Sea lowers Garena’s 2022 guidance after Free Fire ban in India

Sea Group, Southeast Asia’s largest homegrown internet company, for the first time reduced its year-on-year booking guidance for its digital entertainment unit Garena, citing “unanticipated government actions” in India.

Photo credit: Sea Group

For the full year of 2022, Sea expects bookings for Garena to be between US$2.9 billion and US$3.1 billion. In comparison, the estimate for 2021 was between US$4.3 billion and US$4.5 billion.

“With many economies reopening further in the fourth quarter and into this year, we have observed some moderation in online activities and fluctuations in user engagement. Moreover, due to unanticipated government actions, Free Fire is currently unavailable in the Google Play and iOS app stores in India,” stated the company.

India has recently banned Garena’s Free Fire, which has an immense fan following in the country. The game is one of 53 other “China-linked” apps that have recently been blocked. Garena’s GAAP revenue was at US$1.4 billion during the fourth quarter of 2021, up 104.1% from the same quarter a year ago.

However, Sea increased the revenue guidance for its two other core businesses: Shopee (ecommerce) and SeaMoney (digital financial services).

For Shopee, Sea has raised its annual revenue guidance to a range of US$8.9 billion to US$9.1 billion for fiscal year 2022. The midpoint of the guidance represents an increase of 75.7% from 2021, stated the company.

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“We currently expect Shopee to achieve positive adjusted EBITDA before HQ costs allocation in Southeast Asia and Taiwan by this year and SeaMoney to achieve positive cash flow by next year,” said Forrest Li, Sea’s chairman and group CEO.

By 2025, the company expects that cash collectively generated by Shopee and SeaMoney will enable both businesses to fund their own long-term growth.

Shopee reported an 89.4% year-on-year growth in revenue, which stood at US$1.6 billion for Q4 2021.

The company noted that SeaMoney has also become a strong growth engine. The segment’s GAAP revenue was US$197.5 million, up over 7x from the same period a year ago.

Sea expects GAAP revenue for the unit to be between US$1.1 billion and US$1.3 billion for 2022, the midpoint of the guidance representing an increase of 155.4% from 2021.

Overall, Sea said that its GAAP revenue doubled in Q4 2021 to US$3.2 billion. For the full year 2021, its revenue surged by 127.5% to US$10 billion from US$4.4 billion in 2020.