Sea posts huge revenue bump amid much-improved margins

Singapore-based Sea Group posted a total adjusted revenue of US$665.4 million for Q2 2019, up 203.1% year on year from US$219.6 million, while the total adjusted EBITDA was -US$11 million compared with -US$161.9 million in the previous corresponding period.

Photo credit: Shopee

Sea’s digital entertainment segment was a key driver, while the ecommerce units continued to weigh on the group’s financials.

The adjusted revenue for digital entertainment jumped 218.6% to US$443.2 million in Q2 2019 from US$139.1 million in Q2 2018. The adjusted EBITDA was US$263.8 million, up 442.6% year on year from US$48.6 million.

According to Sea, the quarterly active users (QAUs) for its gaming division increased 93.3% year on year to 310.5 million from 160.6 million. It also said that the quarterly paying users continued to grow, accounting for 8.4% of QAUs for Q2 2019, representing a 4.1% increase from the same period last year.

Thanks to its in-house developed game, Free Fire, the average revenue per user also rose to US$1.4 from US$0.9 in Q2 2018. The company said it’s the third most downloaded mobile game and the most downloaded battle royale game globally in the app stores, according to App Annie.

Sea also attributed the positive results to its esports initiatives. In July, it hosted the Arena of Valor World Cup in Vietnam, in partnership with Tencent. The tournament saw more than 74 million online views, according to the company. It also hosted the Free Fire esports event in Brazil, attracting over 12 million online views.

For ecommerce, the gross merchandise volume rose 72.3% to US$3.8 billion in Q2 2019 from US$2.2 billion in the same quarter the prior year. Gross orders for the quarter totalled 246.3 million, an increase of 92.7% from 127.8 million in the previous corresponding period. Sales and marketing expenses, however, rose 18.6% to US$163.7 million from US$138 million in the same quarter last year.

Adjusted EBITDA for ecommerce was at -US$248.3 million compared to -US$188.3 million for Q2 2018. Adjusted EBITDA loss per order decreased by US$0.46 or 31.3% in the second quarter, compared to the same period last year.

Citing App Annie data for Q2 2019, Sea said Shopee ranked No. 1 in the shopping category by average monthly active users (MAUs) and by downloads in Google Play and App Store in both Southeast Asia and Taiwan.

In Indonesia, its largest market, Shopee’s year-on-year growth accelerated compared to the previous quarter, with over 110 million orders registered in Q2 2019.

With the strong Q2 performance, Sea is raising the guidance for both digital entertainment and ecommerce for the full year of 2019.

“We now expect adjusted revenue for digital entertainment to be between US$1.6 billion and US$1.7 billion, representing 142% to 157.2% growth from 2018,” it said. “This compares to the previously disclosed guidance of between US$1.2 billion and US$1.3 billion, representing 81.5% to 96.7% growth.”