Sea stays above water, posts US$153.3 million Q3 profit

GAMING and e-commerce player Sea reported a US$153.3 million net profit for the third quarter of 2024, reversing from a US$144 million loss a year ago, and marking a second consecutive quarter in the black.

The figure beat estimates from a Bloomberg poll of 13 analysts, which projected a net profit of US$128.6 million. Revenue for the quarter also rose 30.8 per cent to US$4.3 billion from US$3.3 billion in Q3 2023.

“I am very proud that we also improved our profitability while getting back to high growth,” said Forrest Li, Sea’s chairman and CEO.

The e-commerce segment, Shopee, posted a positive adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) of US$34.4 million in Q3 2024, up from a loss of US$346.5 million in Q3 2023. Sea is now positive adjusted Ebitda across all markets in e-commerce, with Asia recording US$30.9 million and other markets US$3.5 million.

The segment recorded a 42.6 per cent increase in revenue to US$3.2 billion for Q3 2024, from US$2.2 billion a year ago. E-commerce revenue consists of marketplace revenue, which is made up of transaction fees and advertising revenues, and value-added services revenue, which comprises logistics services.

Marketplace revenue jumped 49.3 per cent to US$2 billion in Q3 from US$1.3 billion. Value-added services revenue rose 29.4 per cent to US$767.2 million from US$592.8 million in Q3 2023.

Shopee’s gross merchandise value rose 25.2 per cent year on year to US$25.1 billion from US$20.1 billion.

Market rationalisation has led to an industry-wide increase in commission take rates, with Li noting that Shopee has improved its take rate in Q3 2024. Ad paying sellers have also increased in tandem with value-added services revenue, up 10 per cent compared to Q3 2023, with ad revenue per seller up 25 per cent in Q3 2024 from Q3 2023.

On the ad side, Shopee’s take rate has risen 0.3 per cent in Q3 2024 compared to Q3 2023, said Chris Feng, president of Sea. The company has invested in revamping and improving the ad system to better match ads to users, improving conversion rates.

“The bigger pool that we have, the easier we can match to our user queries,” said Feng.

Outside Asia, Shopee is seeing traction in Brazil, with average monthly active buyers up about 40 per cent in Q3 2024 compared to Q3 2023. Brazil has also achieved positive adjusted Ebitda for the first time after launching in the country in 2019.

The digital financial services segment booked a 38 per cent increase in revenue to US$615.7 million, up from US$446.2 million. The consumer and small and medium enterprise (SME) loans principal outstanding stood at US$4.6 billion as at Sep 30, 2024, up 73.2 per cent from US$2.4 billion a year ago.

The non-performing loans due by more than 90 days stood at 1.2 per cent of consumer and SME loans principal outstanding, lower than the 1.6 per cent in Q3 2023.

Currently, the average loan outstanding per user is less than US$200 with a tenure period of a few months. More efforts have been made to grow loans outside Shopee, especially in Indonesia. Now more than half of the loan book comes from loans given outside Shopee.

In the digital entertainment segment, revenue for the quarter was down at US$497.8 million from US$592.2 million. The revenue for the quarter decreased as a bigger portion of revenue was deferred due to users’ average lifespan increasing from efforts in user engagement.

Bookings were up 24.3 per cent to US$556.5 million from US$447.9 million.

Quarterly active users stood at 628.5 million in Q3 2024, up 15.5 per cent year on year from 544.1 million.

Quarterly paying users were up 23.9 per cent to 50.2 million from 40.5 million, with the paying user ratio at 8 per cent compared to 7.5 per cent the year prior.

Sea currently has no plan to return capital back to shareholders via share buybacks. But the company remains open minded in looking at all opportunities and options in creating better value for shareholders, said Li. 

“I think when there’s a certain opportunity that appears, we will come up with a plan and communicate with shareholders timely and accordingly,” he added.