SE Ltd Some results

Investment Analysis Clubs Saul’s Investing Discussions
1

SE Q1 results show continued high rates of growth in it digital entertainment and ecommerce business.

Some highlights:

First Quarter 2021 Highlights
? Group
o Total GAAP revenue was US$1.8 billion, up 146.7% year-on-year.
o Total gross profit was US$645.4 million, up 212.1% year-on-year.
o Total adjusted EBITDA1 was US$88.1 million compared to US$(69.9) million for
the first quarter of 2020.
? Digital Entertainment
o Bookings2 were US$1.1 billion, up 117.4% year-on-year.
o Adjusted EBITDA1 was US$717.3 million, up 140.4% year-on-year.
o Adjusted EBITDA represented 64.4% of bookings for the first quarter of 2021,
compared to 58.2% for the first quarter of 2020.
o GAAP revenue was US$781.3 million, up 111.4% year-on-year.
o Quarterly active users (“QAUs”) reached 648.8 million, an increase of 61.4% yearon-year.
o Quarterly paying users grew by 123.5% year-on-year to 79.8 million, and
represented 12.3% of QAUs for the first quarter compared to 8.9% for the same
period in 2020.
o Average bookings per user were US$1.7, compared to US$1.3 for the first quarter
of 2020.
o Our self-developed global hit game, Free Fire, continued to be the highest grossing
mobile game in Latin America, Southeast Asia and India for the first quarter of
2021, according to App Annie3
. Free Fire has maintained this leading position for
the past seven consecutive quarters in Latin America and Southeast Asia, and two
consecutive quarters in India.
? E-commerce
o GAAP revenue was US$922.3 million, up 250.4% year-on-year.
o GAAP revenue included US$715.9 million of GAAP marketplace revenue4
, up
285.0% year-on-year, and US$206.4 million of GAAP product revenue 5
, up
167.1% year-on-year.
o Gross orders totaled 1.1 billion, an increase of 153.0% year-on-year.
o Gross merchandise value (“GMV”) was US$12.6 billion, an increase of 103.2%
year-on-year.
o Adjusted EBITDA1 was US$(412.9) million compared to US$(264.1) million for
the first quarter of 2020. Adjusted EBITDA loss per order decreased by 37.7%
year-on-year to US$0.38, compared to US$0.61 for the first quarter.

Full year 2021 guidance was +38% for digital entertainment and 112.3% for E-commerce. If they continue at their Q1 pace it appears there will be a substantial beat.

Digital Financial Services Update
We continued to see strong growth in the adoption of SeaMoney’s offerings. Our mobile wallet
total payment volume exceeded US$3.4 billion for the first quarter of 2021, more than tripled that
of the first quarter of 2020. Moreover, quarterly paying users for our mobile wallet services
surpassed 26.1 million in the first quarter.

Sea money has grown as a portion of revenue .This portends well for the future.

There needs to be a closer look at the development of Sea Capital and the Latin America numbers for the first quarter. So far at least these are still small components of the business.

The conference call was this AM so I expect it will be summarized here soon if it hasn’t been yet. I need to see the transcripts before rendering further observations.

draj.

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Outstanding numbers from Sea. The consensus EPS Estimate was -$0.57 (-9.6% Y/Y) and the consensus Revenue Estimate was $1.78B (+94.8% Y/Y). A slight beat on the top line and slight miss on the bottom line. Sea’s introduction into South America is driving some expenses. My take at this point is that all engines are running at full speed and producing the expected results. Thanks to sjo and draj for your posts.

Sea has used a very successful gaming venture to fund an e-commerce + fintech venture for Southeast Asia. Free Fire is the most popular mobile game in the world. And Sea has exclusivity on Tencent’s games out of China. Sea is kicking privately-owned e-commerce Lazada’s butt (think Alibaba), the only other competitor. Sea HQs is located in Singapore which is like the Switzerland of Europe. It is very reputable in comparison to China’s enterprise trickery. Further, Sea Ltd is a registered bank in Singapore that must meet capital requirements to be an accepted fintech across SE Asia. The big risk for Sea is whether their massive investment into e-commerce will pay off or will they squander their cash and return to just a gaming stock. So far the big bet seems to be paying off. Note the SE stock has only fallen off by 20% the last couple months as compared to our other high growthy stocks. One other risk to consider is that SE Asia is hard under Covid right now with no immediate vaccines in view (except the less effective Chinese ones). So re-opening is about 6 months delayed from the US. Tourism provides about 25-30% of the SE Asia economies and right now this is zilch. And we need to watch the competitive stance of MELI to SE in South America. I also have owned MELI for 10 years.

Though I own many of Saul’s stocks, SE (13%) and ROKU (12%) are my largest holdings. Followed by SHOP (8%), CRWD (7%), and OKTA (6%). Honestly, I do not have the time to perform an adequate in depth due diligence on all of my stock holdings (15-20). Saul’s strategy is to hold just a few stocks and have an in depth understanding of each one. Well I only have the time to do it on my top 5 of my top holdings. And my lazy bones depend on the rest of you to inform me on this message board on the others. Thank you MF and Saul’s disciples.

I am surprised there is not more interest on Saul’s board for Sea. But I should disclose my wife is from Thailand. This perhaps gives me a better understanding of the business dynamics and culture in SE Asia. I have spent considerable time in SE Asia and India over the last 35 years. If you have invested in South American MELI, then you should understand SE. Perhaps this is an oversimplification but SE uses same proven model as MELI with gaming added.

I am a firm believer in both SE and ROKU. Each has been a multi-bagger for me. I see nothing that dissuades me from their trajectory for the next couple years. And I would not hesitate to buy more here.

-zane

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I am surprised there is not more interest on Saul’s board for Sea.

IMHO there are at least several reasons for the lack of interest in Sea.

.It is not (yet) a necessary B2B service like CRWD or DDOG with seemingly unlimited needs for the product.

. Most of the current revenue is generated by the Digital Entertainment component. E commerce and financial services are growing fast but are still relatively small.

.Some folks think that by moving into Latin America Sea may have overextended themselves.

.It doesn’t have contractual ARR.

.Its a bit complex and therefore hard to analyze and make familiar projections.

.Its in southeast Asia.(Definitely a foolish reason)

What I see is rapid expansion in all sectors, superb management ,location in a very favorable business environment, lots of ways to enlarge the business opportunities, willingness to experiment ,the world’s most popular game (I think) with further growing interest ,gegraphical penetration and 11 successive quarters of triple digit growth.

And so I am long Sea Ltd. @12%

cheers

draj

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Most of the current revenue is generated by the Digital Entertainment component. E commerce and financial services are growing fast but are still relatively small – draj

Thanks for the thread, guys!

And I very much appreciate the “negatives” of SE compared to SaaS companies. Balance is a good thing. Thanks, draj!

The excerpt above is what I wanted to comment on.

At the growth rates seen in recent quarters, the non-video game segment could catch up to the game segment by the end of this year. And, in good order, leave it to increasingly become a minor component. All this predicated, of course, on the future course of the segments looking like the past.

That always happens! Umm… right? :wink:

Disclosure: SE is ~15% of our portfolio.

Rob
Rule Breaker Home Fool & STMP/MTH Maintenance Coverage Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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. Most of the current revenue is generated by the Digital Entertainment component. E commerce and financial services are growing fast but are still relatively small.
Are you sure about that draj?

The way I read it is:

Digital Entertainment - GAAP revenue was US$781.3 million, up 111.4% year-on-year.

E-commerce - GAAP revenue was US$922.3 million, up 250.4% year-on-year.

The E-commerce GAAP revenues were taken from gross orders of US$1.1bn and taken from a GMV of US$12.6bn.

https://seekingalpha.com/article/4429577-sea-limited-2021-q1…

Absolutely the margin and profitability of gaming (digital entertainment) is bailing out the rest of the company but E-commerce leads in revenues.

Admittedly if you go back to a pre Covid year - say 2019, the adjusted revenue split was 2:1 in favour of DE, (although 1/3rd of the DE adjusted revenues came from changes to deferred revenues - otherwise they were closely matched within 20% just as they had been in 2018 - even still E-commerce GMV was much much higher even then than DE).
https://seekingalpha.com/article/4329406-sea-limited-2019-q4…

Ant

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Absolutely the margin and profitability of gaming (digital entertainment) is bailing out the rest of the company but E-commerce leads in revenues.

Very similar to Amazon, though. Substitute DE for AWS and subsidize efforts to expand into e-commerce, e-tailing.

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Digital Entertainment - GAAP revenue was US$781.3 million, up 111.4% year-on-year.

E-commerce - GAAP revenue was US$922.3 million, up 250.4% year-on-year.

The E-commerce GAAP revenues were taken from gross orders of US$1.1bn and taken from a GMV of US$12.6bn.

https://seekingalpha.com/article/4429577-sea-limited-2021-q1……

Ant

I stand corrected. The financial services are a small part of revenue. E-commerce is growing fast and generating revenue but is not contributing yet to profitability.

draj