SG’s Sea Ltd’s gaming division buoys Q2 earnings amidst widening losses

Photo: Sea Group

Sea Ltd’s digital entertainment arm – better known as its gaming division – continues to buoy the Singapore-based company amidst widening Q2 losses.

According to a statement, Sea Group’s net losses rose 11.7 per cent to $280.1 million in Q2 compared to the same quarter last year. The NYSE-listed company, however, has sharply reduced its group revenue losses (adjusted EBITDA) – slashing them by 93.2 per cent to close to $11 million in the April-June period this year from the same period a year ago.

Shopee – Sea Ltd’s e-commerce arm, continues to be the main drag on Sea’s earnings.

In Q2 2019, Shopee’s adjusted EBITDA losses climbed 31.8% to $248.3 million on-year, compared to losses for digital services at $18.1 million, and un-allocated expenses and other services at over $8 million. Digital entertainment meanwhile, remained the biggest buoy for the company, posting over 4-fold jump in $263.8 million EBITDA profits over the same period.

Digital Entertainment: More quarterly paying users

According to Sea Group, its quarterly active users rose 93.3 per cent on-year to 310.5 million year-on-year. Out of these, the number of paying users also expanded, accounting for 8.4% of its quarterly active users, compared to 4.1% during the same period in 2018.

Free Fire – Sea Group’s self-developed game title continues to rise in popularity. It is now the third most downloaded mobile game, and most downloaded battle royal game globally across Google Play and iOS app Stores in Q2.

Esports is a key growth area for Sea Group. In Q2, it partnered with Tencent to hold the Arena of Valor World Cup in Vietnam – the first time ever in Southeast Asia, as well as a Free Fire event in Brazil – both of which generated millions of views online.

Shopee: GMV grows, marketing expenses do too

Shopee registered a jump in gross merchandise value (GMV) in Q2 – leaping 72.3% to $3.8 billion compared to the same period last year. Its sales and marketing expenses also grew in tangent – rising 18.6% to $163.7 million, on the back of stiff competition across multiple markets in Southeast Asia and Taiwan.

Statistics, however, indicate that Shopee remains a go-to platform for online shopping. According to App Annie, Shopee came in tops across all its markets – in average monthly active users and downloads in the shopping category for both Google Play and iOS App Stores.

In Indonesia, Shopee registered over 110 million orders or a daily average of over 1.2 million orders. Shopee continues to post positive quarterly adjusted EBITDA figures in Taiwan.

Shopee competes with several e-commerce players regionally. Its competitors include names like Lazada, Tokopedia and Bukalapak.

Sea Group’s FY19 outlook

Moving forward, Sea Group is raising its FY19 guidance for both its digital entertainment and e-commerce divisions – a clear sign of confidence over its future growth outlook.

In a statement, Sea Group said it is raising its targeted adjusted revenue for digital entertainment to $1.6-1.7 billion, representing 142.0-157.2% growth from 2018. Its previous guidance was $1.2-$1.3 billion, representing 81.5% to 96.7% growth.

For Shopee, Sea Group is targeting adjusted revenue to be between $780-$820 million, representing 168.3-182.1% growth from 2018. Its previous guidance ranged between $630-$660 million, representing 116.7-127.0% growth.