Top Southeast Asian digital tech group Sea expects “headwind factors” for its business in 2022, the company said Tuesday, following rapid expansion throughout the COVID-19 pandemic.
The Singaporean company, which operates various digital services from online gaming to e-commerce and e-payment, reported revenue of USD 9.95 billion for 2021, more than double the previous year, while the net loss widened to USD 2.04 billion, from USD 1.61 billion.
Though Sea achieved top-line growth across its business lines over recent quarters, the chief executive notes a changing environment.
“With many economies reopening further in the fourth quarter and into this year, we have observed some moderation in online activities and fluctuations in user engagement,” chairman and CEO Forrest Li told an earnings webcast, referring to Sea’s profitable gaming business.
Moreover, India last month reportedly banned 54 apps, including Sea’s Free Fire—one of the most downloaded smartphone games in the world—for security reasons. Chinese apps were the target, but the ban included Sea’s lucrative flagship title.
Li acknowledged that Free Fire is currently unavailable in Google Play and iOS app stores in India due to “unanticipated government actions.” The populous emerging country is a core market for Sea’s gaming business.
The bookings for Sea’s gaming business, a metric the company employs to estimate cash spent by users, will drop to around USD 3 billion in 2022 from USD 4.6 billion in 2021, according to its guidance.
“The guidance takes into consideration these headwind factors,” Li said.
The company also faces an adverse stock market environment.
Sea, a rare Southeast Asian company listed in the U.S., attracted global investors amid a COVID-driven stock market boom since early 2020, with its share price rising by a factor of nine from the start of 2020 to its peak in October 2021, reaching USD 366.99 on a closing price basis.
Backed by solid investor appetite, the company raised about USD 7 billion through the offering of new shares and notes in September that went toward e-commerce expansion outside of Southeast Asia, such as in Latin America, Europe, and India.
But with losses rising, the company’s shares have plunged to less than half the October peak amid a tech sell-off driven by global monetary policy shifts.
In Tuesday’s financial statement, Sea reported a net loss of USD 617 million for the fourth quarter of 2021, widened from USD 523 million in the year-ago period, showing that improving profitability remains a key challenge for the fast-growing startup.
Sea’s e-commerce unit operating loss deepened to USD 941 million in Q4 last year.
The company projects e-commerce revenue to total roughly USD 9 billion in 2022, up from USD 5.1 billion in 2021. Li said the company expects the e-commerce business to “achieve positive adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] before headquarters costs allocation in Southeast Asia and Taiwan by this year.”
Meanwhile, the company is also reallocating resources for global expansion. Sea will shut down e-commerce in France on Sunday, just five months after its launch in October. France was one of the first European markets it entered, along with Poland and Spain.