Sea Limited logs37.4% YoY net loss in Q1 2022

This is due to higher operating expenses and cost of revenue.

Sea Limited, the operator of Shopee, SeaMoney, and Garena, posted a 37.4% year-on-year (YoY) decline in its profit to $580.1m in the first quarter of 2022 as a result of higher operating expenses and cost of revenue.

In its statement, the Group’s revenue rose by 64.4% YoY to $2.9b, with the e-commerce and other services segment, leading with a 94.2% increase to $1.5b, whilst the digital entertainment segment jumped by 45.3% to $1.1b, and sales of good by 26.1% to $264.8m.

“We recorded solid results across our business in the first quarter of 2022, despite challenging comparisons to the same period last year during heightened COVID-related restrictions. As a result, we are well on track to achieve our previously shared projections of profitability in our Asia markets, while continuing to scale our businesses and capture market share globally,” said Sea Chairman and CEO Forrest Li. 

“Shopee and SeaMoney continued to enjoy operating leverage and efficiency gain as they scale and strengthen their market leadership positions. With the significant scale, strong leadership and clear synergies achieved by both businesses in Southeast Asia and Taiwan, our consumer internet ecosystem in the region is naturally approaching a stage of long-term profitable growth,” he added.

Garena, on the other hand, experience headwinds but the company “saw some preliminary positive effects from our efforts to improve user engagement in Free Fire.”

However, Sea also saw a 54.7% increase in the cost of revenue to $1.7b, with the e-commerce and other services segment posting a 74.4% increase to $1.2b due to higher costs of logistics from order growth and other costs due to the growth of its e-commerce marketplace.

Its other operating income, meanwhile, inched down by 1.9% to around $73.7m.

Sea’s total sales and marketing expenses rose by 48.1% YoY to $1b, led by the e-commerce segment which saw a 54.9% rise to $699.5m due to the ramping up of marketing incentives and online marketing efforts.

The general and administrative expenses soared 59.2% YoY to $396.1m due to credit losses from its digital financial services business, higher office facilities and related expenses, and higher staff costs.

Research and development expenses skyrocketed by 141.2% during the quarter to $340.4m because of the higher staff cost from increased headcount and investment in the company’s technological capabilities, and expanded service offerings. Its net income tax expense was $81.8m in the first quarter of 2022.

“Given the elevated macro uncertainties, we now see a wider dispersion of potential scenarios for Shopee for the full year of 2022 and hence are revising our e-commerce guidance to 4 correspondingly reflect this view,” according to Sea.

The company said it expects generally accepted accounting principles revenue for e-commerce to be between $8.5b and $9.1b, representing a 71.8% YoY “at the midpoint of the broader guidance,” compared to the previous guidance between $8.9b and $9.1b.