Sea Ltd. (SE) beats and raises

Sea Limited (SE) has been mentioned many times on this board. They are the biggest eCommerce, gaming and fintech company serving Southeast Asia, and have been expanding globally into South America and Europe.

They just announced some pretty impressive earnings.

Total revenue was $2.7 billion (vs $2.39B estimated), up 121.8% YoY

Total gross profit was $1 billion, up 147.5% YoY

“Raising the guidance for e-comm for the full year of 2021. We expect GAAP revenue for e-commerce to be between $5.0B and $5.2B, representing 135.3% growth from 2020 at the midpoint of the revised guide, compared to the previous guide of between US$4.7B to US$4.9B.”

Some other numbers:

  • Garena +93.2%YOY
  • Shopee +134.4%YOY
    Marketplace rev. +151.4%
    Product rev. +82.2%YOY)
    Shopee GMV +80.6%YOY
  • SeaMoney TPV +111%YOY
    Gross profit +147.5%YOY
    FY rev. guidance raised +135.3%YOY

The stock is up 6% pre-market, up 63% YTD, and up 2,300% (a 24-bagger) since Jan. 2019.

Long SE


Some highlights from the conference call and slides:

  • expect more new Shopee markets internationally (in addition to recent expansion into Spain, France, India)
  • more sanguine on prospects for Brazil being a long-term sustainable market for Shopee
  • Shopee take rate continues to improve (7% compared to 5% last year)
  • Digital Financial Services now at an ~$500M annualized run rate.
  • Free Fire/Free Fire Max was top downloaded game worldwide in October (SensorTower data), management highlighted new features, esports, offline collaborations, laying foundation for sustainable platform going forward.

Also in the news recently are SeaCapital venture investments into crypto/NFT space.


First time post by long-time lurker - hope the readers find this helpful. Really appreciate the many insights shared on this Board.

There are tell-tale signs of slowdown in Garena. Garena revenues only grew 7% QoQ (3Q’21: US$1.1bn vs. 2Q’21: US$1.024bn), with Quarterly Active Users (QAU) and Quarterly Paying Users (QPU) each growing at 1% QoQ. This appears to be less due to seasonality (QAU 2Q-3Q QoQ is usually the lowest in the year, with 2018/2019/2020 at 10%/3%/6% QoQ), and more a signal of challenges in converting QAU to QPU (QPU 2Q-3Q QoQ for 2018/2019/2020 at 9%/12%/31%). I do note though that the user base now is substantially higher than it was in prior years - that said, a 1% QoQ QPU growth is worth monitoring.

Management appears focused on driving spend per paying user through the release of FreeFire MAX on 28 Sep 2021 - the higher-definition/ higher-quality graphics version of the game with full portability with the normal FreeFire game. I would argue that the higher quality graphics and full portability may entice users to spend more on in-game skins. That said, the effectiveness of this measure remains to be seen, as Management did not raise guidance on Garena’s full year bookings even when we are already halfway through 4Q’21.

E-commerce remains a bright spot. Growth remains well above 100% yoy, take rate inching up to 9% (vs. 8% in 2Q’21 and 7% in 3Q’20). Negative Adj. EBITDA is understandable given the ongoing land grab / arms race against Lazada in Southeast Asia and GoTo in Indonesia (Southeast Asia’s largest market), as well as investments into new markets while extending Shopee’s leadership in its existing markets (e.g., onboarding local SMBs, expanding reach to rural areas, expanding its in-house logistics, BNPL solutions, etc.). Execution remains tight.

I remain positive on SE for now, but will closely monitor E-Commerce execution especially given entry to many new European markets in the past quarter (lest there be major cost overruns in these new markets), as well as further signals on whether Garena’s 3Q’21 slowdown is temporary or portents a sooner-than-expected deceleration come 4Q’21 earnings.

  • IB
    Long SE 11.5%

Good observation on the Garena slowdown.

That neither surprises me or dismays me. A $180B market cap company like Sea cannot be expected to continue it’s splendid growth rate with an ongoing heavy reliance on video games, even with as much as some folks like video games. There’s just so much that anyone can play, but more importantly… games are like fashion. Interest in a game comes and goes, even though Sea has seen remarkable persistence with their offerings.

I figured that if Sea were to continue to grow, the other arms of the company would have to do so while gaming would eventually slow down it’s growth. Not saying we’re topping off yet because they’ll probably keep pushing it in new areas of the world. But I’m pleased to see e-commerce and financial services continue to explode at 100%+ growth rates. Those are more sustainable and potentially can provide more years of growth.

Pleased with my SE $80 calls I bought at the money
Rule Breaker Home Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.


I may be wrong, but I have always viewed Galena as a powerful, but short-lived source of capital for investing in the other divisions; I expect (and hope!) that the e-commerce and financial divisions can now “take off” and eclipse the need for Galena.

Sure, they can continue to milk cash from Free Fire, and maybe even deliver another hit game or two down the road. But the future of Sea Ltd is in e-commerce and finance. I think Galena served its purpose; It powered the company to compete and win the e-commerce wars in SE Asia, and now they are expanding into Europe and Latin America.

I am a happy shareholder of SE, but not because of Galena. Because of the CORE business, which is e-commerce.

Tiptree, Fool One guide and Market Pass home Fool


Garena contributes ~40% of Sea’s revenues and all of Sea’s profits (~US$700m of Adj. EBITDA per quarter) and cashflows.

Garena used to post strong growth alongside Shopee. The story is that of a dual growth drivers (Garena and Shopee), with Garena cross-subsidizing Shopee. Shopee is heavily loss-making until now, as it should be given the intense competition in its various markets.

A slowdown in Garena would reduce available capital to fund Shopee’s ever-increasing cash burn. This in-turn could result in greater reliance on new equity raises (thus dilution, exerting pressure on share price) or alternatively slower growth - either from slower expansion due to less capital available or because Shopee then has to monetize more aggressively at the risk of users switching to competitors.

It is important that Garena continues growing in tandem with Shopee to ensure that Sea has sufficient capital to finance Shopee and SeaMoney’s growth. Shopee and SeaMoney on their own are still very far from profitability, burning ~US$800bn per quarter as of 3Q’21.


Typo - Shopee and SeaMoney’s cash burn is ~US$800m (not bn) per quarter.

Just wondering why no one talks about Sea’s potentially new stream of revenue - digital bank. They are awarded the digital bank license in Singapore last year but that is not mentioned?
Am I missing something here?


My take on SE is slightly different. While Garena is currently important, I’m invested in SE for ECommerce, not Garena. SE is doing a masterful job of leveraging the popularity of Free Fire to get a much faster foothold in new markets!

SE ECommerce Revenue > Free Fire revenue. ECommerce Revenue is now at an all-time high of 55% of TOTAL revenue.

What is ASTOUNDING to me; almost UNBELIEVABLE. ECommerce revenue of 1.5B this quarter is almost what TOTAL revenue in 2020 Q4 (1.567B Holiday quarter, 3q’s ago).

Its just INCREDIBLE to have a company bringing in over 12B a year (Forward 12 months), growing at TRIPLE digits.


I bailed out of ROKU last summer after I saw slowing user growth while revenue and profit growth was rising. Monetization ARPU increased considerably and continues to be a cash engine. I had a nice run having purchased ROKU in May 2020 ~$80/share. But ROKU no longer had the two engines: User growth and ARPU growth. Baling in hindsight was clearly the right choice.

I mention ROKU as a possible analogy to SE. I have to ask why I should continue to hold SE which appears on the surface to have the same challenges of losing an engine? The flat user growth perplexes me (paying users Q2 92.2M Q3 93.2M). Paying user growth has gone from quarterly double digit growth to 1%. SE has entered new regional markets in South America and Europe. I expected Free Fire to be the initial honey pot attracting new Z-Gen users to Shopee. This does not appear to be the case. I also thought SE had exclusive rights to TenCent games. I see nothing said about this contribution to Garena revenue. Sure, rising ARPU is great, but we just lost one of the engines on our plane. Or maybe the engine is just at maximum RPMs. Ultimately, Garena long term must continue “in tandem” to be a cash machine albeit with lower growth. Amazon funded its growth and beefed up its bottom line through selling the high margin AWS cloud service. But AWS still maintains a high growth rate. Will Garena?

There is not much news in the ER about the Sea Money other than they continued to see strong growth in the adoption of SeaMoney’s offerings. The total payment volume for our mobile wallet was US$4.6 billion for the third quarter of 2021, an increase of 111% year-on-year. And quarterly paying users for the mobile wallet services increased to 39.3 million in the third quarter. So this sounds good, but what is the translation to future revenue and when? MELI is making good money on this due to the lack of their service populations using banking services. So there is an unmeasurable progress here in regards to profit. Or at least I do not know how to extrapolate profit.

A raising take rate for Shopee from 5.3% to 7.8% (YOY) shows margin expansion. And a flat EBITDA -$0.41 per order implies that Shoppe can continue to expand and take on new regions for some time with a predictable cash burn rate. Much of this >100% YOY growth is achieved by paying for most of the shipping costs. Ultimately, SE must address the logistics of shipping much like MELI and AMZN to achieve greater profitability and service. It is easy to start charging for shipping, but it takes a huge continual investment to scale shipping logistics. So I guess this can all come in due time.

Q3 2021
• Total GAAP revenue was US$2.7 billion, up 121.8% year-on-year.
• Total gross profit was US$1.0 billion, up 147.5% year-on-year.
• Total adjusted EBITDA1 was US$(165.5) million compared to US$120.4 million for the third quarter of 2020.

These growth numbers are mind numbing but I am concerned long term on where is the profit. The foolish take would be profit will eventually follow the hyper growth so hold on. So for now I will continue to hold and but maybe lighten my large SE April 2020 purchase a little. This pony’s belly maybe starting to sag. Any further drop off in Garena’s paying user growth next quarter will kill this high flyer.



Zane, here is how I see it.

  1. Entertainment business is kind of flat. It continues to be the milk cow which funds e-commernce and fintech business.

  2. E-commerce is booming, platform (marketplace) revenues grew above 150% YoY and these are 3P revenues with higher margin than direct sales (1P).

  3. Fintech revenues grew 818% YoY to 132m . This makes an annual run-rate of above 500m and super rapidly increasing. Considering growth rate single digits in billions for this business are easily achievable.

So, we have stagnating business Nr. 1 which funds super booming businesses Nr. 2 and Nr. 3. There are 2 rockets and Garena fills their tanks.

How to value that is another question but platform e-commerce business will always have higher margins and higher multiples. E-commerce will probably reach 10b revenues next year and like 17b in 2023. Fintech will probably reach 1b runrate next year. Alipay is an example of how to value it.

Now, if one wants to keep this company in own investment portfolio - each investor decides for himself. I reduced my allocation from 15% in October to 5% now and will keep it for now because of these 2 super fast growing businesses both of which have strong structural tailwinds .