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Sea Group’s net losses widen even though revenues rose to USD 2.7 billion in Q3 2021

Written by Khamila Mulia Published on     4 mins read

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Sea Group doubled revenues in Q3, but it also reported a 34% increase in net losses.

Sea Limited, the parent company of Shopee and Garena, delivered mixed financial results on Tuesday for the third quarter of 2021. The company posted revenues of USD 2.7 billion, up 121.8% year-on-year, but it also reported net losses of USD 571 million for Q3, a 34% increase from last year, above analysts’ expectations. The company’s shares dropped 3.8% at market close.

The group’s gross profit grew 148% YoY to reach USD 1 billion, while total earnings before interest, taxes, depreciation, and amortization (EBITDA) was USD 165.5 million, up from USD 120.4 million in Q3 last year. However, the company’s path to profitability was impacted by its spending on research and development, which doubled to USD 1 billion compared to last year. Sales and marketing spending also increased by 114.4% YoY to reach USD 231.3 million in the last quarter.

Sea is considered to be Southeast Asia’s biggest public company. The firm has three main internet businesses—digital entertainment, led by online game developer and publisher Garena; e-commerce, with its marketplace Shopee; and financial services, with SeaMoney.

The gross merchandise value (GMV) of Sea’s e-commerce arm Shopee accelerated 80.6% YoY reaching USD 16.8 billion in Q3, up from USD 9.3 billion in the same period in 2020. Shopee recorded total gross orders of USD 1.7 billion, up 123.2% YoY from USD 700 million in the third quarter of 2020. Shopee’s revenue reached USD 1.5 billion in the most recent quarter, a significant 134.4% increase from USD 600 million in Q3 2020.

Shopee continued to rank first in the shopping category by average monthly active users and total time spent in-app in Southeast Asia and Taiwan, according to App Annie. In Brazil, Shopee also ranked first by downloads and total time spent in-app, while it ranked second by average MAUs in the third quarter of 2021.

Sea’s digital entertainment division, Garena, showed positive results with USD 1.1 billion of revenue, up 93.2% YoY. Garena’s quarterly active users were 729 million in the third quarter. It had 93.2 million quarterly paying users, up 1.4% compared to the same period in 2020.

As for the company’s digital financial services unit, SeaMoney, the total payment volume for its mobile wallet was USD 4.6 billion in Q3, an increase of 111% YoY. Quarterly paying users for mobile wallet services also increased to 39.3 million.

Support to rural consumers and MSMEs

In the company’s earnings call, Sea’s chief chairman and group chief executive Forrest Li said that Shopee is creating various initiatives to support rural consumers and MSMEs across Southeast Asia to embrace e-commerce.

In Indonesia, the firm runs a program called Shopee Export MSME campuses in Solo and Bandung. The company provides resources and training for local enterprises so they can scale up their online businesses and expand internationally.

In Malaysia, Shopee has partnered with the Malaysian Communications and Multimedia Commission to use their rural internet centers to offer free e-commerce training to local entrepreneurs, including in rural areas. Since July, Shopee has trained over 6,000 rural sellers in the country. The company has similar programs in other markets as well, including Brazil.

“All these initiatives reflect the fundamental mission of our business. We want to ensure that the benefits of technology and digitization are wide-reaching and accessible,” Li said in the call.

Shopee wants to replicate its success in Southeast Asia and Brazil to the other parts of the globe. This year, it has launched localized websites in Poland, Spain, France, and India. It is also expanding to other countries in Latin America, including Mexico, Chile, and Colombia.

Moreover, the e-commerce firm is recently tapping into a new vertical—hotel booking. In early November, it announced a partnership with Agoda and Booking.com to launch Shopee Hotel, a feature that will be available in Singapore, Malaysia, Thailand, Taiwan, Indonesia, Vietnam, and the Philippines. The new offering allows users to access Agoda and Booking.com’s inventories of accommodation through the Shopee app.

Li highlighted the introduction of new content to enrich Garena’s top-grossing game, Free Fire. “We continue to create high quality, diverse content so that our community can enjoy fresh and engaging experiences.” Garena also announced its first movie collaboration with Venom: Let There Be Carnage, to bring themed playable content, in-game items, and collectibles for gamers.

Meanwhile, regarding digital financial services, Li mentioned the launch of “early initiatives” in financial services such as “buy now, pay later,” digital banking, and insurtech, without providing major details. The company launched a digital bank, SeaBank, in Indonesia in Q1 of this year.

“These products are still in the early development phase, and we are currently focused on strengthening our models and operations,” Li said. “We intend to roll out more of these digital financial products in a thoughtful manner with our customary focus on long-term sustainable growth,” he added.

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