Sea sees growth in both revenue and losses in first financial report post-IPO
Sea saw positive revenue numbers, both in terms of growth and diversification
Sea Group experienced encouraging growth and revenue numbers in Q3 2017 but the optimism was restrained as net losses nearly doubled from last year and the numbers from last quarter were nearly as much as the first nine months of 2016.
In Q3 2017, Sea Group reported a net loss of US$127 million and which is more than double the number from 2016 (US$60 million). Furthermore, the US$127 million number is in vicinity of the US$134 million Sea Group reported for the first three quarters of 2016.
In total, the first three quarters has resulted in a net loss of US$281 million for Sea Group — more than double last year’s number.
This particular set of financial reports is receiving extra scrutiny because it is the first public disclosure after the company’s IPO in late October.
The stock dropped 4.58 per cent to US$14.78 today.
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However, according to Group President Nick Nash, much of the spending increase was deliberate. He highlighted three reasons in a conference call.
Some of the markets have turned into a two-horse race faster than expected.
Growth momentum is on Sea Group’s side and can translate the investment into market share growth.
Having achieved market-share leadrship in Indonesia and Taiwan, the country is increasing efforts in Vietnam, Thailand and the Philippines.
The positive side
There were a lot of positive numbers in the report, and if Nash is correct and the spending can be turned on or off like a faucet, then there is a lot to like.
First off, the company as a whole generated US$94.1 million in revenue, which was a 4 per cent growth from last quarter.
More important, the revenue stream is diversifying. At this point last year, 4.8 per cent of revenue came from sources besides the gaming arm Garena. This year, 15.2 per cent the revenue came from non-gaming sources.
AirPay — the company’s digital financial arm — was the key contributor to this trend. Year on year, AirPay generated more than twice as much revenue, growing from US$5.9 million to US$12.7 million.
Also notable is AirPay saw US$448.2 million worth of transactions facilitated through the payment system.
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Shopee also continues to announce itself as serious competitor on the Southeast Asian e-commerce scene. It facilitated 65.9 million orders in Q3 and generated a total sales volume of (GMV) of a bit more than US$1 billion in the quarter.
The GMV number is a 219 per cent increase year-on-year and a 30 per cent boost from last quarter.
However, this provides a moment to highlight the problems with GMV as a stat because the US$1 billion GMV resulted in a GAAP Revenue of US$5.7 million. Still, that is a 111 per cent increase quarter-on-quarter.
Shopee has 5.9 million monthly active buyers who, on average, complete a transaction 3.7 times per month. The average value of one transaction is US$16.20. 93 per cent of these people used their phones to buy something.
Sea Group also is putting a lot of money into making sure Shopee works. As a percentage of its marketing budget, 78 per cent went to e-commerce. The Shopee team accounted for 70 per cent of its sales expenses.
The company believes it is the largest e-commerce platform (by daily orders) in Indonesia and Taiwan and is a close follower in Vietnam, Thailand and the Philippines.
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For the visual learners, here is an infographic with some of Sea Group’s key stats.
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