Sea Ltd nearly doubles 2019 adjusted revenue to $2.9b, net losses hit $1.4b

Photo: Sea Ltd

NYSE-listed consumer internet company Sea Ltd on Tuesday reported a substantial increase in its adjusted revenue for 2019 on the back of strong performance by its digital entertainment business.

The Singapore-headquartered company’s total adjusted revenue for the year was $2.9 billion, up from $1 billion for the full year of 2018. It reported adjusted EBITDA losses of $178.6 million for the year, a 74 per cent drop from $694 million in the previous fiscal.

However, the group’s net losses jumped 51.7 per cent to $1.46 billion for the year. 

Garena, its digital entertainment arm, reported an adjusted EBITDA of $1 billion, up 289 per cent from 2018. Meanwhile, its e-commerce unit Shopee continued to remain a drag on performance, posting an adjusted EBITDA loss of $1 billion in 2019. It did, however, turn gross profit positive in the fourth quarter of the year. Sea chairman and group CEO Forrest Li attributed the improvement to “economies of scale” and “improved operating efficiency.” 

In its guidance for 2020, Sea said it expects adjusted revenue for Garena to be between $1.9 billion and $2 billion, and for Shopee to be between $1.7 billion and $1.8 billion.

Fourth-quarter highlights

The group posted total adjusted revenue of $909.1 million, up 133.5 per cent year-on-year, in the fourth quarter of 2019 and a gross profit of $264.9 million.

Adjusted quarterly revenue for the digital entertainment business was $479.9 million, up 107.4 per cent on a yearly basis. “The growth was primarily driven by the increase of our active user base and deepened paying user penetration, and in particular, the continued success of our self-developed game Free Fire,” said Sea group CFO Tony Hou.

Shopee’s adjusted revenue for the fourth quarter stood at $358.3 million, up 182.3 per cent year-on-year. This included $283.5 million of marketplace revenue, which mainly comprises transaction-based fees, advertising income and revenue generated from other value-added services, and $74.7 million of product revenue generated from direct sales.

Garena continues to soar

During the group’s earnings call, Li drew attention to the first decade milestones of the digital entertainment division. Growth in 2019 was powered by Garena’s flagship mobile game Free Fire that hit a peak of 60 million daily active users during the year. 

“The success of Free Fire has significantly expanded our total addressable markets globally. For example, the Latin America or LatAm markets, with their large and faster growing populations and faster deepening mobile penetration have become the second largest regional market for our Digital Entertainment business after Southeast Asia and Taiwan,” Li said during the company’s earnings call.

Sea recently acquired Canada-based gaming studio Phoenix Labs whose flagship game Dauntless is playable across multiple platforms and claims to have 20 million users.  The company declined to be drawn into details about its next big game.

Shopee offers a silver lining

In 2019, Shopee achieved over $17 billion in gross merchandise value (GMV) with over 1.2 billion orders. The e-commerce business also saw adjusted revenue as a percentage of total GMV reach 5.4 per cent during the year, up from 2.8 per cent in 2018.

In another positive, Shopee’s adjusted EBITDA loss per order decreased year-on-year from $1.34 in the fourth quarter of 2018 to $0.70 in the fourth quarter of 2019.

“Shopee is in an ideal position to continue capturing the lion’s share of the growth in our region’s e-commerce market. We are increasingly benefiting from the scale and brand recognition we enjoy as the clear industry leader,” Li added.

SeaMoney and the digital financial services opportunity

In the fourth quarter of 2019, Sea introduced SeaMoney as the umbrella brand for its digital financial services (DFS) business.

SeaMoney consolidates the group’s e-wallet services, payment processing, credit-related digital financial offerings, and other financial products offered through a multitude of brands such as AirPay, ShopeePay and ShopeePayLater.

In the fourth quarter, paying users for e-wallet services exceeded 8 million, driven by the increased integration of its e-wallets with the Shopee platform. 

Li said Sea will further expand the use cases of its e-wallet services outside of its own platforms to include other online and offline merchants. The business has also piloted consumer credit programmes to build its credit assessment capabilities.

“We are the market leader in both e-commerce and digital entertainment, which are two of the largest, fastest growing and highest quality and frequency use cases in the digital economy served by DFS,” said Li. 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.