13.4 118,210 30.4 434.7% Sales of goods 527 0.3 39,730 10.2 7,438.9% Total adjusted revenue 164,517 100.0 389,292 100.0 136.6%Our total revenue increased by 127.3% to US$283.2 million in the fourth quarter of 2018 from US$124.6 million in the fourth quarter of 2017. Our total adjusted revenue increased by 136.6% to US$389.3 million in the fourth quarter of 2018 from US$164.5 million in the fourth quarter of 2017. 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 188.1% to US$291.2 million in the fourth quarter of 2018 from US$101.1 million in the fourth quarter of 2017.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 32.6% to US$207.5 million in the fourth quarter of 2018 from US$156.4 million in the fourth quarter of 2017. The table below sets forth the breakdown of our sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars (“$”).
For the Three Monthsended December 31,
2017 2018 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 16,854 14,016 (16.8)% E-commerce 134,961 184,477 36.7%ended December 31,
2017 2018 Digital Entertainment $ $ Sales and marketing expenses 16,854 14,016 Adjusted revenue 141,883 231,352 Sales and marketing expenses as a percentage of adjusted revenue 11.9% 6.1%Sales and marketing expenses as a percentage of adjusted revenue decreased to 6.1% in the fourth quarter of 2018 from 11.9% in the fourth quarter of 2017 as we continue to improve the efficiency of our marketing efforts.
For the Three Monthsended December 31,
2017 2018 E-commerce $ $ Sales and marketing expenses 134,961 184,477 GMV 1,578,599 3,425,158 Sales and marketing expenses as a percentage of GMV 8.5% 5.4%Sales and marketing expenses as a percentage of GMV decreased to 5.4% in the fourth quarter of 2018 from 8.5% in the fourth quarter of 2017 as we continue to improve the efficiency of our marketing efforts and leverage organic user acquisition opportunities.
General and Administrative Expenses
Our general and administrative expenses increased by 68.4% to US$87.2 million in the fourth quarter of 2018 from US$51.8 million in the fourth quarter of 2017. This increase was primarily due to the expansion of our staff force, the increase in office facilities and related expenses, impairment loss on our assets, as well as the increase in professional fees and other expenses.
Research and Development Expenses
Our research and development expenses increased by 207.3% to US$26.6 million in the fourth quarter of 2018 from US$8.7 million in the fourth quarter of 2017, primarily due to the increase in our research and development staff force as we expanded and enriched our product offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consists of interest income, interest expense, investment gain (loss), fair value change for convertible notes and foreign exchange gain (loss). The amount was a net non-operating income of US$53.0 million in the fourth quarter of 2018, compared to a net non-operating loss of US$62.3 million in the fourth quarter of 2017. The non-operating gain in 2018 was primarily due to a fair value gain of US$61.2 million in this quarter on the convertible notes issued before our initial public offering partially offset by interest expense on our convertible notes issued in 2018, while the net non-operating loss in 2017 was primarily due to a fair value loss of US$52.0 million in the quarter on the convertible notes issued before our initial public offering coupled with interest expense on these convertible notes.
Income Tax Expense
We had a net income tax expense of US$3.0 million and US$8.7 million despite a group net loss position in the fourth quarter of 2018 and 2017, respectively. This 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 losses of equity investees of US$1.1 million in the fourth quarter of 2018, compared with a loss of US$1.0 million in the fourth quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$276.1 million and US$263.1 million in the fourth quarter of 2018 and 2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove share-based compensation expenses and fair value change for convertible notes, was US$321.2 million and US$199.6 million in the fourth quarter of 2018 and 2017, respectively.
Full Year Ended December 31, 2018 Compared to Full Year Ended December 31, 2017
Revenue
The table below sets forth revenue generated from our reported segments. Amounts are expressed in thousands of US dollars (“$”).
For the Full Year ended December 31, 2017 2018 $% ofrevenue
$% ofrevenue
YOY% Revenue Service revenue Digital Entertainment 365,167 88.2 462,464 55.9 26.6% E-commerce and other services 47,444 11.4 270,049 32.7 469.2% Sales of goods 1,579 0.4 94,455 11.4 5,882.0% Total revenue 414,190 100.0 826,968 100.0 99.7% 2017 2018 $% of totaladjustedrevenue
$% of totaladjustedrevenue
YOY% Adjusted revenue Service revenue Digital Entertainment 495,878 89.6 661,042 63.0 33.3% E-commerce and other services 56,127 10.1 292,954 27.9 421.9% Sales of goods 1,579 0.3 94,732 9.1 5,899.4% Total adjusted revenue 553,584 100.0 1,048,728 100.0 89.4%Our total revenue increased by 99.7% to US$827.0 million for the full year ended December 31, 2018 from US$414.2 million for the full year ended December 31, 2017. Our total adjusted revenue increased by 89.4% to US$1,048.7 million for the full year ended December 31, 2018 from US$553.6 million for the full year ended December 31, 2017. 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 148.5% to US$812.2 million for the full year ended December 31, 2018 from US$326.9 million for the full year ended December 31, 2017. This increase was in line with the overall growth of our businesses:
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 65.5% to US$705.0 million for the full year ended December 31, 2018 from US$426.0 million for the full year ended December 31, 2017. The table below set forth the breakdown of our sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars (“$”).
For the Full Yearended December 31,
2017 2018 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 61,472 68,222 11.0% E-commerce 339,768 602,651 77.4%For the Full Yearended December 31
2017 2018 Digital Entertainment $ $ Sales and marketing expenses 61,472 68,222 Adjusted revenue 495,878 661,042 Sales and marketing expenses as a percentage of adjusted revenue 12.4% 10.3%Sales and marketing expenses as a percentage of adjusted revenue decreased to 10.3% for the full year ended December 31, 2018 from 12.4% for the full year ended December 31, 2017 as we continue to improve the efficiency of our marketing efforts.
For the Full Yearended December 31,
2017 2018 E-commerce $ $ Sales and marketing expenses 339,768 602,651 GMV 4,112,732 10,279,276 Sales and marketing expenses as a percentage of GMV 8.3% 5.9%Sales and marketing expenses as a percentage of GMV decreased to 5.9% for the full year ended December 31, 2018 from 8.3% for the full year ended December 31, 2017 as we continue to improve the efficiency of our marketing efforts and leverage organic user acquisition opportunities.
General and Administrative Expenses
Our general and administrative expenses increased by 74.6% to US$240.8 million for the full year ended December 31, 2018 from US$137.9 million for the full year ended December 31, 2017. This increase was primarily due to the expansion of our staff force, the increase in office facilities and related expenses, impairment loss on our assets, as well as the increase in professional fees and other expenses.
Research and Development Expenses
Our research and development expenses increased by 130.3% to US$67.5 million for the full year ended December 31, 2018 from US$29.3 million for the full year ended December 31, 2017, primarily due to an increase in research and development staff force as we expanded and enriched our product offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consists of interest income, interest expense, investment gain (loss), fair value change for convertible notes and foreign exchange gain (loss). The amount was a net non-operating income of US$34.9 million for the full year ended December 31, 2018, compared to a net non-operating loss of US$46.2 million for the full year ended December 31, 2017. The net non-operating income in 2018 was primarily due to a fair value gain of US$41.3 million on the convertible notes issued before our initial public offering partially offset by interest expenses on our convertible notes, while the net non-operating loss in 2017 was primarily due to a fair value loss of US$52.0 million and interest expenses on the convertible notes, partially offset by an investment gain arising from the disposal of and a net gain arising from re-measurement of our investments.
Income Tax Expense
We had an income tax expense of US$4.1 million and US$10.7 million despite a group net loss position for the full year ended December 31, 2018 and 2017, respectively. This was primarily due to withholding tax and corporate income tax expenses incurred on our digital entertainment segment, partially offset by deferred tax assets recognized during the year.
Share of Results of Equity Investees
We had share of losses of equity investees of US$3.1 million for the full year ended December 31, 2018, compared with US$1.9 million for the full year ended December 31, 2017.
Net Loss
As a result of the foregoing, we had net losses of US$961.0 million and US$561.2 million for the full year ended December 31, 2018 and 2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove share-based compensation expenses and fair value change for convertible notes, was US$944.2 million and US$480.6 million for the full year ended December 31, 2018 and 2017, 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: 7:00 PM U.S. Eastern Time on February 26, 20198:00 AM Singapore / Hong Kong Time on February 27, 2019
Webcast link:https://services.choruscall.com/links/se190226.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: 7169346A 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.
For enquiries, please contact:
Investors / analysts: ir@seagroup.com
Media: media@seagroup.com
About Sea Limited
Sea’s mission is to better the lives of the consumers and small businesses of our region with technology. Our region includes the key markets of Indonesia, Taiwan, Vietnam, Thailand, the Philippines, Malaysia and Singapore. Sea operates three platforms across digital entertainment, e-commerce, and digital financial services, known as Garena, Shopee, and AirPay, respectively.
Forward-Looking Statements
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident,” “guidance,” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Sea’s strategic and operational plans, contain forward-looking statements. Sea may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases, and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Sea’s goals and strategies; its future business development, financial condition, financial results, and results of operations; the growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the region, including segments within those industries; changes in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the growth of its digital entertainment, e-commerce and digital financial services platforms; the growth in its user base, level of user engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries; and general economic and business conditions in the region. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to help evaluate our operating performance:
These non-GAAP financial measures have limitations as analytical tools. None of the above financial measures should be considered in isolation or construed as an alternative to revenue, net loss/income, or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to Sea’s data. We compensate for these limitations by reconciling the non-GAAP financial measures to their nearest U.S. GAAP financial measures, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on any single financial measure.
The tables below present selected financial information of our reporting segments, the non-GAAP financial measures that are most directly comparable to GAAP financial measures, and the related reconciliations between the financial measures. Amounts are expressed in thousands of US dollars (“$”).
For the Three Months ended December 31, 2018DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $ Revenue 131,257 121,660(1) 2,344 27,963 - 283,224 Changes in deferred revenue 100,095 - - - - 100,095 Sales incentives net-off - 5,254 719 - - 5,973 Adjusted revenue 231,352 126,914(2) 3,063 27,963 - 389,292 Operating income (loss) 16,121 (290,616) (10,314) (19,952) (20,196) (324,957) Net effect of changes in deferred revenue and its related cost 78,659 - - - - 78,659 Depreciation and amortization 10,418 13,119 509 2,549 - 26,595 Share-based compensation - - - - 16,058 16,058 Adjusted EBITDA 105,198 (277,497) (9,805) (17,403) (4,138) (203,645) For the Three Months ended December 31, 2017DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated
$ $ $ $ $ $ Revenue 106,323 4,966(1) 4,102 9,213 - 124,604 Changes in deferred revenue 35,560 - - - - 35,560 Sales incentives net-off - 4,353 - - - 4,353 Adjusted revenue 141,883 9,319(2) 4,102 9,213 - 164,517 Operating income (loss) 18,102 (178,780) (8,038) (8,269) (14,156) (191,141) Net effect of changes in deferred revenue and its related cost26,724
- - - -26,724
Depreciation and amortization 7,781 3,366 487 993 - 12,627 Share-based compensation - - - - 11,577 11,577 Adjusted EBITDA 52,607 (175,414) (7,551) (7,276) (2,579) (140,213) (1) For the fourth quarter of 2018, revenue of $121,660 included marketplace revenue of $82,483 and product revenue of $39,177 net of sales incentives. For the fourth quarter of 2017, revenue of $4,966 included marketplace revenue of $4,558 and product revenue of $408, net of sales incentives. (2) For the fourth quarter of 2018, adjusted revenue of $126,914 included marketplace revenue of $87,618 and product revenue of $39,296. For the fourth quarter of 2017, adjusted revenue of $9,319 included marketplace revenue of $8,911 and product revenue of $408, net of sales incentives. (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. For the Year ended December 31, 2018DigitalEntertainment
E-commerceDigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $ Revenue 462,464 269,578(1) 11,458 83,468 - 826,968 Changes in deferred revenue 198,578 - - - - 198,578 Sales incentives net-off - 21,128 2,054 - - 23,182 Adjusted revenue 661,042 290,706(2) 13,512 83,468 - 1,048,728 Operating income (loss) 69,449 (893,489) (34,056) (62,548) (68,124) (988,768) Net effect of changes in deferred revenue and its related cost 157,918 - - - - 157,918 Depreciation and amortization 35,171 33,167 1,900 8,490 - 78,728 Share-based compensation - - - - 58,121 58,121 Adjusted EBITDA 262,538 (860,322) (32,156) (54,058) (10,003) (694,001) For the Year ended December 31, 2017DigitalEntertainment
E-commerceDigitalFinancialServices
OtherServices(3)
Unallocatedexpenses(4)
Consolidated $ $ $ $ $ $ Revenue 365,167 9,034(1) 16,270 23,719 - 414,190 Changes in deferred revenue 130,711 - - - - 130,711 Sales incentives net-off - 8,683 - - - 8,683 Adjusted revenue 495,878 17,717(2) 16,270 23,719 - 553,584 Operating income (loss) 45,637 (452,233) (38,038) (21,199) (36,523) (502,356) Net effect of changes in deferred revenue and its related cost100,678
- - - -100,678
Depreciation and amortization 28,624 7,953 1,341 3,009 - 40,927 Share-based compensation - - - - 28,636 28,636 Adjusted EBITDA 174,939 (444,280) (36,697) (18,190) (7,887) (332,115) (1) For the year of 2018, revenue of $269,578 included marketplace revenue of $176,434 and product revenue of $93,144, net of sales incentives. For the year of 2017, revenue of $9,034 included marketplace revenue of $8,626 and product revenue of $408, net of sales incentives. (2) For the year of 2018, adjusted revenue of $290,706 included marketplace revenue of $197,285 and product revenue of $93,421. For the year of 2017, adjusted revenue of $17,717 included marketplace revenue of $17,309 and product revenue of $408, net of sales incentives. (3) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services.” (4) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. The expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share dataFor the Three Monthsended December 31,
For the Yearended December 31,
2017 2018 2017 2018 $ $ $ $ (unaudited) (unaudited) (unaudited) (unaudited) Revenue Service revenue Digital Entertainment 106,323 131,257 365,167 462,464 E-commerce and other services 17,754 112,356 47,444 270,049 Sales of goods 527 39,611 1,579 94,455 Total revenue 124,604 283,224 414,190 826,968 Cost of revenue Cost of service Digital Entertainment (60,240) (77,846) (217,986) (267,359) E-commerce and other services (40,257) (171,229) (107,260) (446,281) Cost of goods sold (562) (42,108) (1,632) (98,570) Total cost of revenue (101,059) (291,183) (326,878) (812,210) Gross profit 23,545 (7,959) 87,312 14,758 Operating income (expenses): Other operating income 2,157 4,291 3,497 9,799 Sales and marketing expenses (156,418) (207,487) (425,974) (705,015) General and administrative expenses (51,754) (87,160) (137,868) (240,781) Research and development expenses (8,671) (26,642) (29,323) (67,529) Total operating expenses (214,686) (316,998) (589,668) (1,003,526) Operating loss Interest income 760 2,953 2,922 11,520 Interest expense (9,043) (9,882) (26,501) (31,295) Investment (loss) gain, net (352) (771) 33,591 8,603 Changes in fair value of convertible notes (51,950) 61,187 (51,950) 41,259 Foreign exchange (loss) gain (1,698) (503) (4,215) 4,801 Loss before income tax and share of results of equity investees (253,424) (271,973) (548,509) (953,880) Income tax expense (8,730) (2,993) (10,745) (4,088) Share of results of equity investees (986) (1,092) (1,912) (3,066) Net loss (263,140) (276,058) (561,166) (961,034) Net loss (profit) attributable to non-controlling interests 480 (565) 681 (207) Net loss attributable to Sea Limited’s ordinary shareholders (262,660) (276,623) (560,485) (961,241) Adjusted net loss (1) (199,613) (321,187) (480,580) (944,172) Loss per share: Basic and diluted (0.90) (0.81) (2.72) (2.84) Weighted average shares used in loss per share computation: Basic and diluted 293,324,598 340,397,564 205,727,195 338,472,987 (1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.” UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”)As ofDecember 31,
As ofDecember 31,
2017 2018 $ $ (unaudited) ASSETS Current assets Cash and cash equivalents 1,347,361 1,002,841 Restricted cash 95,300 254,100 Accounts receivable, net 61,846 97,782 Prepaid expenses and other assets 186,181 312,387 Inventories, net 9,790 37,689 Short-term investment 18,000 690 Amounts due from related parties 2,235 5,224 Total current assets 1,720,713 1,710,713 Non-current assets Property and equipment, net 74,348 192,357 Intangible assets, net 37,333 12,887 Long-term investments 28,216 111,022 Prepaid expenses and other assets 46,297 69,065 Restricted cash 2,317 2,371 Deferred tax assets 48,104 63,302 Goodwill 30,952 30,952 Total non-current assets 267,567 481,956 Total assets 1,988,280 2,192,669 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”)As ofDecember 31,
As ofDecember 31,
2017 2018 $ $ (unaudited) LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable 8,644 37,163 Accrued expenses and other payables 285,248 636,880 Advances from customers 27,155 29,355 Amount due to related parties 36,790 46,025 Short-term bank borrowings 2,013 856 Deferred revenue 268,241 426,675 Income taxes payable 9,614 9,539 Total current liabilities 637,705 1,186,493 Non-current liabilities Accrued expenses and other payables 7,547 7,894 Long-term bank borrowings-
1,026 Deferred revenue 133,481 171,262 Convertible notes 726,950 1,061,796 Deferred tax liabilities 4,378 679 Unrecognized tax benefits 3,088 2,974 Total non-current liabilities 875,444 1,245,631 Total liabilities 1,513,149 2,432,124Shareholders’ equity Class A Ordinary shares 91 94 Class B Ordinary shares 76 76 Additional paid-in capital 1,564,656 1,809,232 Accumulated other comprehensive income 10,701 15,199 Statutory reserves 46 46 Accumulated deficit (1,106,545) (2,067,786) Total Sea Limited shareholders’ equity (deficit) 469,025 (243,139) Non-controlling interests 6,106 3,684 Total shareholders’ equity (deficit) 475,131 (239,455)
Total liabilities and shareholders’ equity (deficit)
1,988,280 2,192,669 UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Amounts expressed in thousands of US dollars (“$”)For the Three months endedDecember 31,
For the Year endedDecember 31,
2017 2018 2017 2018 $ $ $ $ (unaudited) (unaudited) (unaudited) Net cash used in operating activities (88,388) (138,191) (259,228) (495,220) Net cash used in investing activities (51,140) (65,590) (118,614) (224,528) Net cash generated from financing activities 927,401 1,522 1,623,843 546,628 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 3,925 2,193 8,153 (12,546) Net increase (decrease) in cash, cash equivalents and restricted cash 791,798 (200,066) 1,254,154 (185,666) Cash, cash equivalents and restricted cash at beginning of the period 653,180 1,459,378 190,824 1,444,978 Cash, cash equivalents and restricted cash at end of the period 1,444,978 1,259,312 1,444,978 1,259,3121
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 December 31, 2018DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $ Revenue 131,257 121,660 2,344 27,963 - 283,224 Operating income (loss) 16,121 (290,616) (10,314) (19,952) (20,196) (324,957) Non-operating income, net 52,984 Income tax expense (2,993) Share of results of equity investees (1,092) Net loss (276,058) For the Three Months ended December 31, 2017DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $ Revenue 106,323 4,966 4,102 9,213 - 124,604 Operating income (loss) 18,102 (178,780) (8,038) (8,269) (14,156) (191,141) Non-operating loss, net (62,283) Income tax expense (8,730) Share of results of equity investees (986) Net loss (263,140) For the Year ended December 31, 2018DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $ Revenue 462,464 269,578 11,458 83,468 - 826,968 Operating income (loss) 69,449 (893,489) (34,056) (62,548) (68,124) (988,768) Non-operating income, net 34,888 Income tax expense (4,088) Share of results of equity investees (3,066) Net loss (961,034) For the Year ended December 31, 2017DigitalEntertainment
E-commerce
DigitalFinancialServices
OtherServices(1)
Unallocatedexpenses(2)
Consolidated $ $ $ $ $ $ Revenue 365,167 9,034 16,270 23,719 - 414,190 Operating income (loss) 45,637 (452,233) (38,038) (21,199) (36,523) (502,356) Non-operating loss, net (46,153) Income tax expense (10,745) Share of results of equity investees (1,912) Net loss (561,166) (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 Monthsended September 30,2018
For the Three Monthsended December 31,2018
Digital Entertainment Unit Quarterly active users millions 176.1 216.2 Monthly active users (last month) millions 104.5 135.7 Quarterly paying users millions 7.2 11.9 Average revenue per user US$ 0.8 1.1 Average revenue per paying user US$ 20.1 19.4 E-commerce Gross GMV US$ millions 2,690.9 3,425.2 Gross orders millions 158.5 206.9
View source version on businesswire.com: https://www.businesswire.com/news/home/20190226006240/en/
For enquiries:Martin ReidyInvestors / analysts: ir@seagroup.comorMedia: media@seagroup.com
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