Sea Limited (NYSE: SE) Q4 2020 Earnings Call Highlights

Sea Limited (NYSE: SE) Q4 2020 Earnings Call Highlights

Forrest Li, Chairman & CEO: 

“…On the group level, in the fourth quarter, we recorded accelerated year-on-year growth in GAAP revenue compared to the previous quarter. It reached $1.6 billion, up 102% year on year. We’ve also recorded 102% year-on-year growth in our fourth quarter gross profit to reach $533.7 million. Our fourth quarter of adjusted EBITDA was $48.7 million, compared to an adjusted EBITDA loss of $104.9 million a year ago.

The strong fourth-quarter results contributed to an outstanding set of results for the full year of 2020. GAAP revenue for the full year more than doubled compared to that of 2019 to reach $4.4 billion. Gross profit grew 123% year on year to reach $1.3 billion. We also achieved the positive of adjusted EBITDA of $107 million for the full year, compared to a loss of $178.6 million for 2019.

This was supported by the strong performance across our digital entertainment and e-commerce businesses. For full year, Garena achieved bookings of $3.2 billion and the Shopee achieved GAAP revenue plus sales incentives net-off of $2.5 billion. Both businesses exceeded our recently raised full-year guidance for 2020. Let me now discuss each business individually starting with digital entertainment.

Garena’s outstanding performance in the previous quarter continued in the fourth quarter as we recorded bookings of $1 billion, up 111% year on year. And adjusted EBITDA in the fourth quarter was $663.5 million, up 149% year on year, representing 66% of bookings. For the full year, we generated bookings of $3.2 billion, increasing by 80% year on year. Garena’s adjusted EBITDA increased by 94% year on year to reach $2 billion, representing 62% of bookings.

This growth financial performance in the fourth quarter and as a full year was the result of our ability to continually expand our user and the paying user base. Every quarter, more gamers globally engaged with our in-game content and e-sport activity. In the fourth quarter, quarterly active users reached 610.6 million, an increase of 72% year on year. Quarterly paying users hit $73.1 million — 70 — 73.1 million, up 120% year on year.

Our paying user ratio measured at quarterly paying users as a percentage of the quarterly active users continues to grow in the fourth quarter to reach 12%. Free Fire was once again a key driver of Garena’s outperformance. According to App Annie, it continues to be the highest-grossing mobile game in Latin America and Southeast Asia in the fourth quarter, as well as the full year of 2020. It has maintained the top ranking for six consecutive quarters.

The strong performance was also evident in India where Free Fire was the hype of working mobile game for the fourth quarter and for the full year of 2020 based on App Annie. We’re also pleased to share that Free Fire was once again the most downloaded mobile game in the world in 2020 according to App Annie. This is the second year in a row that Free Fire was ranked first globally. As we continue to grow the Free Fire user base worldwide and then build even tighter bonds with global gamers, we believe that Free Fire is still formally establishing itself as a strong global gaming franchise and platform.

One of the key factors in Free Fire’s extent of success is our commitment to keeping our game fresh and engaging. Gamers around the world increasingly recognized Garena’s reputation for constantly enhancing the Free Fire experience within the weighted content, partnerships, and e-sport activity. In the fourth quarter, for example, we announced a partnership between Free Fire and the football legend, Cristiano Ronaldo, marking one of the most significant tie-ups between the e-sport industry and the physical support industry in recent times. In addition to new in-game items and the playable characters, we also introduced the two new game modes as part of the partnership with Cristiano Ronaldo, a limited-time Battle Royale recent game mode and the team-based of 1V1 duel mode.

Our users love these new game modes as they provide a richer and a more varied gaming experience by morphing different types of gameplay into the Battle Royale genre. Free Fire’s huge and the growing e-sport and streaming community is another key pillar of our user engagement strategy. We make significant progress in deepening engagement with our community in 2020 despite the challenge of holding live events. Three of the five top e-sport tournaments by peak concurrent viewers in 2020 were Free Fire tournament according to Esports Charts.

In 2020, Free Fire was once again the top-ranked mobile-only video game and the top-ranked battle royale video game on YouTube in terms of views. It was also the third-ranked game overall on YouTube by view count. Free Fire-related content recorded over 72 billion view count across YouTube globally over the course of the year. The game was also named the Esports Mobile Game of the Year at the Esports Award 2020.

These e-sports activities and online video content helped to drive up gamers’ engagement ar — around the Free Fire franchise while extending its reach to a wider group of communities as the spectator sport. While we continue to grow Free Fire into a long-lasting global franchise, we’re also focused on building solid foundations for Garena’s long-term growth. For example, in the fourth quarter, Phoenix Labs, our triple-A gaming studio based in Vancouver, enough to further expansion, adding new offices in Montreal and the Los Angeles, alongside its existing — existing bases in Vancouver and Seattle. It also on well planned to build out teams in each of those cities to focus on new game development.

We are confident that the expanded Phoenix Labs team will deliver great content in the years to come. As we move through 2021, Garena is building on the strong momentum of 2020 and it’s strengthening our position as the global leader in the digital entertainment industry. We believe that our uniquely newfound understanding of the taste and the preferences of global games community and our proven ability — ability to build lasting bonds of affinity with gamers in diverse markets around the world will continue to drive growth and success for Garena in 2021 and beyond. Moving on to e-commerce.

2020 was an extraordinary year for Shopee. In a challenging environment, we adapted quickly to serve our communities and addressed the fast-evolving needs of our buyers and sellers. As a result, we have cemented Shopee’s position as the favorite e-commerce platform for both buyers and sellers across Southeast Asia and the Taiwan. We continue to record excellent results for the fourth quarter.

Year-on-year growth for each of gross order, GMV, and the GAAP revenue further accelerated compared to the third quarter. In the fourth quarter, Shopee reported 1 billion gross order, up 135% year on year, and a GMV of $11.9 billion, an increase of 113% year on year. GAAP revenue grew 178% year on year to $842.2 million, as adjusted EBITDA loss for order decreased by 41% year on year to $0.41 during the quarter, reflecting that efficiencies we have reached across 2020 even as we continue to invest in growth, especially during the peak shopping season. For the full year of 2020, Shopee’s gross order totaled 2.8 billion, up 133% year on year.

GMV was $35.4 billion, an increase of 101% year on year. GAAP revenue grew 150% year on year to achieve $2.2 billion. In Indonesia, Shopee’s largest market, we continue to grow our leadership position. We recorded more than 430 million orders in the fourth quarter.

These translate into a daily average of around 4.7 million orders, up 128% year on year. According to App Annie, Shopee continued to rank first in Indonesia by average monthly active users, total time spent in app on Android, and the downloads in the shopping category in the fourth quarter and the for the full year of 2020. We are also encouraged to see more sellers and the brand around the region doing business on Shopee. For example, Shopee Mall, our dedicated space for leading brands, now features over 23,000 international and the local brands.

As our communities increasingly embrace e-commerce as their top retail choice, we believe Shopee’s relentless focus on serving our users ensure that we continue to capture the large share of the results in growth. In both the fourth quarter and for the full year, Shopee was ranked the No. 1 in the shopping category across Southeast Asia and Taiwan by average monthly active users, total time spent in app on Android, and the downloads based on App Annie. In fact, Shopee was ranked the third most downloaded app in the shopping category globally for the full year according to App Annie.

The success of Shopee has also translated into stronger brand recognition across our communities. We see this YouGov’s recently published “Best APAC Buzz Rankings 2020” where Shopee was ranked first in Asia. Shopee was also the No. 8 ranked brand YouGov’s “Best Global Brands 2020”, representing one of the two e-commerce brands in the world’s top 10 ranking.

Our strong focus on serving our users will continue to drive lasting brand affinity across our region. In each of our markets, e-commerce adoption continues to grow at an accelerated pace. And we believe that as the go-to online shopping platform, Shopee will successfully capture and further drive this growth opportunity. Turning now to digital financial services.

SeaMoney had a transformational year in 2020 as it successfully captured opportunities presented by both the acceleration of digitalization in our economy as a whole and then the particularly strong growth of our e-commerce platform. As a result, it’s enjoyed rapid and efficient growth in the fourth quarter and in the full year of 2020. For the fourth quarter, SeaMoney’s mobile wallets reported a total payment volume of $2.9 billion with quarterly paying users surpassing 23.2 million. This was partially driven by monthly paying users in Indonesia, which exceeded 10 million during the fourth quarter.

For the full-year 2020, our mobile wallet total payment volume was $7.8 billion. Even at our mobile wallet, ShopeePay, benefited from the strong growth of Shopee. It also meaningfully reduced the payment friction and improved the user experience on Shopee. This synergistic growth of both Shopee and ShopeePay showcases the strength of our platforms in terms of adding value for our consumers.

Both platform online and offline use cases and the partnerships also grew in 2020 as we continued our initiatives to expand the use cases and as we saw more natural adoption by users who appreciate accessibility and convenience of our mobile wallet services. For example, we recently expanded our partnership with Google to offer our mobile wallet as a payment option for the Google Play Store in Indonesia in addition to our existing partnership in Thailand. As we onboard more online and offline use cases, we are seeing that our users increasingly appreciate the ease and the convenience of using our mobile wallet services. We also see that SeaMoney’s merchant partners increasingly recognize the value of tapping into the vast and the rapidly growing user — user bases of Shopee and SeaMoney…”



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