Sea's Q1 net loss rises 50.3% even as revenue more than doubles

SINGAPORE-BASED Sea Ltd, which owns e-commerce platform Shopee and game developer Garena, reported on Tuesday a net loss of US$422.1 million for the quarter ended March 31, 2021, up 50.3 per cent from a year earlier.

The higher loss came even as Q1 revenue more than doubled to US$1.76 billion in 2021, from US$714.9 million in the previous year.

Sea, which is listed on the New York Stock Exchange, reported an increase in operating expenses during the quarter, rising to US$993.8 million from US$474.5 million in Q1 2020, with around two-thirds of expenses coming from sales and marketing.

Total adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) was US$88.1 million, compared with a loss of US$69.9 million a year ago. Ebitda was adjusted for share-based compensation, depreciation and amortisation expenses, as well as the net effect of changes in deferred revenue and its related cost for the digital entertainment segment.

Under the digital entertainment segment, which is Sea's gaming arm, revenue rose 111.4 per cent from the previous year to US$781.3 million. Bookings, which represent GAAP (generally accepted accounting principles) revenue plus change in deferred revenue, totalled US$1.1 billion, up 117.4 per cent.

Average bookings per user were also higher at US$1.7 compared to US$1.3 during the same period last year. Meanwhile, quarterly active users also reached 648.8 million, up 61.4 per cent year-on-year.

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Sea said its hit game, Free Fire, continued to be the highest grossing mobile game in Latin America, South-east Asia and India in Q1 2021. The game has been in the lead in Latin America and South-east Asia for the past seven consecutive quarters.

Adjusted Ebitda for the digital entertainment segment rose to US$717.3 million for Q1 2021, from US$298.4 million a year earlier.

The e-commerce segment saw revenue more than triple year on year in Q1, rising from US$263.2 million to US$922.3 million. Gross orders totalled 1.1 billion, up 153 per cent from Q1 2020, while gross merchandise value doubled to US$12.6 billion.

Sea noted that adjusted Ebitda loss per order fell to US$0.38 from US$0.61 in Q1 2020. The e-commerce segment recorded an adjusted Ebitda loss of US$412.9 million, up from US$264.1 million in Q1 2020.

Sea said that Shopee ranked on top in the shopping category by monthly active users and total time spent in app on Android in both South-east Asia and Taiwan for Q1 2021, according to App Annie.

Under digital financial services, Sea said it continues to see "strong growth" in the adoption of SeaMoney's offerings. Its mobile wallet total payment volume exceeded US$3.4 billion for Q1 2021, more than triple that from a year ago. Even so, the segment recorded an adjusted Ebitda loss of US$153.1 million for Q1 2021, up from the US$93.1 million loss the prior year.

In an earnings call on Tuesday, Sea’s chairman Forrest Li said the Q1 results are a “great start to the year”. “Our strong performance, in terms of user growth and engagement, shows that digital adoption is still rising healthily as the communities we serve continue to embrace the benefits of online lifestyles,” he said. “Even when offline activity continues to resume, we expect rising digital adoption to be a tailwind for Sea’s sustained growth”.

Last week, MSCI announced that Sea will be included in the MSCI Singapore Index as of the close of May 27, 2021. MSCI had announced in November 2020 that foreign listings will become eligible for the MSCI Singapore Indices from the May 2021 semi-annual index review (SAIR).

Eligible foreign listed securities will be initially included at 5 per cent of their free float adjusted market capitalisation as part of the May 2021 SAIR. The inclusion factor will be increased to 25 per cent, 50 per cent and 100 per cent in subsequent index reviews. Sea's initial weight in the MSCI Singapore Index during the May SAIR was 1.85 per cent.

Sea shares fell on Tuesday's open, and traded at US$206.87 as at 9.45am US time, down 5.6 per cent.