Key Highlights Of SEA Limited’s ($SE(SE.SI)) Q2 & 1H FY2022 Results

Key Highlights Of SEA Limited’s ($SE(SE.SI)) Q2 & 1H FY2022 Results

SEA Limited is a company founded in Singapore, but listed on the New York Stock Exchange (under the ticker symbol NYSE:SE).

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2,000 followers.

The company’s key businesses include (i) Garena – a leading games developer and publisher with games including League of Legends, Call of Duty, Area of Valor, Free Fire, and Speed Drifters; (ii) Shopee – a leading online shopping platform in Southeast Asia and Taiwan; (iii) SeaMoney – a leading digital payments and financial services provider in Southeast Asia.

Yesterday evening (16 August), the company released its Q2 and 1H FY2022 results and in this post, you’ll find key aspects about its financial results, as well as its cash flow statement to take note of.

Financial Results (Q2 FY2021 vs. Q2 FY2022):

  • Its total revenue is contributed from 3 business segments – Digital Entertainment (Garena), E-commerce & Other Services (mainly Shopee and SeaMoney), and Sales of Goods (products purchased by the company from manufacturers and 3rd parties and sold on the Shopee platform under their official store.)
  • Improvements in its E-commerce & Other Service (driven by the growing adoption of products and services across its e-commerce and digital financial services businesses) and Sales of Goods (due to an increase in product offerings) was offset by a decline in Digital Entertainment (mainly due to the softening of bookings post-Covid.)
  • Cost of sales went up by 37.2% due to a 62.8% spike in the cost of its E-commerce and Other Services business (due to higher cost of logistics from order growth, and other costs driven by the growth of its e-commerce marketplace), and a 9.1% rise in its Sales of Goods business (in-line with an increase in revenue in the business segment.)
  • As a result of the cost of sales going up by a bigger percentage (37.2%) compared to its total revenue (29.0%), its gross profit margin declined by 3.7 percentage points (pp) to 37.1%.
  • Finally, due to increases in sales and marketing expenses (by 5.7%), general and administrative expenses (by 95.9%, due to increase in allowance for credit losses from its digital financial services business driven by loans receivable growth, higher staff cost, and higher office facilities and related expenses to support business growth), research and development expenses (by 115.0%, due to higher staff cost from increased headcount growth as they invested in its technological capabilities and expanded its service offerings), impairment of goodwill (of $117m, due to change in carrying amount of goodwill associated with its prior acquisitions, mainly driven by lower valuations amid the market uncertainties), net loss for the quarter sank deeper to -$931m (Q2 FY2021: -$433m.)

Financial Results (1H FY2021 vs. 1H FY2022):

  • Compared to its quarter-on-quarter (q-o-q) results (which is a weak one in my opinion), its year-on-year (y-o-y) results was a slightly better one (helped by a stronger q-o-q results in the first quarter, where its total revenue saw a 64.4% increase.)
  • As all 3 of its business segments saw y-o-y improvements in its results (helped by a strong first quarter), its total revenue grew by 44.5%. However, as its cost of sales went up by a slightly higher percentage, its gross profit margin declined by 0.3pp to 38.7%.

Cash Flow Statement (1H FY2021 vs. 1H FY2022):

Statement by SEA Limited’s Chairman & Group CEO, Mr Forrest Li:

“Our solid results for the quarter reflect our continued progress in enhancing efficiency and strengthening our ecosystem.

Shopee’s unit economics improved significantly driven by gains in both monetization and efficiency across our markets, even as we sustained a healthy growth rate against tough comparisons. At Garena, we saw positive outcomes from our focus on user retention and efforts to bring more engaging experiences to our large global games community, with quarterly active users stable quarter-on-quarter. We also benefited from expanding synergies between Shopee and SeaMoney as our underserved user base adopted more of our financial products and services, resulting in strong growth and narrowing losses at SeaMoney.

Our success has always been defined by our ability to focus on the right thing at the right time, quickly make the right strategic decisions, and remain agile and adaptable in our execution. During the pandemic lockdowns, we rapidly scaled our businesses to answer to the fast-rising market demand for online consumption and services. That allowed us to significantly expand our businesses and total addressable markets, strengthen our market leadership, and scale up more efficiently.

As we navigate the current environment of increased macro uncertainty with that same nimble and decisive approach, we believe it is vital to be thoughtful, prudent, and disciplined. While we have strong resources and are well on-track to achieve our self-sufficiency targets, we are nevertheless rapidly prioritizing profitability and cash flow management. We are confident that this focus, combined with our demonstrated ability to execute, our scale and leadership, and our proven business models, will position us for long-term sustained success. “

Disclaimer: At the time of writing, I am a shareholder of SEA Limited.

Once again, this article is a guest post and was originally posted on ljunyuan‘s profile on InvestingNote. 


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