SINGAPORE–(BUSINESS WIRE)–Sea Limited (NYSE: SE) (�Sea or the Company) today announced its financial results for the fourth quarter and full year ended December 31, 2022.
We are starting 2023 on a much stronger footing, said Forrest Li, Seas Chairman and Group Chief Executive Officer. Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom line improvements. We delivered positive total net income in the fourth quarter, demonstrating the strength and resilience of our underlying business model and the execution capabilities of our teams. As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem.
Given the macro uncertainty and our recent strong pivot, we are closely monitoring the market environment and we will continue to adjust our pace and fine-tune our operations accordingly. While there may be near-term fluctuations in our performance, we remain highly confident in the long-term growth potential of our markets and fully focused on capturing this opportunity.
Fourth Quarter 2022 Highlights
Full Year 2022 Highlights
| 1 | For a discussion of the use of non-GAAP financial measures, see Non-GAAP Financial Measures. | |
| 2 | Current and comparative prior period local currency amounts are converted into United States dollars using the same exchange rates, rather than the actual exchange rates during the respective periods. | |
| 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) | |||||||||||||||||||
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For the Three |
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For the Full Year |
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| 2021 | 2022 |
| 2021 | 2022 |
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| $ | $ | YOY% | $ | $ | YOY% | |||||||||||||
| Revenue |
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| Service revenue |
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| Digital Entertainment | 1,415,044 |
| 948,857 |
| (32.9 | )% | 4,320,013 |
| 3,877,163 |
| (10.3 | )% | |||||||
| E-commerce and other services | 1,482,665 |
| 2,231,133 |
| 50.5 | % | 4,564,617 |
| 7,463,173 |
| 63.5 | % | |||||||
| Sales of goods | 324,405 |
| 271,594 |
| (16.3 | )% | 1,070,560 |
| 1,109,369 |
| 3.6 | % | |||||||
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| 3,222,114 |
| 3,451,584 |
| 7.1 | % | 9,955,190 |
| 12,449,705 |
| 25.1 | % | |||||||
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| Cost of revenue |
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| Cost of service |
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| Digital Entertainment | (374,783 | ) | (242,470 | ) | (35.3 | )% | (1,230,082 | ) | (1,077,017 | ) | (12.4 | )% | |||||||
| E-commerce and other services | (1,235,351 | ) | (1,282,174 | ) | 3.8 | % | (3,825,826 | ) | (5,194,065 | ) | 35.8 | % | |||||||
| Cost of goods sold | (301,252 | ) | (229,627 | ) | (23.8 | )% | (1,003,547 | ) | (993,346 | ) | (1.0 | )% | |||||||
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| (1,911,386 | ) | (1,754,271 | ) | (8.2 | )% | (6,059,455 | ) | (7,264,428 | ) | 19.9 | % | |||||||
| Gross profit | 1,310,728 |
| 1,697,313 |
| 29.5 | % | 3,895,735 |
| 5,185,277 |
| 33.1 | % | |||||||
| Other operating income | 72,294 |
| 68,453 |
| (5.3 | )% | 287,946 |
| 279,184 |
| (3.0 | )% | |||||||
| Sales and marketing expenses | (1,219,858 | ) | (473,620 | ) | (61.2 | )% | (3,829,743 | ) | (3,269,223 | ) | (14.6 | )% | |||||||
| General and administrative expenses (3) | (284,065 | ) | (352,321 | ) | 24.0 | % | (987,868 | ) | (1,437,612 | ) | 45.5 | % | |||||||
| Provision for credit losses (3) | (34,532 | ) | (175,103 | ) | 407.1 | % | (117,427 | ) | (513,690 | ) | 337.5 | % | |||||||
| Research and development expenses | (286,642 | ) | (244,195 | ) | (14.8 | )% | (831,703 | ) | (1,376,501 | ) | 65.5 | % | |||||||
| Impairment of goodwill | – |
| (177,663 | ) | – |
| – |
| (354,943 | ) | – |
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| Total operating expenses | (1,752,803 | ) | (1,354,449 | ) | (22.7 | )% | (5,478,795 | ) | (6,672,785 | ) | 21.8 | % | |||||||
| Operating (loss) income | (442,075 | ) | 342,864 |
| (177.6 | )% | (1,583,060 | ) | (1,487,508 | ) | (6.0 | )% | |||||||
| Non-operating (loss) income, net | (70,995 | ) | 34,973 |
| (149.3 | )% | (132,124 | ) | (13,025 | ) | (90.1 | )% | |||||||
| Income tax (expense) credit | (105,609 | ) | 43,461 |
| (141.2 | )% | (332,865 | ) | (168,395 | ) | (49.4 | )% | |||||||
| Share of results of equity investees | 2,390 |
| 1,540 |
| 35.6 | % | 5,019 |
| 11,156 |
| 122.3 | % | |||||||
| Net (loss) income | (616,289 | ) | 422,838 |
| (168.6 | )% | (2,043,030 | ) | (1,657,772 | ) | (18.9 | )% | |||||||
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(Loss) Earnings per share attributable to Sea | (1.12 | ) | 0.76 |
| (167.9 | )% | (3.84 | ) | (2.96 | ) | (22.9 | )% | |||||||
| Diluted | (1.12 | ) | 0.72 |
| (164.3 | )% | (3.84 | ) | (2.96 | ) | (22.9 | )% | |||||||
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Change in deferred revenue of Digital | (333,300 | ) | (405,262 | ) | 21.6 | % | 276,352 |
| (1,125,294 | ) | (507.2 | )% | |||||||
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| Adjusted EBITDA for Digital Entertainment (1) | 602,565 |
| 258,233 |
| (57.1 | )% | 2,775,957 |
| 1,313,091 |
| (52.7 | )% | |||||||
| Adjusted EBITDA for E-commerce (1) | (877,737 | ) | 196,146 |
| (122.3 | )% | (2,554,221 | ) | (1,690,554 | ) | (33.8 | )% | |||||||
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Adjusted EBITDA for Digital | (149,813 | ) | 75,601 |
| (150.5 | )% | (616,924 | ) | (228,560 | ) | (63.0 | )% | |||||||
| Adjusted EBITDA for Other Services (1) | (56,859 | ) | (25,437 | ) | (55.3 | )% | (170,211 | ) | (239,149 | ) | 40.5 | % | |||||||
| Unallocated expenses (2) | (10,296 | ) | (8,887 | ) | (13.7 | )% | (28,196 | ) | (32,962 | ) | 16.9 | % | |||||||
| Total adjusted EBITDA (1) | (492,140 | ) | 495,656 |
| (200.7 | )% | (593,595 | ) | (878,134 | ) | 47.9 | % | |||||||
(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.
(3) Provision for credit losses were previously recorded within general and administrative expenses.
Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
Revenue
Our total GAAP revenue increased by 7.1% to US$3.5 billion in the fourth quarter of 2022 from US$3.2 billion in the fourth quarter of 2021.
Cost of Revenue
Our total cost of revenue decreased by 8.2% to US$1.8 billion in the fourth quarter of 2022 from US$1.9 billion in the fourth quarter of 2021.
Other Operating Income
Our other operating income was US$68.5 million and US$72.3 million in the fourth quarter of 2022 and 2021, 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 decreased by 61.2% to US$473.6 million in the fourth quarter of 2022 from US$1.2 billion in the fourth quarter of 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars ($).
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For the Three Months |
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| 2021 |
| 2022 | YOY% | |||
| Sales and Marketing Expenses | $ |
| $ |
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| Digital Entertainment | 109,625 |
| 43,262 | (60.5 | )% | ||
| E-commerce | 840,727 |
| 379,369 | (54.9 | )% | ||
| Digital Financial Services | 228,729 |
| 29,918 | (86.9 | )% | ||
The decrease in sales and marketing expenses across all major reporting segments were mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies.
General and Administrative Expenses
Our general and administrative expenses increased by 24.0% to US$352.3 million in the fourth quarter of 2022 from US$284.1 million in the fourth quarter of 2021. The increase was primarily driven by impairment costs incurred due to the exits from non-core markets and certain divestments.
Provision for Credit Losses
Our provision for credit losses increased by 407.1% to US$175.1 million in the fourth quarter of 2022 from US$34.5 million in the fourth quarter of 2021, primarily driven by the growth in our loan book.
Research and Development Expenses
Our research and development expenses decreased by 14.8% to US$244.2 million in the fourth quarter of 2022 from US$286.6 million in the fourth quarter of 2021, primarily due to the impact of the accruals reversal as described earlier.
Impairment of Goodwill
We recorded an impairment of goodwill of US$177.7 million in the fourth quarter of 2022, compared to nil in the fourth quarter of 2021. The goodwill impairment was primarily due to our strategic decisions to dispose of or shut down certain historical investments for the digital entertainment business.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) from debt extinguishment. We recorded a net non-operating income of US$35.0 million in the fourth quarter of 2022, as compared to a net non-operating loss of US$71.0 million in the fourth quarter of 2021. Our non-operating income in the fourth quarter of 2022 was mainly due to a US$199.7 million net gain from debt extinguishment, partially offset by investment losses recognized amid lower valuations in the broader market.
Income Tax Credit or Expenses
We had a net income tax credit of US$43.5 million in the fourth quarter of 2022, as compared to net income tax expense of US$105.6 million in the fourth quarter of 2021. The income tax credit was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, partially offset by income tax incurred by our digital entertainment business.
Net Income or Loss
As a result of the foregoing, we had net income of US$422.8 million in the fourth quarter of 2022, as compared to net loss of US$616.3 million in the fourth quarter of 2021.
Basic and Diluted Earnings or Loss Per Share Attributable to Sea Limiteds Ordinary Shareholders
Basic earnings per share attributable to Sea Limiteds ordinary shareholders was US$0.76 in the fourth quarter of 2022, compared to basic loss per share attributable to Sea Limiteds ordinary shareholders of US$1.12 in the fourth quarter of 2021.
Diluted earnings per share attributable to Sea Limiteds ordinary shareholders was US$0.72 in the fourth quarter of 2022.
Full Year Ended December 31, 2022 Compared to Full Year Ended December 31, 2021
Revenue
Our total GAAP revenue increased by 25.1% to US$12.4 billion for the full year ended December 31, 2022 from US$10.0 billion for the full year ended December 31, 2021.
Cost of Revenue
Our total cost of revenue increased by 19.9% to US$7.3 billion for the full year ended December 31, 2022 from US$6.1 billion for the full year ended December 31, 2021.
Other Operating Income
Our other operating income was US$279.2 million for the full year ended December 31, 2022 from US$287.9 million for the full year ended December 31, 2021. Other operating income mainly consists of rebates from e-commerce related logistics services providers.
Sales and Marketing Expenses
Our total sales and marketing expenses decreased by 14.6% to US$3.3 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars ($).
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For the Full Year |
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| 2021 |
| 2022 | YOY% | ||
| Sales and Marketing Expenses | $ |
| $ |
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| Digital Entertainment | 357,106 |
| 268,061 | (24.9 | )% | |
| E-commerce | 2,630,401 |
| 2,328,636 | (11.5 | )% | |
| Digital Financial Services | 742,702 |
| 508,089 | (31.6 | )% | |
The decrease in sales and marketing expenses across all major reporting segments was mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies.
General and Administrative Expenses
Our general and administrative expenses increased by 45.5% to US$1.4 billion for the full year ended December 31, 2022 from US$987.9 million for the full year ended December 31, 2021. The increase was primarily due to the higher staff cost from higher average staff headcount over the year, as well as higher office facilities and related expenses to support the headcount growth.
Provision for Credit Losses
Our provision for credit losses increased by 337.5% to US$513.7 million for the full year ended December 31, 2022 from US$117.4 million for the full year ended December 31, 2021, primarily driven by the growth in our loan book.
Research and Development Expenses
Our research and development expenses increased by 65.5% to US$1.4 billion for the full year ended December 31, 2022 from US$831.7 million for the full year ended December 31, 2021, primarily due to the increase in research and development staff cost from higher average staff headcount over the year.
Impairment of Goodwill
We recorded an impairment of goodwill of US$354.9 million for the full year ended December 31, 2022, as compared to nil for the full year ended December 31, 2021. The goodwill impairment was primarily due to the change in carrying amount of goodwill associated with our prior acquisitions, mainly driven by the lower valuations amid the market uncertainties, and our strategic decision to dispose of or shut down certain historical investments for the digital entertainment business.
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), and gain (loss) on debt extinguishment. We recorded a net non-operating loss of US$13.0 million for the full year ended December 31, 2022, as compared to a net non-operating loss of US$132.1 million for the full year ended December 31, 2021.
Income Tax Expense
We had a net income tax expense of US$168.4 million and US$332.9 million for the full year ended December 31, 2022 and 2021, respectively. The lower income tax expense was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, as well as lower income tax expense incurred by our digital entertainment business.
Net Loss
As a result of the foregoing, we had net loss of US$1.7 billion and US$2.0 billion for the full year ended December 31, 2022 and 2021, respectively.
Basic and Diluted Loss Per Share Attributable to Sea Limiteds Ordinary Shareholders
Basic and diluted loss per share attributable to Sea Limiteds ordinary shareholders was US$2.96 for the full year ended December 31, 2022, as compared to US$3.84 for the full year ended December 31, 2021.
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Contacts
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Investors / analysts: ir@sea.com
Media: media@sea.com
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