Sea posts US$143.9 million loss for Q3 2023 with focus on e-commerce growth
NEW York-listed Sea fell back into the red, reporting a loss of US$143.9 million for the third quarter of 2023.
This comes after three quarters in the black, with the last time the company posted a loss in Q3 2022 of US$569.3 million.
The loss missed analysts’ consensus of a profit of US$102 million, and came as the company shifts its focus to growth for its e-commerce segment.
Sea said maximising long-term profitability for the e-commerce business requires scale and strong market leadership.
“To achieve this long-term objective, we look at three key operational factors: growth, current profitability, and market share gain,” said Forrest Li, Sea chairman and chief executive.
This shift to growth is predicated on recent developments, according to Li, with the emergence of new e-commerce competition.
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“Our move to self-sufficiency and profitability in the past quarters has significantly improved both our cash reserves and operational efficiency and we see a very good opportunity to build our e-commerce content ecosystem efficiently, especially in live streaming,” said Li.
There is a commitment to maintaining a strong cash position without relying on external funding, with Li noting that Sea’s cash position has increased over US$600 million year on year to over US$7.9 billion.
This puts the company in a strong position to pursue growth, with a focus on maintaining a financial discipline and a strong balance sheet for the long term, said Li. Any investment will be done within its means and at its pace.
New entrants on the e-commerce front, notably TikTok Shop, have intensified competition in the e-commerce front. Li believes that competition may accelerate market share consolidation, with players looking for profitability when competition ramps down.
“Investing in market share gain now will position us better with an even stronger market leadership,” said Li.
The company says it intends to grow its competitive moat of understanding its markets and strong execution across Shopee’s markets.
Shopee is looking to ride the tail wind of live streaming, which has become popular in Indonesia. Li sees this as an opportunity to build an e-commerce content ecosystem efficiently.
“We believe that live streaming e-commerce will become a sizeable and profitable part of our platform, and extend our long-term growth potential,” said Li.
Revenue for the quarter was up 4.9 per cent to US$3.3 billion, from US$3.2 billion the year prior. This was driven by the e-commerce segment, which increased 18.2 per cent to US$2.2 billion, from US$1.9 billion a year earlier.
The bulk of e-commerce revenue growth was from core marketplace revenue, which grew 31.7 per cent to US$1.3 billion. This was offset by value-added services revenue, which fell 4.2 per cent to US$592.8 million.
The adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) for Asia markets in the e-commerce segment widened to a loss of US$306.2 million in Q3 2023, compared to a loss of US$216.8 million a year before. Adjusted Ebitda for other markets narrowed to a loss of US$40.3 million, from a loss of US$279 million before.
“In this current period, we will prioritise investing in the business to increase our market share and further strengthen our market leadership,” said Li.
Digital financial services also contributed to revenue growth, rising 36.5 per cent to US$446.2 million.
Sea’s revenue growth was offset by the digital entertainment segment, which fell 33.7 per cent to US$592.2 million from US$892.9 million.
Both active users and paying users were down in Q3 2023. Quarterly active users fell to 544.1 million from 544.5 million the quarter before, and quarterly paying users fell to 40.5 million from 43.1 million.
Shares of Sea fell as much as 12 per cent in pre-market trading on Tuesday.
*Amendment note: The article previously stated that Sea’s preceding three quarters from Q3 2022 was profitable, instead of the preceding three quarters from Q3 2023.
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