Singapore-based tech group Sea on Tuesday reported its first quarterly profit since going public five years ago, as restructuring efforts that included cutting thousands of jobs and freezing salaries started to pay off.
The New York Stock Exchange-listed firm posted net income of USD 422 million for the October-December period, a turnaround from a USD 616 million loss in the same period a year ago. Group revenue totaled USD 3.45 billion, up 7% on the year.
E-commerce business Shopee posted an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of USD 196 million, turning positive for the first time. The top line rose 50% to USD 2.23 billion, led by growth in its core Asian markets, even as sales and marketing expenses were more than halved.
“Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom-line improvements,” Chairman and CEO Forrest Li said during an earnings call last Tuesday.
Sea’s share price jumped 15% at one point in early trading in New York.
Yet its core gaming business continues to struggle, with revenue dipping 33% to USD 948 million, as paying users decreased for the fifth straight quarter. Paying users totaled 43.6 million for the October-December quarter, down 44% from a year ago.
This contributed to an annual net loss of USD 1.65 billion for 2022, narrowing 19% from a year earlier. Revenue was USD 12.44 billion, up 25%.
“Given the macro uncertainty and our recent strong pivot, we are closely monitoring the market environment and we will continue to adjust our pace and fine-tune our operations accordingly,” Li added.
The stronger results came after Sea took a series of layoffs and cost-cutting measures as it prioritized reaching profitability, shifting away from an aggressive expansion to new markets and hiring on the back of a wave of demand during the COVID-19 pandemic.
Last year, aggressive rate hikes brought a deep sell-off and market correction for loss-making tech companies including Sea. The company’s share price has tumbled 80% from its peak in October 2021.
The tech conglomerate laid off more than 7,000 employees, about 10% of its total workforce, over six months through late 2022. Top management forwent their salaries and tightened company expense policies. It also limited pay raises and provided lower bonuses for employees last year.
“Most of the big changes we need to make are complete,” Li said in an internal memo sent to staff in December, which was seen by Nikkei Asia. But he added that its push toward self-sufficiency — a level with positive cash flow without relying on external funding — will be “going into early 2024.”
“With continued discipline and determination, I believe we are on track to achieve our goal,” Li said in the memo.