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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 | |
---|---|---|---|---|---|---|---|---|
1.02 | 1.59% | 65.00 | 65.73 | 64.45 | 64.74 | 1,277,703 | 15:26:59 |
Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the quarter ended September 30, 2019.
Third Quarter 2019 Highlights
1 Latin America rankings data for App Annie is based on Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay.
2 Marketplace revenue mainly consists of transaction-based fees and advertising income and revenue generated from other value-added services.
3 Product revenue mainly consists of revenue generated from direct sales.
Guidance
We are raising the guidance for both digital entertainment and e-commerce for the full year of 2019.
We now expect adjusted revenue for digital entertainment to be between US$1.7 billion and US$1.8 billion, representing 157.2% to 172.3% growth from 2018. This compares to the previously disclosed guidance of between US$1.6 billion and US$1.7 billion, representing 142.0% to 157.2% growth.
We also expect adjusted revenue for e-commerce to be between US$880 million and US$920 million, representing 202.7% to 216.5% growth from 2018. This compares to the previously disclosed guidance of between US$780 million and US$820 million, representing 168.3% to 182.1% growth.
Unaudited Summary of Financial Results
(Amounts are expressed in thousands of US dollars “$”)
For the Three Months
ended September 30,
2018
2019
$
$
YOY%
Revenue
Service revenue
Digital Entertainment
112,520
329,058
192.4%
E-commerce and other services
71,319
229,740
222.1%
Sales of goods
21,082
51,339
143.5%
204,921
610,137
197.7%
Cost of revenue
Cost of service
Digital Entertainment
(63,960)
(117,194)
83.2%
E-commerce and other services
(113,223)
(240,037)
112.0%
Cost of goods sold
(22,128)
(49,738)
124.8%
(199,311)
(406,969)
104.2%
Gross profit
5,610
203,168
3,521.5%
Other operating income
3,072
3,985
29.7%
Sales and marketing expenses
(180,304)
(251,751)
39.6%
General and administrative expenses
(57,285)
(99,265)
73.3%
Research and development expenses
(17,293)
(43,599)
152.1%
Total operating expenses
(251,810)
(390,630)
55.1%
Operating loss
(246,200)
(187,462)
(23.9)%
Non-operating income, net
30,903
9,786
(68.3)%
Income tax expense
(2,020)
(27,370)
1,255.0%
Share of results of equity investees
(702)
(1,051)
49.7%
Net loss
(218,019)
(206,097)
(5.5)%
Net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes (1)
(237,568)
(175,162)
(26.3)%
Adjusted revenue of Digital Entertainment (1)
144,558
451,004
212.0%
Adjusted revenue of E-commerce (1)
71,233
257,213
261.1%
Adjusted revenue of Digital Financial Services (1)
3,113
2,019
(35.1)%
Revenue of Other Services
23,934
53,021
121.5%
Total adjusted revenue (1)
242,838
763,257
214.3%
Adjusted EBITDA for Digital Entertainment (1)
53,724
265,958
395.0%
Adjusted EBITDA for E-commerce (1)
(214,861)
(253,712)
18.1%
Adjusted EBITDA for Digital Financial Services (1)
(7,001)
(33,628)
380.3%
Adjusted EBITDA for Other Services (1)
(13,850)
(6,494)
(53.1)%
Unallocated expenses (2)
(1,764)
(2,921)
65.6%
Total adjusted EBITDA (1)
(183,752)
(30,797)
(83.2)%
(1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.”
(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 September 30, 2019 Compared to Three Months Ended September 30, 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 September 30,
2018
2019
$
% of
revenue
$
% of
revenue
YOY%
Revenue
Service revenue
Digital Entertainment
112,520
54.9
329,058
53.9
192.4%
E-commerce and other services
71,319
34.8
229,740
37.7
222.1%
Sales of goods
21,082
10.3
51,339
8.4
143.5%
Total revenue
204,921
100.0
610,137
100.0
197.7%
2018
2019
$
% of total adjusted revenue
$
% of total adjusted revenue
YOY%
Adjusted revenue
Service revenue
Digital Entertainment
144,558
59.5
451,004
59.1
212.0%
E-commerce and other services
77,040
31.7
260,914
34.2
238.7%
Sales of goods
21,240
8.8
51,339
6.7
141.7%
Total adjusted revenue
242,838
100.0
763,257
100.0
214.3%
Our total revenue increased by 197.7% to US$610.1 million in the third quarter of 2019 from US$204.9 million in the third quarter of 2018. Our total adjusted revenue increased by 214.3% to US$763.3 million in the third quarter of 2019 from US$242.8 million in the third 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 104.2% to US$407.0 million in the third quarter of 2019 from US$199.3 million in the third quarter of 2018.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 39.6% to US$251.8 million in the third quarter of 2019 from US$180.3 million in the third quarter of 2018. The table below sets forth the breakdown of the sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars (“$”).
For the Three Months
ended September 30,
2018
2019
YOY%
Sales and Marketing Expenses
$
$
Digital Entertainment
19,046
24,750
29.9%
E-commerce
152,934
199,167
30.2%
General and Administrative Expenses
Our general and administrative expenses increased by 73.3% to US$99.3 million in the third quarter of 2019 from US$57.3 million in the third 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 152.1% to US$43.6 million in the third quarter of 2019 from US$17.3 million in the third 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 income of US$9.8 million in the third quarter of 2019, compared to a net non-operating income of US$30.9 million in the third quarter of 2018.
Income Tax Expense
We had a net income tax expense of US$27.4 million in the third quarter of 2019 and net income tax expense of US$2.0 million in the third quarter of 2018. The income tax expense in the third 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.
Net Loss
As a result of the foregoing, we had net losses of US$206.1 million and US$218.0 million in the third quarter of 2019 and 2018, respectively.
Net Loss Excluding Share-based Compensation and Changes in Fair Value of the 2017 Convertible Notes
Net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes, was US$175.2 million and US$237.6 million in the third 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:
7:30 AM U.S. Eastern Time on November 12, 2019
8:30 PM Singapore / Hong Kong Time on November 12, 2019
Webcast link:
https://services.choruscall.com/links/se191112.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: 7282425
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 September 30, 2019
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(3)
Unallocated
expenses(4)
Consolidated
$
$
$
$
$
$
Revenue
329,058
226,396(1)
1,662
53,021
-
610,137
Changes in deferred revenue
121,946
-
-
-
-
121,946
Sales incentives net-off
-
30,817
357
-
-
31,174
Adjusted revenue
451,004
257,213(2)
2,019
53,021
-
763,257
Operating income (loss)
169,369
(277,219)
(34,553)
(9,429)
(35,630)
(187,462)
Net effect of changes in deferred revenue and its related cost
91,654
-
-
-
-
91,654
Depreciation and Amortization
4,935
23,507
925
2,935
-
32,302
Share-based compensation
-
-
-
-
32,709
32,709
Adjusted EBITDA
265,958
(253,712)
(33,628)
(6,494)
(2,921)
(30,797)
For the Three Months ended September 30, 2018
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(3)
Unallocated expenses(4)
Consolidated
$
$
$
$
$
$
Revenue
112,520
65,919(1)
2,548
23,934
-
204,921
Changes in deferred revenue
32,038
-
-
-
-
32,038
Sales incentives net-off
-
5,314
565
-
-
5,879
Adjusted revenue
144,558
71,233(2)
3,113
23,934
-
242,838
Operating income (loss)
19,403
(223,787)
(7,387)
(16,186)
(18,243)
(246,200)
Net effect of changes in deferred revenue and its related cost
26,192
-
-
-
-
26,192
Depreciation and Amortization
8,129
8,926
386
2,336
-
19,777
Share-based compensation
-
-
-
-
16,479
16,479
Adjusted EBITDA
53,724
(214,861)
(7,001)
(13,850)
(1,764)
(183,752)
(1) For the third quarter of 2019, revenue of $226,396 included marketplace revenue of $177,235 and product revenue of $49,161 net of sales incentives. For the third quarter of 2018, revenue of $65,919 included marketplace revenue of $45,147 and product revenue of $20,772 net of sales incentives.
(2) For the third quarter of 2019, adjusted revenue of $257,213 included marketplace revenue of $208,052 and product revenue of $49,161. For the third quarter of 2018, adjusted revenue of $71,233 included marketplace revenue of $50,303 and product revenue of $20,930.
(3) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services.”
(4) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. The expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data
For the Nine Months
ended September 30,
2018
2019
$
$
Revenue
Service revenue
Digital Entertainment
331,207
731,935
E-commerce and other services
157,693
526,144
Sales of goods
54,844
140,075
Total revenue
543,744
1,398,154
Cost of revenue
Cost of service
Digital Entertainment
(189,513)
(296,788)
E-commerce and other services
(275,052)
(612,833)
Cost of goods sold
(56,462)
(148,465)
Total cost of revenue
(521,027)
(1,058,086)
Gross profit
22,717
340,068
Operating income (expenses):
Other operating income
5,508
9,875
Sales and marketing expenses
(497,528)
(627,803)
General and administrative expenses
(153,621)
(276,160)
Research and development expenses
(40,887)
(107,167)
Total operating expenses
(686,528)
(1,001,255)
Operating loss
(663,811)
(661,187)
Interest income
8,567
24,539
Interest expense
(21,413)
(31,041)
Investment gain, net
9,374
4,817
Changes in fair value of the 2017 convertible notes
(19,928)
(466,102)(1)
Foreign exchange gain
5,304
5,583
Loss before income tax and share of results of equity investees
(681,907)
(1,123,391)
Income tax expense
(1,095)
(49,853)
Share of results of equity investees
(1,974)
(2,558)
Net loss
(684,976)
(1,175,802)
Net loss (profit) attributable to non-controlling interests
358
(3,208)
Net loss attributable to Sea Limited’s ordinary shareholders
(684,618)
(1,179,010)
Net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes (2)
(622,985)
(627,566)
Loss per share:
Basic and diluted
(2.03)
(2.75)
Shares used in loss per share computation:
Basic and diluted
337,804,410
428,606,948
(1) Fair value loss of $466.1 million on the 2017 convertible notes was recorded as our share prices significantly exceeded the conversion prices of the 2017 convertible notes.
(2) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.”
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
As of
September 30,
2018
2019
$
$
ASSETS
Current assets
Cash and cash equivalents
1,002,841
2,297,187
Restricted cash
254,100
360,065
Accounts receivable, net
97,782
138,198
Prepaid expenses and other assets
312,387
489,272
Inventories, net
37,689
21,372
Short-term investments
690
9,416
Amounts due from related parties
5,224
2,277
Total current assets
1,710,713
3,317,787
Non-current assets
Property and equipment, net
192,357
294,783
Operating lease right-of-use assets, net
-
168,366
Intangible assets, net
12,887
14,914
Long-term investments
111,022
99,086
Prepaid expenses and other assets
69,065
66,330
Restricted cash
2,371
16,583
Deferred tax assets
63,302
73,100
Goodwill
30,952
30,952
Total non-current assets
481,956
764,114
Total assets
2,192,669
4,081,901
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
As of
September 30,
2018
2019
$
$
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
37,163
48,124
Accrued expenses and other payables
636,880
826,887
Advances from customers
29,355
50,203
Amount due to related parties
46,025
45,959
Short-term borrowings
856
1,307
Operating lease liabilities
-
49,729
Deferred revenue
426,675
990,677
Convertible notes
-
22,706
Income tax payable
9,539
16,138
Total current liabilities
1,186,493
2,051,730
Non-current liabilities
Accrued expenses and other payables
7,894
22,633
Long-term borrowings
1,026
633
Operating lease liabilities
-
134,293
Deferred revenue
171,262
164,976
Convertible notes
1,061,796
445,936
Deferred tax liabilities
679
791
Unrecognized tax benefits
2,974
1,409
Total non-current liabilities
1,245,631
770,671
Total liabilities
2,432,124
2,822,401
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
As of
September 30,
2018
2019
$
$
Shareholders’ equity
Class A Ordinary shares
94
154
Class B Ordinary shares
76
76
Additional paid-in capital
1,809,232
4,505,967
Accumulated other comprehensive income
15,199
(6,979)
Statutory reserves
46
46
Accumulated deficit
(2,067,786)
(3,246,796)
Total Sea Limited shareholders’ (deficit) equity
(243,139)
1,252,468
Non-controlling interests
3,684
7,032
Total shareholders’ (deficit) equity
(239,455)
1,259,500
Total liabilities and shareholders’ (deficit) equity
2,192,669
4,081,901
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts expressed in thousands of US dollars (“$”)
For the Nine Months ended
September 30,
2018
2019
$
$
Net cash (used in) generated from operating activities
(357,029)
97,663
Net cash used in investing activities
(158,938)
(219,538)
Net cash generated from financing activities
545,106
1,534,550
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash
(14,739)
1,848
Net increase in cash, cash equivalents and restricted cash
14,400
1,414,523
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
1,459,378
2,673,835
1 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 September 30, 2019
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
329,058
226,396
1,662
53,021
-
610,137
Operating income (loss)
169,369
(277,219)
(34,553)
(9,429)
(35,630)
(187,462)
Non-operating income, net
9,786
Income tax expense
(27,370)
Share of results of equity investees
(1,051)
Net loss
(206,097)
For the Three Months ended September 30, 2018
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
112,520
65,919
2,548
23,934
-
204,921
Operating income (loss)
19,403
(223,787)
(7,387)
(16,186)
(18,243)
(246,200)
Non-operating income, net
30,903
Income tax expense
(2,020)
Share of results of equity investees
(702)
Net loss
(218,019)
(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
View source version on businesswire.com: https://www.businesswire.com/news/home/20191112005556/en/
Martin Reidy Investors / analysts: ir@seagroup.com Media: media@seagroup.com
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