Singapore tech giant Sea reports a smaller-than-expected loss as efforts to improve efficiency pays off

August 17, 2022 0 Comments

Southeast Asian tech giant Sea Limited today reported second-quarter earnings with a smaller-than-expected loss.

The company’s revenue rose 29% to $2.9 billion, missing estimates of $2.98 billion. It lost $1.03 per share, better than estimates of a loss of $1.21 per share, showing the its efforts to improve efficiency and long-term profitability.

Founded in 2009, the giant operates three main businesses, e-commerce unit Shopee, digital financial service Sea Money and gaming business Gerena.

Shopee has shown resilience despite the impact of inflation and interest rate hikes. Sales from online marketplaces reached $1.7 billion, representing a year-over-year growth of 51.4%. The total order volume was 2 billion, a year-on-year increase of 41.6%, while gross merchandise volume hit $19 billion, a 27.2% gain.

Notably, Shopee fared exceptionally well in Brazil, with revenue jumping by more than 270% year-on-year. During the quarter, Shopee ranked first in average monthly active users under the shopping category in the region, the company said, citing

Even as the impact of the COVID-19 pandemic has significantly waned, online retail sales in Brazil continue to boom. Mercadolibre, the largest e-commerce platform in Latin America, sees 42% revenue growth in the country in the quarter.

In the Southeast Asian markets where Shopee is rooted, growth slowed in Malaysia and Singapore, while Indonesia, the Philippines and Vietnam continued to maintain high growth.

In the quarter, Shopee’s gross profit increased by nearly 85% year-on-year, and adjusted EBITDA loss per order fell 21% to $0.33 in the quarter, compared to $0.41 a year earlier. The e-commerce arm said it is on track to break even in the Taiwan and Southeast Asian markets. 

Shopee also saw improvement in monetization capabilities during the quarter, contributed by growth in high-margin revenue streams such as transaction-based fees and advertising.

The stay-at-home economy driven by the COVID-19 pandemic has subsided as much of the world returns to normal life. Therefore, revenue from Sea’s digital entertainment fell to $900.3 million from $1.0 billion a year earlier.

But Free Fire continued to be the highest-grossing mobile game in Southeast Asia and Latin America for the quarter, according to The company’s flagship title has maintained this leading position for the past 12 consecutive quarters.

The company said it aims to diversify its gaming portfolio and in terms of genres and a mix of esports and more casual types of games across the more diverse market.

Revenue from digital financial services was $279 million, up 214.4% year over year, thanks to strong synergies with Shopee.

SeaMoney’s quarterly active users reached 52.7 million, an increase of 53.3% year over year. Mobile wallet payments totaled $5.7 billion, up 35.7% year over year. In Southeast Asia, nearly 40% of Shopee’s quarterly active buyers used SeaMoney’s products and services during the quarter.

SeaMoney’s adjusted EBITDA loss has also continued to narrow during the quarter.

There are still sizable populations in emerging economies that are underserved when it comes to digital financial products and services, and Sea shows confidence in growing its financial business in the region.

“We are well positioned with our strong ecosystem to serve the largest segment of our markets through the direct relationships and insights we have accrued,” said Yanjun Wang, chief corporate officer of Sea, in the earnings call. The company is working closely with its partners and local stakeholders to build a healthy and sustainable environment for the long-term.

Although the loss for the quarter was lower than expected, it widened from the previous quarter, rising 114.7% to $931.2 million from $433.7 million. According to the company, the widening loss was mainly due to higher logistics expenses from increased order volumes.

The company suspended its full-year guidance for Shopee due to uncertainties in the global economy. “Even though we have stopped providing guidance, our focus for the rest of the year remains very clear, which is to continue to improve efficiency by both deepening monetization and optimizing our cost structure,” said Forrest Li, CEO and founder of Sea, in the earnings call.

In an effort to improve efficiency and optimize expenditure, Shopee has slowed down global expansion and cut jobs in food delivery and digital payment in recent months.

While Sea’s shares have fallen about 60% since the start of the year due to a slowing digital economy and rising interest rates, some major institutional investors have upped their bets on it in the second quarter. 

Bridgewater Associates, the hedge fund owned by billionaire Ray Dalio, liquidated its stake in China’s e-commerce behemoth Alibaba and bought a $31 million stake in Sea. Well-known Hillhouse Capital added 2 million shares in Sea, making the Southeast Asian tech powerhouse its fifth-largest holding.

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