Sea (SE) Q2 Loss Widens Y/Y, E-Commerce Growth Aids Revenues
Sea Limited SE reported second-quarter 2018 adjusted loss of 59 cents per share that was narrower than the Zacks Consensus Estimate of a loss of 70 cents. The company had reported loss of 50 cents per share in the year-ago quarter.
Net sales surged 81.1% year over year to $183.8 million, which comfortably surpassed the Zacks Consensus Estimate of $159 million. On an adjusted basis, revenues soared 71% year over year to $219.5 million.
Digital Entertainment (Garena) revenues on an adjusted basis increased 19% year over year to $139.1 million. Approximately 73% of revenues were derived from mobile games.
In June, self-developed game revenues accounted for approximately 13% of adjusted digital entertainment revenues, driven by success of Free Fire. Daily active user (DAU) count reached a record high of more than 16 million.
Sea Limited Sponsored ADR Price, Consensus and EPS Surprise
Sea Limited Sponsored ADR Price, Consensus and EPS Surprise | Sea Limited Sponsored ADR Quote
According to App Annie, in July 2018, Free Fire was ranked in the top 10 in terms of game downloads worldwide, across both the App Store and Alphabet’s GOOGL Google Play Store.
Quarterly active users were 160.6 million, up from 126.7 million in the previous quarter. On a year-over-year basis, the figure jumped 150%. Quarterly paying users were 6.6 million, down from 7.2 million reported in the previous quarter. Average revenue per paying user increased almost 4% sequentially to $21.1.
E-commerce (Shopee) revenues were $58.8 million compared with $2.6 million in the year-ago quarter. Marketplace revenues were $37.3 million, while product revenues were $21.5 million.
Gross Merchandise Value (GMV) increased 14.4% sequentially and 171% year over year to $2.22 billion. Gross orders jumped 181% from the year-ago quarter to 127.8 million.
Digital Financial Services (AirPay) revenues declined 35.8% year over year to $3.4 million. Gross Transaction Value surged 44.7% sequentially and 608% year over year to $2.46 billion. The growth was attributable to the payment processing services provided by AirPay to Shopee in most of Sea’s markets.
Other Services revenues were $18.2 million compared with $3.6 million in the year-ago quarter.
Reported gross profit declined 66.7% year over year to $8.6 million.
Adjusted EBITDA loss was $161.9 million compared with loss of $50.9 million in the year-ago quarter.
Reported operating expenses surged 110.8% year over year to $228.1 million due to higher sales & marketing (S&M), research & development (R&D), and general & administrative (G&A) expenses, up 122.8%, 92.5% and 87.7%, respectively.
Notably, S&M as percentage of revenues declined 60 basis points (bps) on a year-over-year basis to 6.2% reflecting growing scale that is driving cost efficiency.
Operating loss was $219.5 million compared with year-ago quarter’s loss of $82.4 million.
Zacks Rank & Stocks to Consider
Currently, Sea carries a Zacks Rank #3 (Hold).
Ally Financial ALLY and Athene Holding ATH are two better-ranked stocks from the broader finance sector. Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long term earnings growth rate for Ally and Athene are currently pegged at 12.7% and 15%, respectively.
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