Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced
its financial results for the fourth quarter and full year ended
December 31, 2020.
Fourth Quarter 2020 Highlights
- Group
- Total GAAP revenue was US$1.6 billion, up 101.6%
year-on-year.
- Total gross profit was US$533.7 million, up 101.5%
year-on-year.
- Total adjusted EBITDA1 was US$48.7 million compared to
US$(104.9) million for the fourth quarter of 2019.
- Digital Entertainment
- Bookings2 were US$1.0 billion, up 111.1% year-on-year.
- Adjusted EBITDA1 was US$663.5 million, up 149.1%
year-on-year.
- Adjusted EBITDA represented 65.5% of bookings for the fourth
quarter of 2020, compared to 55.5% for the fourth quarter of
2019.
- GAAP revenue was US$693.4 million, up 71.6% year-on-year.
- Quarterly active users (“QAUs”) reached 610.6 million, an
increase of 72.1% year-on-year.
- Quarterly paying users grew by 119.5% year-on-year to 73.1
million, and represented 12.0% of QAUs for the fourth quarter
compared to 9.4% for the same period in 2019.
- Average bookings per user were US$1.7, compared to US$1.4 for
the fourth quarter of 2019.
- Our self-developed global hit game, Free Fire, was the most
downloaded mobile game globally for 2020, according to App Annie3,
maintaining this leading position for a second consecutive
year.
- Free Fire continued to be the highest grossing mobile game in
Latin America and in Southeast Asia for the fourth quarter and for
the full year of 2020, according to App Annie3. Free Fire has
maintained this leading position for the past six consecutive
quarters.
- Free Fire was also the highest grossing mobile game in India
for the fourth quarter and for the full year of 2020, according to
App Annie3.
- Free Fire related content recorded over 72 billion view counts
across YouTube globally in 2020, making Free Fire the most viewed
mobile-only video game globally on YouTube for both 2019 and 2020.
It was also the third most viewed among all video games on YouTube
in 2020.
- Our esports and community-building efforts continued to attract
significant followings in the fourth quarter. Free Fire esports
tournaments hosted during the quarter have accumulated over 170
million online views to date.
- E-commerce
- GAAP revenue was US$842.2 million, up 178.3% year-on-year.
- GAAP revenue included US$627.6 million of GAAP marketplace
revenue4, up 175.4% year-on-year, and US$214.6 million of GAAP
product revenue5, up 187.1% year-on-year.
- Gross orders totaled 1.0 billion, an increase of 134.6%
year-on-year.
- Gross merchandise value (“GMV”) was US$11.9 billion, an
increase of 112.5% year-on-year.
- Adjusted EBITDA1 was US$(427.5) million compared to US$(306.2)
million for the fourth quarter of 2019. Adjusted EBITDA loss per
order decreased by 41.4% year-on-year to US$0.41, compared to
US$0.70 for the fourth quarter of 2019.
- In Indonesia, where Shopee is the largest e-commerce platform,
it registered over 430 million orders for the market in the fourth
quarter, or a daily average of around 4.7 million orders, an
increase of over 128% year-on-year. Shopee also ranked first in
Indonesia by average monthly active users, total time spent in app
on Android, and downloads, in the Shopping category for the fourth
quarter and for the full year of 2020, according to App
Annie3.
- Both in Southeast Asia and in Taiwan, Shopee ranked first in
the Shopping category by average monthly active users, total time
spent in app on Android, and downloads, for the fourth quarter and
for the full year of 2020, according to App Annie3.
- Shopee was also the third most downloaded app globally in the
Shopping category for the full year of 2020, according to App
Annie3.
- Shopee is building ever-stronger brand affinity with our
communities. Shopee ranked first in YouGov’s “Best APAC Buzz
Rankings 2020” and ranked eighth in YouGov’s “Best Global Brands
2020”. Shopee represents one of the only two e-commerce brands in
YouGov’s top 10 global brand rankings.
Full Year 2020 Highlights
- Group
- Total GAAP revenue was US$4.4 billion, up 101.1%
year-on-year.
- Total gross profit was US$1.3 billion, up 123.0%
year-on-year.
- Total adjusted EBITDA1 was US$107.0 million compared to
US$(178.6) million for the full year of 2019.
- Digital Entertainment
- Bookings2 were US$3.2 billion, up 80.3% year-on-year, exceeding
our recently raised full-year guidance for 2020.
- Adjusted EBITDA1 was US$2.0 billion, up 94.0%
year-on-year.
- Adjusted EBITDA represented 62.2% of bookings for the full year
of 2020, compared to 57.8% for the full year of 2019.
- GAAP revenue was US$2.0 billion, up 77.5% year-on-year.
- E-commerce
- GAAP revenue was US$2.2 billion, up 159.8% year-on-year.
- GAAP revenue included US$1.6 billion of GAAP marketplace
revenue4, up 155.2% year-on-year, and US$575.4 million of GAAP
product revenue5, up 173.1% year-on-year.
- GAAP revenue plus sales incentives net-off was US$2.5 billion,
exceeding our recently raised full-year guidance for 2020.
- Gross orders totaled 2.8 billion, an increase of 132.8%
year-on-year.
- Gross merchandise value (“GMV”) was US$35.4 billion, an
increase of 101.1% year-on-year.
- Adjusted EBITDA1 was US$(1.3) billion compared to US$(1.0)
billion for the full year of 2019. Adjusted EBITDA loss per order
decreased by 46.5% year-on-year to US$0.46, compared to US$0.86 for
the full year of 2019.
Digital Financial Services Update
In the fourth quarter, we continued to see strong growth in the
adoption of SeaMoney’s offerings. Our mobile wallet total payment
volume exceeded US$2.9 billion for the quarter and US$7.8 billion
for the full year of 2020. Moreover, quarterly paying users for our
mobile wallet services surpassed 23.2 million in the fourth quarter
with monthly paying users in Indonesia surpassing 10 million during
the quarter.
We also continued to expand our suite of online and offline
third-party use cases and partnerships. We recently expanded our
partnership with Google to offer our mobile wallet as a payment
option for the Google Play Store in Indonesia, following our
partnership with Google in Thailand from March 2020.
Other Updates
Sea has acquired 100% of Composite Capital Management
(“Composite”), a Hong Kong-licensed global investment management
firm. Composite was founded and is led by David Ma. Its team has a
demonstrated track record of successful, long-term investing, and a
deep understanding of industry trends and relevant sectors
globally.
Concurrent with this acquisition, we are establishing Sea
Capital, a platform to manage Sea’s overall investment efforts.
David Ma will serve as the Chief Investment Officer of Sea Capital
and will report directly to Sea’s Chairman and Group Chief
Executive Officer, Forrest Li. Sea Capital will focus on partnering
with entrepreneurs using technology to better serve consumers and
small businesses. Through Sea Capital, we intend to invest into and
support the growth of our broader ecosystem to create value for our
users, business partners, and communities. In line with this
commitment, we are allocating an initial US$1 billion to be
deployed by Sea Capital over the next few years. We believe the
addition of the Composite team and the establishment of Sea Capital
will further enhance our investment and capital allocation
capabilities in support of Sea’s long-term growth strategies.
Separately, Dr. Yan Shuicheng has joined Sea as Group Chief
Scientist to build and lead Sea AI Labs. Dr. Yan is a leading
expert in the field of artificial intelligence, with a particular
focus on computer vision, machine learning and multimedia analysis.
He is an ACM Fellow and Fellow of Academy of Engineering
Singapore.
Sea AI Labs intends to attract and collaborate with top talent
in artificial intelligence with the goal of exploring and
developing long-term insights and technologies related to our
existing businesses and new opportunities beyond. Dr. Yan and Sea
AI Labs will strengthen our capabilities in innovation and
research, in line with our commitment to advancing technology to
drive the development of the digital economy across our
regions.
Guidance
For the full year of 2021, we currently expect bookings for
digital entertainment to be between US$4.3 billion and US$4.5
billion. The midpoint of the guidance represents an increase of
38.1% from 2020.
We also expect GAAP revenue for e-commerce to be between US$4.5
billion and US$4.7 billion. The midpoint of the guidance represents
an increase of 112.3% from 2020.
1 For definitions of total adjusted EBITDA and adjusted EBITDA
for digital entertainment and e-commerce segments, please refer to
the “Non-GAAP Financial Measures” section. 2 GAAP revenue for the
digital entertainment segment plus change in digital entertainment
deferred revenue. This operating metric is used as an approximation
of cash spent by our users in the applicable period that is
attributable to our digital entertainment segment. 3 Rankings data
for App Annie is based on combined data from the Google Play and
iOS App Stores, unless otherwise stated. Southeast Asia rankings
are based on Indonesia, Malaysia, Philippines, Singapore, Thailand,
and Vietnam. Latin America rankings are based on Argentina, Brazil,
Chile, Colombia, Mexico, and Uruguay. 4 GAAP marketplace revenue
mainly consists of transaction-based fees and advertising income
and revenue generated from other value-added services. 5 GAAP
product revenue mainly consists of revenue generated from direct
sales.
Unaudited Summary of Financial Results
(Amounts are expressed in thousands of US dollars “$” except for
per share data)
For the Three Months
ended December 31,
For the Full Year
ended December 31,
2019
2020
2019
2020
$
$
YOY%
$
$
YOY%
Revenue
Service revenue
Digital Entertainment
404,082
693,362
71.6%
1,136,017
2,015,972
77.5%
E-commerce and other services
296,515
656,566
121.4%
822,659
1,777,330
116.0%
Sales of goods
76,627
216,622
182.7%
216,702
582,362
168.7%
777,224
1,566,550
101.6%
2,175,378
4,375,664
101.1%
Cost of revenue
Cost of service
Digital Entertainment
(139,117)
(208,360)
49.8%
(435,905)
(702,329)
61.1%
E-commerce and other services
(294,685)
(611,637)
107.6%
(907,518)
(1,743,773)
92.1%
Cost of goods sold
(78,570)
(212,841)
170.9%
(227,035)
(580,657)
155.8%
(512,372)
(1,032,838)
101.6%
(1,570,458)
(3,026,759)
92.7%
Gross profit
264,852
533,712
101.5%
604,920
1,348,905
123.0%
Other operating income
6,015
72,697
1,108.6%
15,890
189,645
1,093.5%
Sales and marketing expenses
(341,740)
(665,222)
94.7%
(969,543)
(1,830,875)
88.8%
General and administrative expenses
(109,705)
(189,005)
72.3%
(385,865)
(657,215)
70.3%
Research and development expenses
(49,467)
(109,507)
121.4%
(156,634)
(353,785)
125.9%
Total operating expenses
(494,897)
(891,037)
80.0%
(1,496,152)
(2,652,230)
77.3%
Operating loss
(230,045)
(357,325)
55.3%
(891,232)
(1,303,325)
46.2%
Non-operating loss, net
(15,183)
(124,459)
719.7%
(477,387)(1)
(179,913)
(62.3)%
Income tax expense
(36,011)
(44,166)
22.6%
(85,864)
(141,640)
65.0%
Share of results of equity investees
(681)
1,381
(302.8)%
(3,239)
721
(122.3)%
Net loss
(281,920)
(524,569)
86.1%
(1,457,722)
(1,624,157)
11.4%
Net loss excluding share-based
compensation and changes in fair value of the 2017 convertible
notes (2)
(240,210)
(430,722)
79.3%
(867,776)
(1,333,824)
53.7%
Basic and diluted loss per share based on
net loss excluding share-based compensation and changes in fair
value of the 2017 convertible notes attributable to Sea Limited’s
ordinary shareholders (2)
(0.53)
(0.87)
64.2%
(2.00)
(2.78)
39.0%
Change in deferred revenue of
Digital
Entertainment
75,794
319,720
321.8%
631,355
1,170,399
85.4%
E-commerce sales incentives
net-off
55,679
119,344
114.3%
107,828
301,254
179.4%
Adjusted EBITDA for Digital
Entertainment (2)
266,407
663,539
149.1%
1,021,941
1,982,734
94.0%
Adjusted EBITDA for E-commerce (2)
(306,150)
(427,474)
39.6%
(1,043,366)
(1,306,908)
25.3%
Adjusted EBITDA for Digital
Financial Services (2)
(49,761)
(171,263)
244.2%
(113,445)
(511,092)
350.5%
Adjusted EBITDA for Other Services (2)
(8,022)
(12,668)
57.9%
(27,996)
(39,551)
41.3%
Unallocated expenses (3)
(7,353)
(3,407)
(53.7)%
(15,743)
(18,198)
15.6%
Total adjusted EBITDA (2)
(104,879)
48,727
(146.5)%
(178,609)
106,985
(159.9)%
(1) This was primarily due to fair value loss of $472.9 million
on the 2017 convertible notes 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.” (3) Unallocated expenses are mainly
related to share-based compensation and general and corporate
administrative costs such as professional fees and other
miscellaneous items that are not allocated to segments. These
expenses are excluded from segment results as they are not reviewed
by the Chief Operating Decision Maker (“CODM”) as part of segment
performance.
Three Months Ended December 31, 2020 Compared to Three Months
Ended December 31, 2019
Revenue
Our total GAAP revenue increased by 101.6% to US$1.6 billion in
the fourth quarter of 2020 from US$777.2 million in the fourth
quarter of 2019. The increase was mainly driven by the growth in
each of the segments detailed as follows:
- Digital Entertainment: GAAP revenue increased by 71.6% to
US$693.4 million in the fourth quarter of 2020 from US$404.1
million in the fourth quarter of 2019. This increase was primarily
due to the increase in our active user base as well as the deepened
paying user penetration, and in particular, the continued success
of our self-developed game Free Fire.
- E-commerce and other services: GAAP revenue increased by 121.4%
to US$656.6 million in the fourth quarter of 2020 from US$296.5
million in the fourth quarter of 2019. This increase was primarily
driven by the growth of our e-commerce marketplace, and positive
developments in each of our marketplace revenue streams –
transaction-based fees, value-added services, and advertising. It
is a result of our commitment to continuously enhance our service
offerings as we seek to create greater value for our platform
users.
- Sales of goods: GAAP revenue increased by 182.7% to US$216.6
million in the fourth quarter of 2020 from US$76.6 million in the
fourth quarter of 2019, primarily due to the increase in our
product offerings.
Cost of Revenue
Our total cost of revenue increased by 101.6% to US$1.0 billion
in the fourth quarter of 2020 from US$512.4 million in the fourth
quarter of 2019.
- Digital Entertainment: Cost of revenue increased by 49.8% to
US$208.4 million in the fourth quarter of 2020 from US$139.1
million in the fourth quarter of 2019. The increase was largely in
line with revenue growth in our digital entertainment business.
Improvement in gross profit margins was largely due to higher
revenue contribution from our self-developed game.
- E-commerce and other services: Cost of revenue for our
e-commerce and other services segment combined increased by 107.6%
to US$611.6 million in the fourth quarter of 2020 from US$294.7
million in the fourth quarter of 2019. The increase was primarily
due to higher expenses associated with our logistics and other
value-added services that we provide to our users, and other costs
incurred in line with the growth of our e-commerce marketplace.
Improvement in gross profit margins was mainly due to take-rate
growth as we continue to roll out tools to better serve our users’
needs.
- Cost of goods sold: Cost of goods sold increased by 170.9% to
US$212.8 million in the fourth quarter of 2020 from US$78.6 million
in the fourth quarter of 2019. The increase was largely in line
with the increase in our product offerings.
Other Operating Income
Our other operating income increased by 1,108.6% to US$72.7
million in the fourth quarter of 2020 from US$6.0 million in the
fourth quarter of 2019. The increase in our other operating income
was mainly due to the rebates from e-commerce related logistic
services provided by third parties.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 94.7% to
US$665.2 million in the fourth quarter of 2020 from US$341.7
million in the fourth quarter of 2019. The table below sets forth
the breakdown of the sales and marketing expenses of our major
reporting segments. Amounts are expressed in thousands of US
dollars (“$”).
For the Three Months
ended December 31,
2019
2020
YOY%
Sales and Marketing Expenses
$
$
Digital Entertainment
44,547
61,191
37.4%
E-commerce
254,710
438,475
72.1%
Digital Financial Services
38,830
152,359
292.4%
- Digital Entertainment: Sales and marketing expenses increased
by 37.4% to US$61.2 million in the fourth quarter of 2020 from
US$44.5 million in the fourth quarter of 2019. The increase was
primarily due to higher online marketing costs as we continue to
deepen the engagement with our gaming community.
- E-commerce: Sales and marketing expenses increased by 72.1% to
US$438.5 million in the fourth quarter of 2020 from US$254.7
million in the fourth quarter of 2019. The increase in marketing
expenses was primarily attributable to the ramping up of marketing
incentives and brand marketing efforts, as we continue our
investments to fully capture the opportunities in our markets.
- Digital Financial Services: Sales and marketing expenses
increased by 292.4% to US$152.4 million in the fourth quarter of
2020 from US$38.8 million in the fourth quarter of 2019. The
increase in marketing expenses was mainly due to our efforts to
drive adoption of our mobile wallet services.
General and Administrative Expenses
Our general and administrative expenses increased by 72.3% to
US$189.0 million in the fourth quarter of 2020 from US$109.7
million in the fourth quarter of 2019. This increase was primarily
due to higher staff compensation and benefit costs as well as
increase in office facilities and related expenses.
Research and Development Expenses
Our research and development expenses increased by 121.4% to
US$109.5 million in the fourth quarter of 2020 from US$49.5 million
in the fourth quarter of 2019, primarily due to the increase in
research and development staff force.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income,
interest expense, investment gain (loss), fair value change for the
2017 convertible notes and foreign exchange gain (loss). We
recorded a net non-operating loss of US$124.5 million in the fourth
quarter of 2020, compared to a net non-operating loss of US$15.2
million in the fourth quarter of 2019. Our non-operating loss in
the fourth quarter of 2020 was primarily due to investment loss
arising mainly from the impairment of a private investment made in
the prior years, and interest expense on convertible notes.
Income Tax Expense
We had a net income tax expense of US$44.2 million and US$36.0
million in the fourth quarter of 2020 and 2019, respectively. The
income tax expense in the fourth quarter of 2020 was primarily due
to corporate income tax and withholding tax expenses incurred by
our digital entertainment segment.
Net Loss
As a result of the foregoing, we had net losses of US$524.6
million and US$281.9 million in the fourth quarter of 2020 and
2019, 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$430.7 million and
US$240.2 million in the fourth quarter of 2020 and 2019,
respectively.
Basic and Diluted Loss Per Share Based on Net Loss Excluding
Share-based Compensation and Changes in Fair Value of the 2017
Convertible Notes Attributable to Sea Limited’s Ordinary
Shareholders
Basic and diluted loss per share based on net loss excluding
share-based compensation and changes in fair value of the 2017
convertible notes, was US$0.87 and US$0.53 in the fourth quarter of
2020 and 2019, respectively.
Full Year Ended December 31, 2020 Compared to Full Year Ended
December 31, 2019
Revenue
Our total GAAP revenue increased by 101.1% to US$4.4 billion for
the full year ended December 31, 2020 from US$2.2 billion for the
full year ended December 31, 2019. The increase was mainly driven
by the growth in each of the segments detailed as follows:
- Digital Entertainment: GAAP revenue increased by 77.5% to
US$2.0 billion for the full year ended December 31, 2020 from
US$1.1 billion for the full year ended December 31, 2019. This
increase was primarily due to the increase in our active user base
as well as the deepened paying user penetration, and in particular,
the continued success of our self-developed game Free Fire.
- E-commerce and other services: GAAP revenue increased by 116.0%
to US$1.8 billion for the full year ended December 31, 2020 from
US$822.7 million for the full year ended December 31, 2019. This
increase was primarily driven by the growth of our e-commerce
marketplace, and positive developments in each of our marketplace
revenue streams – transaction-based fees, value-added services, and
advertising. It is a result of our commitment to continuously
enhance our service offerings as we seek to create greater value
for our platform users.
- Sales of goods: GAAP revenue increased by 168.7% to US$582.4
million for the full year ended December 31, 2020 from US$216.7
million for the full year ended December 31, 2019, primarily due to
the increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 92.7% to US$3.0 billion
for the full year ended December 31, 2020 from US$1.6 billion for
the full year ended December 31, 2019.
- Digital Entertainment: Cost of revenue increased by 61.1% to
US$702.3 million for the full year ended December 31, 2020 from
US$435.9 million for the full year ended December 31, 2019. The
increase was largely in line with revenue growth in our digital
entertainment business. Improvement in gross profit margins was
largely due to higher revenue contribution from our self-developed
game.
- E-commerce and other services: Cost of revenue for our
e-commerce and other services segment combined increased by 92.1%
to US$1.7 billion for the full year ended December 31, 2020 from
US$907.5 million for the full year ended December 31, 2019. The
increase was primarily due to higher expenses associated with our
logistics and other value-added services that we provide to our
users, and other costs incurred in line with the growth of our
e-commerce marketplace. Improvement in gross profit margins was
mainly due to take-rate growth as we continue to roll out tools to
better serve our users’ needs.
- Cost of goods sold: Cost of goods sold increased by 155.8% to
US$580.7 million for the full year ended December 31, 2020 from
US$227.0 million for the full year ended December 31, 2019. The
increase was largely in line with the increase in our product
offerings.
Other Operating Income
Our other operating income increased by 1,093.5% to US$189.6
million for the full year ended December 31, 2020 from US$15.9
million for the full year ended December 31, 2019. The increase in
our other operating income was mainly due to the rebates from
e-commerce related logistic services provided by third parties.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 88.8% to
US$1.8 billion for the full year ended December 31, 2020 from
US$969.5 million for the full year ended December 31, 2019. The
table below sets forth the breakdown of the sales and marketing
expenses of our major reporting segments. Amounts are expressed in
thousands of US dollars (“$”).
For the Full Year
ended December 31,
2019
2020
YOY%
Sales and Marketing Expenses
$
$
Digital Entertainment
108,505
165,319
52.4%
E-commerce
765,481
1,219,607
59.3%
Digital Financial Services
78,342
415,418
430.3%
- Digital Entertainment: Sales and marketing expenses increased
by 52.4% to US$165.3 million for the full year ended December 31,
2020 from US$108.5 million for the full year ended December 31,
2019. The increase was primarily due to higher online marketing
costs as we continue to deepen the engagement with our gaming
community.
- E-commerce: Sales and marketing expenses increased by 59.3% to
US$1.2 billion for the full year ended December 31, 2020 from
US$765.5 million for the full year ended December 31, 2019. The
increase in marketing expenses was primarily attributable to the
ramping up of marketing incentives and brand marketing efforts, as
we continue our investments to fully capture the opportunities in
our markets.
- Digital Financial Services: Sales and marketing expenses
increased by 430.3% to US$415.4 million for the full year ended
December 31, 2020 from US$78.3 million for the full year ended
December 31, 2019. The increase in marketing expenses was mainly
due to our efforts to drive adoption of our mobile wallet
services.
General and Administrative Expenses
Our general and administrative expenses increased by 70.3% to
US$657.2 million for the full year ended December 31, 2020 from
US$385.9 million for the full year ended December 31, 2019. This
increase was primarily due to higher staff compensation and benefit
costs as well as provision for credit losses for our digital
financial services business.
Research and Development Expenses
Our research and development expenses increased by 125.9% to
US$353.8 million for the full year ended December 31, 2020 from
US$156.6 million for the full year ended December 31, 2019,
primarily due to the increase in research and development staff
force.
Non-operating Income or Losses, Net
Non-operating income or losses consist of interest income,
interest expense, investment gain (loss), fair value change for the
2017 convertible notes and foreign exchange gain (loss). We
recorded a net non-operating loss of US$179.9 million for the full
year ended December 31, 2020, compared to a net non-operating loss
of US$477.4 million for the full year ended December 31, 2019. Our
non-operating loss for the full year ended December 31, 2020 was
primarily due to interest expense on convertible notes. Our
non-operating loss for the full year ended December 31, 2019 was
primarily due to a fair value loss of US$472.9 million arising from
the fair value accounting treatment for the 2017 convertible
notes.
Income Tax Expense
We had a net income tax expense of US$141.6 million and US$85.9
million for the full year ended December 31, 2020 and 2019,
respectively. The income tax expense for the full year ended
December 31, 2020 was primarily due to corporate income tax and
withholding tax expenses incurred by our digital entertainment
segment.
Net Loss
As a result of the foregoing, we had net losses of US$1.6
billion and US$1.5 billion for the full year ended December 31,
2020 and 2019, 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$1.3 billion and
US$867.8 million for the full year ended December 31, 2020 and
2019, respectively.
Basic and Diluted Loss Per Share Based on Net Loss Excluding
Share-based Compensation and Changes in Fair Value of the 2017
Convertible Notes Attributable to Sea Limited’s Ordinary
Shareholders
Basic and diluted loss per share based on net loss excluding
share-based compensation and changes in fair value of the 2017
convertible notes, was US$2.78 and US$2.00 for the full year ended
December 31, 2020 and 2019, 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 March 2,
2021
8:30 PM Singapore / Hong Kong Time on
March 2, 2021
Webcast link:
https://services.choruscall.com/links/se210302.html
Dial in numbers:
US Toll Free: 1-888-317-6003
International: 1-412-317-6061
Hong Kong: 800-963-976
Singapore: 800-120-5863
United Kingdom: 08-082-389-063
Passcode for Participants: 8293261
A replay of the conference call will be available at the
Company’s 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. Our mission is to better the
lives of consumers and small businesses with technology. We operate
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
“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 markets where it operates, 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; general economic and
business conditions in its markets; and the impact of widespread
health developments, including the recent global coronavirus
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)
which could materially and adversely affect, among other things,
the business and manufacturing activities of its sellers, merchants
and logistics providers, the global supply chain including those of
its sellers’ and merchants’, and consumer discretionary spending.
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:
- “Net loss excluding share-based compensation and changes in
fair value of the 2017 convertible notes” represents net loss
before share-based compensation and changes in fair value of
convertible notes. This financial measure helps to identify
underlying trends in our business that could otherwise be distorted
by the effect of certain expenses that are included in net loss.
The use of this measure has its limitations in that it does not
include all items that impact the net loss or income for the
period, and share-based compensation and changes in fair value of
convertible notes are significant expenses.
- “Net loss excluding share-based compensation and changes in
fair value of the 2017 convertible notes attributable to Sea
Limited’s ordinary shareholders” represents net loss attributable
to Sea Limited’s ordinary shareholders before share-based
compensation and changes in fair value of convertible notes. This
financial measure helps to identify underlying trends in our
business that could otherwise be distorted by the effect of certain
expenses that are included in net loss. The use of this measure has
its limitations in that it does not include all items that impact
the net loss or income for the period, and share-based compensation
and changes in fair value of convertible notes are significant
expenses.
- “Basic and diluted loss per share based on net loss excluding
share-based compensation and changes in fair value of the 2017
convertible notes attributable to Sea Limited’s ordinary
shareholders” represents net loss excluding share-based
compensation and changes in fair value of the 2017 convertible
notes attributable to Sea Limited’s ordinary shareholders divided
by the weighted average number of shares outstanding during the
period.
- “Adjusted EBITDA” for our digital entertainment segment
represents operating income (loss) before share-based compensation
plus (a) depreciation and amortization expenses, and (b) the net
effect of changes in deferred revenue and its related cost for our
digital entertainment segment. We believe that the segment adjusted
EBITDA helps to identify underlying trends in our operating
results, enhancing their understanding of the past performance and
future prospects.
- “Adjusted EBITDA” for our e-commerce segment, digital financial
services segment and other services segment represents operating
income (loss) before share-based compensation plus depreciation and
amortization expenses. We believe that the segment adjusted EBITDA
helps to identify underlying trends in our operating results,
enhancing their understanding of the past performance and future
prospects.
- “Total adjusted EBITDA” represents the sum of adjusted EBITDA
of all our segments combined, plus unallocated expenses. We believe
that the total adjusted EBITDA helps to identify underlying trends
in our operating results, enhancing their understanding of the past
performance and future prospects.
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 (“$”) except for number of
shares & per share data.
For the Three Months ended
December 31, 2020
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
397,115
(467,955)
(174,896)
(14,335)
(97,254)
(357,325)
Net effect of changes in deferred
revenue and its related cost
259,107
-
-
-
-
259,107
Depreciation and Amortization
7,317
40,481
3,633
1,667
-
53,098
Share-based compensation
-
-
-
-
93,847
93,847
Adjusted EBITDA
663,539
(427,474)
(171,263)
(12,668)
(3,407)
48,727
For the Three Months ended
December 31, 2019
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
205,559
(331,431)
(50,731)
(11,154)
(42,288)
(230,045)
Net effect of changes in deferred
revenue and its related cost
55,902
-
-
-
-
55,902
Depreciation and Amortization
4,946
25,281
970
3,132
-
34,329
Share-based compensation
-
-
-
-
34,935
34,935
Adjusted EBITDA
266,407
(306,150)
(49,761)
(8,022)
(7,353)
(104,879)
(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. These
expenses are excluded from segment results as they are not reviewed
by the CODM as part of segment performance.
For the Full Year ended
December 31, 2020
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
1,016,793
(1,442,593)
(520,075)
(49,006)
(308,444)
(1,303,325)
Net effect of changes in deferred
revenue and its related cost
939,816
-
-
-
-
939,816
Depreciation and Amortization
26,125
135,685
8,983
9,455
-
180,248
Share-based compensation
-
-
-
-
290,246
290,246
Adjusted EBITDA(3)
1,982,734
(1,306,908)
(511,092)
(39,551)
(18,198)
106,985
For the Full Year ended
December 31, 2019
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
529,524
(1,131,771)
(116,309)
(39,864)
(132,812)
(891,232)
Net effect of changes in deferred
revenue and its related cost
474,340
-
-
-
-
474,340
Depreciation and Amortization
18,077
88,405
2,864
11,868
-
121,214
Share-based compensation
-
-
-
-
117,069
117,069
Adjusted EBITDA
1,021,941
(1,043,366)
(113,445)
(27,996)
(15,743)
(178,609)
(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. These
expenses are excluded from segment results as they are not reviewed
by the CODM as part of segment performance. (3) For the full year
of 2020, intersegment sales incentives are not included in the
adjusted EBITDA calculation for e-commerce, digital financial
services and other services segments.
For the Three Months
ended December 31,
For the Year
ended December 31,
2019
2020
2019
2020
$
$
$
$
Net loss
(281,920)
(524,569)
(1,457,722)
(1,624,157)
Share-based compensation
34,935
93,847
117,069
290,246
Changes in fair value of the 2017
convertible notes
6,775
–
472,877 (1)
87
Net loss excluding share-based
compensation and changes in fair value
of the 2017 convertible notes
(240,210)
(430,722)
(867,776)
(1,333,824)
Net (profit) loss attributable to
non-controlling interests
(1,869)
977
(5,077)
6,101
Net loss excluding share-based
compensation and changes in fair value
of the 2017 convertible notes attributable to Sea Limited’s
ordinary shareholders
(242,079)
(429,745)
(872,853)
(1,327,723)
Weighted average shares used in loss per
share computation:
Basic and diluted
460,325,659
494,805,090
436,601,801
477,264,888
Basic and diluted loss per share based on
net
loss excluding share-based compensation
and changes in fair value of the 2017 convertible notes
attributable to Sea Limited’s ordinary shareholders
(0.53)
(0.87)
(2.00)
(2.78)
(1) Fair value loss of $472.9 million on the 2017 convertible
notes was recorded as our share prices significantly exceeded the
conversion prices of the 2017 convertible notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS Amounts expressed in thousands of US dollars
(“$”) except for number of shares & per share data
For the Three Months
ended December 31,
For the Year
ended December 31,
2019
2020
2019
2020
$
$
$
$
Revenue
Service revenue
Digital Entertainment
404,082
693,362
1,136,017
2,015,972
E-commerce and other services
296,515
656,566
822,659
1,777,330
Sales of goods
76,627
216,622
216,702
582,362
Total revenue
777,224
1,566,550
2,175,378
4,375,664
Cost of revenue
Cost of service
Digital Entertainment
(139,117)
(208,360)
(435,905)
(702,329)
E-commerce and other services
(294,685)
(611,637)
(907,518)
(1,743,773)
Cost of goods sold
(78,570)
(212,841)
(227,035)
(580,657)
Total cost of revenue
(512,372)
(1,032,838)
(1,570,458)
(3,026,759)
Gross profit
264,852
533,712
604,920
1,348,905
Operating income (expenses):
Other operating income
6,015
72,697
15,890
189,645
Sales and marketing expenses
(341,740)
(665,222)
(969,543)
(1,830,875)
General and administrative expenses
(109,705)
(189,005)
(385,865)
(657,215)
Research and development expenses
(49,467)
(109,507)
(156,634)
(353,785)
Total operating expenses
(494,897)
(891,037)
(1,496,152)
(2,652,230)
Operating loss
(230,045)
(357,325)
(891,232)
(1,303,325)
Interest income
9,396
4,275
33,935
24,804
Interest expense
(17,167)
(34,889)
(48,208)
(148,243)
Investment gain (loss), net
6,977
(63,073)
11,794
(17,820)
Changes in fair value of convertible
notes
(6,775)
-
(472,877)(1)
(87)
Foreign exchange loss
(7,614)
(30,772)
(2,031)
(38,567)
Loss before income tax and share of
results of equity investees
(245,228)
(481,784)
(1,368,619)
(1,483,238)
Income tax expense
(36,011)
(44,166)
(85,864)
(141,640)
Share of results of equity investees
(681)
1,381
(3,239)
721
Net loss
(281,920)
(524,569)
(1,457,722)
(1,624,157)
Net (profit) loss attributable to
non-controlling interests
(1,869)
977
(5,077)
6,101
Net loss attributable to Sea Limited’s
ordinary shareholders
(283,789)
(523,592)
(1,462,799)
(1,618,056)
Loss per share:
Basic and diluted
(0.62)
(1.06)
(3.35)
(3.39)
Weighted average shares used in loss per
share computation:
Basic and diluted
460,325,659
494,805,090
436,601,801
477,264,888
(1) Fair value loss of $472.9 million on the 2017 convertible
notes was recorded as our share prices significantly exceeded the
conversion prices of the 2017 convertible notes.
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
As of
December 31,
2019
2020
$
$
ASSETS
Current assets
Cash and cash equivalents
3,118,988
6,166,880
Restricted cash
434,938
859,192
Accounts receivable, net of allowance for
credit losses of $4,083 and $7,978, as of December 31, 2019 and
December 31, 2020 respectively
187,035
362,999
Prepaid expenses and other assets
535,187
1,054,229
Loans receivable, net of allowance for
credit losses of nil and $20,872, as of December 31, 2019 and
December 31, 2020 respectively
-
285,937
Inventories, net
26,932
64,219
Short-term investments
102,324
126,099
Amounts due from related parties
4,735
19,449
Total current assets
4,410,139
8,939,004
Non-current assets
Property and equipment, net
318,620
386,401
Operating lease right-of-use assets,
net
182,965
234,555
Intangible assets, net
15,020
39,773
Long-term investments
113,797
190,482
Prepaid expenses and other assets
65,684
204,804
Loans receivable, net of allowance for
credit losses of nil and $19,612, as of December 31, 2019 and
December 31, 2020 respectively
-
117,149
Restricted cash
16,652
27,321
Deferred tax assets
70,340
99,904
Goodwill
30,952
216,278
Total non-current assets
814,030
1,516,667
Total assets
5,224,169
10,455,671
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
As of
December 31,
2019
2020
$
$
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities
Accounts payable
69,370
121,637
Accrued expenses and other payables
980,805
2,033,461
Advances from customers
65,062
161,379
Amounts due to related parties
34,990
42,613
Short-term borrowings
1,258
-
Operating lease liabilities
56,320
74,506
Deferred revenue
1,097,868
2,150,165
Convertible notes
29,481
-
Income tax payable
27,212
52,306
Total current liabilities
2,362,366
4,636,067
Non-current liabilities
Accrued expenses and other payables
25,802
36,159
Long-term borrowings
358
-
Operating lease liabilities
144,000
177,870
Deferred revenue
160,708
343,297
Convertible notes
1,356,332
1,840,406
Deferred tax liabilities
975
1,526
Unrecognized tax benefits
976
107
Total non-current liabilities
1,689,151
2,399,365
Total liabilities
4,051,517
7,035,432
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US dollars (“$”)
As of
December 31,
As of
December 31,
2019
2020
$
$
Shareholders’ equity
Class A Ordinary shares
154
179
Class B Ordinary shares
76
76
Additional paid-in capital
4,687,284
8,526,571
Accumulated other comprehensive income
5,449
4,681
Statutory reserves
46
2,363
Accumulated deficit
(3,530,585)
(5,150,958)
Total Sea Limited shareholders’
equity
1,162,424
3,382,912
Non-controlling interests
10,228
37,327
Total shareholders’ equity
1,172,652
3,420,239
Total liabilities and shareholders’
equity
5,224,169
10,455,671
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS Amounts expressed in thousands of US dollars
(“$”)
For the Three months
ended
December 31,
For the Year ended
December 31,
2019
2020
2019
2020
$
$
$
$
Net cash (used in) generated from
operating activities
(27,798)
185,444
69,865
555,868
Net cash used in investing activities
(143,681)
(366,936)
(363,219)
(886,912)
Net cash generated from financing
activities
1,045,045
2,949,101
2,579,595
3,733,132
Effect of foreign exchange rate changes on
cash, cash equivalents and restricted cash
23,177
59,032
25,025
80,727
Net increase in cash, cash equivalents and
restricted cash
896,743
2,826,641
2,311,266
3,482,815
Cash, cash equivalents and restricted cash
at beginning of the period/year
2,673,835
4,226,752
1,259,312
3,570,578
Cash, cash equivalents and restricted cash
at end of the period/year
3,570,578
7,053,393
3,570,578
7,053,393
UNAUDITED SEGMENT INFORMATION
The Company has three reportable segments, namely digital
entertainment, e-commerce and digital financial services. The Chief
Operating 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, 2020
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
693,362
842,215
24,353
6,620
-
1,566,550
Operating income (loss)
397,115
(467,955)
(174,896)
(14,335)
(97,254)
(357,325)
Non-operating loss, net
(124,459)
Income tax expense
(44,166)
Share of results of equity investees
1,381
Net loss
(524,569)
For the Three Months ended
December 31, 2019
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
404,082
302,590
3,206
67,346
-
777,224
Operating income (loss)
205,559
(331,431)
(50,731)
(11,154)
(42,288)
(230,045)
Non-operating loss, net
(15,183)
Income tax expense
(36,011)
Share of results of equity investees
(681)
Net loss
(281,920)
(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. These
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, 2020
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
2,015,972
2,167,149
60,785
131,758
-
4,375,664
Operating income (loss)
1,016,793
(1,442,593)
(520,075)
(49,006)
(308,444)
(1,303,325)
Non-operating loss, net
(179,913)
Income tax expense
(141,640)
Share of results of equity investees
721
Net loss
(1,624,157)
For the Year ended December
31, 2019
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
1,136,017
834,295
9,223
195,843
-
2,175,378
Operating income (loss)
529,524
(1,131,771)
(116,309)
(39,864)
(132,812)
(891,232)
Non-operating loss, net
(477,387)
Income tax expense
(85,864)
Share of results of equity investees
(3,239)
Net loss
(1,457,722)
(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. These
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/20210302005582/en/
For enquiries: Investors / analysts: ir@sea.com Media:
Martin Reidy, media@sea.com
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