Insights

Sea Ltd’s Latest Earnings: Explosive Growth Continues Amid Covid-19

Sea Ltd (NYSE: SE) delivered robust growth across its major segments. Here are some key takeaways from its latest results. – Sea Ltd stock

Sea Ltd (NYSE: SE) is a technology company based out of Singapore. The company operates mainly in the Southeast Asia and Taiwan markets.

Its business activities span across three main areas – online gaming, e-commerce, and digital financial services.

On Tuesday, the company reported its second-quarter results for 2020. Here are some highlights from the earnings announcement.

Key financials

I’ll start by looking at the numbers for the quarter ended June 30, 2020.

Total adjusted revenue jumped 93.4% year-on-year to US$1.3 billion. Total gross profit was US$200.8 million, up 106.1% year-on-year from US$ 97.4 million.

Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) improved from US$(11.0) million last year to US$7.7 million this quarter.

Net losses expanded from US$(280.1) million to US$(317.7) million.

Overall, revenue growth accelerated (as compared to the previous quarter) but losses remained high.

Digital entertainment

Garena, Sea Ltd’s gaming company, delivered strong performance with growth across its key metrics. Here are some numbers.

Adjusted revenue improved by 61.6% year-on-year to US$716.2 million. Similarly, adjusted EBITDA grew 65.4% year-on-year to US$ 436.2 million.

Adjusted EBITDA grew faster than adjusted revenue mainly because of margin expansion, which increased from 59.5% last year to 60.9% this quarter.

Operational wise, quarterly active users (QAUs) reached 499.8 million, an increase of 61.0% year-on-year.

Paying users now account for 10.0% of QAUs, up from 8.4% in the same period last year. The average revenue per user (ARPU) remained flat at US$1.40.

Overall, the digital entertainment business delivered a strong quarter with improving metrics across the board.

E-commerce

Similar to Garena, the e-commerce business segment operating under the Shopee brand, delivered outstanding growth during the quarter.

Adjusted revenue was US$510.6 million, up 187.7% year-on-year. Out of this, marketplace revenue grew 174.8% year-on-year to US$378.7 million, thanks to the increase in gross merchandise value (GMV).

GMV was up 109.9% year-on-year – with a higher take rate – and adjusted revenue as a percentage of total GMV increased to 6.4%, up from 4.7% last year.

Unlike Garena, Shopee reported a loss for the quarter. Adjusted EBITDA for the quarter was US$(305.5) million, an increase from US$(248.3) million reported in the first quarter of 2019.

Adjusted EBITDA remained in negative territory as Shopee continued to invest and grow its users.

The e-commerce platform continues to rank first in terms of average monthly active users across Indonesia, Taiwan, and the whole of Southeast Asia.

Foolish takeaway

In sum, Sea reported top line growth across all segments. Looking ahead, Garena is well-positioned to sustain its profitability via its monetisation efforts.

Shopee, on the other hand, will remain in the red for the foreseeable future as it invests aggressively to attract more shoppers.

More reading

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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