Sea Ltd Latest Earnings: Solid Growth, But Net Losses Remained High

Sea Ltd (NYSE: SE) is a technology company based out of Singapore.

The company operates mainly in Southeast Asia and Taiwan. Its business activities span across three main areas: online gaming, e-commerce, and digital financial service.

On Tuesday, the company reported its 2019 fourth-quarter earnings. Here are some highlights from the earnings announcement.

Key financials

Let’s start by looking at the company’s financials.

Total adjusted revenue grew 133.5% year-on-year to US$ 909.1 million. Total gross profit was US$264.9 million, compared to US$(8.0) million for the fourth quarter of 2018.

Consequently, total adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) improved from US$203.6 million last year to US$104.9 million this quarter.

Overall, that means there was a financial improvement across all key metrics.

Digital entertainment

Garena, Sea’s online gaming platform, delivered a solid performance in the fourth quarter. Here are some numbers:

Adjusted revenue was up by 107.4% year-on-year to US$479.9 million. Similarly, adjusted EBITDA jumped 153.2% year-on-year to US$266.4 million. Adjusted EBITDA grew faster because of margin expansion, which increased from 45.5% last year to 55.5%.

The company also saw strong growth in operation. Quarterly active users (QAUs) reached 354.7 million, marking an increase of 64.1% year-on-year. Paying users now account for 9.4% of QAUs, up from 5.5% in the same period last year. It’s also worth mentioning that there was an increase in average revenue per user (ARPU). ARPU increased from US$ 1.1 to US$ 1.4.

So far, so good.

E-commerce

Sea’s e-commerce segment Shopee also delivered outstanding growth during the quarter.

Adjusted revenue was US$358.3 million, up 182.3% year-on-year from US$126.9 million. Out of this, marketplace revenue grew 223.6% year-on-year to US$283.5 million. This was due to a 64.8% increase in gross merchandise value (GMV) and an increase in take-rate. Adjusted revenue as a percentage of total GMV increased to 6.3%, up from 3.7% last year.

Unlike Garena, Shopee did report a loss for the quarter. Adjusted EBITDA was US$306.2 million as compared to US$277.5 million for the fourth quarter of 2018.

Adjusted EBITDA remained in negative territory as Shopee continued to invest and grow its user base.

Key takeaway

Sea Ltd reported solid topline growth across all segments.

Looking ahead, Garena should continue to deliver high profits as it continues monetization efforts. Shopee, on the other hand, will likely remain red in the coming quarters as it invests in growing its user base.

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