Sea Ltd. (NYSE: SE) reported Q4 EPS of ($0.53), $0.23 worse than the analyst estimate of ($0.30). Revenue for the quarter came in at $909.1 million versus the consensus estimate of $873.12 million.

Fourth Quarter 2019 Highlights

Group

• Total adjusted revenue was US$909.1 million, up 133.5% year-on-year from US$389.3 million for the fourth quarter of 2018.
• Total gross profit was US$264.9 million, compared to US$(8.0) million for the fourth quarter of 2018.
• Total adjusted EBITDA was US$(104.9) million compared to US$(203.6) million for the fourth quarter of 2018.

Digital Entertainment

• Adjusted revenue was US$479.9 million, up 107.4% year-on-year from US$231.4 million for the fourth quarter of 2018.
• Adjusted EBITDA was US$266.4 million, up 153.2% year-on-year from US$105.2 million for the fourth quarter of 2018.
• Adjusted EBITDA margin increased to 55.5% for the fourth quarter of 2019 from 45.5% for the fourth quarter of 2018.
• Quarterly active users ("QAUs") reached 354.7 million, an increase of 64.1% year-on-year from 216.2 million for the fourth quarter of 2018.
• Quarterly paying users continued to grow, accounting for 9.4% of QAUs for the fourth quarter of 2019, increasing from 5.5% for the same period in 2018.
• Average revenue per user was US$1.4 compared to US$1.1 for the fourth quarter of 2018.
• Our self-developed global hit game, Free Fire, was the most downloaded mobile game globally for 2019, according to App Annie1, and recently hit a new record of 60 million peak daily active users. According to App Annie1, Free Fire was also the highest grossing mobile game in Latin America and in Southeast Asia in the fourth quarter and for the full year of 2019.
• Free Fire related content recorded approximately 30 billion view counts across YouTube globally in 2019, making it the fourth most viewed video game on YouTube and the most viewed mobile-only video game in the year2.
• We sustained our esports and community building efforts for our gamers throughout 2019. The finals of our largest global esports tournament for Free Fire, the Free Fire World Series 2019 in Rio de Janeiro, Brazil, recorded over 2 million peak concurrent viewers, setting a new record for the highest concurrent viewership for a mobile game esports event, according to Esports Charts. The Free Fire World Series 2019 achieved over 130 million cumulative online views across the national and regional qualifiers globally and the finals as at the end of 2019.

E-commerce

• Adjusted revenue was US$358.3 million, up 182.3% year-on-year from US$126.9 million for the fourth quarter of 2018.
• Adjusted revenue included US$283.5 million of marketplace revenue3, up 223.6% year-on-year from US$87.6 million for the fourth quarter of 2018, and US$74.7 million of product revenue4, up 90.2% year-on-year from US$39.3 million for the fourth quarter of 2018.
• Gross orders for the quarter totaled 440.5 million, an increase of 112.9% year-on-year from 206.9 million for the fourth quarter of 2018.
• Gross merchandise value (“GMV”) was US$5.6 billion, an increase of 64.8% year-on-year from US$3.4 billion for the fourth quarter of 2018.
• Adjusted revenue as a percentage of total GMV increased to 6.3% in the fourth quarter of 2019, up from 3.7% for the same period a year ago. Adjusted marketplace revenue as a percentage of total GMV was 5.0% in the fourth quarter of 2019. We also recorded a positive gross profit for the fourth quarter of 2019.
• Sales and marketing expenses were US$254.7 million, an increase of 38.1% year-on-year from US$184.5 million for the fourth quarter of 2018.
• Adjusted EBITDA was US$(306.2) million compared to US$(277.5) million for the fourth quarter of 2018. Adjusted EBITDA loss per order decreased by 47.8% to US$0.70 in the fourth quarter of 2019, compared to US$1.34 for the same period in 2018.
• Shopee also enjoyed strong user retention as we continued to strengthen our market leadership. Its three-year order retention5 from January 2017 to December 2019 was close to 70%, with the order retention rate in Indonesia, our largest market, even higher than the group rate for the same period.
• In Indonesia, year-on-year growth for Shopee’s GMV and orders accelerated each quarter in 2019 as we further extended our market leadership. As the largest e-commerce platform by orders, Shopee registered over 188 million orders for the market in the fourth quarter, or a daily average of over 2 million orders, an increase of 124.6% year-on-year. Shopee also ranked first by average monthly active users, downloads, and by total time spent in app on Android, in the Shopping category in the fourth quarter of 2019, according to App Annie1.
• In Taiwan, we continued to record a positive quarterly adjusted EBITDA after allocation of the headquarters’ common expenses. Adjusted EBITDA margin in Taiwan before allocation of the headquarters’ common expenses exceeded 20% in the fourth quarter of 2019.
• Both in Southeast Asia and in Taiwan, Shopee ranked number one in the Shopping category by average monthly active users, and total time spent in app on Android, for the fourth quarter and for the full year of 2019, according to App Annie1.
• Shopee was also ranked number one in the Shopping category by downloads both in Southeast Asia and in Taiwan, and was among the top five worldwide by downloads in the same category, for the full year of 2019, according to App Annie1.

Business Update – SeaMoney

In the fourth quarter of 2019, we introduced SeaMoney as the overall brand for our digital financial services (“DFS”) business. Our DFS business currently offers e-wallet services, payment processing, credit related digital financial offerings, and other financial products – through a variety of brands, such as AirPay, ShopeePay, ShopeePayLater, and other DFS brands. Chris Feng, Chief Executive Officer of Shopee, also serves as Chief Executive Officer of SeaMoney.

Throughout 2019, we have been working on further integrating the e-wallet services of SeaMoney with our Shopee platform across different markets, to promote efficient growth of SeaMoney and to reduce payment friction for Shopee users. In January 2020, over 30% of Shopee gross orders in Indonesia were already paid using our own e-wallet services.

Moreover, we have been expanding the use cases of our e-wallet services outside of Sea’s platforms to include other online and offline merchants, along with a variety of third-party use cases. As a result of our integration efforts and the growth of third-party use cases, quarterly paying users for our e-wallet services have exceeded 8 million in the fourth quarter of 2019.

Leveraging on Shopee’s organic user base, wealth of high-quality data, strong on-platform demand and operational efficiency, we have also piloted consumer credit programs to build up our credit assessment capabilities.

We continue to believe that our core businesses of e-commerce – Shopee, digital entertainment – Garena, and digital financial services – SeaMoney, represent some of the largest opportunities in the digital economy of our region, and that our strong market leadership and strengths across the e-commerce and digital entertainment businesses position us very well to grow our DFS business in pursuit of our mission to better the lives of the consumers and small businesses with technology.

GUIDANCE:

Sea Ltd. sees FY2020 revenue of $3.6-3.8 billion, versus the consensus of $3.86 billion.

• For the full year of 2020, we currently expect adjusted revenue for digital entertainment to be between US$1.9 billion and US$2.0 billion, and adjusted revenue for e-commerce to be between US$1.7 billion and US$1.8 billion.

For earnings history and earnings-related data on Sea Ltd. (SE) click here.