Singapore-based tech company Sea Limited (SE -0.85%) reported third-quarter earnings on Tuesday, Nov. 12, that topped analyst consensus estimates on both top and bottom lines. The company reported robust financial performance, with total revenue for the quarter growing nearly 31% year over year to reach $4.3 billion. The growth highlights significant demand across its three business verticals. The company’s earnings per share (EPS) of $0.24 came in just ahead of estimates for $0.23, and it marked a solid recovery from the prior year's loss of $0.26 per share.
Overall, Sea Limited delivered a strong quarter, showcasing growth across its segments and improvements in key profitability metrics.
| Metric | Q3 2024 | Analyst Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $4.3 billion | $4.1 billion | $3.3 billion | 30.8% |
| EPS | $0.24 | $0.23 | ($0.26) | N/A |
| Net income | $153.3 million | N/A | ($144.0 million) | N/A |
| Adjusted EBITDA | $521.3 million | N/A | $35.3 million | 1,378% |
Source: Sea Limited. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. EBITDA = Earnings before interest, taxes, depreciation, and amortization.
Overview of Sea Limited's Business
Sea Limited's business encompasses three primary segments: e-commerce, digital financial services, and digital entertainment. Shopee, its e-commerce division, is a mobile-centric marketplace offering payment and logistics infrastructure as well as seller services, predominantly operating in Southeast Asia and Latin America. SeaMoney provides various financial services, including mobile wallets, payment processing, and credit. Garena, its digital entertainment platform, is renowned for online games and esports operations.
Recently, Sea Limited has been focusing on expanding its market share within these segments. For Shopee, the focus is on profitability and scale, while SeaMoney aims to capture underserved markets through innovative financial products. Garena is working on maintaining high user engagement and rolling out new game content to diversify away from its highly popular Free Fire battle royale game.
Quarterly Performance Highlights
Sea Limited reported solid performance across its segments in Q3. The e-commerce segment, driven by Shopee, achieved notably positive adjusted EBITDA in Asia and Brazil. Revenue from this segment surged by 42.6% year over year to $3.2 billion, with gross merchandise volume (GMV) rising 25.2% to $25.1 billion. Despite profitability gains in key regions, Shopee continues to face intense competition, challenging its market dominance.
Digital Entertainment, led by Garena, noted a 24.3% increase in bookings to $556.5 million. However, GAAP revenue for the segment declined by 15.9% from Q3 2023 to $497.8 million. This discrepancy highlights increased deferred revenue reflecting prolonged user engagement, aligning with Sea's strategic focus on retention. Garena’s Free Fire remained a top contributor, with bookings growing over 30% year over year, emphasizing its sustained market relevance.
In digital financial services, SeaMoney reported a 38% increase in revenue to $615.7 million, bolstered by robust growth in consumer and SME loans outstanding, which jumped 73.2% year on year. Management maintained a stable non-performing loan ratio at 1.2%, pointing to prudent risk management amidst rapid expansion.
Sea Limited managed to control its expenses effectively in Q3. Sales and marketing expenses reduced by 4.3% from the prior year. The company did ramp up its R&D investments by 7.7% to $302 million, fueling future growth initiatives.
Looking Ahead
Looking forward, Sea Limited's management did not provide specific Q4 guidance in its report. Management has indicated elsewhere that it is optimistic about its continued growth trajectory. Management has also expressed confidence in Shopee's path toward sustained profitability, with expectations for mid-20% GMV growth for the full year. For digital entertainment, Free Fire's continued momentum is crucial, with bookings projected to surpass a 30% growth rate, underpinning Garena's enduring appeal. Sea Limited's future emphasis will also revolve around expanding SeaMoney’s reach, leveraging cross-platform synergies to enhance customer value across its diverse service offerings.
Investors should keep an eye on competitive dynamics, especially in regions like Latin America, and regulatory shifts that may influence Sea’s operational landscape. Noteworthy is the company's adaptability in handling regional market challenges, pivotal for maintaining its competitive edge and scaling its synergistic ecosystem globally.
