Sea's FY2021 losses widen to US$1.5b, revenue up 127.5%

Singapore

SINGAPORE-BASED Sea, which owns e-commerce platform Shopee and games developer Garena, widened its net loss excluding share-based compensation attributable to ordinary shareholders of US$1.5 billion for FY2021 ending Dec 31, up 17.9 per cent from US$1.3 billion a year prior.

In a filing on Tuesday (Mar 1), the New York Stock Exchange-listed company reported a 127.5 per cent increase in FY2021 revenue from US$4.4 billion to US$9.9 billion. The increase is driven by growth across all business segments.

E-commerce FY2021 revenue jumped 156.8 per cent to US$4.6 billion, driven by growing adoption of products and services across e-commerce. Sea has set its guidance for e-commerce revenue for 2022 to be between US$8.9 billion and US$9.1 billion. The midpoint of the guidance represents a 75 per cent y-o-y increase.

E-commerce gross orders grew 116.5 per cent y-o-y in FY2021 totalling US$6.1 billion, while gross merchandise value jumped 76.8 per cent to US$62.5 billion. But adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) loss for the segment widened from US$1.3 billion to US$2.6 billion.

"We currently expect Shopee to achieve positive adjusted Ebitda before HQ costs allocation in South-east Asia and Taiwan by this year and SeaMoney to achieve positive cashflow by next year. As a result, we believe that by 2025, cash generated by Shopee and SeaMoney collectively will enable these 2 businesses to substantially self-fund their long-term growth," said Forrest Li, chairman and chief executive officer, Sea.

Brazil is a key market for Shopee's plan for Latin America, and Sea has a war chest of US$10 billion in cash and cash equivalents and short-term investments. According to Li, this means that there will be less reliance on Garena to fund Shopee.

Kristine Lau, analyst at research firm Third Bridge, noted the promising take-rate in Brazil but pointed out that the market has other issues that Shopee has to address. "Our experts however question its ability to scale the cross-border e-commerce segment and onboard local premium sellers. The market is also rife with logistical and regulatory challenges that other international players such as Amazon have found challenging to overcome," said Lau.

Under Sea's digital entertainment segment, which is Garena, revenue rose 114.3 per cent to US$4.3 billion. Bookings, which represent generally accepted accounting principles (GAAP) revenue plus change in deferred revenue, totalled US$4.6 billion, up 44.3 per cent.

Adjusted Ebitda for Garena grew 40 per cent to US$2.8 billion, and represented 60.4 per cent of bookings for FY2021.

"With many economies reopening further in the fourth quarter and into this year, we have observed some moderation in online activities and fluctuations in user engagement," said Li.

Digital financial services saw revenue grow 672.8 per cent to US$469.8 million. Total payment volume for the mobile wallet was up 119.6 per cent to US$17.2 billion.