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Sea Limited (SE) Incurs Loss in Q1, Free Fire Drives Top Line

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Sea Limited SE incurred first-quarter 2022 loss of 80 cents per share, wider than the year-ago quarter’s reported loss of 62 cents. The figure beat the Zacks Consensus Estimate by 2.44%.

Revenues of $2.90 billion jumped 64.4% on a year-over-year basis but lagged the consensus mark by 4.64%.

The year-over-year upside in revenues can be attributed to growth in the company’s digital entertainment business, especially the self-developed game — Free Fire — and continued monetization efforts in its e-commerce business.

According to data.ai, Free Fire continued to be the highest grossing mobile game in Southeast Asia and Latin America for the first quarter of 2022. In the United States, Free Fire was the highest-grossing mobile battle royale game for five consecutive quarters for the first quarter of 2022.

Sea Limited Sponsored ADR Price, Consensus and EPS Surprise

Sea Limited Sponsored ADR Price, Consensus and EPS Surprise
Sea Limited Sponsored ADR Price, Consensus and EPS Surprise

Sea Limited Sponsored ADR price-consensus-eps-surprise-chart | Sea Limited Sponsored ADR Quote

Sea shares were up 14.05% to close at $80.21 on May 17, following the results. Sea shares have been down 64.2% year to date, underperforming the Zacks Computer & Technology sector’s decline of 26.7%.

Top-Line Details

Digital entertainment revenues of $1.14 billion surged 45.3% year over year.

Quarterly active users (QAUs) reached 615.9 million compared with the year-ago quarter’s 648.8 million. Quarterly paying users of 61.4 million, representing paying user ratio of 10% for the first quarter, compared with 12.3% for the same period in 2021.

Average bookings per user for the reported quarter were $1.30 compared with year-ago quarter’s figure of $1.70. Bookings were $0.8 billion in first-quarter 2022 compared with the year-ago quarter’s $1.1 billion.

E-commerce and other services’ revenues were $1.50 billion, up 94.2% from the year-ago quarter.

Gross orders for the quarter under review totaled 1.9 billion, up 71.3% year over year. Gross merchandise value was $17.4 billion, up 38.7% year over year.

Finally, sales of goods soared 26.1% year over year to $264.8 million in the first quarter of 2021.

Digital financial services revenues jumped 359.9% year over year to $236 million.

SeaMoney products and services’ QAUs reached 49 million, up 78.2% year over year. Mobile wallet total payment volume for the first quarter surpassed $5.1 billion, up 48.5% year over year.

Operating Details

Gross profit surged 81.3% year over year to $2.9 billion in first-quarter 2022.

Adjusted EBITDA loss was $509.9 million against EBITDA of $88.1 million in the year-ago quarter.

Digital Entertainment adjusted EBITDA was $431.4 million compared with $717.3 million reported in the year-ago quarter. Adjusted EBITDA represented 52.2% of bookings for the first quarter of 2022 compared with 64.4% for the first quarter of 2021.

Shopee’s adjusted EBITDA loss per order was $0.40 compared with $0.38 reported in the year-ago quarter.

Balance Sheet

As of Mar 31, 2022, Sea had cash and cash equivalents of $9.07 billion compared with $10.80 billion as of Dec 31, 2021.

Guidance

For 2022, e-commerce revenues are expected between $8.5 billion and $9.1 billion, representing 71.8% growth from 2021 at the midpoint of the guidance.

Zacks Rank & Upcoming Earnings to Watch

Sea Limited currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader Zacks Computer and Technology sector that are scheduled to report their earnings soon are Pure Storage PSTG, The Descartes Systems DSGX and Cisco Systems CSCO. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pure Storage shares have outperformed the sector year to date, declining 19.2%.

PSTG is set to report first-quarter fiscal 2023 results on Jun 1.

Descartes’ shares have underperformed the sector year to date, declining 26.8%.

DSGX is set to report first-quarter fiscal 2023 results on Jun 1.

Cisco’ shares have outperformed sector year to date, declining 20.2%.

CSCO is set to report third-quarter fiscal 2022 results on May 18.


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