SINGAPORE–(BUSINESS WIRE)–Sea Limited (NYSE: SE) (�Sea or the Company) today announced its financial results for the third quarter ended September 30, 2022.
Given the significant uncertainties in the macro environment, we have entirely shifted our mindset and focus from growth to achieving self-sufficiency and profitability as soon as possible, without relying on any external funding, said Forrest Li, Seas Chairman and Group Chief Executive Officer.
We are adapting quickly to the changing climate. All our efforts are directed to ensure that Sea not only survives the macro storms but emerges stronger, more efficient, and more resilient and as a long-term winner in our markets. This positions us to continue capturing the long-term potential of our businesses and markets, and to deliver strong and sustained shareholder returns over time. Over the last quarter, we took decisive actions to improve margins, and set clear goals and priorities for the quarters to come. We remain highly confident about the compelling long-term growth prospects of our businesses and markets.
Third Quarter 2022 Highlights
Outlook
Given rising macro uncertainties, and with reopening trends having an ongoing effect on the business, we are revising the guidance for digital entertainment. We now expect bookings for the full year of 2022 to be between US$2.6 billion and US$2.8 billion, as compared to the previous guidance of between US$2.9 billion to US$3.1 billion.
In addition, given the ongoing macro uncertainties, we currently do not intend to provide any guidance for 2023 for our businesses.
1 | Compared with total net loss excluding share-based compensation and impairment of goodwill for the second quarter of 2022. | |
2 | For definitions of total adjusted EBITDA and adjusted EBITDA for digital entertainment, e-commerce and digital financial services segments, please refer to the Non-GAAP Financial Measures section. | |
3 | 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. | |
4 | 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 Months |
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| 2021 | 2022 |
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| $ | $ | YOY% | |||
Revenue |
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Service revenue |
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Digital Entertainment | 1,099,367 | 892,879 | (18.8)% | |||
E-commerce and other services | 1,309,912 | 1,976,743 | 50.9% | |||
Sales of goods | 279,605 | 286,329 | 2.4% | |||
| 2,688,884 | 3,155,951 | 17.4% | |||
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Cost of revenue |
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Cost of service |
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Digital Entertainment | (314,363) | (264,833) | (15.8)% | |||
E-commerce and other services | (1,099,189) | (1,405,749) | 27.9% | |||
Cost of goods sold | (266,628) | (257,651) | (3.4)% | |||
| (1,680,180) | (1,928,233) | 14.8% | |||
Gross profit | 1,008,704 | 1,227,718 | 21.7% | |||
Other operating income | 68,557 | 65,972 | (3.8)% | |||
Sales and marketing expenses | (1,009,601) | (816,662) | (19.1)% | |||
General and administrative expenses | (294,848) | (551,700) | 87.1% | |||
Research and development expenses | (231,368) | (420,972) | 81.9% | |||
Total operating expenses | (1,467,260) | (1,723,362) | 17.5% | |||
Operating loss | (458,556) | (495,644) | 8.1% | |||
Non-operating loss, net | (12,816) | (9,173) | (28.4)% | |||
Income tax expense | (101,040) | (65,279) | (35.4)% | |||
Share of results of equity investees | 1,431 | 821 | (42.6)% | |||
Net loss | (570,981) | (569,275) | (0.3)% | |||
Net loss excluding share-based compensation (1) | (448,014) | (373,520) | (16.6)% | |||
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Basic and diluted loss per share based on | (0.84) | (0.66) | (21.4)% | |||
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Change in deferred revenue of Digital Entertainment | 121,306 | (228,207) | (288.1)% | |||
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Adjusted EBITDA for Digital Entertainment (1) | 715,139 | 289,879 | (59.5)% | |||
Adjusted EBITDA for E-commerce (1) | (683,813) | (495,735) | (27.5)% | |||
Adjusted EBITDA for Digital Financial Services (1) | (159,037) | (67,746) | (57.4)% | |||
Adjusted EBITDA for Other Services (1) | (31,920) | (76,530) | 139.8% | |||
Unallocated expenses (2) | (5,823) | (7,520) | 29.1% | |||
Total adjusted EBITDA (1) | (165,454) | (357,652) | 116.2% |
(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 Operating Decision Maker (CODM) as part of segment performance. |
Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
Revenue
Our total GAAP revenue increased by 17.4% to US$3.2 billion in the third quarter of 2022 from US$2.7 billion in the third quarter of 2021.
Cost of Revenue
Our total cost of revenue increased by 14.8% to US$1.9 billion in the third quarter of 2022 from US$1.7 billion in the third quarter of 2021.
Other Operating Income
Other operating income was US$66.0 million and US$68.6 million in the third quarter of 2022 and 2021, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers.
Sales and Marketing Expenses
Total sales and marketing expenses decreased by 19.1% to US$816.7 million in the third quarter of 2022 from US$1.0 billion in the third quarter of 2021. The table below sets forth breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars ($).
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For the Three Months |
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| 2021 |
| 2022 | YOY% | |
Sales and Marketing Expenses | $ |
| $ |
| |
Digital Entertainment | 108,631 |
| 60,521 | (44.3)% | |
E-commerce | 688,924 |
| 575,676 | (16.4)% | |
Digital Financial Services | 195,794 |
| 130,824 | (33.2)% |
The decrease in sales and marketing expenses across all major reporting segments were mainly attributable to our efforts to continue to reduce operating costs and achieve higher cost efficiencies.
General and Administrative Expenses
Our general and administrative expenses increased by 87.1% to US$551.7 million in the third quarter of 2022 from US$294.8 million in the third quarter of 2021. This increase was primarily due to the increase in credit loss expense related to loans receivable, in addition to higher staff cost, including share-based compensation, and higher office facilities and related expenses to support our business growth. Credit loss expenses on loans receivable increased to US$136.4 million in the third quarter of 2022 from US$33.2 million in the third quarter of 2021, primarily driven by the growth in our loan book.
Research and Development Expenses
Research and development expenses increased by 81.9% to US$421.0 million in the third quarter of 2022 from US$231.4 million in the third quarter of 2021, primarily attributable to higher staff cost from the increase in headcount as we invested in our technological capabilities and expanded our service offerings.
Non-operating Income or Losses, Net
Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss) and foreign exchange gain (loss). We recorded a net non-operating loss of US$9.2 million in the third quarter of 2022, compared to a net non-operating loss of US$12.8 million in the third quarter of 2021.
Income Tax Expense
We had a net income tax expense of US$65.3 million and US$101.0 million in the third quarter of 2022 and 2021, respectively.
Net Loss
As a result of the foregoing, we had net losses of US$569.3 million and US$571.0 million in the third quarter of 2022 and 2021, respectively.
Net Loss Excluding Share-based Compensation
Net loss excluding share-based compensation, was US$373.5 million and US$448.0 million in the third quarter of 2022 and 2021, respectively.
Basic and Diluted Loss Per Share Based on Net Loss Excluding Share-based Compensation Attributable to Sea Limiteds Ordinary Shareholders
Basic and diluted loss per share based on net loss excluding share-based compensation, was US$0.66 and US$0.84 in the third quarter of 2022 and 2021, respectively.
Webcast and Conference Call Information
The Companys management will host a conference call today to review Seas 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 15, 2022 | ||
Webcast link: | https://event.choruscall.com/mediaframe/webcast.html?webcastid=69JIbsbL | ||
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
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Passcode for Participants: | 5795737 |
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A replay of the conference call will be available at the Companys investor relations website (www.sea.com/investor/home). An archived webcast will be available at the same link above.
About Sea Limited
Sea Limited (NYSE: SE) is a leading global consumer internet company founded in Singapore in 2009. Its mission is to better the lives of consumers and small businesses with technology. Sea operates three core businesses across digital entertainment, e-commerce, as well as digital payments and financial services, known as Garena, Shopee and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest pan-regional e-commerce platform in Southeast Asia and Taiwan. SeaMoney is a leading digital payments and financial services provider in Southeast Asia.
Forward-Looking Statements
This announcement contains forward-looking statements. These statements are made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as may, could, will, expect, anticipate, aim, future, intend, plan, believe, estimate, likely to, potential, confident, guidance, and similar statements. Among other things, statements that are not historical facts, including statements about Seas beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Seas 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: Seas goals and strategies; its future business development, financial condition, financial results, and results of operations; the expected growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the markets where it operates, including segments within those industries; expected changes or guidance in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the expected growth of its digital entertainment, e-commerce and digital financial services businesses; its expectations regarding growth in its user base, level of engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; its expectations regarding the use of proceeds from its financing activities, including its follow-on equity offerings and convertible notes offerings; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries, including the effects of any government orders or actions on its businesses; general economic, political, social and business conditions in its markets; and the impact of widespread health developments, including the COVID-19 pandemic, and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities, and the availability of effective vaccines or treatments) and the impact of economies reopening further to the COVID-19 pandemic. Further information regarding these and other risks is included in Seas 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.
Contacts
For enquiries:
Investors / analysts: ir@sea.com
Media: Martin Reidy, media@sea.com
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