SINGAPORE--(BUSINESS WIRE)--Sea Limited (NYSE: SE) (�Sea� or the �Company�) today announced its financial results for the fourth quarter and full year ended December 31, 2022.

�We are starting 2023 on a much stronger footing,� said Forrest Li, Sea�s Chairman and Group Chief Executive Officer. �Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom line improvements. We delivered positive total net income in the fourth quarter, demonstrating the strength and resilience of our underlying business model and the execution capabilities of our teams. As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem.�

�Given the macro uncertainty and our recent strong pivot, we are closely monitoring the market environment and we will continue to adjust our pace and fine-tune our operations accordingly. While there may be near-term fluctuations in our performance, we remain highly confident in the long-term growth potential of our markets and fully focused on capturing this opportunity.�

Fourth Quarter 2022 Highlights

• Group
  • Total GAAP revenue was US$3.5 billion, up 7.1% year-on-year.
  • Total gross profit was US$1.7 billion, up 29.5% year-on-year.
  • Total net income turned positive to US$422.8 million, as compared to US$(616.3) million for the fourth quarter of 2021. Total net income was:
    • negatively impacted by US$177.7 million impairment of goodwill related to certain historical investments for the digital entertainment business, and
    • positively impacted by US$199.7 million net gain on debt extinguishment as discussed below, and approximately US$130 million in reversal of previous accruals for certain expenses (�accruals reversal�). As we made the management decision to strongly pivot to a clear focus on cost efficiency, there were accruals reversed during the quarter resulting from changes in previous estimations of certain expenses.
  • Total adjusted EBITDA¹ turned positive to US$495.7 million, as compared to US$(492.1) million for the fourth quarter of 2021. Total adjusted EBITDA was also positively impacted by approximately US$130 million of accruals reversal as mentioned above.
  • As of December 31, 2022, cash, cash equivalents and short-term investments were US$6.9 billion, representing a net change of US$(401.6) million from September 30, 2022. Excluding cash consideration used to repurchase our outstanding convertible bonds with a gain as discussed below, cash, cash equivalents and short-term investments would have increased by US$209.8 million from September 30, 2022.
  • In the fourth quarter, the Company repurchased US$817.2 million aggregate principal amount of the 0.25% convertible senior notes due 2026 (the �2026 CB�), for a cash consideration of US$611.3 million. This resulted in a US$199.7 million gain on debt extinguishment, inclusive of an accelerated deferred issuance cost of US$6.2 million, and US$7.7 million savings in future interest payments. As of the date hereof, approximately US$2.1 billion aggregate principal amount of the 2026 CB remained outstanding.

• E-commerce
  • GAAP revenue was US$2.1 billion, up 31.8% year-on-year. Based on constant currency assumptions², GAAP revenue was up 42.3% year-on-year.
  • GAAP revenue included US$1.8 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 43.5% year-on-year.
    • Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 53.9% year-on-year to US$1.1 billion.
    • Value-added services revenue, mainly consisting of revenues related to logistics services, was up 29.2% year-on-year to US$0.7 billion.
  • Adjusted EBITDA¹ turned positive to US$196.1 million, as compared to US$(877.7) million for the fourth quarter of 2021. Adjusted EBITDA was positively impacted by approximately US$80 million of accruals reversal as described earlier.
    • Asia markets recorded adjusted EBITDA of US$320.0 million, as compared to US$(525.8) million for the fourth quarter of 2021.
    • Other markets recorded adjusted EBITDA of US$(123.9) million, as compared to US$(352.0) million for the fourth quarter of 2021. In Brazil, unit economics continued to improve significantly, with contribution margin loss per order improving 53.9% quarter-on-quarter to reach US$0.47.
  • Gross orders were 1.7 billion, as compared to 2.0 billion for the fourth quarter of 2021. Gross merchandise value (�GMV�) was US$18.0 billion, as compared to US$18.2 billion for the fourth quarter of 2021. Based on constant currency assumptions², GMV was up 7.7% year-on-year. Beginning 2023, we will transition from quarterly to annual disclosure of such operating metrics.

• Digital Entertainment
  • GAAP revenue was US$948.9 million, as compared to US$892.9 million for the previous quarter.
  • Bookings³ were US$543.6 million, as compared to US$664.7 million for the previous quarter.
  • Adjusted EBITDA¹ was US$258.2 million, as compared to US$289.9 million for the previous quarter.
  • Adjusted EBITDA represented 47.5% of bookings for the fourth quarter of 2022, as compared to 43.6% for the previous quarter.
  • Quarterly active users were 485.5 million, as compared to 568.2 million for the previous quarter.
  • Quarterly paying users were 43.6 million, representing a paying user ratio of 9.0%, as compared to 9.1% for the previous quarter.
  • Average bookings per user were US$1.1, as compared to US$1.2 for the previous quarter.

• Digital Financial Services
  • GAAP revenue was US$380.2 million, up 92.5% year-on-year.
  • Adjusted EBITDA¹ turned positive to US$75.6 million, as compared to US$(149.8) million for the fourth quarter of 2021.
  • As of the end of the fourth quarter of 2022, total loans receivable was US$2.1 billion, net of allowance for credit losses of US$238.8 million. Non-performing loans past due by more than 90 days as a percentage of our total gross loans receivable declined from less than 4% in the third quarter of 2022 to less than 2%. This was mainly due to the shortening of loan write-off period in a certain market from 180 days to 120 days in the fourth quarter based on our assessment of historical credit losses. Without this change in write-off period, the ratio would be about 5%.

Full Year 2022 Highlights

• Group
  • Total GAAP revenue was US$12.4 billion, up 25.1% year-on-year.
  • Total gross profit was US$5.2 billion, up 33.1% year-on-year.
  • Total net loss was US$1.7 billion, improving by 18.9% year-on-year.
  • Total adjusted EBITDA¹ was US$(878.1) million, as compared to US$(593.6) million for the full year of 2021.

• E-commerce
  • GAAP revenue was US$7.3 billion, up 42.3% year-on-year. Based on constant currency assumptions², GAAP revenue was up 49.1% year-on-year.
  • GAAP revenue included US$6.2 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 52.0% year-on-year.
  • Adjusted EBITDA¹ was US$(1.7) billion, improving by 33.8% as compared to US$(2.6) billion for the full year of 2021.
  • Gross orders totaled 7.6 billion, up 23.7% year-on-year.
  • GMV was US$73.5 billion, up 17.6% year-on-year. Based on constant currency assumptions², GMV was up 24.0% year-on-year.

• Digital Entertainment
  • GAAP revenue was US$3.9 billion, as compared to US$4.3 billion for the full year of 2021.
  • Bookings³ were US$2.8 billion, as compared to US$4.6 billion for the full year of 2021.
  • Adjusted EBITDA¹ was US$1.3 billion, as compared to US$2.8 billion for the full year of 2021.
  • Adjusted EBITDA represented 47.7% of bookings for the full year of 2022, as compared to 60.4% for the full year of 2021.

• Digital Financial Services
  • GAAP revenue was US$1.2 billion, up 160.1% year-on-year.
  • Adjusted EBITDA¹ was US$(228.6) million, as compared to US$(616.9) million for the full year of 2021.

⁽¹⁾ For a discussion of the use of non-GAAP financial measures, see �Non-GAAP Financial Measures�.

⁽²⁾ Unallocated expenses within total adjusted EBITDA are mainly related to general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operating Decision Maker (�CODM�) as part of segment performance.

⁽³⁾ Provision for credit losses were previously recorded within general and administrative expenses.

Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021

Revenue

Our total GAAP revenue increased by 7.1% to US$3.5 billion in the fourth quarter of 2022 from US$3.2 billion in the fourth quarter of 2021.

• Digital Entertainment: GAAP revenue was US$948.9 million compared to US$1.4 billion in the fourth quarter of 2021, primarily attributable to the ongoing moderation in user engagement and monetization.
• E-commerce and other services: GAAP revenue increased by 50.5% to US$2.2 billion in the fourth quarter of 2022 from US$1.5 billion in the fourth quarter of 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business.
• Sales of goods: GAAP revenue was US$271.6 million, as compared to US$324.4 million in the fourth quarter of 2021.

Cost of Revenue

Our total cost of revenue decreased by 8.2% to US$1.8 billion in the fourth quarter of 2022 from US$1.9 billion in the fourth quarter of 2021.

• Digital Entertainment: Cost of revenue decreased by 35.3% to US$242.5 million in the fourth quarter of 2022 from US$374.8 million in the fourth quarter of 2021, which was largely in line with the decrease in digital entertainment revenue.
• E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined was US$1.3 billion, as compared to US$1.2 billion in the fourth quarter of 2021. Improvement in gross profit margins was mainly due to our better cost efficiencies.
• Cost of goods sold: Cost of goods sold decreased by 23.8% to US$229.6 million in the fourth quarter of 2022 from US$301.3 million in the fourth quarter of 2021.

Other Operating Income

Our other operating income was US$68.5 million and US$72.3 million in the fourth quarter of 2022 and 2021, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers.

Sales and Marketing Expenses

Our total sales and marketing expenses decreased by 61.2% to US$473.6 million in the fourth quarter of 2022 from US$1.2 billion in the fourth quarter of 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (�$�).

The decrease in sales and marketing expenses across all major reporting segments were mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies.

General and Administrative Expenses

Our general and administrative expenses increased by 24.0% to US$352.3 million in the fourth quarter of 2022 from US$284.1 million in the fourth quarter of 2021. The increase was primarily driven by impairment costs incurred due to the exits from non-core markets and certain divestments.

Provision for Credit Losses

Our provision for credit losses increased by 407.1% to US$175.1 million in the fourth quarter of 2022 from US$34.5 million in the fourth quarter of 2021, primarily driven by the growth in our loan book.

Research and Development Expenses

Our research and development expenses decreased by 14.8% to US$244.2 million in the fourth quarter of 2022 from US$286.6 million in the fourth quarter of 2021, primarily due to the impact of the accruals reversal as described earlier.

Impairment of Goodwill

We recorded an impairment of goodwill of US$177.7 million in the fourth quarter of 2022, compared to nil in the fourth quarter of 2021. The goodwill impairment was primarily due to our strategic decisions to dispose of or shut down certain historical investments for the digital entertainment business.

Non-operating Income or Losses, Net

Non-operating income or losses consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) from debt extinguishment. We recorded a net non-operating income of US$35.0 million in the fourth quarter of 2022, as compared to a net non-operating loss of US$71.0 million in the fourth quarter of 2021. Our non-operating income in the fourth quarter of 2022 was mainly due to a US$199.7 million net gain from debt extinguishment, partially offset by investment losses recognized amid lower valuations in the broader market.

Income Tax Credit or Expenses

We had a net income tax credit of US$43.5 million in the fourth quarter of 2022, as compared to net income tax expense of US$105.6 million in the fourth quarter of 2021. The income tax credit was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, partially offset by income tax incurred by our digital entertainment business.

Net Income or Loss

As a result of the foregoing, we had net income of US$422.8 million in the fourth quarter of 2022, as compared to net loss of US$616.3 million in the fourth quarter of 2021.

Basic and Diluted Earnings or Loss Per Share Attributable to Sea Limited�s Ordinary Shareholders

Basic earnings per share attributable to Sea Limited�s ordinary shareholders was US$0.76 in the fourth quarter of 2022, compared to basic loss per share attributable to Sea Limited�s ordinary shareholders of US$1.12 in the fourth quarter of 2021.

Diluted earnings per share attributable to Sea Limited�s ordinary shareholders was US$0.72 in the fourth quarter of 2022.

Full Year Ended December 31, 2022 Compared to Full Year Ended December 31, 2021

Revenue

Our total GAAP revenue increased by 25.1% to US$12.4 billion for the full year ended December 31, 2022 from US$10.0 billion for the full year ended December 31, 2021.

• Digital Entertainment: GAAP revenue was US$3.9 billion for the full year ended December 31, 2022 from US$4.3 billion for the full year ended December 31, 2021, primarily attributable to the ongoing moderation in user engagement and monetization.
• E-commerce and other services: GAAP revenue increased by 63.5% to US$7.5 billion for the full year ended December 31, 2022 from US$4.6 billion for the full year ended December 31, 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business.
• Sales of goods: GAAP revenue was US$1.1 billion for the full year ended December 31, 2022, relatively stable year-on-year.

Cost of Revenue

Our total cost of revenue increased by 19.9% to US$7.3 billion for the full year ended December 31, 2022 from US$6.1 billion for the full year ended December 31, 2021.

• Digital Entertainment: Cost of revenue decreased by 12.4% to US$1.1 billion for the full year ended December 31, 2022 from US$1.2 billion for the full year ended December 31, 2021, which was largely in line with the decrease in digital entertainment revenue.
• E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined increased by 35.8% to US$5.2 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021, primarily driven by higher costs of logistics from order growth and other costs related to the growth of e-commerce marketplace. Improvement in gross profit margins was mainly due to the growth of core marketplace revenue with higher gross profit margin.
• Cost of goods sold: Cost of goods sold was US$1.0 billion for the full year ended December 31, 2022.

Other Operating Income

Our other operating income was US$279.2 million for the full year ended December 31, 2022 from US$287.9 million for the full year ended December 31, 2021. Other operating income mainly consists of rebates from e-commerce related logistics services providers.

Sales and Marketing Expenses

Our total sales and marketing expenses decreased by 14.6% to US$3.3 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (�$�).

The decrease in sales and marketing expenses across all major reporting segments was mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies.

General and Administrative Expenses

Our general and administrative expenses increased by 45.5% to US$1.4 billion for the full year ended December 31, 2022 from US$987.9 million for the full year ended December 31, 2021. The increase was primarily due to the higher staff cost from higher average staff headcount over the year, as well as higher office facilities and related expenses to support the headcount growth.

Provision for Credit Losses

Our provision for credit losses increased by 337.5% to US$513.7 million for the full year ended December 31, 2022 from US$117.4 million for the full year ended December 31, 2021, primarily driven by the growth in our loan book.

Research and Development Expenses

Our research and development expenses increased by 65.5% to US$1.4 billion for the full year ended December 31, 2022 from US$831.7 million for the full year ended December 31, 2021, primarily due to the increase in research and development staff cost from higher average staff headcount over the year.

Impairment of Goodwill

We recorded an impairment of goodwill of US$354.9 million for the full year ended December 31, 2022, as compared to nil for the full year ended December 31, 2021. The goodwill impairment was primarily due to the change in carrying amount of goodwill associated with our prior acquisitions, mainly driven by the lower valuations amid the market uncertainties, and our strategic decision to dispose of or shut down certain historical investments for the digital entertainment business.

Non-operating Income or Losses, Net

Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) on debt extinguishment. We recorded a net non-operating loss of US$13.0 million for the full year ended December 31, 2022, as compared to a net non-operating loss of US$132.1 million for the full year ended December 31, 2021.

Income Tax Expense

We had a net income tax expense of US$168.4 million and US$332.9 million for the full year ended December 31, 2022 and 2021, respectively. The lower income tax expense was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, as well as lower income tax expense incurred by our digital entertainment business.

Net Loss

As a result of the foregoing, we had net loss of US$1.7 billion and US$2.0 billion for the full year ended December 31, 2022 and 2021, respectively.

Basic and Diluted Loss Per Share Attributable to Sea Limited�s Ordinary Shareholders

Basic and diluted loss per share attributable to Sea Limited�s ordinary shareholders was US$2.96 for the full year ended December 31, 2022, as compared to US$3.84 for the full year ended December 31, 2021.

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Contacts

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Investors / analysts: [email protected]
Media: [email protected]

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