Sea's Q3 loss deepens to US$450.1m, revenue up 122%

Claudia Chong

Published Tue, Nov 16, 2021 · 09:27 PM

SINGAPORE-BASED Sea, which owns e-commerce platform Shopee and game developer Garena, reported on Tuesday a third-quarter net loss attributable to ordinary shareholders of US$450.1 million, after excluding share-based compensation. The net loss widened from US$340.8 million a year ago. (see Amendment note)

Revenue however rose 121.8 per cent to US$2.7 billion for the three months ended Sep 30. Gross profit increased 147.5 per cent to US$1 billion.

Loss per share was US$0.84, compared with US$0.69 a year ago, missing an estimate of US$0.762 based on a Bloomberg poll of 5 analysts.

Sea, which is listed on the New York Stock Exchange, reported higher operating expenses during the quarter, with sales and marketing comprising two-thirds of costs. Operating expenses rose 105.8 per cent to US$1.5 billion.

Under the e-commerce segment, revenue increased 134.4 per cent from the year before to reach US$1.5 billion.

Sea again raised its guidance for e-commerce for the full year of 2021. It expects revenue for e-commerce to be between US$5 billion and US$5.2 billion, up from US$4.7 billion to US$4.9 billion. This represents a 135.3 per cent growth from 2020 at the midpoint of the revised guidance.

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Gross orders rose 123.2 per cent to 1.7 billion while gross merchandise value increased 80.6 per cent to US$16.8 billion.

But adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) loss for the segment widened to US$683.8 million from US$301.6 million in Q3 2020. Sea said this translated to an Ebitda loss per order of US$0.41, in line with the year before. Ebitda was adjusted for share-based compensation, and depreciation and amortisation expenses.

Kristine Lau, an analyst at research house Third Bridge, said Shopee's increased commission rate across Asean and Taiwan signals increasing pricing power due to market share gains. "Shopee’s swift merchandising strategy and aggressive campaigns have reinforced its leading positioning. Its expansion into other seller services such as advertising and Shopee Express also contribute towards steady growth in both first-party and third-party seller take rate expansion," she said.

She added that the regional e-commerce industry remains highly competitive, with Tokopedia and Lazada in aggressive expansion mode. "However, our experts point out Shopee’s strong user traffic and particular edge in advertising offerings also help onboard and retain branded retailers, leading to a network effect of wider stock keeping unit selection and order volume growth."

Under Sea's digital entertainment segment, which is the group's gaming arm, revenue rose 93.2 per cent to US$1.1 billion. Bookings, which represent generally accepted accounting principles (GAAP) revenue plus change in deferred revenue, totalled US$1.2 billion, up 29.2 per cent.

Adjusted Ebitda was up 22.3 per cent to US$715.1 million. Ebitda was adjusted for share-based compensation, depreciation and amortisation expenses, and the net effect of changes in deferred revenue and its related cost for the segment.

Adjusted Ebitda, however, represented 58.6 per cent of bookings, lower than the 61.9 per cent recorded in Q3 last year.

Quarterly active users rose 27.4 per cent to reach 729 million; quarterly paying users grew 42.7 per cent to 93.2 million. Sea said average bookings per user was US$1.70, in line with that for Q3 2020.

The group added that it continues to see strong growth in the adoption of SeaMoney's offerings. The total payment volume for its mobile wallet was US$4.6 billion in Q3, an increase of 111 per cent.

Quarterly paying users for the mobile wallet services increased to 39.3 million from 32.7 million in Q2 2021.

The group had US$12.5 billion of cash on its balance sheet as at end-September, up from US$7 billion as at end-Dec 2020. Sea raised US$6.3 billion in the largest equity offering of the year in September this year.

On the back of its earnings report on Tuesday, the group announced the appointment of Chris Feng as group president effective Jan 1, 2022. Feng, who drove Shopee's meteoric rise as an e-commerce player in South-east Asia, will continue in his roles as chief executive officer of Shopee and SeaMoney.

Shares of Sea rose 0.51 per cent or US$1.73 to close at US$343.02 on Monday in New York.

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Amendment note: Net loss and loss per share figures were amended to include effects of share-based compensation.