Sea Limited (SE)

Sea Limited is engaged in online gaming (Garena), e-Commerce (Shopee), and digital banking (SeaMoney). Garena, the gaming arm, generates revenue through the publishing of games. They also developed and published Free Fire, the most downloaded mobile game of 2020, which generates revenue through in-game purchases. Shopee is the leading e-Commerce platform in Southeast Asia. They also recently received full approval as a digital bank.

Attached are my condensed notes. Thank you to Muji and Rex for their contributions.

Approximate Q4 earnings release is 2/9.


Left Brain Investment Research (Nov 20th)……


  • Garena has had tremendous success in Southeast Asia, becoming the number one platform by market share in the region with 570 million active players

  • Shopee is also leading the region as one of the most popular shopping apps. Gross Merchandise Value (GMV), or the total value of goods sold on its e-commerce marketplace, has expanded more than 15x in a mere three years, reaching $17.6 billion at the end of 2019. During that same period, the number of orders processed on its platform has increased more than 16x to 1.2 billion orders. The company faces competition from regional players like Lazada (backed by Alibaba), global e-commerce brands like Amazon, and local players like Indonesia’s Tokopedia and Bukalapak. Yet despite the tough competitive landscape, Shopee is winning the region, ranking first in the shopping category by the number of downloads, average monthly active users, and total time spent in app according to data from App Annie, a leading global provider of mobile data and analytics. Shopee was also the second most downloaded app globally.

  • We can see this from the growing number of game quarterly active users (QAU) and game quarterly paying users (QPU). Crucially, the number of QPUs is rising faster than QAUs, increasing the QPU as a percentage of QAU. Revenue per QPU is also trending up quarter-on-quarter, which explains the explosive sales growth of 167% for its digital entertainment segment in FY 2019.

  • The company has also done exceedingly well in proprietary game development, launching a battle royale genre mobile game titled Free Fire in 2017, which has received very positive reception in Southeast Asia and Latin America, and driving a solid revenue stream for the company. Free Fire is the highest grossing mobile game in these two regions, sustained by a steady roll-out of attractive content to keep users interested and e-sports tournaments. The success of Free Fire is a promising indication of Sea’s ability to complement its licensed games with proprietary game generation capabilities, free of revenue sharing agreements and potentially less favorable partnership agreements.

  • The result of deeper engagement is greater monetization rates for Sea Limited. This has led to the robust revenue growth the company consistently reports. Between FY16 and FY19, revenue rose at a CAGR of 84.5%, accelerating to triple-digit growth in FY19. Strong topline performance has lifted margins for Sea Limited, and it just started turning adjusted EBITDA positive on a consolidated group basis in Q2 and Q3, and achieved its first full year of positive operating cash flow last year. This is good news for investors who often have to contend with deeply negative profitability and cash flows in exchange for high sales growth rates. Sea Limited’s profitability comes from its Garena digital entertainment segment, which has offset the cash burn from its younger Shopee and SeaMoney businesses. Garena is expected to continue delivering strong sales performance in the near to medium term, supporting the growth investments required for e-commerce and digital financial services until they scale sufficiently to become profitable.

Great Article on Sea Limited:

Seeking Alpha (Dec 13th)……


Second Quarter 2020 Highlights

Adj Revenue 1.29B +93.4% YoY, +40.8% QoQ

  • Digital Ent 716.2M +61.6%
  • E-commerce 510.6M +187.7%
  • Marketplace Rev 378.7M +174.8%
  • Product Rev 131.9M +232.5%
  • Digital Finance 11.9M +327.7%

Gross Profit 200.8M +106%
Adj EBITDA 7.7M vs (-11.0M)

  • Digital Ent 436.2M +65.4%
  • E-commerce -305.5M (vs -248.2M)
  • Margin -59.8% (vs -140%)
  • Digital Finance -110.1M (vs -18.1M)

Opex: 573.6M +72.8%

  • R&D +115%
  • S&M +95%
    Cash 3.4B

Digital Entertainment (Gaming):
QAUs 499.8M +61%
QPUs 49.9M +91%
ARPU 1.40

  • Free Fire >100M peak DAUs
  • highest grossing mobile game in LatAm and SEAsia, 3rd globally

GMV 8.0B +109.9%
Gross Orders 615.9M +150.1%, +3890bps seq

  • Shopee Mall +210%
  • Indonesia 260M +130%
    GMV 8.0B +109.9% !!, +3560bps seq !!

Digital Financial Services (Sea Money):
TPV 1.6B
QPUs 15M

45% of Indonesia Gross Orders used it

Third Quarter 2020 Highlights

o Total GAAP revenue was US$1.2 billion, up 98.7% year-on-year, +37% seq
o Total gross profit was US$407.6 million, up 100.6% year-on-year.
o Total adjusted EBITDA was US$120.4 million compared to US$(30.8) million for the third quarter of 2019.

Digital Entertainment
o Bookings were US$944.7 million, up 109.5% year-on-year
o Adjusted EBITDA was US$584.5 million, up 119.8% year-on-year
o GAAP Revenue was US$569.0 million, up 72.9% year-on-year from US$329.1 million for the third quarter of 2019.
o Our self-developed global hit game, Free Fire, continued to be the highest grossing mobile game in Latin America and in Southeast Asia in the third quarter, according to App Annie

o GAAP Revenue was US$618.7 million, up 173.3% year-on-year.
o Gross orders totaled 741.6 million, an increase of 130.7% year-on-year.
o Gross merchandise value (“GMV”) was US$9.3 billion, an increase of 102.7% year on-year.
o Adjusted EBITDA was US$(301.6) million compared to US$(253.7) million for the third quarter of 2019. Adjusted EBITDA loss per order decreased by 48.1% year-on-year to US$0.41, compared to US$0.79 for the third quarter of 2019.
o Shopee was also the second most downloaded app globally in the Shopping category in the third quarter, according to App Annie

Opex: 772M +95% (59% of sales - down from 64% a year ago)

  • R&D +139%
  • S&M +87%
    Cash 3.5B

Digital Financial Services Update
o Mobile wallet total payment volume for the quarter exceeded US$2.1 billion
o Quarterly paying users for our mobile wallet services surpassed 17.8 million

o In digital entertainment, we expect bookings for digital entertainment to exceed US$3.1 billion, representing over 75.4% growth from 2019. The revised guidance represents an increase of more than 59.0% from the midpoint of the previously disclosed guidance of between US$1.9 billion and US$2.0 billion
o In e-commerce, we expect GAAP revenue plus sales incentives net-off for e-commerce to exceed US$2.3 billion. The revised guidance represents a more than 144.1% increase from 2019, and a more than 31.4% increase from the midpoint of the previously disclosed guidance of between US$1.7 billion and US$1.8 billion

Me here - I thought this was a great quarter as we see revenues are continuing to grow 100% which is pretty impressive at this scale. The most impressive part for me is the continued hyper growth of Shopee. Revenues were less than $9M in 2017 and will likely be over $2B this year. That is absolutely unreal growth. All the while, the loss per order (calculated by dividing adjusted EBITDA by gross orders) has shrunk from $(1.61) to $(0.41). This was also the first quarter Sea has ever posted a significant positive number for adjusted EBITDA (thanks Garena). Overall, it was another strong quarter which I am quite pleased with. This company, along with MELI, I think deserve a spot in most portfolios.


SE Total Revenue Ecommerce Gaming Digital Finance Gross Profit Cost of Revenue
FY20 ? >$2.3B >$3.1B Bookings ?
Q420 ? ?(>856.7M) ?(>959.2M) ?
Q320 $1.2B GAAP $618.7M GAAP $944.7M Bookings $407.6M $804.6M
Q220 $1.29B Adj $510.6M Adj $716.2M Adj $11.9M $200.8M $681.2M
Q120 $914M Adj $314.0M Adj $512.4M Adj $206.8M $508.1M
Q419 $909M Adj $358.3M Adj $479.9M Adj $264.9M $512.4M
Q319 $763M Adj $257.2M Adj $451.0M Adj $203.2M $407.0M
Q219 $665M Adj $177.4M Adj $443.2M Adj $97.4M $338.7M
Q119 $579M Adj $149.2M Adj $393.3M Adj $39.5M $312.4M

-HugoStocklitz (long SE)


SE Total Revenue Ecommerce Gaming
FY20 ? >$2.3B >$3.1B Bookings
Q420 ? ? (>856.7M) ? (>959.2M)
Q320 $1.2B GAAP $618.7M GAAP $944.7M Bookings
Q220 $1.29B Adj $510.6M Adj $716.2M Adj
Q120 $914M Adj $314.0M Adj $512.4M Adj
Q419 $909M Adj $358.3M Adj $479.9M Adj
Q319 $763M Adj $257.2M Adj $451.0M Adj
Q219 $665M Adj $177.4M Adj $443.2M Adj
Q119 $579 M Adj $149.2M Adj $393.3M Adj

SE Gross Profit Cost of Revenue S&M R&D G&A Net Loss (Adjusted)
Q320 $407.6M $804.6M $471.0M $104.3M $196.7M $346M
Q220 $200.8M $681.2M $386.3M $75.3M $144.5M $317.7M
Q120 $206.8M $508.1M $308.3M $64.6M $126.9M $239.4M
Q419 $264.9M $512.4M $341.7M $49.5M $109.7M $240.2M
Q319 $203.2M $407.0M $251.8M $43.6M $99.3M $175.2M
Q219 $97.4M $338.7M $198.1M $35.1M $101.3M $215.1M
Q119 $39.5M $312.4M $178.0M $28.5M $75.6M $237.3M