Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the first quarter ended March 31, 2024.

“I am pleased to share that we are kicking off 2024 with a strong quarter. All our three businesses have delivered strong growth with an improved profit profile,” said Forrest Li, Sea’s Chairman and Chief Executive Officer. Referring to the macro environment challenges in the past few years, he said, “Going through this period has made us leaner, fitter, and savvier. We are now much more confident of our ability to weather headwinds well, and adapt quickly to changing environments.”

On the e-commerce front, Mr Li said, “Shopee delivered strong growth this quarter, achieving its highest ever quarterly orders, GMV, and revenue.” He pointed to Shopee’s integrated logistics capability as a key differentiating factor of service quality, saying SPX Express had become “one of the fastest and most extensive logistics operators in our markets today, greatly enhancing our customer experience.”

On digital financial services, Mr Li said, “SeaMoney has continued its strong growth momentum and profitability into 2024 while maintaining prudent risk management.” Commenting on future growth, Mr Li said, “We anticipate further growth for our digital financial services business throughout the year. As we healthily grow our user base, we will be able to offer a broader set of financial services to meet our users’ needs in the future.”

On digital entertainment, Mr Li said, “We are pleased to share that Garena is back to positive growth, led by Free Fire’s strong performance across markets.” Specifically on Free Fire, Mr Li commented, “In its 7th 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.”

In conclusion, Mr Li said, “We have a clear roadmap for profitable growth. Our results in the first quarter have given us a strong start to 2024, and we are well on-track to deliver our full-year guidance.”

First Quarter 2024 Highlights

• Group
  • Total GAAP revenue was US$3.7 billion, up 22.8% year-on-year.
  • Total gross profit was US$1.6 billion, up 9.7% year-on-year.
  • Total net loss was US$(23.0) million, as compared to total net income of US$87.3 million for the first quarter of 2023.
  • Total adjusted EBITDA¹ was US$401.1 million, as compared to US$507.2 million for the first quarter of 2023.
  • As of March 31, 2024, cash, cash equivalents, short-term investments, and other treasury investments² were US$8.6 billion, representing a net change of US$(12.3) million from December 31, 2023. This included US$143.9 million of cash consideration used to repurchase US$171.9 million aggregate principal amount of the 0.25% convertible senior notes due 2026 during the first quarter.
    
    
    
    
• E-commerce
  • Gross orders totaled 2.6 billion for the quarter, increasing by 56.8% year-on-year.
  • GMV was US$23.6 billion for the quarter, increasing by 36.3% year-on-year.
  • GAAP revenue was US$2.7 billion, up 32.9% year-on-year.
  • GAAP revenue included US$2.4 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 32.7% year-on-year.
    • Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 47.0% year-on-year to US$1.7 billion.
    • Value-added services revenue, mainly consisting of revenues related to logistics services, was up 7.9% year-on-year to US$722.5 million.
  • Adjusted EBITDA¹ was US$(21.7) million, as compared to US$207.7 million for the first quarter of 2023.
    • Asia markets recorded adjusted EBITDA of US$11.5 million, as compared to US$275.8 million for the first quarter of 2023.
    • Other markets recorded adjusted EBITDA of US$(33.2) million, as compared to US$(68.1) million for the first quarter of 2023.
    • In Brazil, unit economics continued to improve, with contribution margin³ loss per order improving 87.9% year-on-year to US$(0.04) for the quarter.
      
      
      
      
• Digital Financial Services
  • GAAP revenue was US$499.4 million, up 21.0% year-on-year.
  • Adjusted EBITDA¹ was US$148.7 million, up 50.3% year-on-year.
  • Digital financial services revenue and operating income are primarily attributed to the consumer and SME credit business. As of March 31, 2024, consumer and SME loans principal outstanding was US$3.3 billion, up 28.7% year-on-year. This consists of US$2.7 billion on-book and US$0.6 billion off-book loans principal outstanding⁴.
  • Non-performing loans past due by more than 90 days as a percentage of consumer and SME loans principal outstanding, which includes both on-book and off-book loans principal outstanding⁴, was 1.4%, as compared to 1.4% in the fourth quarter of 2023, stable quarter-on-quarter.
    
    
    
    
• Digital Entertainment
  • Bookings⁵ were US$512.1 million, up 10.8% year-on-year.
  • GAAP revenue was US$458.1 million, as compared to US$539.7 million for the first quarter of 2023.
  • Adjusted EBITDA¹ was US$292.2 million, up 27.0% year-on-year.
  • Adjusted EBITDA represented 57.1% of bookings for the first quarter of 2024, as compared to 49.8% for the first quarter of 2023.
  • Quarterly active users were 594.7 million, up 21.0% year-on-year.
  • Quarterly paying users were 48.9 million, up 29.8% year-on-year. Paying user ratio was 8.2%, as compared to 7.7% for the first quarter of 2023.
  • Average bookings per user were US$0.86, as compared to US$0.94 for the first quarter of 2023.
    
    
    
    

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenue

Our total GAAP revenue increased by 22.8% to US$3.7 billion in the first quarter of 2024 from US$3.0 billion in the first quarter of 2023.

• Digital Entertainment: GAAP revenue was US$458.1 million in the first quarter of 2024 compared to US$539.7 million in the first quarter of 2023. Despite the increase in bookings during the first quarter of 2024, the decrease in GAAP revenue was primarily due to lower recognition of accumulated deferred revenue due to lower bookings in previous quarters.
• E-commerce and other services: GAAP revenue increased by 30.6% to US$3.0 billion in the first quarter of 2024 from US$2.3 billion in the first quarter of 2023, primarily driven by the GMV growth of our e-commerce business and the growth of our credit business.
• Sales of goods: GAAP revenue increased by 34.9% to US$326.2 million in the first quarter of 2024 from US$241.8 million in the first quarter of 2023.

Cost of Revenue

Our total cost of revenue was US$2.2 billion in the first quarter of 2024, as compared to US$1.6 billion in the first quarter of 2023.

• Digital Entertainment: Cost of revenue decreased by 10.0% to US$156.0 million in the first quarter of 2024 from US$173.4 million in the first quarter of 2023.
• E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined was US$1.7 billion in the first quarter of 2024, as compared to US$1.2 billion in the first quarter of 2023, primarily driven by an increase in logistics costs as orders volume grew.
• Cost of goods sold: Cost of goods sold increased by 47.6% to US$309.5 million in the first quarter of 2024 from US$209.7 million in the first quarter of 2023.

Other Operating Income

Our other operating income was US$44.0 million and US$57.9 million in the first quarter of 2024 and 2023, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers.

Sales and Marketing Expenses

Our total sales and marketing expenses increased by 92.3% to US$769.6 million in the first quarter of 2024 from US$400.1 million in the first quarter of 2023. The table below sets forth breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”).

General and Administrative Expenses

Our general and administrative expenses decreased by 12.8% to US$290.9 million in the first quarter of 2024 from US$333.4 million in the first quarter of 2023.

Provision for Credit Losses

Our provision for credit losses decreased by 8.8% to US$161.8 million in the first quarter of 2024 from US$177.4 million in the first quarter of 2023.

Research and Development Expenses

Our research and development expenses decreased by 5.0% to US$304.4 million in the first quarter of 2024 from US$320.5 million in the first quarter of 2023.

Impairment of Goodwill

We recorded nil impairment of goodwill in the first quarter of 2024, compared to US$117.9 million in the first quarter of 2023.

Non-operating Income or Losses, Net

Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss), foreign exchange gain (loss) and gain (loss) on debt extinguishment. We recorded a net non-operating loss of US$(17.5) million in the first quarter of 2024, as compared to a net non-operating income of US$22.5 million in the first quarter of 2023. The non-operating loss in the first quarter of 2024 was primarily due to investment losses of US$(111.2) million recognized, partially offset by interest income of US$87.1 million and a US$27.1 million net gain from debt extinguishment.

We recognized a gain on debt extinguishment of US$27.1 million in the first quarter of 2024 as the Company repurchased US$171.9 million aggregate principal amount of the 0.25% convertible senior notes due 2026 (the “2026 CB”), for a cash consideration of US$143.9 million. As of March 31, 2024, approximately US$1.6 billion aggregate principal amount of the 2026 CB remained outstanding.

Income Tax Expense

We had a net income tax expense of US$78.8 million and US$61.9 million in the first quarter of 2024 and 2023, respectively.

Net Loss or Income

As a result of the foregoing, we had net loss of US$(23.0) million in the first quarter of 2024, as compared to net income of US$87.3 million in the first quarter of 2023.

Basic and Diluted Loss or Earnings Per Share Attributable to Sea Limited’s Ordinary Shareholders

Basic loss per share attributable to Sea Limited’s ordinary shareholders was US$(0.04) in the first quarter of 2024, compared to basic earnings per share attributable to Sea Limited’s ordinary shareholders of US$0.16 in the first quarter of 2023.

Diluted loss per share attributable to Sea Limited’s ordinary shareholders was US$(0.04) in the first quarter of 2024, compared to basic earnings per share attributable to Sea Limited’s ordinary shareholders of US$0.15 in the first quarter of 2023.

Webcast and Conference Call Information

The Company’s management will host a conference call today to review Sea’s business and financial performance.

Details of the conference call and webcast are as follows:

A replay of the conference call will be available at the Company’s investor relations website (www.sea.com/investor/home). An archived webcast will be available at the same link above.

About Sea Limited

Sea Limited (NYSE: SE) is a leading global consumer internet company founded in Singapore in 2009. Its mission is to better the lives of consumers and small businesses with technology. Sea operates three core businesses across digital entertainment, e-commerce, as well as digital financial services, known as Garena, Shopee and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest pan-regional e-commerce platform in Southeast Asia and Taiwan and has a significant presence in Latin America. SeaMoney is a leading digital financial services provider in Southeast Asia and is growing its presence in Brazil.

Forward-Looking Statements

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “could,” “will,” “expect,” “anticipate,” “aim,” “future,” “intend,” “plan,” “believe,” “estimate,” “likely to,” “potential,” “confident,” “guidance,” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Sea’s strategic and operational plans, contain forward-looking statements. Sea may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases, and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Sea’s goals and strategies; its future business development, financial condition, financial results, and results of operations; the expected growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the markets where it operates, including segments within those industries; expected changes or guidance in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the expected growth of its digital entertainment, e-commerce and digital financial services businesses; its expectations regarding growth in its user base, level of engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries, including the effects of any government orders or actions on its businesses; general economic, political, social and business conditions in its markets; and the impact of widespread health developments. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to help evaluate our operating performance:

• “Adjusted EBITDA” for our digital entertainment segment represents operating income (loss) plus (a) depreciation and amortization expenses, and (b) the net effect of changes in deferred revenue and its related cost for our digital entertainment segment. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects.
• “Adjusted EBITDA” for our e-commerce segment, digital financial services segment and other services segment represents operating income (loss) before share-based compensation and impairment of goodwill plus depreciation and amortization expenses. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects.
• “Total adjusted EBITDA” represents the sum of adjusted EBITDA of all our segments combined, plus unallocated expenses. We believe that the total adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects.

These non-GAAP financial measures have limitations as analytical tools. None of the above financial measures should be considered in isolation or construed as an alternative to revenue, net loss/income, or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to Sea’s data. We compensate for these limitations by reconciling the non-GAAP financial measures to their nearest U.S. GAAP financial measures, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on any single financial measure.

The tables below present selected financial information of our reporting segments, the non-GAAP financial measures that are most directly comparable to GAAP financial measures, and the related reconciliations between the financial measures. Amounts are expressed in thousands of US dollars (“$”) except for number of shares & per share data.

Net cash used in investing activities amounted to US$854 million for the three months ended March 31, 2024. This was primarily attributable to net placement of US$423 million in securities purchased under agreements to resell, time deposits and liquid investment products, for better cash yield management, increase in loans receivable of our credit business of US$377 million and purchase of property and equipment of US$27 million to support the existing operations. Net cash generated from financing activities amounted to US$184 million for the three months ended March 31, 2024. This was primarily attributable to an increase in bank customer deposits of US$363 million, offset by the cash used in repurchase of convertible notes of US$144 million as well as net repayment from other funding sources related to the credit business of US$36 million.

UNAUDITED SEGMENT INFORMATION

The Company has three reportable segments, namely e-commerce, digital financial services and digital entertainment. The Chief Operating Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment. Amounts are expressed in thousands of US dollars (“$”).

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