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, Sea’s 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
- Group
- Total GAAP revenue was US$3.5 billion, up 7.1%
year-on-year.
- Total gross profit was US$1.7 billion, up 29.5%
year-on-year.
- Total net income turned positive to US$422.8 million, as
compared to US$(616.3) million for the fourth quarter of 2021.
Total net income was:
- negatively impacted by US$177.7 million impairment of goodwill
related to certain historical investments for the digital
entertainment business, and
- positively impacted by US$199.7 million net gain on debt
extinguishment as discussed below, and approximately US$130 million
in reversal of previous accruals for certain expenses (“accruals
reversal”). As we made the management decision to strongly pivot to
a clear focus on cost efficiency, there were accruals reversed
during the quarter resulting from changes in previous estimations
of certain expenses.
- Total adjusted EBITDA1 turned positive to US$495.7 million, as
compared to US$(492.1) million for the fourth quarter of 2021.
Total adjusted EBITDA was also positively impacted by approximately
US$130 million of accruals reversal as mentioned above.
- As of December 31, 2022, cash, cash equivalents and short-term
investments were US$6.9 billion, representing a net change of
US$(401.6) million from September 30, 2022. Excluding cash
consideration used to repurchase our outstanding convertible bonds
with a gain as discussed below, cash, cash equivalents and
short-term investments would have increased by US$209.8 million
from September 30, 2022.
- In the fourth quarter, the Company repurchased US$817.2 million
aggregate principal amount of the 0.25% convertible senior notes
due 2026 (the “2026 CB”), for a cash consideration of US$611.3
million. This resulted in a US$199.7 million gain on debt
extinguishment, inclusive of an accelerated deferred issuance cost
of US$6.2 million, and US$7.7 million savings in future interest
payments. As of the date hereof, approximately US$2.1 billion
aggregate principal amount of the 2026 CB remained
outstanding.
- E-commerce
- GAAP revenue was US$2.1 billion, up 31.8% year-on-year. Based
on constant currency assumptions2, GAAP revenue was up 42.3%
year-on-year.
- GAAP revenue included US$1.8 billion of GAAP marketplace
revenue, which consists of core marketplace revenue and value-added
services revenue and increased by 43.5% year-on-year.
- Core marketplace revenue, mainly consisting of
transaction-based fees and advertising revenues, was up 53.9%
year-on-year to US$1.1 billion.
- Value-added services revenue, mainly consisting of revenues
related to logistics services, was up 29.2% year-on-year to US$0.7
billion.
- Adjusted EBITDA1 turned positive to US$196.1 million, as
compared to US$(877.7) million for the fourth quarter of 2021.
Adjusted EBITDA was positively impacted by approximately US$80
million of accruals reversal as described earlier.
- Asia markets recorded adjusted EBITDA of US$320.0 million, as
compared to US$(525.8) million for the fourth quarter of 2021.
- Other markets recorded adjusted EBITDA of US$(123.9) million,
as compared to US$(352.0) million for the fourth quarter of 2021.
In Brazil, unit economics continued to improve significantly, with
contribution margin loss per order improving 53.9%
quarter-on-quarter to reach US$0.47.
- Gross orders were 1.7 billion, as compared to 2.0 billion for
the fourth quarter of 2021. Gross merchandise value (“GMV”) was
US$18.0 billion, as compared to US$18.2 billion for the fourth
quarter of 2021. Based on constant currency assumptions2, GMV was
up 7.7% year-on-year. Beginning 2023, we will transition from
quarterly to annual disclosure of such operating metrics.
- Digital Entertainment
- GAAP revenue was US$948.9 million, as compared to US$892.9
million for the previous quarter.
- Bookings3 were US$543.6 million, as compared to US$664.7
million for the previous quarter.
- Adjusted EBITDA1 was US$258.2 million, as compared to US$289.9
million for the previous quarter.
- Adjusted EBITDA represented 47.5% of bookings for the fourth
quarter of 2022, as compared to 43.6% for the previous
quarter.
- Quarterly active users were 485.5 million, as compared to 568.2
million for the previous quarter.
- Quarterly paying users were 43.6 million, representing a paying
user ratio of 9.0%, as compared to 9.1% for the previous
quarter.
- Average bookings per user were US$1.1, as compared to US$1.2
for the previous quarter.
- Digital Financial Services
- GAAP revenue was US$380.2 million, up 92.5% year-on-year.
- Adjusted EBITDA1 turned positive to US$75.6 million, as
compared to US$(149.8) million for the fourth quarter of 2021.
- As of the end of the fourth quarter of 2022, total loans
receivable was US$2.1 billion, net of allowance for credit losses
of US$238.8 million. Non-performing loans past due by more than 90
days as a percentage of our total gross loans receivable declined
from less than 4% in the third quarter of 2022 to less than 2%.
This was mainly due to the shortening of loan write-off period in a
certain market from 180 days to 120 days in the fourth quarter
based on our assessment of historical credit losses. Without this
change in write-off period, the ratio would be about 5%.
Full Year 2022 Highlights
- Group
- Total GAAP revenue was US$12.4 billion, up 25.1%
year-on-year.
- Total gross profit was US$5.2 billion, up 33.1%
year-on-year.
- Total net loss was US$1.7 billion, improving by 18.9%
year-on-year.
- Total adjusted EBITDA1 was US$(878.1) million, as compared to
US$(593.6) million for the full year of 2021.
- E-commerce
- GAAP revenue was US$7.3 billion, up 42.3% year-on-year. Based
on constant currency assumptions2, GAAP revenue was up 49.1%
year-on-year.
- GAAP revenue included US$6.2 billion of GAAP marketplace
revenue, which consists of core marketplace revenue and value-added
services revenue and increased by 52.0% year-on-year.
- Adjusted EBITDA1 was US$(1.7) billion, improving by 33.8% as
compared to US$(2.6) billion for the full year of 2021.
- Gross orders totaled 7.6 billion, up 23.7% year-on-year.
- GMV was US$73.5 billion, up 17.6% year-on-year. Based on
constant currency assumptions2, GMV was up 24.0% year-on-year.
- Digital Entertainment
- GAAP revenue was US$3.9 billion, as compared to US$4.3 billion
for the full year of 2021.
- Bookings3 were US$2.8 billion, as compared to US$4.6 billion
for the full year of 2021.
- Adjusted EBITDA1 was US$1.3 billion, as compared to US$2.8
billion for the full year of 2021.
- Adjusted EBITDA represented 47.7% of bookings for the full year
of 2022, as compared to 60.4% for the full year of 2021.
- Digital Financial Services
- GAAP revenue was US$1.2 billion, up 160.1% year-on-year.
- Adjusted EBITDA1 was US$(228.6) million, as compared to
US$(616.9) million for the full year of 2021.
1
For a discussion of the use of non-GAAP
financial measures, see “Non-GAAP Financial Measures”.
2
Current and comparative prior period local
currency amounts are converted into United States dollars using the
same exchange rates, rather than the actual exchange rates during
the respective periods.
3
GAAP revenue for the digital entertainment
segment plus change in digital entertainment deferred revenue. This
operating metric is used as an approximation of cash spent by our
users in the applicable period that is attributable to our digital
entertainment segment.
Unaudited Summary of Financial
Results
(Amounts are expressed in thousands of US
dollars “$” except for per share data)
For the Three Months
ended December 31,
For the Full Year ended
December 31,
2021
2022
2021
2022
$
$
YOY%
$
$
YOY%
Revenue
Service revenue
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
%
3,222,114
3,451,584
7.1
%
9,955,190
12,449,705
25.1
%
Cost of revenue
Cost of service
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
)%
(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
)
-
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
)%
(Loss) Earnings per share attributable to
Sea Limited’s ordinary shareholders:
Basic
(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
)%
Change in deferred revenue of Digital
Entertainment
(333,300
)
(405,262
)
21.6
%
276,352
(1,125,294
)
(507.2
)%
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
)%
Adjusted EBITDA for Digital
Financial Services (1)
(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.
- Digital Entertainment: GAAP revenue was US$948.9 million
compared to US$1.4 billion in the fourth quarter of 2021, primarily
attributable to the ongoing moderation in user engagement and
monetization.
- E-commerce and other services: GAAP revenue increased by 50.5%
to US$2.2 billion in the fourth quarter of 2022 from US$1.5 billion
in the fourth quarter of 2021, primarily driven by the improved
monetization in our e-commerce business and the growth of our
credit business.
- Sales of goods: GAAP revenue was US$271.6 million, as compared
to US$324.4 million 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.
- Digital Entertainment: Cost of revenue decreased by 35.3% to
US$242.5 million in the fourth quarter of 2022 from US$374.8
million in the fourth quarter of 2021, which was largely in line
with the decrease in digital entertainment revenue.
- E-commerce and other services: Cost of revenue for our
e-commerce and other services segment combined was US$1.3 billion,
as compared to US$1.2 billion in the fourth quarter of 2021.
Improvement in gross profit margins was mainly due to our better
cost efficiencies.
- Cost of goods sold: Cost of goods sold decreased by 23.8% to
US$229.6 million in the fourth quarter of 2022 from US$301.3
million 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$1.2 billion
in the fourth quarter of 2021. The table below sets forth the
breakdown of the sales and marketing expenses of our major
reporting segments. Amounts are expressed in thousands of US
dollars (“$”).
For the Three Months
ended December 31,
2021
2022
YOY%
Sales and Marketing Expenses
$
$
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 Limited’s Ordinary Shareholders
Basic earnings per share attributable to Sea Limited’s ordinary
shareholders was US$0.76 in the fourth quarter of 2022, compared to
basic loss per share attributable to Sea Limited’s ordinary
shareholders of US$1.12 in the fourth quarter of 2021.
Diluted earnings per share attributable to Sea Limited’s
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.
- Digital Entertainment: GAAP revenue was US$3.9 billion for the
full year ended December 31, 2022 from US$4.3 billion for the full
year ended December 31, 2021, primarily attributable to the ongoing
moderation in user engagement and monetization.
- E-commerce and other services: GAAP revenue increased by 63.5%
to US$7.5 billion for the full year ended December 31, 2022 from
US$4.6 billion for the full year ended December 31, 2021, primarily
driven by the improved monetization in our e-commerce business and
the growth of our credit business.
- Sales of goods: GAAP revenue was US$1.1 billion for the full
year ended December 31, 2022, relatively stable year-on-year.
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.
- Digital Entertainment: Cost of revenue decreased by 12.4% to
US$1.1 billion for the full year ended December 31, 2022 from
US$1.2 billion for the full year ended December 31, 2021, which was
largely in line with the decrease in digital entertainment
revenue.
- E-commerce and other services: Cost of revenue for our
e-commerce and other services segment combined increased by 35.8%
to US$5.2 billion for the full year ended December 31, 2022 from
US$3.8 billion for the full year ended December 31, 2021, primarily
driven by higher costs of logistics from order growth and other
costs related to the growth of e-commerce marketplace. Improvement
in gross profit margins was mainly due to the growth of core
marketplace revenue with higher gross profit margin.
- Cost of goods sold: Cost of goods sold was US$1.0 billion for
the full year ended December 31, 2022.
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$3.8 billion for the full year ended December 31, 2021. The table
below sets forth the breakdown of the sales and marketing expenses
of our major reporting segments. Amounts are expressed in thousands
of US dollars (“$”).
For the Full Year ended
December 31,
2021
2022
YOY%
Sales and Marketing Expenses
$
$
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
Limited’s Ordinary Shareholders
Basic and diluted loss per share attributable to Sea Limited’s
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.
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 7, 2023
8:30 PM Singapore / Hong Kong Time on March 7, 2023
Webcast link:
https://event.choruscall.com/mediaframe/webcast.html?webcastid=xHK3DVEZ
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:
6144794
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. 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 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 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 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:
- “Adjusted EBITDA” for our digital entertainment segment
represents operating income (loss) before share-based compensation
and impairment of goodwill 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, 2022
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
400,165
109,486
61,841
(28,714
)
(199,914
)
342,864
Net effect of changes in deferred
revenue and its related cost
(331,321
)
-
-
-
-
(331,321
)
Depreciation and Amortization
11,726
86,660
13,760
3,277
-
115,423
Share-based compensation
-
-
-
-
191,027
191,027
Impairment of goodwill
177,663
-
-
-
-
177,663
Adjusted EBITDA
258,233
196,146
75,601
(25,437
)
(8,887
)
495,656
For the Three Months ended
December 31, 2021
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
858,831
(941,028
)
(157,647
)
(59,138
)
(143,093
)
(442,075
)
Net effect of changes in deferred
revenue and its related cost
(266,399
)
-
-
-
-
(266,399
)
Depreciation and Amortization
10,133
63,291
7,834
2,279
-
83,537
Share-based compensation
-
-
-
-
132,797
132,797
Adjusted EBITDA
602,565
(877,737
)
(149,813
)
(56,859
)
(10,296
)
(492,140
)
(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, impairment of
goodwill of prior acquisitions that are not under our reportable
segments, 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, 2022
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
1,971,416
(2,013,360
)
(277,264
)
(252,162
)
(916,138
)
(1,487,508
)
Net effect of changes in deferred
revenue and its related cost
(879,809
)
-
-
-
-
(879,809
)
Depreciation and Amortization
43,821
322,806
48,704
13,013
-
428,344
Share-based compensation
-
-
-
-
705,896
705,896
Impairment of goodwill
177,663
-
-
-
177,280
354,943
Adjusted EBITDA
1,313,091
(1,690,554
)
(228,560
)
(239,149
)
(32,962
)
(878,134
)
For the Full Year ended
December 31, 2021
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Operating income (loss)
2,500,081
(2,766,566
)
(640,422
)
(177,633
)
(498,520
)
(1,583,060
)
Net effect of changes in deferred
revenue and its related cost
240,109
-
-
-
-
240,109
Depreciation and Amortization
35,767
212,345
23,498
7,422
-
279,032
Share-based compensation
-
-
-
-
470,324
470,324
Adjusted EBITDA
2,775,957
(2,554,221
)
(616,924
)
(170,211
)
(28,196
)
(593,595
)
(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, impairment of
goodwill of prior acquisitions that are not under our reportable
segments, 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.
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,
2021
2022
2021
2022
$
$
$
$
Revenue
Service revenue
Digital Entertainment
1,415,044
948,857
4,320,013
3,877,163
E-commerce and other services
1,482,665
2,231,133
4,564,617
7,463,173
Sales of goods
324,405
271,594
1,070,560
1,109,369
Total revenue
3,222,114
3,451,584
9,955,190
12,449,705
Cost of revenue
Cost of service
Digital Entertainment
(374,783
)
(242,470
)
(1,230,082
)
(1,077,017
)
E-commerce and other services
(1,235,351
)
(1,282,174
)
(3,825,826
)
(5,194,065
)
Cost of goods sold
(301,252
)
(229,627
)
(1,003,547
)
(993,346
)
Total cost of revenue
(1,911,386
)
(1,754,271
)
(6,059,455
)
(7,264,428
)
Gross profit
1,310,728
1,697,313
3,895,735
5,185,277
Operating income (expenses):
Other operating income
72,294
68,453
287,946
279,184
Sales and marketing expenses
(1,219,858
)
(473,620
)
(3,829,743
)
(3,269,223
)
General and administrative expenses
(284,065
)
(352,321
)
(987,868
)
(1,437,612
)
Provision for credit losses
(34,532
)
(175,103
)
(117,427
)
(513,690
)
Research and development expenses
(286,642
)
(244,195
)
(831,703
)
(1,376,501
)
Impairment of goodwill
–
(177,663
)
–
(354,943
)
Total operating expenses
(1,752,803
)
(1,354,449
)
(5,478,795
)
(6,672,785
)
Operating (loss) income
(442,075
)
342,864
(1,583,060
)
(1,487,508
)
Interest income
10,924
54,336
36,082
115,515
Interest expense
(47,555
)
(10,809
)
(136,876
)
(45,396
)
Investment loss, net
(18,917
)
(123,004
)
(43,502
)
(207,331
)
Net (loss) gain on debt extinguishment
(4,737
)
199,697
(2,069
)
199,697
Foreign exchange (loss) gain
(10,710
)
(85,247
)
14,241
(75,510
)
(Loss) Income before income tax and
share of results of equity investees
(513,070
)
377,837
(1,715,184
)
(1,500,533
)
Income tax (expense) credit
(105,609
)
43,461
(332,865
)
(168,395
)
Share of results of equity investees
2,390
1,540
5,019
11,156
Net (loss) income
(616,289
)
422,838
(2,043,030
)
(1,657,772
)
Net (income) loss attributable to
non-controlling interests
(1,319
)
3,960
(3,729
)
6,351
Net (loss) income attributable to Sea
Limited’s ordinary shareholders
(617,608
)
426,798
(2,046,759
)
(1,651,421
)
(Loss) Earnings per share:
Basic
(1.12
)
0.76
(3.84
)
(2.96
)
Diluted
(1.12
)
0.72
(3.84
)
(2.96
)
Weighted-average shares used in (loss)
earnings per share computation:
Basic
553,635,479
560,326,301
532,705,796
558,119,948
Diluted
553,635,479
611,938,691
532,705,796
558,119,948
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of December 31,
2021
2022
$
$
ASSETS
Current assets
Cash and cash equivalents
9,247,762
6,029,859
Restricted cash
1,551,635
1,549,574
Accounts receivable, net of allowance for
credit losses of $5,772 and $12,818, as of
December 31, 2021 and 2022 respectively
388,308
268,814
Prepaid expenses and other assets
1,401,863
1,798,651
Loans receivable, net of allowance for
credit losses of $91,504 and $236,797, as of
December 31, 2021 and 2022 respectively
1,500,954
2,053,767
Inventories, net
117,499
109,668
Short-term investments
911,281
864,258
Amounts due from related parties
16,095
13,421
Total current assets
15,135,397
12,688,012
Non-current assets
Property and equipment, net
1,029,963
1,387,895
Operating lease right-of-use assets,
net
649,680
957,840
Intangible assets, net
52,517
65,019
Long-term investments
1,052,861
1,253,593
Prepaid expenses and other assets
124,521
135,616
Loans receivable, net of allowance for
credit losses of $6,172 and $2,022, as of
December 31, 2021 and 2022 respectively
28,964
21,663
Restricted cash
38,743
17,724
Deferred tax assets
103,755
245,226
Goodwill
539,624
230,208
Total non-current assets
3,620,628
4,314,784
Total assets
18,756,025
17,002,796
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of December 31,
2021
2022
$
$
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities
Accounts payable
213,580
258,648
Accrued expenses and other payables
1,519,938
1,396,613
Deposits payable
465,850
1,316,395
Escrow payables and advances from
customers
1,789,973
1,862,325
Amounts due to related parties
74,738
415
Borrowings
100,000
88,410
Operating lease liabilities
186,494
269,968
Convertible notes (1)
–
31,237
Deferred revenue
2,644,463
1,535,083
Income tax payable
181,400
176,598
Total current liabilities
7,176,436
6,935,692
Non-current liabilities
Accrued expenses and other payables
76,234
87,072
Operating lease liabilities
491,313
756,818
Deferred revenue
104,826
63,566
Convertible notes (1)
3,475,708
3,338,750
Deferred tax liabilities
6,992
9,967
Unrecognized tax benefits
107
107
Total non-current liabilities
4,155,180
4,256,280
Total liabilities
11,331,616
11,191,972
UNAUDITED INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
Amounts expressed in thousands of US
dollars (“$”)
As of December 31,
2021
2022
$
$
Shareholders’ equity
Class A Ordinary shares
204
258
Class B Ordinary shares
74
23
Additional paid-in capital (1)
14,622,292
14,559,690
Accumulated other comprehensive loss
(28,519
)
(111,215
)
Statutory reserves
6,144
12,490
Accumulated deficit (1)
(7,201,498
)
(8,745,541
)
Total Sea Limited shareholders’
equity
7,398,697
5,715,705
Non-controlling interests
25,712
95,119
Total shareholders’ equity
7,424,409
5,810,824
Total liabilities and shareholders’
equity
18,756,025
17,002,796
(1) The Company adopted ASU 2020-06 on January 1, 2022 using
modified retrospective method and the cumulative effects have been
adjusted via retained earnings opening balance. As a result of
adoption, our Convertible Notes balances have increased and
additional paid-in capital and accumulated deficit have decreased
accordingly.
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,
2021
2022
2021
2022
$
$
$
$
Net cash (used in) generated from
operating activities
(304,824
)
319,691
208,649
(1,055,692
)
Net cash (used in) generated from
investing activities
(1,775,510
)
51,522
(3,767,273
)
(2,428,809
)
Net cash generated from (used in)
financing activities
385,993
(513,711
)
7,401,589
400,256
Effect of foreign exchange rate changes
on cash, cash equivalents and
restricted cash
6,509
109,112
(58,218
)
(143,511
)
Net (decrease) increase in cash, cash
equivalents and restricted cash
(1,687,832
)
(33,386
)
3,784,747
(3,227,756
)
Cash, cash equivalents and restricted
cash at beginning of the period
12,525,972
7,643,770
7,053,393
10,838,140
Cash, cash equivalents and restricted
cash at end of the period (1)
10,838,140
7,610,384
10,838,140
7,610,384
(1) As of December 31, 2022, cash and cash equivalents of
US$13,227 was included in assets held for sale within prepaid
expenses and other assets.
Net cash generated from investing activities amounted to US$51.5
million for the three months ended December 31, 2022. This was
primarily attributable to net receipt of US$123.4 million from time
deposits and liquid investment products for better cash yield
management, offset by purchase of property and equipment of
US$152.2 million to support the existing operations. Net cash used
in financing activities amounted to US$513.7 million for the three
months ended December 31, 2022. This was primarily attributable to
cash used in repurchase of convertible notes of US$611.3
million.
Net cash used in investing activities amounted to US$2.4 billion
for the year ended December 31, 2022. This was primarily
attributable to an increase in loans receivable of US$1.2 billion
and purchase of property and equipment of US$924.2 million to
support the growth of our businesses, as well as net placement of
US$65.2 million into time deposits and liquid investment products
for better cash yield management. Net cash generated from financing
activities amounted to US$400.3 million for the year ended December
31, 2022. This was primarily attributable to increase in deposits
payable of US$942.6 million offset by the cash used in repurchase
of convertible notes of US$611.3 million.
The Company has three reportable segments, namely digital
entertainment, e-commerce and digital financial services. The Chief
Operating Decision Maker (“CODM”) reviews the performance of each
segment based on revenue and certain key operating metrics of the
operations and uses these results for the purposes of allocating
resources to and evaluating the financial performance of each
segment. Amounts are expressed in thousands of US dollars
(“$”).
For the Three Months ended
December 31, 2022
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
948,857
2,102,740
380,172
19,815
-
3,451,584
Operating income (loss)
400,165
109,486
61,841
(28,714
)
(199,914
)
342,864
Non-operating income, net
34,973
Income tax credit
43,461
Share of results of equity investees
1,540
Net income
422,838
For the Three Months ended
December 31, 2021
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
1,415,044
1,595,075
197,531
14,464
-
3,222,114
Operating income (loss)
858,831
(941,028
)
(157,647
)
(59,138
)
(143,093
)
(442,075
)
Non-operating loss, net
(70,995
)
Income tax expense
(105,609
)
Share of results of equity investees
2,390
Net loss
(616,289
)
(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, impairment of
goodwill of prior acquisitions that are not under our reportable
segments, 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, 2022
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
3,877,163
7,288,677
1,221,996
61,869
-
12,449,705
Operating income (loss)
1,971,416
(2,013,360
)
(277,264
)
(252,162
)
(916,138
)
(1,487,508
)
Non-operating loss, net
(13,025
)
Income tax expense
(168,395
)
Share of results of equity investees
11,156
Net loss
(1,657,772
)
For the Year ended December
31, 2021
Digital Entertainment
E- commerce
Digital Financial Services
Other Services(1)
Unallocated expenses(2)
Consolidated
$
$
$
$
$
$
Revenue
4,320,013
5,122,959
469,774
42,444
-
9,955,190
Operating income (loss)
2,500,081
(2,766,566
)
(640,422
)
(177,633
)
(498,520
)
(1,583,060
)
Non-operating loss, net
(132,124
)
Income tax expense
(332,865
)
Share of results of equity investees
5,019
Net loss
(2,043,030
)
(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, impairment of
goodwill of prior acquisitions that are not under our reportable
segments, 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.
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