E-COMMERCE and gaming company Sea recorded a US$23 million net loss for the first quarter ended Mar 31, reversing its year-ago US$87.3 million profit.
The company’s e-commerce arm Shopee hit record highs in quarterly orders, gross merchandise value (GMV) and revenue – but this came with higher marketing costs, as Sea fends off e-commerce challengers TikTok Shop and Temu.
However, Sea chief executive Forrest Li said in an earnings statement on Tuesday (May 14) that the company has a “clear roadmap for profitable growth”, and is “well on track” to deliver on its full-year guidance.
Sea’s total revenue beat street estimates to grow 22.8 per cent in Q1 to US$3.7 billion. Gross profit, however, grew by a smaller margin of 9.7 per cent to US$1.6 billion, amid higher cost of revenue.
The company’s net earnings was weighed down by a 14.8 per cent increase in operating expenses to US$1.5 billion. Sales and marketing expenses, in particular, near-doubled to US$769.6 million, from US$400.1 million a year ago.
On the basis of adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda), Sea’s Q1 bottom line stood at US401.1 million, down 20.9 per cent.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Growth but with higher costs
Sea’s e-commerce revenue for Q1 hit a record high at US$2.7 billion, up 32.9 per cent. This came on the back of record GMV of US$23.6 billion, an increase of 36.3 per cent.
The topline growth was however accompanied by an adjusted Ebitda loss of US$21.7 million in the segment, reversed from the year-ago US$207.7 million Ebitda. The shift comes as e-commerce sales and marketing costs doubled in the quarter US$675.9 million.
On the digital-entertainment front, Sea’s topline growth was less rosy, with revenue from its gaming arm Garena falling 15.1 per cent to US$458.1 million.
The company noted an increase in quarterly paying users, up 29.8 per cent to 48.9 million. But average bookings per user was down at US$0.86, compared to US$0.94 a year ago.
That said, Li expressed confidence in Garena’s popular Free Fire game as a growth engine.
“In its seventh year, Free Fire is still one of the largest mobile games in the world by user scale, and remains highly effective in attracting new users. We are confident of building Free Fire into an evergreen franchise,” he said.
Sea’s third business and newest segment, digital financial services branded SeaMoney, also saw growth in the quarter. Revenue was up 21 per cent to US$499.4 million, while adjusted Ebitda stood at US$148.7 million, up 50.3 per cent.
The revenue growth was driven by an expansion of loans, with the outstanding consumer and SME loans principal at US$3.3 billion as of Mar 31, up 28.7 per cent. The non-performing loans ratio – for loans past due by more than 90 days – was 1.4 per cent, unchanged from the previous quarter.
Sea shares were up 7.7 per cent to US$69.40 in pre-market trading, as of 7 pm Singapore time on Tuesday.
