Sea Limited stock jumps as much as 41% as company renews focus on profitability

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The Sea Limited logo is displayed on a smartphone screen.

Rafael Henrique | Sopa Images | Lightrocket | Getty Images

Shares of Sea Limited jumped as much as 41% following Tuesday’s announcement of its third-quarter financial results, after the company said it will renew its focus on profitability instead of outright, blistering growth.

In early morning Asia time, the stock was trading at about $62.70 in after hours trade. Its previous close came in at $45.80.

“Given the significant uncertainties in the macro environment, we have entirely shifted our mindset and focus from growth to achieving self-sufficiency and profitability as soon as possible, without relying on any external funding,” said Forrest Li, chairman and group CEO of Sea Limited.

Shares of Sea Ltd are down more than 70% year-to-date. The company owns online shopping platform Shopee and gaming arm Garena, two of its main money-making divisions.

The company fell deeper into the red in the third quarter ending September, as adjusted EBITDA loss widened to $358 million. That’s compared to the $166 million loss in the same period last year. EBITDA is a measure of profitability that shows earnings before interest, taxes, depreciation and amortization.

In a bid to stem losses, the Singapore-based tech giant has laid off more than 7,000 employees, or around 10% of its workforce, over the past six months, according to local media.

In September, its top management also announced it will forgo salaries “until the company reaches self-sufficiency.”

E-commerce, fintech see increased revenue, but gaming dips

E-commerce and financial services units saw higher EBITDA year-on-year for the third quarter ending September, but was offset by a disappointing gaming sales performance.

Adjusted EBITDA loss for Shopee was $495.7 million, improving by 27.5% year-on-year, “driven by strong topline growth and efficiency improvements in operating costs.”

“We are currently working towards adjusted EBITDA breakeven for Shopee overall by the end of 2023,” said Li.

EBITDA loss of its digital financial services unit, which includes Shopee Pay and its buy now, pay later service SPayLater, narrowed to $67.7 million, improving by 57.4% compared to a year ago, “predominantly driven by more targeted sales and marketing spending for the mobile wallet business.”

Meanwhile, its gaming arm Garena saw adjusted EBITDA drop about 60% year-on-year to $289.9 million for the third quarter.

“Garena plans to launch new games,” said Li, during the media conference. The globally successful Free Fire has struggled after the game was banned by India in early 2022.

Sea also lowered its expected bookings for Garena for the full year of 2022 to be between $2.6 billion and $2.8 billion, as compared to the previous guidance of between $2.9 billion to $3.1 billion, due to “rising macro uncertainties.”

Scaling down on expansion

Sea said it does not intend to provide any guidance for 2023 for its businesses, given the ongoing macro uncertainties.

The Singapore-based company faced several setbacks over the course of this year, including investor Tencent Holdings trimming its stake in the company, the ban of gaming app Free Fire by India, and shutting down Shopee’s operations in Latin America, including markets in Argentina, Chile, Colombia, and Mexico.

The tech company has also pulled out from India and France to focus on key markets in Brazil, Southeast Asia and Taiwan in March.

Sea Ltd.'s first quarter revenue beats estimates, but losses widen

“Brazil continues to be growth market and we will continue to invest in the market,” said Li during the conference call.

After these setbacks and amassing billions of losses, it realized that chasing after growth was not a sustainable strategy. Sea’s adjusted EBITDA loss for the financial year of 2021 was at $593.6 million, compared to an adjusted EBITDA profit of $107 million in 2020.



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