Sea Group’s Q3 net losses narrow but Shopee remains the big drag

Photo: Sea Group

NYSE-listed Sea Ltd on Tuesday reported narrower net losses in the third quarter ending September 30, 2019, but its e-commerce arm Shopee continued to be the main drag on overall performance.

According to its statement, Sea’s net losses declined 5.5 per cent to a negative $206.1 million in Q3 compared to the same quarter last year. Group revenues expanded nearly two-fold to $610.1 million but that was nearly offset by high operating losses of $187.5 million and a more than 10x growth in taxes to $27.4 million over the same period.

Sea Group’s total adjusted EBITDA stood at a negative $31 million in Q3, compared to a negative $183.7 million in the previous corresponding quarter, registering an 83.2 per cent reduction in revenue losses.

The group saw a 39.6 per cent increase in sales and marketing expenses at $251.8 million in the third quarter of 2019 from $180.3 million in the third quarter of 2018. The rise in expenses is primarily on account of the launch of new games in the digital entertainment division and ramping up brand marketing efforts in the e-commerce business.

Digital entertainment division registers growth

Digital entertainment – better known as Sea Group’s gaming division – continues to post robust growth.

The adjusted EBITDA for this segment was up nearly 4x to $266 million for Q3 compared to the year before.

“Improvement in gross profit margins was largely due to higher revenue contribution from our self-developed game,” the company said, in its statement.

Sea Group’s gaming division saw a significant rise in quarterly active users – up 82.3 per cent over the same period. Out of these, the portion of paying users also grew, comprising 9.1 per cent of all its quarterly active users compared to 4.1 per cent the year before.

Free Fire, one of its top performing game titles, continues to see success across regions globally. The mobile game was the highest grossing mobile game in Latin America and Southeast Asia in Q3, and is among the top five most downloaded mobile games globally across Google Play and iOS App Stores, according to App Annie data.

Sea Group added it will continue to expand its focus on e-sports and community building activities, including the Free Fire World Series 2019 – one of its largest global e-sports tournaments. For the final match of the Brazil qualifiers, the firm recorded over 1 million concurrent viewers online.

Shopee: Losses mount for e-commerce

Losses for Sea Group’s e-commerce unit Shopee continue to mount.

The division’s adjusted EBITDA losses deepened 18.1 per cent to a negative $253.7 million for the third quarter of 2019 compared to a year ago. Sales and marketing expenses contributed to these losses, rising 30.2 per cent on-year to $199.2 million over the same period.

Sea Group however continues to see strong growth in Indonesia – calling itself the largest e-commerce platform in that market by orders.

The company posted over 138 million orders in Q3, or a daily average of more than 1.5 million orders – a jump of 117.8 per cent on-year. This contributed to healthy Gross Merchandise Value (GMV) growth, which rose by almost 70 per cent on-year to $4.6 billion in Q3 2019.

According to App Annie, Shopee was ranked first by average monthly active users and downloads in the Shopping category across the Google Play and iOS App Stores combined in the third quarter of 2019.

Sea Group’s FY19 outlook

Sea Group has raised its revenue guidance marginally for both its digital entertainment and e-commerce arms for FY19.

In a statement, Sea Group expects adjusted revenue for digital entertainment to be $1.7-$1.8 billion for FY19, representing 157.2-172.3% growth from 2018. Its previous guidance was $1.6-$1.7 billion in Q2.

Sea also expects adjusted revenue for Shopee to be $880-$920 million, representing 202.7-216.5% growth from FY2018. This compares to the previously disclosed guidance of between $780-$820 million last quarter.

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.