News
Sea Limited Reports Fourth Quarter and Full Year 2018 Results
Reading Time: 29 minutes
Sea Limited today announced its financial results for the fourth quarter and full year ended December 31, 2018.
Highlights
– Group
- Total adjusted revenue for the full year of 2018 reached US$1,048.7 million, more than 10.4% above the midpoint of our previous guidance, which was revised upwards twice during 2018.
– Digital Entertainment
- Adjusted revenue for the full year of 2018 reached US$661.0 million, more than 8.4% above the midpoint of our previous guidance.
- Adjusted revenue was up 60.0% from the third quarter to the fourth quarter of 2018 to reach US$231.4 million, and is expected to show further robust growth in the first quarter of 2019.
- Adjusted EBITDA margin increased to 45.5% for the fourth quarter of 2018 from 37.2% for the third quarter of 2018, and is expected to improve further in the first quarter of 2019.
- Our first fully self-developed game, Free Fire, continued to see good momentum and recently achieved more than 350 million registered users and more than 40 million peak daily active users, and was the world’s fourth most downloaded game across the Apple App Store and the Google Play Store combined in 2018, according to App Annie.
- Free Fire is also one of the most popular games in Latin America. According to App Annie, Free Fire was the top ranked game in Brazil in 2018 by average monthly active users, downloads and consumer spend, and ranked in the top five in each category in both Mexico and Argentina. We believe this demonstrates our ability to penetrate fast growing emerging markets globally, which greatly expands our total addressable market base beyond just our core markets.
- We also recently launched Speed Drifters, a localized version of Tencent’s hit game QQ Speed, and the first game published under our right of first refusal arrangement with Tencent.
- We have partnered with PUBG Corporation to bring PUBG LITE to several of our key markets in Southeast Asia.
– E-commerce
- Gross merchandise value (“GMV”) for the full year of 2018 reached US$10.3 billion, more than 8.8% above the midpoint of our previous guidance.
- GMV was US$3.4 billion for the fourth quarter of 2018, up 27.3% quarter-on-quarter from US$2.7 billion for the third quarter of 2018.
- Gross orders for the fourth quarter of 2018 totaled 206.9 million, up 30.5% quarter-on-quarter from 158.5 million for the third quarter of 2018.
- Annual active buyers for 2018 totaled 49.9 million, up 130.0% year-on-year from 21.7 million for 2017.
- According to App Annie, Shopee was the most downloaded app in the Shopping category in Southeast Asia and Taiwan in 2018.
- Adjusted revenue for the full year of 2018 reached US$290.7 million, up 1,540.8% year-on-year. In the fourth quarter of 2018, adjusted revenue was up 78.2% from the third quarter of 2018, to reach US$126.9 million.
- Adjusted revenue as a percentage of GMV increased to 3.7% in the fourth quarter of 2018, up from 2.6% in the previous quarter and 0.6% for the same period a year ago.
- Sales and marketing expenses as a percentage of GMV fell once again to 5.4% in the fourth quarter of 2018, down from 5.7% in the previous quarter and 8.5% for the same period a year ago.
- Shipping subsidies declined in absolute dollar terms in the fourth quarter compared to the third quarter, even as order numbers grew by 30.5% during the same period.
- We expect sales and marketing expenses to start trending downwards in absolute dollar terms in 2019, as Shopee continues to scale with increasing efficiency, benefiting from strong organic user growth, and solidify its market leadership in our region.
- We expect Shopee to record a positive quarterly adjusted EBITDA before allocation of the headquarters’ common expenses for the first time in the first quarter of 2019 in Taiwan.
- In Indonesia, Shopee’s largest market, Shopee recorded 83.8 million orders in the fourth quarter of 2018, or a daily average of 0.9 million, further extending its leadership as the largest e-commerce platform in the market.
Guidance
For the full year of 2019, we currently expect adjusted revenue for digital entertainment to be between US$1.2 billion and US$1.3 billion, representing 81.5% to 96.7% growth from 2018.
We currently expect adjusted revenue for e-commerce for the full year of 2019 to be between US$630 million and US$660 million, representing year-on-year growth of 116.7% to 127.0%.
Fourth Quarter 2018 Key Metrics
– Group
- Total adjusted revenue was US$389.3 million, up 136.6% year-on-year from US$164.5 million for the fourth quarter of 2017 and up 60.3% quarter-on-quarter from US$242.8 million for the third quarter of 2018.
- Total adjusted EBITDA was US$(203.6) million, compared to US$(140.2) million for the fourth quarter of 2017 and US$(183.8) million for the third quarter of 2018.
– Digital Entertainment
- Adjusted revenue was US$231.4 million, up 63.1% year-on-year from US$141.9 million for the fourth quarter of 2017 and an increase of 60.0% quarter-on-quarter from US$144.6 million for the third quarter of 2018.
- Adjusted EBITDA was US$105.2 million, up 100.0% year-on-year from US$52.6 million for the fourth quarter of 2017 and an increase of 95.9% quarter-on-quarter from US$53.7 million for the third quarter of 2018.
- Quarterly active users reached 216.2 million, an increase of 146.2% year-on-year from 87.8 million for the fourth quarter of 2017 and up 22.8% quarter-on-quarter from 176.1 million for the third quarter of 2018.
- Average revenue per user was US$1.1 compared to US$1.6 for the fourth quarter of 2017 and US$0.8 for the third quarter of 2018.
– E-commerce
- GMV was US$3.4 billion, an increase of 117.0% year-on-year from US$1.6 billion for the fourth quarter of 2017 and up 27.3% quarter-on-quarter from US$2.7 billion for the third quarter of 2018.
- Gross orders for the quarter totaled 206.9 million, an increase of 110.5% year-on-year from 98.3 million for the fourth quarter of 2017 and up 30.5% quarter-on-quarter from 158.5 million for the third quarter of 2018.
- Adjusted revenue was US$126.9 million, up 1,261.9% year-on-year from US$9.3 million for the fourth quarter of 2017 and up 78.2% quarter-on-quarter from US$71.2 million for the third quarter of 2018.
- Adjusted revenue included US$87.6 million of marketplace revenue[1], up 884.3% year-on-year from US$8.9 million for the fourth quarter of 2017 and up 74.2% quarter-on-quarter from US$50.3 million for the third quarter of 2018, and US$39.3 million of product revenue[2], up 9,725.0% year-on-year from US$0.4 million for the fourth quarter of 2017 and up 88.0% quarter-on-quarter from US$20.9 million in the third quarter of 2018.
- Adjusted revenue as a percentage of GMV increased to 3.7% in the fourth quarter of 2018, up from 2.6% in the previous quarter and 0.6% for the same period a year ago.
- Adjusted EBITDA was US$(277.5) million, compared to US$(175.4) million for the fourth quarter of 2017 and US$(214.9) million for the third quarter of 2018.
- Sales and marketing expenses as a percentage of GMV declined to 5.4% from 8.5% for the fourth quarter of 2017 and 5.7% for the third quarter of 2018, while Shopee achieved record-breaking transaction volumes in its 11.11 and 12.12 sales events during the fourth quarter.
Full Year 2018 Key Metrics
– Group
- Total adjusted revenue was US$1,048.7 million, up 89.4% year-on-year from US$553.6 million for the full year of 2017.
- Total adjusted EBITDA was US$(694.0) million, compared to US$(332.1) million for the full year of 2017.
– Digital Entertainment
- Adjusted revenue was US$661.0 million, up 33.3% year-on-year from US$495.9 million for the full year of 2017.
- Adjusted EBITDA was US$262.5 million, an increase of 50.1% year-on-year from US$174.9 million for the full year of 2017.
– E-commerce
- GMV was US$10.3 billion, an increase of 149.9% year-on-year from US$4.1 billion for the full year of 2017.
- Gross orders totaled 604.5 million, an increase of 146.9% year-on-year from 244.8 million for the full year of 2017.
- Adjusted revenue was US$290.7 million, up 1,540.8% year-on-year from US$17.7 million for the full year of 2017. Adjusted revenue included US$197.3 million of marketplace revenue1, up 1,040.5% year-on-year from US$17.3 million for the full year of 2017, and US$93.4 million of product revenue2, up 23,250.0% year-on-year from US$0.4 million for the full year of 2017.
- Adjusted revenue as a percentage of GMV increased to 2.8%, up from 0.4% in the previous year.
- Adjusted EBITDA was US$(860.3) million, compared to US$(444.3) million for the full year of 2017.
- Sales and marketing expenses as a percentage of GMV was 5.9% compared to 8.3% for the full year of 2017.
|
[1] |
Marketplace revenue mainly consists of commission and advertising income and revenue generated from other value-added services. |
|
[2] |
Product revenue mainly consists of revenue generated from direct sales. |
Strategic Business Updates
Digital Entertainment
In 2018, Garena recorded strong results and materially expanded our digital entertainment business from being a PC-focused regional publisher to a leading global developer and publisher, with core strengths in mobile games and a key focus on emerging markets. In the fourth quarter of 2018, our adjusted revenue from mobile games, self-developed game, and regions outside our current core markets accounted for 85.1%, 44.5% and 28.0% of our total digital entertainment adjusted revenue, respectively.
Our game development studio in Shanghai now has more than 200 developers focused on enhancing our existing game and building out our pipeline of self-developed games. Our first global self-developed hit game, Free Fire, is now one of the world’s most popular mobile battle royale titles. According to App Annie, for the full year of 2018, Free Fire was the fourth most downloaded game across the Apple App Store and the Google Play Store combined. It has also hit the milestone of recording more than 100 million monthly active users. Moreover, since late 2018, we have been rolling out our first global eSports tournament for Free Fire, the Free Fire World Cup.
Meanwhile, we continued to strengthen our relationships with our long-term game publishing partners and leading global developers to enhance Garena’s portfolio of top quality content. In January 2019, we launched Speed Drifters, a localized version of Tencent’s hit game QQ Speed. Speed Drifters is the first game from the Tencent portfolio published under our recently announced right of first refusal arrangement with Tencent. Furthermore, we have agreed with PUBG Corporation to bring into several of our key markets in Southeast Asia PUBG LITE, a PC game adapted from their global hit game PUBG.
E-commerce
Shopee saw sustained strong growth in the fourth quarter and full year of 2018, with GMV, orders, and adjusted revenue each increasing sharply, and sales and marketing expenses as a percentage of GMV continuing to decline.
Just three years since the launch of the platform, Shopee’s annual GMV has exceeded US$10 billion. We believe that Shopee’s rapid growth and ascent to regional market leadership over such a short period of time reflects the success of our strategy to build a mobile-centric, socially engaging marketplace with the right product category focus and with integrated and comprehensive user services – as well as our ability to execute this strategy efficiently and effectively.
Shopee continues to scale with increasing efficiency as it enjoys the increasingly powerful flywheel effects of an e-commerce marketplace. During the fourth quarter, we saw robust consumer engagement in our large-scale sales events for 11.11 and 12.12. We set a new record for orders in a single day with more than 12 million orders recorded over the 24 hours of December 12, 2018. Approximately 5.4 million of those orders were recorded in Indonesia alone.
While the level of user engagement in the fourth quarter of 2018 broke all previous records, Shopee’s sales and marketing expenses as a percentage of GMV declined further during the fourth quarter to 5.4%, compared to 5.7% in the third quarter of 2018. Moreover, shipping subsidies fell in absolute dollar terms in the fourth quarter compared to the third quarter, even as GMV and order numbers continued to grow sharply.
Our focus on engaging with sellers and enhancing the online shopping experience for buyers is also delivering strong financial results for Shopee. During the fourth quarter, e-commerce adjusted revenue reached US$126.9 million, up 1,261.9% year-on-year from US$9.3 million for the fourth quarter of 2017 and up 78.2% quarter-on-quarter from US$71.2 million for the third quarter of 2018. This strong growth in revenue was primarily driven by the expansion of our e-commerce marketplace, as we deepened our relationships and engagement with sellers and buyers, and enhanced our e-commerce ecosystem. Ramping up monetization in tandem with promoting the efficient growth of the Shopee ecosystem will continue to be our key focus for 2019.
Unaudited Summary of Financial Results
(Amounts are expressed in thousands of US dollars “$”)
|
For the Three Months ended December 31, |
For the Full Year ended December 31, |
|||||
|
2017 |
2018 |
2017 |
2018 |
|||
|
$ |
$ |
YOY% |
$ |
$ |
YOY% |
|
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
|||
|
Revenue |
||||||
|
Service revenue |
||||||
|
Digital Entertainment |
106,323 |
131,257 |
23.5% |
365,167 |
462,464 |
26.6% |
|
E-commerce and other services |
17,754 |
112,356 |
532.8% |
47,444 |
270,049 |
469.2% |
|
Sales of goods |
527 |
39,611 |
7,416.3% |
1,579 |
94,455 |
5,882.0% |
|
124,604 |
283,224 |
127.3% |
414,190 |
826,968 |
99.7% |
|
|
Cost of revenue |
||||||
|
Cost of service |
||||||
|
Digital Entertainment |
(60,240) |
(77,846) |
29.2% |
(217,986) |
(267,359) |
22.6% |
|
E-commerce and other services |
(40,257) |
(171,229) |
325.3% |
(107,260) |
(446,281) |
316.1% |
|
Cost of goods sold |
(562) |
(42,108) |
7,392.5% |
(1,632) |
(98,570) |
5,939.8% |
|
(101,059) |
(291,183) |
188.1% |
(326,878) |
(812,210) |
148.5% |
|
|
Gross profit |
23,545 |
(7,959) |
(133.8)% |
87,312 |
14,758 |
(83.1)% |
|
Other operating income |
2,157 |
4,291 |
98.9% |
3,497 |
9,799 |
180.2% |
|
Sales and marketing expenses |
(156,418) |
(207,487) |
32.6% |
(425,974) |
(705,015) |
65.5% |
|
General and administrative expenses |
(51,754) |
(87,160) |
68.4% |
(137,868) |
(240,781) |
74.6% |
|
Research and development expenses |
(8,671) |
(26,642) |
207.3% |
(29,323) |
(67,529) |
130.3% |
|
Total operating expenses |
(214,686) |
(316,998) |
47.7% |
(589,668) |
(1,003,526) |
70.2% |
|
Operating loss |
(191,141) |
(324,957) |
70.0% |
(502,356) |
(988,768) |
96.8% |
|
Non-operating (loss) income, net |
(62,283) |
52,984 |
(185.1)% |
(46,153) |
34,888 |
(175.6)% |
|
Income tax expense |
(8,730) |
(2,993) |
(65.7)% |
(10,745) |
(4,088) |
(62.0)% |
|
Share of results of equity investees |
(986) |
(1,092) |
10.8% |
(1,912) |
(3,066) |
60.4% |
|
Net loss |
(263,140) |
(276,058) |
4.9% |
(561,166) |
(961,034) |
71.3% |
|
Adjusted net loss (1) |
(199,613) |
(321,187) |
60.9% |
(480,580) |
(944,172) |
96.5% |
|
Adjusted revenue of Digital Entertainment (1) |
141,883 |
231,352 |
63.1% |
495,878 |
661,042 |
33.3% |
|
Adjusted revenue of E-commerce (1) |
9,319 |
126,914 |
1,261.9% |
17,717 |
290,706 |
1,540.8% |
|
Adjusted revenue of Digital Financial Services (1) |
4,102 |
3,063 |
(25.3)% |
16,270 |
13,512 |
(17.0)% |
|
Revenue of Other Services |
9,213 |
27,963 |
203.5% |
23,719 |
83,468 |
251.9% |
|
Total adjusted revenue (1) |
164,517 |
389,292 |
136.6% |
553,584 |
1,048,728 |
89.4% |
|
Adjusted EBITDA for Digital Entertainment (1) |
52,607 |
105,198 |
100.0% |
174,939 |
262,538 |
50.1% |
|
Adjusted EBITDA for E-commerce (1) |
(175,414) |
(277,497) |
(58.2)% |
(444,280) |
(860,322) |
(93.6)% |
|
Adjusted EBITDA for Digital Financial Services (1) |
(7,551) |
(9,805) |
(29.9)% |
(36,697) |
(32,156) |
12.4% |
|
Adjusted EBITDA for Other Services (1) |
(7,276) |
(17,403) |
(139.2)% |
(18,190) |
(54,058) |
(197.2)% |
|
Unallocated expenses (2) |
(2,579) |
(4,138) |
(60.4)% |
(7,887) |
(10,003) |
(26.8)% |
|
Total adjusted EBITDA (1) |
(140,213) |
(203,645) |
(45.2)% |
(332,115) |
(694,001) |
(109.0)% |
(1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.” The 2017 comparative numbers for adjusted net loss were restated due to a change in computation basis in 2018 to exclude impact from changes in fair value of convertible notes.
(2) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operation Decision Maker (“CODM”) as part of segment performance.
Three Months Ended December 31, 2018 Compared to Three Months Ended December 31, 2017
Revenue
The table below sets forth revenue generated from our reported segments. Amounts are expressed in thousands of US dollars (“$”).
|
For the Three Months ended December 31, |
||||||
|
2017 |
2018 |
|||||
|
$ |
% of revenue |
$ |
% of revenue |
YOY% |
||
|
Revenue |
||||||
|
Service revenue |
||||||
|
Digital Entertainment |
106,323 |
85.3 |
131,257 |
46.3 |
23.5% |
|
|
E-commerce and other services |
17,754 |
14.3 |
112,356 |
39.7 |
532.8% |
|
|
Sales of goods |
527 |
0.4 |
39,611 |
14.0 |
7,416.3% |
|
|
Total revenue |
124,604 |
100.0 |
283,224 |
100.0 |
127.3% |
|
|
2017 |
2018 |
|||||
|
$ |
% of total adjusted revenue |
$ |
% of total adjusted revenue |
YOY% |
||
|
Adjusted revenue |
||||||
|
Service revenue |
||||||
|
Digital Entertainment |
141,883 |
86.3 |
231,352 |
59.4 |
63.1% |
|
|
E-commerce and other services |
22,107 |
13.4 |
118,210 |
30.4 |
434.7% |
|
|
Sales of goods |
527 |
0.3 |
39,730 |
10.2 |
7,438.9% |
|
|
Total adjusted revenue |
164,517 |
100.0 |
389,292 |
100.0 |
136.6% |
|
Our total revenue increased by 127.3% to US$283.2 million in the fourth quarter of 2018 from US$124.6 million in the fourth quarter of 2017. Our total adjusted revenue increased by 136.6% to US$389.3 million in the fourth quarter of 2018 from US$164.5 million in the fourth quarter of 2017. These increases were mainly driven by the growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue increased by 23.5% to US$131.3 million in the fourth quarter of 2018 from US$106.3 million in the fourth quarter of 2017. Adjusted revenue increased by 63.1% to US$231.4 million in the fourth quarter of 2018 from US$141.9 million in the fourth quarter of 2017. This increase was primarily due to our enlarged user base and continued efforts to improve the monetization of our games.
- E-commerce and other services: Revenue increased by 532.8% to US$112.4 million in the fourth quarter of 2018 from US$17.8 million in the fourth quarter of 2017. Adjusted revenue increased by 434.7% to US$118.2 million in the fourth quarter of 2018 from US$22.1 million in the fourth quarter of 2017. This increase was primarily driven by the expansion of our e-commerce marketplace. As we deepened our relationships and engagement with sellers and buyers, and enhanced our e-commerce ecosystem, more users are using our integrated and value-added services, as well as ancillary services we provide.
- Sales of goods: Revenue increased by 7,416.3% to US$39.6 million in the fourth quarter of 2018 from US$0.5 million in the fourth quarter of 2017. Adjusted revenue increased by 7,438.9% to US$39.7 million in the fourth quarter of 2018 from US$0.5 million in the fourth quarter of 2017. The increase was primarily due to the increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 188.1% to US$291.2 million in the fourth quarter of 2018 from US$101.1 million in the fourth quarter of 2017.
- Digital Entertainment: Cost of revenue increased by 29.2% to US$77.8 million in the fourth quarter of 2018 from US$60.2 million in the fourth quarter of 2017. The increase was largely in line with revenue growth in our digital entertainment business.
- E-commerce and other services: Cost of revenue for our e-commerce and other services combined increased by 325.3% to US$171.2 million in the fourth quarter of 2018 from US$40.3 million in the fourth quarter of 2017. The increase was primarily due to costs incurred in line with the expansion of our e-commerce marketplace, higher bank transaction fees driven by GMV growth from our e-commerce business, higher costs associated with other ancillary services we provided to our e-commerce platform users, as well as higher staff compensation and benefit costs.
- Cost of goods sold: Cost of goods sold increased by 7,392.5% to US$42.1 million in the fourth quarter of 2018 from US$0.6 million in the fourth quarter of 2017. The increase was primarily due to the increase in our product offerings.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 32.6% to US$207.5 million in the fourth quarter of 2018 from US$156.4 million in the fourth quarter of 2017. The table below sets forth the breakdown of our sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars (“$”).
|
For the Three Months ended December 31, |
||||
|
2017 |
2018 |
YOY% |
||
|
Sales and Marketing Expenses |
$ |
$ |
||
|
Digital Entertainment |
16,854 |
14,016 |
(16.8)% |
|
|
E-commerce |
134,961 |
184,477 |
36.7% |
|
- Digital Entertainment: Sales and marketing expenses decreased by 16.8% to US$14.0 million in the fourth quarter of 2018 from US$16.9 million in the fourth quarter of 2017. Spending on marketing efforts in 2017 was higher as we expanded our games into new markets and launched new games.
|
For the Three Months ended December 31, |
|||
|
2017 |
2018 |
||
|
Digital Entertainment |
$ |
$ |
|
|
Sales and marketing expenses |
16,854 |
14,016 |
|
|
Adjusted revenue |
141,883 |
231,352 |
|
|
Sales and marketing expenses as a percentage of adjusted revenue |
11.9% |
6.1% |
|
Sales and marketing expenses as a percentage of adjusted revenue decreased to 6.1% in the fourth quarter of 2018 from 11.9% in the fourth quarter of 2017 as we continue to improve the efficiency of our marketing efforts.
- E-commerce: Sales and marketing expenses increased by 36.7% to US$184.5 million in the fourth quarter of 2018 from US$135.0 million in the fourth quarter of 2017. The increase in marketing efforts was aligned with our strategy to fully capture the market growth opportunity and was primarily attributable to the ramping up of offline and online digital marketing and other promotions on our platform that were designed to increase our user base and enhance user engagement, particularly during the festive seasons in the fourth quarter.
|
For the Three Months ended December 31, |
|||
|
2017 |
2018 |
||
|
E-commerce |
$ |
$ |
|
|
Sales and marketing expenses |
134,961 |
184,477 |
|
|
GMV |
1,578,599 |
3,425,158 |
|
|
Sales and marketing expenses as a percentage of GMV |
8.5% |
5.4% |
|
Sales and marketing expenses as a percentage of GMV decreased to 5.4% in the fourth quarter of 2018 from 8.5% in the fourth quarter of 2017 as we continue to improve the efficiency of our marketing efforts and leverage organic user acquisition opportunities.
General and Administrative Expenses
Our general and administrative expenses increased by 68.4% to US$87.2 million in the fourth quarter of 2018 from US$51.8 million in the fourth quarter of 2017. This increase was primarily due to the expansion of our staff force, the increase in office facilities and related expenses, impairment loss on our assets, as well as the increase in professional fees and other expenses.
Research and Development Expenses
Our research and development expenses increased by 207.3% to US$26.6 million in the fourth quarter of 2018 from US$8.7 million in the fourth quarter of 2017, primarily due to the increase in our research and development staff force as we expanded and enriched our product offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consists of interest income, interest expense, investment gain (loss), fair value change for convertible notes and foreign exchange gain (loss). The amount was a net non-operating income of US$53.0 million in the fourth quarter of 2018, compared to a net non-operating loss of US$62.3 million in the fourth quarter of 2017. The non-operating gain in 2018 was primarily due to a fair value gain of US$61.2 million in this quarter on the convertible notes issued before our initial public offering partially offset by interest expense on our convertible notes issued in 2018, while the net non-operating loss in 2017 was primarily due to a fair value loss of US$52.0 million in the quarter on the convertible notes issued before our initial public offering coupled with interest expense on these convertible notes.
Income Tax Expense
We had a net income tax expense of US$3.0 million and US$8.7 million despite a group net loss position in the fourth quarter of 2018 and 2017, respectively. This was primarily due to withholding tax and corporate income tax expenses incurred by our digital entertainment segment, partially offset by deferred tax assets recognized during the period.
Share of Results of Equity Investees
We had share of losses of equity investees of US$1.1 million in the fourth quarter of 2018, compared with a loss of US$1.0 million in the fourth quarter of 2017.
Net Loss
As a result of the foregoing, we had net losses of US$276.1 million and US$263.1 million in the fourth quarter of 2018 and 2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove share-based compensation expenses and fair value change for convertible notes, was US$321.2 million and US$199.6 million in the fourth quarter of 2018 and 2017, respectively.
Full Year Ended December 31, 2018 Compared to Full Year Ended December 31, 2017
Revenue
The table below sets forth revenue generated from our reported segments. Amounts are expressed in thousands of US dollars (“$”).
|
For the Full Year ended December 31, |
||||||
|
2017 |
2018 |
|||||
|
$ |
% of revenue |
$ |
% of revenue |
YOY% |
||
|
Revenue |
||||||
|
Service revenue |
||||||
|
Digital Entertainment |
365,167 |
88.2 |
462,464 |
55.9 |
26.6% |
|
|
E-commerce and other services |
47,444 |
11.4 |
270,049 |
32.7 |
469.2% |
|
|
Sales of goods |
1,579 |
0.4 |
94,455 |
11.4 |
5,882.0% |
|
|
Total revenue |
414,190 |
100.0 |
826,968 |
100.0 |
99.7% |
|
|
2017 |
2018 |
|||||
|
$ |
% of total adjusted revenue |
$ |
% of total adjusted revenue |
YOY% |
||
|
Adjusted revenue |
||||||
|
Service revenue |
||||||
|
Digital Entertainment |
495,878 |
89.6 |
661,042 |
63.0 |
33.3% |
|
|
E-commerce and other services |
56,127 |
10.1 |
292,954 |
27.9 |
421.9% |
|
|
Sales of goods |
1,579 |
0.3 |
94,732 |
9.1 |
5,899.4% |
|
|
Total adjusted revenue |
553,584 |
100.0 |
1,048,728 |
100.0 |
89.4% |
|
Our total revenue increased by 99.7% to US$827.0 million for the full year ended December 31, 2018 from US$414.2 million for the full year ended December 31, 2017. Our total adjusted revenue increased by 89.4% to US$1,048.7 million for the full year ended December 31, 2018 from US$553.6 million for the full year ended December 31, 2017. These increases were mainly driven by the growth in each of the segments detailed as follows:
- Digital Entertainment: Revenue increased by 26.6% to US$462.5 million for the full year ended December 31, 2018 from US$365.2 million for the full year ended December 31, 2017. Adjusted revenue increased by 33.3% to US$661.0 million for the full year ended December 31, 2018 from US$495.9 million in the full year ended December 31, 2017. This increase was primarily due to the growth of our user base in 2018, as we launched new games and increased the number of paying users.
- E-commerce and other services: Revenue increased by 469.2% to US$270.0 million for the full year ended December 31, 2018 from US$47.4 million for the full year ended December 31, 2017. Adjusted revenue increased by 421.9% to US$293.0 million for the full year ended December 31, 2018 from US$56.1 million in the full year ended December 31, 2017. This increase was primarily driven by the expansion of our e-commerce marketplace. As we deepened our relationships and engagement with our sellers and buyers, and enhanced our e-commerce ecosystem, more users are using our integrated and value-added services, as well as ancillary services we provide.
- Sales of goods: Revenue increased by 5,882.0% to US$94.5 million for the full year ended December 31, 2018 from US$1.6 million for the full year ended December 31, 2017. Adjusted revenue increased by 5,899.4% to US$94.7 million for the full year ended December 31, 2018 from US$1.6 million in the full year ended December 31, 2017. The increase was primarily due to increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 148.5% to US$812.2 million for the full year ended December 31, 2018 from US$326.9 million for the full year ended December 31, 2017. This increase was in line with the overall growth of our businesses:
- Digital Entertainment: Cost of revenue increased by 22.6% to US$267.4 million for the full year ended December 31, 2018 from US$218.0 million for the full year ended December 31, 2017. The increase was largely in line with revenue growth in our digital entertainment business.
- E-commerce and other services: Cost of revenue for our e-commerce and other services combined increased by 316.1% to US$446.3 million for the full year ended December 31, 2018 from US$107.3 million for the full year ended December 31, 2017. The increase was primarily due to costs incurred in line with the expansion of our e-commerce marketplace, higher bank transaction fees driven by GMV growth from our e-commerce business; higher costs associated with other ancillary services we provided to our e-commerce platform users; as well as higher staff compensation and benefit costs.
- Cost of goods sold: Cost of goods sold increased by 5,939.8% to US$98.6 million for the fill year ended December 31, 2018 from US$1.6 million for the full year ended December 31, 2017. The increase was primarily due to the increase in our product offerings.
Sales and Marketing Expenses
Our total sales and marketing expenses increased by 65.5% to US$705.0 million for the full year ended December 31, 2018 from US$426.0 million for the full year ended December 31, 2017. The table below set forth the breakdown of our sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars (“$”).
|
For the Full Year ended December 31, |
||||
|
2017 |
2018 |
YOY% |
||
|
Sales and Marketing Expenses |
$ |
$ |
||
|
Digital Entertainment |
61,472 |
68,222 |
11.0% |
|
|
E-commerce |
339,768 |
602,651 |
77.4% |
|
- Digital Entertainment: Sales and marketing expenses increased by 11.0% to US$68.2 million for the full year ended December 31, 2018 from US$61.5 million for the full year ended December 31, 2017. The increase was primarily due to our continued efforts to expand our existing games into new markets and the launch of new games.
|
For the Full Year ended December 31, |
|||
|
2017 |
2018 |
||
|
Digital Entertainment |
$ |
$ |
|
|
Sales and marketing expenses |
61,472 |
68,222 |
|
|
Adjusted revenue |
495,878 |
661,042 |
|
|
Sales and marketing expenses as a percentage of adjusted revenue |
12.4% |
10.3% |
|
Sales and marketing expenses as a percentage of adjusted revenue decreased to 10.3% for the full year ended December 31, 2018 from 12.4% for the full year ended December 31, 2017 as we continue to improve the efficiency of our marketing efforts.
- E-commerce: Sales and marketing expenses increased by 77.4% to US$602.7 million for the full year ended December 31, 2018 from US$339.8 million for the full year ended December 31, 2017. The increase in marketing efforts was aligned with our strategy to fully capture the market growth opportunity and was primarily attributable to the ramping up of offline and online digital marketing and other promotions on our platform that were designed to increase our user base and enhance user engagement.
|
For the Full Year ended December 31, |
|||
|
2017 |
2018 |
||
|
E-commerce |
$ |
$ |
|
|
Sales and marketing expenses |
339,768 |
602,651 |
|
|
GMV |
4,112,732 |
10,279,276 |
|
|
Sales and marketing expenses as a percentage of GMV |
8.3% |
5.9% |
|
Sales and marketing expenses as a percentage of GMV decreased to 5.9% for the full year ended December 31, 2018 from 8.3% for the full year ended December 31, 2017 as we continue to improve the efficiency of our marketing efforts and leverage organic user acquisition opportunities.
General and Administrative Expenses
Our general and administrative expenses increased by 74.6% to US$240.8 million for the full year ended December 31, 2018 from US$137.9 million for the full year ended December 31, 2017. This increase was primarily due to the expansion of our staff force, the increase in office facilities and related expenses, impairment loss on our assets, as well as the increase in professional fees and other expenses.
Research and Development Expenses
Our research and development expenses increased by 130.3% to US$67.5 million for the full year ended December 31, 2018 from US$29.3 million for the full year ended December 31, 2017, primarily due to an increase in research and development staff force as we expanded and enriched our product offerings.
Non-operating Income or Losses, Net
Non-operating income or losses consists of interest income, interest expense, investment gain (loss), fair value change for convertible notes and foreign exchange gain (loss). The amount was a net non-operating income of US$34.9 million for the full year ended December 31, 2018, compared to a net non-operating loss of US$46.2 million for the full year ended December 31, 2017. The net non-operating income in 2018 was primarily due to a fair value gain of US$41.3 million on the convertible notes issued before our initial public offering partially offset by interest expenses on our convertible notes, while the net non-operating loss in 2017 was primarily due to a fair value loss of US$52.0 million and interest expenses on the convertible notes, partially offset by an investment gain arising from the disposal of and a net gain arising from re-measurement of our investments.
Income Tax Expense
We had an income tax expense of US$4.1 million and US$10.7 million despite a group net loss position for the full year ended December 31, 2018 and 2017, respectively. This was primarily due to withholding tax and corporate income tax expenses incurred on our digital entertainment segment, partially offset by deferred tax assets recognized during the year.
Share of Results of Equity Investees
We had share of losses of equity investees of US$3.1 million for the full year ended December 31, 2018, compared with US$1.9 million for the full year ended December 31, 2017.
Net Loss
As a result of the foregoing, we had net losses of US$961.0 million and US$561.2 million for the full year ended December 31, 2018 and 2017, respectively.
Adjusted Net Loss
Adjusted net loss, which is net loss adjusted to remove share-based compensation expenses and fair value change for convertible notes, was US$944.2 million and US$480.6 million for the full year ended December 31, 2018 and 2017, 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: |
7:00 PM U.S. Eastern Time on February 26, 2019 |
|
|
8:00 AM Singapore / Hong Kong Time on February 27, 2019 |
||
|
Webcast link: |
||
|
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: |
7169346 |
|
A replay of the conference call will be available at the Company’s investor relations website (https://www.seagroup.com/investor/financials). An archived webcast will be available at the same link above.
For enquiries, please contact:
Investors / analysts: [email protected]
Media: [email protected]
About Sea Limited
Sea’s mission is to better the lives of the consumers and small businesses of our region with technology. Our region includes the key markets of Indonesia, Taiwan, Vietnam, Thailand, the Philippines, Malaysia and Singapore. Sea operates three platforms across digital entertainment, e-commerce, and digital financial services, known as Garena, Shopee, and AirPay, respectively.
Forward-Looking Statements
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident,” “guidance,” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Sea’s strategic and operational plans, contain forward-looking statements. Sea may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases, and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Sea’s goals and strategies; its future business development, financial condition, financial results, and results of operations; the growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the region, including segments within those industries; changes in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the growth of its digital entertainment, e-commerce and digital financial services platforms; the growth in its user base, level of user engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries; and general economic and business conditions in the region. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to help evaluate our operating performance:
- “Adjusted revenue” of our digital entertainment segment represents revenue of the digital entertainment segment plus change in digital entertainment deferred revenue. This financial measure is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment. Although other companies may present such measures related to gross billings differently or not at all, we believe that the adjusted revenue of our digital entertainment segment provides useful information to investors about the segment’s core operating results, enhancing their understanding of our past performance and future prospects.
- “Adjusted revenue” of our e-commerce segment represents revenue of the e-commerce segment (currently consisting of marketplace revenue and product revenue) plus certain revenues that were net-off against their corresponding sales incentives. This financial measure enables our investors to follow trends in our e-commerce monetization capability over time and is a useful performance measure.
- “Adjusted revenue” of our digital financial services segment represents revenue of the digital financial services segment plus certain revenues that were net-off against their corresponding sales incentives.
- “Total adjusted revenue” represents the sum of the adjusted revenue of our digital entertainment segment, the adjusted revenue of our e-commerce segment, the adjusted revenue of our digital financial services segment, and the revenue of our other services. This financial measure enables our investors to follow trends in our overall group monetization capability over time and is a useful performance measure.
- “Adjusted net loss” represents net loss before share-based compensation and changes in fair value of convertible notes. We believe that the adjusted net loss 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 adjusted net loss 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.
- “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. Although other companies may calculate adjusted EBITDA differently or not present it at all, 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. Although other companies may calculate adjusted EBITDA differently or not present it at all, 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. Although other companies may calculate adjusted EBITDA differently or not present it at all, 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 (“$”).
|
For the Three Months ended December 31, 2018 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(3) |
Unallocated expenses(4) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
131,257 |
121,660(1) |
2,344 |
27,963 |
– |
283,224 |
|
Changes in deferred revenue |
100,095 |
– |
– |
– |
– |
100,095 |
|
Sales incentives net-off |
– |
5,254 |
719 |
– |
– |
5,973 |
|
Adjusted revenue |
231,352 |
126,914(2) |
3,063 |
27,963 |
– |
389,292 |
|
Operating income (loss) |
16,121 |
(290,616) |
(10,314) |
(19,952) |
(20,196) |
(324,957) |
|
Net effect of changes in deferred revenue and its related cost |
78,659 |
– |
– |
– |
– |
78,659 |
|
Depreciation and amortization |
10,418 |
13,119 |
509 |
2,549 |
– |
26,595 |
|
Share-based compensation |
– |
– |
– |
– |
16,058 |
16,058 |
|
Adjusted EBITDA |
105,198 |
(277,497) |
(9,805) |
(17,403) |
(4,138) |
(203,645) |
|
For the Three Months ended December 31, 2017 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(3) |
Unallocated expenses(4) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
106,323 |
4,966(1) |
4,102 |
9,213 |
– |
124,604 |
|
Changes in deferred revenue |
35,560 |
– |
– |
– |
– |
35,560 |
|
Sales incentives net-off |
– |
4,353 |
– |
– |
– |
4,353 |
|
Adjusted revenue |
141,883 |
9,319(2) |
4,102 |
9,213 |
– |
164,517 |
|
Operating income (loss) |
18,102 |
(178,780) |
(8,038) |
(8,269) |
(14,156) |
(191,141) |
|
Net effect of changes in deferred revenue and its related cost |
26,724 |
– |
– |
– |
– |
26,724 |
|
Depreciation and amortization |
7,781 |
3,366 |
487 |
993 |
– |
12,627 |
|
Share-based compensation |
– |
– |
– |
– |
11,577 |
11,577 |
|
Adjusted EBITDA |
52,607 |
(175,414) |
(7,551) |
(7,276) |
(2,579) |
(140,213) |
(1) For the fourth quarter of 2018, revenue of $121,660 included marketplace revenue of $82,483 and product revenue of $39,177 net of sales incentives. For the fourth quarter of 2017, revenue of $4,966 included marketplace revenue of $4,558 and product revenue of $408, net of sales incentives.
(2) For the fourth quarter of 2018, adjusted revenue of $126,914 included marketplace revenue of $87,618 and product revenue of $39,296. For the fourth quarter of 2017, adjusted revenue of $9,319 included marketplace revenue of $8,911 and product revenue of $408, net of sales incentives.
(3) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services.”
(4) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. The expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance.
|
For the Year ended December 31, 2018 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(3) |
Unallocated expenses(4) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
462,464 |
269,578(1) |
11,458 |
83,468 |
– |
826,968 |
|
Changes in deferred revenue |
198,578 |
– |
– |
– |
– |
198,578 |
|
Sales incentives net-off |
– |
21,128 |
2,054 |
– |
– |
23,182 |
|
Adjusted revenue |
661,042 |
290,706(2) |
13,512 |
83,468 |
– |
1,048,728 |
|
Operating income (loss) |
69,449 |
(893,489) |
(34,056) |
(62,548) |
(68,124) |
(988,768) |
|
Net effect of changes in deferred revenue and its related cost |
157,918 |
– |
– |
– |
– |
157,918 |
|
Depreciation and amortization |
35,171 |
33,167 |
1,900 |
8,490 |
– |
78,728 |
|
Share-based compensation |
– |
– |
– |
– |
58,121 |
58,121 |
|
Adjusted EBITDA |
262,538 |
(860,322) |
(32,156) |
(54,058) |
(10,003) |
(694,001) |
|
For the Year ended December 31, 2017 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(3) |
Unallocated expenses(4) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
365,167 |
9,034(1) |
16,270 |
23,719 |
– |
414,190 |
|
Changes in deferred revenue |
130,711 |
– |
– |
– |
– |
130,711 |
|
Sales incentives net-off |
– |
8,683 |
– |
– |
– |
8,683 |
|
Adjusted revenue |
495,878 |
17,717(2) |
16,270 |
23,719 |
– |
553,584 |
|
Operating income (loss) |
45,637 |
(452,233) |
(38,038) |
(21,199) |
(36,523) |
(502,356) |
|
Net effect of changes in deferred revenue and its related cost |
100,678 |
– |
– |
– |
– |
100,678 |
|
Depreciation and amortization |
28,624 |
7,953 |
1,341 |
3,009 |
– |
40,927 |
|
Share-based compensation |
– |
– |
– |
– |
28,636 |
28,636 |
|
Adjusted EBITDA |
174,939 |
(444,280) |
(36,697) |
(18,190) |
(7,887) |
(332,115) |
(1) For the year of 2018, revenue of $269,578 included marketplace revenue of $176,434 and product revenue of $93,144, net of sales incentives. For the year of 2017, revenue of $9,034 included marketplace revenue of $8,626 and product revenue of $408, net of sales incentives.
(2) For the year of 2018, adjusted revenue of $290,706 included marketplace revenue of $197,285 and product revenue of $93,421. For the year of 2017, adjusted revenue of $17,717 included marketplace revenue of $17,309 and product revenue of $408, net of sales incentives.
(3) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services.”
(4) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. The expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance.
|
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data |
||||
|
For the Three Months ended December 31, |
For the Year ended December 31, |
|||
|
2017 |
2018 |
2017 |
2018 |
|
|
$ |
$ |
$ |
$ |
|
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
|
|
Revenue |
||||
|
Service revenue |
||||
|
Digital Entertainment |
106,323 |
131,257 |
365,167 |
462,464 |
|
E-commerce and other services |
17,754 |
112,356 |
47,444 |
270,049 |
|
Sales of goods |
527 |
39,611 |
1,579 |
94,455 |
|
Total revenue |
124,604 |
283,224 |
414,190 |
826,968 |
|
Cost of revenue |
||||
|
Cost of service |
||||
|
Digital Entertainment |
(60,240) |
(77,846) |
(217,986) |
(267,359) |
|
E-commerce and other services |
(40,257) |
(171,229) |
(107,260) |
(446,281) |
|
Cost of goods sold |
(562) |
(42,108) |
(1,632) |
(98,570) |
|
Total cost of revenue |
(101,059) |
(291,183) |
(326,878) |
(812,210) |
|
Gross profit |
23,545 |
(7,959) |
87,312 |
14,758 |
|
Operating income (expenses): |
||||
|
Other operating income |
2,157 |
4,291 |
3,497 |
9,799 |
|
Sales and marketing expenses |
(156,418) |
(207,487) |
(425,974) |
(705,015) |
|
General and administrative expenses |
(51,754) |
(87,160) |
(137,868) |
(240,781) |
|
Research and development expenses |
(8,671) |
(26,642) |
(29,323) |
(67,529) |
|
Total operating expenses |
(214,686) |
(316,998) |
(589,668) |
(1,003,526) |
|
Operating loss |
||||
|
Interest income |
760 |
2,953 |
2,922 |
11,520 |
|
Interest expense |
(9,043) |
(9,882) |
(26,501) |
(31,295) |
|
Investment (loss) gain, net |
(352) |
(771) |
33,591 |
8,603 |
|
Changes in fair value of convertible notes |
(51,950) |
61,187 |
(51,950) |
41,259 |
|
Foreign exchange (loss) gain |
(1,698) |
(503) |
(4,215) |
4,801 |
|
Loss before income tax and share of results of equity investees |
(253,424) |
(271,973) |
(548,509) |
(953,880) |
|
Income tax expense |
(8,730) |
(2,993) |
(10,745) |
(4,088) |
|
Share of results of equity investees |
(986) |
(1,092) |
(1,912) |
(3,066) |
|
Net loss |
(263,140) |
(276,058) |
(561,166) |
(961,034) |
|
Net loss (profit) attributable to non-controlling interests |
480 |
(565) |
681 |
(207) |
|
Net loss attributable to Sea Limited’s ordinary shareholders |
(262,660) |
(276,623) |
(560,485) |
(961,241) |
|
Adjusted net loss (1) |
(199,613) |
(321,187) |
(480,580) |
(944,172) |
|
Loss per share: |
||||
|
Basic and diluted |
(0.90) |
(0.81) |
(2.72) |
(2.84) |
|
Weighted average shares used in loss per share computation: |
||||
|
Basic and diluted |
293,324,598 |
340,397,564 |
205,727,195 |
338,472,987 |
(1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures.”
|
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) |
|||
|
As of December 31, |
As of December 31, |
||
|
2017 |
2018 |
||
|
$ |
$ |
||
|
(unaudited) |
|||
|
ASSETS |
|||
|
Current assets |
|||
|
Cash and cash equivalents |
1,347,361 |
1,002,841 |
|
|
Restricted cash |
95,300 |
254,100 |
|
|
Accounts receivable, net |
61,846 |
97,782 |
|
|
Prepaid expenses and other assets |
186,181 |
312,387 |
|
|
Inventories, net |
9,790 |
37,689 |
|
|
Short-term investment |
18,000 |
690 |
|
|
Amounts due from related parties |
2,235 |
5,224 |
|
|
Total current assets |
1,720,713 |
1,710,713 |
|
|
Non-current assets |
|||
|
Property and equipment, net |
74,348 |
192,357 |
|
|
Intangible assets, net |
37,333 |
12,887 |
|
|
Long-term investments |
28,216 |
111,022 |
|
|
Prepaid expenses and other assets |
46,297 |
69,065 |
|
|
Restricted cash |
2,317 |
2,371 |
|
|
Deferred tax assets |
48,104 |
63,302 |
|
|
Goodwill |
30,952 |
30,952 |
|
|
Total non-current assets |
267,567 |
481,956 |
|
|
Total assets |
1,988,280 |
2,192,669 |
|
|
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) |
||
|
As of December 31, |
As of December 31, |
|
|
2017 |
2018 |
|
|
$ |
$ |
|
|
(unaudited) |
||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||
|
Current liabilities |
||
|
Accounts payable |
8,644 |
37,163 |
|
Accrued expenses and other payables |
285,248 |
636,880 |
|
Advances from customers |
27,155 |
29,355 |
|
Amount due to related parties |
36,790 |
46,025 |
|
Short-term bank borrowings |
2,013 |
856 |
|
Deferred revenue |
268,241 |
426,675 |
|
Income taxes payable |
9,614 |
9,539 |
|
Total current liabilities |
637,705 |
1,186,493 |
|
Non-current liabilities |
||
|
Accrued expenses and other payables |
7,547 |
7,894 |
|
Long-term bank borrowings |
– |
1,026 |
|
Deferred revenue |
133,481 |
171,262 |
|
Convertible notes |
726,950 |
1,061,796 |
|
Deferred tax liabilities |
4,378 |
679 |
|
Unrecognized tax benefits |
3,088 |
2,974 |
|
Total non-current liabilities |
875,444 |
1,245,631 |
|
Total liabilities |
1,513,149 |
2,432,124 |
|
Shareholders’ equity |
||
|
Class A Ordinary shares |
91 |
94 |
|
Class B Ordinary shares |
76 |
76 |
|
Additional paid-in capital |
1,564,656 |
1,809,232 |
|
Accumulated other comprehensive income |
10,701 |
15,199 |
|
Statutory reserves |
46 |
46 |
|
Accumulated deficit |
(1,106,545) |
(2,067,786) |
|
Total Sea Limited shareholders’ equity (deficit) |
469,025 |
(243,139) |
|
Non-controlling interests |
6,106 |
3,684 |
|
Total shareholders’ equity (deficit) |
475,131 |
(239,455) |
|
Total liabilities and shareholders’ equity (deficit) |
1,988,280 |
2,192,669 |
|
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, |
|||
|
2017 |
2018 |
2017 |
2018 |
|
|
$ |
$ |
$ |
$ |
|
|
(unaudited) |
(unaudited) |
(unaudited) |
||
|
Net cash used in operating activities |
(88,388) |
(138,191) |
(259,228) |
(495,220) |
|
Net cash used in investing activities |
(51,140) |
(65,590) |
(118,614) |
(224,528) |
|
Net cash generated from financing activities |
927,401 |
1,522 |
1,623,843 |
546,628 |
|
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash |
3,925 |
2,193 |
8,153 |
(12,546) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
791,798 |
(200,066) |
1,254,154 |
(185,666) |
|
Cash, cash equivalents and restricted cash at beginning of the period |
653,180 |
1,459,378 |
190,824 |
1,444,978 |
|
Cash, cash equivalents and restricted cash at end of the period |
1,444,978 |
1,259,312 |
1,444,978 |
1,259,312 |
1 UNAUDITED SEGMENT INFORMATION
The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The Chief Operation Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment. Amounts are expressed in thousands of US dollars (“$”).
|
For the Three Months ended December 31, 2018 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(1) |
Unallocated expenses(2) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
131,257 |
121,660 |
2,344 |
27,963 |
– |
283,224 |
|
Operating income (loss) |
16,121 |
(290,616) |
(10,314) |
(19,952) |
(20,196) |
(324,957) |
|
Non-operating income, net |
52,984 |
|||||
|
Income tax expense |
(2,993) |
|||||
|
Share of results of equity investees |
(1,092) |
|||||
|
Net loss |
(276,058) |
|||||
|
For the Three Months ended December 31, 2017 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(1) |
Unallocated expenses(2) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
106,323 |
4,966 |
4,102 |
9,213 |
– |
124,604 |
|
Operating income (loss) |
18,102 |
(178,780) |
(8,038) |
(8,269) |
(14,156) |
(191,141) |
|
Non-operating loss, net |
(62,283) |
|||||
|
Income tax expense |
(8,730) |
|||||
|
Share of results of equity investees |
(986) |
|||||
|
Net loss |
(263,140) |
|||||
|
For the Year ended December 31, 2018 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(1) |
Unallocated expenses(2) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
462,464 |
269,578 |
11,458 |
83,468 |
– |
826,968 |
|
Operating income (loss) |
69,449 |
(893,489) |
(34,056) |
(62,548) |
(68,124) |
(988,768) |
|
Non-operating income, net |
34,888 |
|||||
|
Income tax expense |
(4,088) |
|||||
|
Share of results of equity investees |
(3,066) |
|||||
|
Net loss |
(961,034) |
|||||
|
For the Year ended December 31, 2017 |
||||||
|
Digital Entertainment |
E-commerce |
Digital Financial Services |
Other Services(1) |
Unallocated expenses(2) |
Consolidated |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
Revenue |
365,167 |
9,034 |
16,270 |
23,719 |
– |
414,190 |
|
Operating income (loss) |
45,637 |
(452,233) |
(38,038) |
(21,199) |
(36,523) |
(502,356) |
|
Non-operating loss, net |
(46,153) |
|||||
|
Income tax expense |
(10,745) |
|||||
|
Share of results of equity investees |
(1,912) |
|||||
|
Net loss |
(561,166) |
|||||
(1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services.”
(2) Unallocated expenses are mainly related to share-based compensation and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. The expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance.
SUPPLEMENTAL OPERATIONAL METRICS
|
For the Three Months |
For the Three Months |
||||
|
Digital Entertainment |
Unit |
||||
|
Quarterly active users |
millions |
176.1 |
216.2 |
||
|
Monthly active users (last month) |
millions |
104.5 |
135.7 |
||
|
Quarterly paying users |
millions |
7.2 |
11.9 |
||
|
Average revenue per user |
US$ |
0.8 |
1.1 |
||
|
Average revenue per paying user |
US$ |
20.1 |
19.4 |
||
|
E-commerce |
|||||
|
Gross GMV |
US$ millions |
2,690.9 |
3,425.2 |
||
|
Gross orders |
millions |
158.5 |
206.9 |
Source: Sea Limited
Source: European Gaming Media
This is a Syndicated News piece. Photo credits or photo sources can be found on the source article: Sea Limited Reports Fourth Quarter and Full Year 2018 Results
The iGaming industry is advancing at breakneck speed, driven by technological innovation and evolving player expectations. Itai Zak, Executive Director of iGaming at Digicode, emphasizes the importance of bridging client aspirations with customized business solutions. Key trends shaping the future of iGaming include live dealer games, blockchain integration, artificial intelligence (AI) and machine learning (ML), enhanced personalization, and shifting regulatory environments. Let’s delve into how these trends influence the industry, presenting new opportunities while paving the way for future growth.
A Closer Look at Emerging Trends
- Live Dealer Games
Live dealer games are revolutionizing the online gaming experience, blending the best aspects of land-based casinos with the convenience of virtual gaming. Players can now engage with real-life dealers via high-definition video streams, enhancing the social component of online gambling. This bridge between physical and virtual casinos introduces interactive features like live chat and immersive gameplay. Industry leaders like Evolution Gaming and NetEnt are setting new standards in player engagement with innovative game formats and top-tier studio setups, redefining the realism and appeal of live gaming.
- Blockchain and Cryptocurrency Integration
Blockchain technology is transforming iGaming by offering unparalleled transparency and security. With blockchain’s ability to enable provably fair gaming, players can verify that each round is fair via an immutable ledger. Cryptocurrencies like Bitcoin and Ethereum facilitate faster, more secure transactions, catering to tech-savvy players who value privacy. Platforms like Bitcasino.io are leading the way, leveraging blockchain to ensure fairness and seamless payments. However, the rise of blockchain also attracts regulatory attention, requiring operators to balance innovation with compliance as governments navigate this new technology.
- Artificial Intelligence and Machine Learning
AI and ML are instrumental in enhancing player experience and operational efficiency. AI algorithms analyze player behavior in real-time, offering personalized game recommendations and promotions. Additionally, AI-powered chatbots provide instant customer support, improving user satisfaction. AI-driven predictive analytics also help operators fine-tune marketing strategies based on player preferences. Companies like Bet365 are already using these technologies to stay ahead of the competition, offering more personalized and efficient gaming experiences.
- Richer Personalization and Engagement
Personalization has become crucial for iGaming operators looking to boost player satisfaction and retention. By leveraging data analytics, companies can offer tailored game recommendations, dynamic bonuses, and individualized promotional offers. This level of engagement enhances the player experience and strengthens loyalty. Industry pioneers like DraftKings and FanDuel push the envelope by offering highly customized features, such as personalized fantasy sports leagues and bespoke betting options.
- Regulatory Changes and Market Expansion
The constantly evolving regulatory landscape offers both challenges and opportunities for iGaming operators. As more regions legalize various forms of online gambling, companies gain access to new markets. With their large populations and increasing internet penetration, emerging markets like Brazil and Nigeria represent lucrative opportunities. However, navigating the diverse regulations in these markets requires agility and strict compliance with local laws to succeed.
- Enhanced Payment Solutions
With digital transactions becoming the norm, the demand for fast, secure, and flexible payment methods is skyrocketing. From digital wallets to instant banking and cryptocurrencies, players expect payment solutions that offer convenience and security. This growing demand is driving innovation in payment processing, giving operators more opportunities to streamline the transaction process while building trust with users.
Future Implications
The Expanding Role of AI and Blockchain
AI and blockchain are not just current trends, but they are poised to play an even more significant role in iGaming’s future. As AI technology evolves, more sophisticated algorithms will emerge, enabling real-time adaptation to player behavior and preferences. Blockchain’s application may extend beyond transparency and security, transforming game mechanics and player interactions potentially redefining how games are designed and played.
Shifting Player Preferences
Player expectations will continue to evolve toward immersive, interactive experiences. As Virtual Reality (VR) and Augmented Reality (AR) become more mainstream, they will significantly influence the future of iGaming. Players will demand more engaging, lifelike environments, pushing the industry to create innovative game formats and features that offer deeper immersion and entertainment value.
Regulatory Developments
The regulatory environment will continue to evolve, and iGaming operators must stay agile to navigate future changes. New regulations may increasingly emphasize responsible gaming and player protection, influencing platform design and operational practices. A more harmonized regulatory framework across jurisdictions could provide stability while requiring operators to prioritize compliance.
Integrating Emerging Technologies
Technologies like 5G and edge computing are set to revolutionize iGaming by enabling faster, more reliable connectivity. This will allow for more complex game designs and real-time player interactions, opening new avenues for innovative gaming experiences. As these technologies mature, operators will have greater opportunities to differentiate their offerings. The potential of these emerging technologies to revolutionize iGaming is truly exciting and promising for the industry’s future.
Final Thoughts
The iGaming industry is on the cusp of significant transformations, driven by technological advancements and shifting player demands. Innovations like live dealer games, blockchain integration, AI, ML, and enhanced personalization are just the beginning. As the industry evolves, staying ahead of these trends will be critical for operators looking to thrive in an increasingly dynamic environment.
At Digicode, we are constantly exploring new technologies and refining our solutions to meet the evolving needs of our clients. Our focus on adaptability and foresight ensures that our clients are not just keeping pace with the industry—they’re leading it.
The post Innovations Redefining iGaming: What Operators Need to Know appeared first on European Gaming Industry News.
A partnership between game developer Turbo Games and iGaming solution provider and aggregator Slotegrator began in November 2022 via the APIgrator game integration solution. Since then, the collaboration has been developing successfully — and now it’s time to analyze what made it successful.
Turbo Games has noticed how the new technologies spreading throughout the industry can work for the good of brand transparency and player loyalty: “We can already see how blockchain technology has made it possible to make betting checks more accessible to players. All you need is a blockchain-hash and a decoder service. We think we will continue to move in this direction. Many traditional online casinos do not offer the possibility to check the bet. Sooner or later we all have to come to this. Perhaps the development of artificial intelligence will help here, because we are already seeing its involvement in all spheres of human life.”
Turbo Games specializes in provably fair games. Provable fairness is a concept where players can verify their wins or losses using blockchain technology — the outcome of the game is dictated by a smart contract and is absolutely random, barring the possibility of any human involvement. Using cryptographic hashing algorithms, the gambling site and the player’s device both generate seeds (random strings of numbers). Players receive a key that allows them to check the results; if the results are the same as the game round they witnessed, it proves that there was no foul play.
According to statistics from Turbo Games, the audience for provably fair games is mostly between 18 and 25 years old. However, there are also players aged 35-40 who prefer traditional games but would like to try something new, and have turned their attention to provably fair games.
There are good odds that the technology of provably fair games will become more popular, if not even commonplace, because it gives players a feeling of transparency and proves that the business is trustworthy without the need to search through dozens of reviews. Whereas many innovations in iGaming simply add entertainment, provable fairness addresses security concerns and reassures players that they’re not being exploited, which is invaluable.
Provably fair games are beneficial for both players and online casinos. Vadim Potapenko, Head of Sales at Turbo Games, comments: “It often happens that the users are not satisfied with the result, because gambling is not only about big wins, but also possible losses. By allowing them to check the fairness of a bet, we make life easier for platforms and players. Of course, this allows us to communicate with partners and users that we work honestly and that’s why they should trust our games.”
Ayvar Gabidullin, Business Development Manager at Slotegrator, adds that “this type of game is now becoming more and more popular and has great potential for both players and game providers in the future. On the part of the player, the advantage is that the player can always be sure that his game is fair and he can independently check any of his bets. And for the game provider, this also simplifies the process of implementing casino games, since now it will not be necessary to obtain the appropriate certificates from independent laboratories before launching new games, they can immediately enter the market with these games and where anyone can check the result and make sure that that there is no cheating with players. Many game providers are starting to look towards this type of game. And as far as I see, many operators are starting to think about adding these games.”
What do players in 2023 need? The iGaming industry is all about reputation and trust. Players have a huge number of platforms to choose from, making them pickier and pickier. There’s an abundance of forums where players leave reviews, so if players view a brand as untrustworthy, there are plenty of places they can share their opinion. Provable fairness not only stops that from happening, it provides evidence to the contrary, giving players something else to talk about.
Slotegrator also recommends investing time and effort into localization and creating an effective and detailed marketing strategy — before trying provably fair technology players need to get to the platform, and there is no acquisition without marketing.
ABOUT SLOTEGRATOR
Since 2012, Slotegrator has been one of the iGaming industry’s leading software and business solution providers for online casino and sportsbook operators.
The company’s main focus is software development and support for online casino platforms, as well as the integration of game content and payment systems.
The company works with licensed game developers and offers a vast portfolio of casino content: slots, live casino games, poker, virtual sports, table games, lotteries, casual games, and data feeds for betting.
Slotegrator also provides consulting services in gambling license acquisition and business incorporation.
More information: https://slotegrator.pro/
ABOUT TURBO GAMES
Turbo Games — a provably fair games provider that belongs to Turbo Stars company — has an ambitious goal to establish widespread recognition throughout the iGaming world. Even though it is young, the company consists of professionals who have been working on the brand for over five years and are even planning to introduce a new brand for a wider audience soon.
Turbo Games also works in Europe, India, and South Africa, where the company sees the most potential and expects the same “hype” as in Brazil.
The portfolio of Turbo Games consists of 21 titles, including well-known games like Mines, Crash X, DoubleRoll, Hi-Lo, and Plinko. The studio releases a game every month. However, not all games are developed from scratch. Wicket Blast and Spin Strike, the last two releases, are based on cricket and the Indian Premier League. Crash X remains the most popular fast game in the Turbo Games portfolio, and the studio reports that crash games enjoy stable levels of popularity. Overall, the main focus of the brand is provably fair games.
More information: https://turbogames.io/
Looking to take your career to the next level in the games industry? Then, Nordic Game Talents is the place to be! Games Factory Talents has teamed up with Nordic Game to bring you Nordic Game Talents.
From Oct 27-29, the online and interactive event is dedicated to recruitment and career building in the creative & games industry within the Nordic region. The event empowers participants to be part of a bigger community and motivates them to explore new paths in achieving their career goals.
Hiring creative & games studios – Supercell, Funcom, Panzerdog, Tactile Games, Gamecan, Fingersoft, Dazzle Rocks, Redhill Games to name a few from the Nordic region will be participating in the event. These studios will share information on their latest projects, work culture and what it takes to be part of their team. The individual games associations from Finland, Denmark, Sweden, Norway and Estonia will share insights through live sessions on the booming games industry in their respective countries. Career development topics pertinent to job seekers like – How to have a successful first interview, Creative Portfolio reviews will also be discussed.
Experienced game industry professionals and individuals beginning their careers from around the world are welcome to join the event. One-to-one interviews with the hiring studios can be scheduled through the event platform. A great opportunity to get to know the studios and network with game professionals from around the world.
Participating in the event
As a job seeker attending Nordic Game Talents, take a few minutes to fill out a simple registration form. After filling the registration form you will receive a link to the online event platform – PINE, to join the event on 27th October. Participants joining Nordic Game Talents will also receive a free-of-charge pass to the Nordic Game Conference.
To view the complete agenda, please click here and to learn more about the event please visit Games Job Fair
About Games Factory Talents
A Helsinki-based talent attraction agency dedicated to the games & creative industry. Our services include direct recruitment, organizing game job fairs and managing a community of game industry professionals through our GameDev Talent Board.
To learn more about Games Factory Talents visit – Games Factory Talents
Xanada Investments Announces the Launch of the Xanada Pitch Contest 2025
Pole Position Performance: GR8 Tech Transforms Client Challenges into Opportunities with CRM
Gainr.ai and Goal Analytics Agree Trading Data Partnership
Playzia Partners with St8.io to Expand Global Reach through Advanced Casino Game Aggregation
First EveryMatrix US content aggregation deal live with betPARX
Natural8 India welcomes 2025 in style with Natural8 India X APT Manila Classic 2025
Aristocrat Gaming Begins Expanded Launch of NFL-Themed Slot Machine Franchise with 13-Casino Event in Puerto Rico
Bragg Gaming Announces Preliminary Unaudited Results for the Year Ended December 31, 2024 and 2025 Strategic Initiatives and Guidance
BetConstruct Becomes the First iGaming Company to Offer Both B2B and B2C Licenses in Canada through Affiliate Entity
Golden Nugget Atlantic City Announces Re-opening of Sportsbook with New, Innovative Technology and Expanded Betting Markets
-
gaming2 years agoODIN by 4Players: Immersive, state-of-the-art in-game audio launches into the next generation of gaming
-
EEG iGaming Directory8 years ago
iSoftBet continues to grow with new release Forest Mania
-
News7 years ago
Softbroke collaborates with Asia Live Tech for the expansion of the service line in the igaming market
-
News6 years ago
Super Bowl LIII: NFL Fans Can Bet on the #1 Sportsbook Review Site Betting-Super-Bowl.com, Providing Free Unbiased and Trusted News, Picks and Predictions
-
iGaming Industry7 years ago
Rick Meitzler appointed to the Indian Gaming Magazine Advisory Board for 2018
-
News6 years ago
REVEALED: Top eSports players set to earn $3.2 million in 2019
-
iGaming Industry7 years ago
French Senator raises Loot Boxes to France’s Gambling Regulator
-
News7 years ago
Exclusive Interview with Miklos Handa (Founder of the email marketing solutions, “MailMike.net”), speaker at Vienna International Gaming Expo 2018
