Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Sea Limited Reports Fourth Quarter and Full Year 2022 Results By: Sea Limited via Business Wire March 07, 2023 at 06:30 AM EST Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the fourth quarter and full year ended December 31, 2022. “We are starting 2023 on a much stronger footing,” said Forrest Li, Sea’s Chairman and Group Chief Executive Officer. “Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom line improvements. We delivered positive total net income in the fourth quarter, demonstrating the strength and resilience of our underlying business model and the execution capabilities of our teams. As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem.” “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. While there may be near-term fluctuations in our performance, we remain highly confident in the long-term growth potential of our markets and fully focused on capturing this opportunity.” Fourth Quarter 2022 Highlights Group Total GAAP revenue was US$3.5 billion, up 7.1% year-on-year. Total gross profit was US$1.7 billion, up 29.5% year-on-year. Total net income turned positive to US$422.8 million, as compared to US$(616.3) million for the fourth quarter of 2021. Total net income was: negatively impacted by US$177.7 million impairment of goodwill related to certain historical investments for the digital entertainment business, and positively impacted by US$199.7 million net gain on debt extinguishment as discussed below, and approximately US$130 million in reversal of previous accruals for certain expenses (“accruals reversal”). As we made the management decision to strongly pivot to a clear focus on cost efficiency, there were accruals reversed during the quarter resulting from changes in previous estimations of certain expenses. Total adjusted EBITDA1 turned positive to US$495.7 million, as compared to US$(492.1) million for the fourth quarter of 2021. Total adjusted EBITDA was also positively impacted by approximately US$130 million of accruals reversal as mentioned above. As of December 31, 2022, cash, cash equivalents and short-term investments were US$6.9 billion, representing a net change of US$(401.6) million from September 30, 2022. Excluding cash consideration used to repurchase our outstanding convertible bonds with a gain as discussed below, cash, cash equivalents and short-term investments would have increased by US$209.8 million from September 30, 2022. In the fourth quarter, the Company repurchased US$817.2 million aggregate principal amount of the 0.25% convertible senior notes due 2026 (the “2026 CB”), for a cash consideration of US$611.3 million. This resulted in a US$199.7 million gain on debt extinguishment, inclusive of an accelerated deferred issuance cost of US$6.2 million, and US$7.7 million savings in future interest payments. As of the date hereof, approximately US$2.1 billion aggregate principal amount of the 2026 CB remained outstanding. E-commerce GAAP revenue was US$2.1 billion, up 31.8% year-on-year. Based on constant currency assumptions2, GAAP revenue was up 42.3% year-on-year. GAAP revenue included US$1.8 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 43.5% year-on-year. Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 53.9% year-on-year to US$1.1 billion. Value-added services revenue, mainly consisting of revenues related to logistics services, was up 29.2% year-on-year to US$0.7 billion. Adjusted EBITDA1 turned positive to US$196.1 million, as compared to US$(877.7) million for the fourth quarter of 2021. Adjusted EBITDA was positively impacted by approximately US$80 million of accruals reversal as described earlier. Asia markets recorded adjusted EBITDA of US$320.0 million, as compared to US$(525.8) million for the fourth quarter of 2021. Other markets recorded adjusted EBITDA of US$(123.9) million, as compared to US$(352.0) million for the fourth quarter of 2021. In Brazil, unit economics continued to improve significantly, with contribution margin loss per order improving 53.9% quarter-on-quarter to reach US$0.47. Gross orders were 1.7 billion, as compared to 2.0 billion for the fourth quarter of 2021. Gross merchandise value (“GMV”) was US$18.0 billion, as compared to US$18.2 billion for the fourth quarter of 2021. Based on constant currency assumptions2, GMV was up 7.7% year-on-year. Beginning 2023, we will transition from quarterly to annual disclosure of such operating metrics. Digital Entertainment GAAP revenue was US$948.9 million, as compared to US$892.9 million for the previous quarter. Bookings3 were US$543.6 million, as compared to US$664.7 million for the previous quarter. Adjusted EBITDA1 was US$258.2 million, as compared to US$289.9 million for the previous quarter. Adjusted EBITDA represented 47.5% of bookings for the fourth quarter of 2022, as compared to 43.6% for the previous quarter. Quarterly active users were 485.5 million, as compared to 568.2 million for the previous quarter. Quarterly paying users were 43.6 million, representing a paying user ratio of 9.0%, as compared to 9.1% for the previous quarter. Average bookings per user were US$1.1, as compared to US$1.2 for the previous quarter. Digital Financial Services GAAP revenue was US$380.2 million, up 92.5% year-on-year. Adjusted EBITDA1 turned positive to US$75.6 million, as compared to US$(149.8) million for the fourth quarter of 2021. As of the end of the fourth quarter of 2022, total loans receivable was US$2.1 billion, net of allowance for credit losses of US$238.8 million. Non-performing loans past due by more than 90 days as a percentage of our total gross loans receivable declined from less than 4% in the third quarter of 2022 to less than 2%. This was mainly due to the shortening of loan write-off period in a certain market from 180 days to 120 days in the fourth quarter based on our assessment of historical credit losses. Without this change in write-off period, the ratio would be about 5%. Full Year 2022 Highlights Group Total GAAP revenue was US$12.4 billion, up 25.1% year-on-year. Total gross profit was US$5.2 billion, up 33.1% year-on-year. Total net loss was US$1.7 billion, improving by 18.9% year-on-year. Total adjusted EBITDA1 was US$(878.1) million, as compared to US$(593.6) million for the full year of 2021. E-commerce GAAP revenue was US$7.3 billion, up 42.3% year-on-year. Based on constant currency assumptions2, GAAP revenue was up 49.1% year-on-year. GAAP revenue included US$6.2 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 52.0% year-on-year. Adjusted EBITDA1 was US$(1.7) billion, improving by 33.8% as compared to US$(2.6) billion for the full year of 2021. Gross orders totaled 7.6 billion, up 23.7% year-on-year. GMV was US$73.5 billion, up 17.6% year-on-year. Based on constant currency assumptions2, GMV was up 24.0% year-on-year. Digital Entertainment GAAP revenue was US$3.9 billion, as compared to US$4.3 billion for the full year of 2021. Bookings3 were US$2.8 billion, as compared to US$4.6 billion for the full year of 2021. Adjusted EBITDA1 was US$1.3 billion, as compared to US$2.8 billion for the full year of 2021. Adjusted EBITDA represented 47.7% of bookings for the full year of 2022, as compared to 60.4% for the full year of 2021. Digital Financial Services GAAP revenue was US$1.2 billion, up 160.1% year-on-year. Adjusted EBITDA1 was US$(228.6) million, as compared to US$(616.9) million for the full year of 2021. 1 For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”. 2 Current and comparative prior period local currency amounts are converted into United States dollars using the same exchange rates, rather than the actual exchange rates during the respective periods. 3 GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment. Unaudited Summary of Financial Results (Amounts are expressed in thousands of US dollars “$” except for per share data) For the Three Months ended December 31, For the Full Year ended December 31, 2021 2022 2021 2022 $ $ YOY% $ $ YOY% Revenue Service revenue Digital Entertainment 1,415,044 948,857 (32.9 )% 4,320,013 3,877,163 (10.3 )% E-commerce and other services 1,482,665 2,231,133 50.5 % 4,564,617 7,463,173 63.5 % Sales of goods 324,405 271,594 (16.3 )% 1,070,560 1,109,369 3.6 % 3,222,114 3,451,584 7.1 % 9,955,190 12,449,705 25.1 % Cost of revenue Cost of service Digital Entertainment (374,783 ) (242,470 ) (35.3 )% (1,230,082 ) (1,077,017 ) (12.4 )% E-commerce and other services (1,235,351 ) (1,282,174 ) 3.8 % (3,825,826 ) (5,194,065 ) 35.8 % Cost of goods sold (301,252 ) (229,627 ) (23.8 )% (1,003,547 ) (993,346 ) (1.0 )% (1,911,386 ) (1,754,271 ) (8.2 )% (6,059,455 ) (7,264,428 ) 19.9 % Gross profit 1,310,728 1,697,313 29.5 % 3,895,735 5,185,277 33.1 % Other operating income 72,294 68,453 (5.3 )% 287,946 279,184 (3.0 )% Sales and marketing expenses (1,219,858 ) (473,620 ) (61.2 )% (3,829,743 ) (3,269,223 ) (14.6 )% General and administrative expenses (3) (284,065 ) (352,321 ) 24.0 % (987,868 ) (1,437,612 ) 45.5 % Provision for credit losses (3) (34,532 ) (175,103 ) 407.1 % (117,427 ) (513,690 ) 337.5 % Research and development expenses (286,642 ) (244,195 ) (14.8 )% (831,703 ) (1,376,501 ) 65.5 % Impairment of goodwill - (177,663 ) - - (354,943 ) - Total operating expenses (1,752,803 ) (1,354,449 ) (22.7 )% (5,478,795 ) (6,672,785 ) 21.8 % Operating (loss) income (442,075 ) 342,864 (177.6 )% (1,583,060 ) (1,487,508 ) (6.0 )% Non-operating (loss) income, net (70,995 ) 34,973 (149.3 )% (132,124 ) (13,025 ) (90.1 )% Income tax (expense) credit (105,609 ) 43,461 (141.2 )% (332,865 ) (168,395 ) (49.4 )% Share of results of equity investees 2,390 1,540 35.6 % 5,019 11,156 122.3 % Net (loss) income (616,289 ) 422,838 (168.6 )% (2,043,030 ) (1,657,772 ) (18.9 )% (Loss) Earnings per share attributable to Sea Limited’s ordinary shareholders: Basic (1.12 ) 0.76 (167.9 )% (3.84 ) (2.96 ) (22.9 )% Diluted (1.12 ) 0.72 (164.3 )% (3.84 ) (2.96 ) (22.9 )% Change in deferred revenue of Digital Entertainment (333,300 ) (405,262 ) 21.6 % 276,352 (1,125,294 ) (507.2 )% Adjusted EBITDA for Digital Entertainment (1) 602,565 258,233 (57.1 )% 2,775,957 1,313,091 (52.7 )% Adjusted EBITDA for E-commerce (1) (877,737 ) 196,146 (122.3 )% (2,554,221 ) (1,690,554 ) (33.8 )% Adjusted EBITDA for Digital Financial Services (1) (149,813 ) 75,601 (150.5 )% (616,924 ) (228,560 ) (63.0 )% Adjusted EBITDA for Other Services (1) (56,859 ) (25,437 ) (55.3 )% (170,211 ) (239,149 ) 40.5 % Unallocated expenses (2) (10,296 ) (8,887 ) (13.7 )% (28,196 ) (32,962 ) 16.9 % Total adjusted EBITDA (1) (492,140 ) 495,656 (200.7 )% (593,595 ) (878,134 ) 47.9 % (1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”. (2) Unallocated expenses within total adjusted EBITDA are mainly related to general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operating Decision Maker (“CODM”) as part of segment performance. (3) Provision for credit losses were previously recorded within general and administrative expenses. Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021 Revenue Our total GAAP revenue increased by 7.1% to US$3.5 billion in the fourth quarter of 2022 from US$3.2 billion in the fourth quarter of 2021. Digital Entertainment: GAAP revenue was US$948.9 million compared to US$1.4 billion in the fourth quarter of 2021, primarily attributable to the ongoing moderation in user engagement and monetization. E-commerce and other services: GAAP revenue increased by 50.5% to US$2.2 billion in the fourth quarter of 2022 from US$1.5 billion in the fourth quarter of 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. Sales of goods: GAAP revenue was US$271.6 million, as compared to US$324.4 million in the fourth quarter of 2021. Cost of Revenue Our total cost of revenue decreased by 8.2% to US$1.8 billion in the fourth quarter of 2022 from US$1.9 billion in the fourth quarter of 2021. Digital Entertainment: Cost of revenue decreased by 35.3% to US$242.5 million in the fourth quarter of 2022 from US$374.8 million in the fourth quarter of 2021, which was largely in line with the decrease in digital entertainment revenue. E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined was US$1.3 billion, as compared to US$1.2 billion in the fourth quarter of 2021. Improvement in gross profit margins was mainly due to our better cost efficiencies. Cost of goods sold: Cost of goods sold decreased by 23.8% to US$229.6 million in the fourth quarter of 2022 from US$301.3 million in the fourth quarter of 2021. Other Operating Income Our other operating income was US$68.5 million and US$72.3 million in the fourth quarter of 2022 and 2021, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our total sales and marketing expenses decreased by 61.2% to US$473.6 million in the fourth quarter of 2022 from US$1.2 billion in the fourth quarter of 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”). For the Three Months ended December 31, 2021 2022 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 109,625 43,262 (60.5 )% E-commerce 840,727 379,369 (54.9 )% Digital Financial Services 228,729 29,918 (86.9 )% The decrease in sales and marketing expenses across all major reporting segments were mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 24.0% to US$352.3 million in the fourth quarter of 2022 from US$284.1 million in the fourth quarter of 2021. The increase was primarily driven by impairment costs incurred due to the exits from non-core markets and certain divestments. Provision for Credit Losses Our provision for credit losses increased by 407.1% to US$175.1 million in the fourth quarter of 2022 from US$34.5 million in the fourth quarter of 2021, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses decreased by 14.8% to US$244.2 million in the fourth quarter of 2022 from US$286.6 million in the fourth quarter of 2021, primarily due to the impact of the accruals reversal as described earlier. Impairment of Goodwill We recorded an impairment of goodwill of US$177.7 million in the fourth quarter of 2022, compared to nil in the fourth quarter of 2021. The goodwill impairment was primarily due to our strategic decisions to dispose of or shut down certain historical investments for the digital entertainment business. Non-operating Income or Losses, Net Non-operating income or losses consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) from debt extinguishment. We recorded a net non-operating income of US$35.0 million in the fourth quarter of 2022, as compared to a net non-operating loss of US$71.0 million in the fourth quarter of 2021. Our non-operating income in the fourth quarter of 2022 was mainly due to a US$199.7 million net gain from debt extinguishment, partially offset by investment losses recognized amid lower valuations in the broader market. Income Tax Credit or Expenses We had a net income tax credit of US$43.5 million in the fourth quarter of 2022, as compared to net income tax expense of US$105.6 million in the fourth quarter of 2021. The income tax credit was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, partially offset by income tax incurred by our digital entertainment business. Net Income or Loss As a result of the foregoing, we had net income of US$422.8 million in the fourth quarter of 2022, as compared to net loss of US$616.3 million in the fourth quarter of 2021. Basic and Diluted Earnings or Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders Basic earnings per share attributable to Sea Limited’s ordinary shareholders was US$0.76 in the fourth quarter of 2022, compared to basic loss per share attributable to Sea Limited’s ordinary shareholders of US$1.12 in the fourth quarter of 2021. Diluted earnings per share attributable to Sea Limited’s ordinary shareholders was US$0.72 in the fourth quarter of 2022. Full Year Ended December 31, 2022 Compared to Full Year Ended December 31, 2021 Revenue Our total GAAP revenue increased by 25.1% to US$12.4 billion for the full year ended December 31, 2022 from US$10.0 billion for the full year ended December 31, 2021. Digital Entertainment: GAAP revenue was US$3.9 billion for the full year ended December 31, 2022 from US$4.3 billion for the full year ended December 31, 2021, primarily attributable to the ongoing moderation in user engagement and monetization. E-commerce and other services: GAAP revenue increased by 63.5% to US$7.5 billion for the full year ended December 31, 2022 from US$4.6 billion for the full year ended December 31, 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. Sales of goods: GAAP revenue was US$1.1 billion for the full year ended December 31, 2022, relatively stable year-on-year. Cost of Revenue Our total cost of revenue increased by 19.9% to US$7.3 billion for the full year ended December 31, 2022 from US$6.1 billion for the full year ended December 31, 2021. Digital Entertainment: Cost of revenue decreased by 12.4% to US$1.1 billion for the full year ended December 31, 2022 from US$1.2 billion for the full year ended December 31, 2021, which was largely in line with the decrease in digital entertainment revenue. E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined increased by 35.8% to US$5.2 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021, primarily driven by higher costs of logistics from order growth and other costs related to the growth of e-commerce marketplace. Improvement in gross profit margins was mainly due to the growth of core marketplace revenue with higher gross profit margin. Cost of goods sold: Cost of goods sold was US$1.0 billion for the full year ended December 31, 2022. Other Operating Income Our other operating income was US$279.2 million for the full year ended December 31, 2022 from US$287.9 million for the full year ended December 31, 2021. Other operating income mainly consists of rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our total sales and marketing expenses decreased by 14.6% to US$3.3 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”). For the Full Year ended December 31, 2021 2022 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 357,106 268,061 (24.9 )% E-commerce 2,630,401 2,328,636 (11.5 )% Digital Financial Services 742,702 508,089 (31.6 )% The decrease in sales and marketing expenses across all major reporting segments was mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 45.5% to US$1.4 billion for the full year ended December 31, 2022 from US$987.9 million for the full year ended December 31, 2021. The increase was primarily due to the higher staff cost from higher average staff headcount over the year, as well as higher office facilities and related expenses to support the headcount growth. Provision for Credit Losses Our provision for credit losses increased by 337.5% to US$513.7 million for the full year ended December 31, 2022 from US$117.4 million for the full year ended December 31, 2021, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses increased by 65.5% to US$1.4 billion for the full year ended December 31, 2022 from US$831.7 million for the full year ended December 31, 2021, primarily due to the increase in research and development staff cost from higher average staff headcount over the year. Impairment of Goodwill We recorded an impairment of goodwill of US$354.9 million for the full year ended December 31, 2022, as compared to nil for the full year ended December 31, 2021. The goodwill impairment was primarily due to the change in carrying amount of goodwill associated with our prior acquisitions, mainly driven by the lower valuations amid the market uncertainties, and our strategic decision to dispose of or shut down certain historical investments for the digital entertainment business. Non-operating Income or Losses, Net Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) on debt extinguishment. We recorded a net non-operating loss of US$13.0 million for the full year ended December 31, 2022, as compared to a net non-operating loss of US$132.1 million for the full year ended December 31, 2021. Income Tax Expense We had a net income tax expense of US$168.4 million and US$332.9 million for the full year ended December 31, 2022 and 2021, respectively. The lower income tax expense was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, as well as lower income tax expense incurred by our digital entertainment business. Net Loss As a result of the foregoing, we had net loss of US$1.7 billion and US$2.0 billion for the full year ended December 31, 2022 and 2021, respectively. Basic and Diluted Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders Basic and diluted loss per share attributable to Sea Limited’s ordinary shareholders was US$2.96 for the full year ended December 31, 2022, as compared to US$3.84 for the full year ended December 31, 2021. Webcast and Conference Call Information The Company’s management will host a conference call today to review Sea’s business and financial performance. Details of the conference call and webcast are as follows: Date and time: 7:30 AM U.S. Eastern Time on March 7, 2023 8:30 PM Singapore / Hong Kong Time on March 7, 2023 Webcast link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=xHK3DVEZ Dial in numbers: US Toll Free: 1-888-317-6003 Hong Kong: 800-963-976 International: 1-412-317-6061 Singapore: 800-120-5863 United Kingdom: 08-082-389-063 Passcode for Participants: 6144794 A replay of the conference call will be available at the Company’s investor relations website (www.sea.com/investor/home). An archived webcast will be available at the same link above. About Sea Limited Sea Limited (NYSE: SE) is a leading global consumer internet company founded in Singapore in 2009. Its mission is to better the lives of consumers and small businesses with technology. Sea operates three core businesses across digital entertainment, e-commerce, as well as digital payments and financial services, known as Garena, Shopee and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest pan-regional e-commerce platform in Southeast Asia and Taiwan. SeaMoney is a leading digital payments and financial services provider in Southeast Asia. Forward-Looking Statements This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “could,” “will,” “expect,” “anticipate,” “aim,” “future,” “intend,” “plan,” “believe,” “estimate,” “likely to,” “potential,” “confident,” “guidance,” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Sea’s strategic and operational plans, contain forward-looking statements. Sea may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases, and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Sea’s goals and strategies; its future business development, financial condition, financial results, and results of operations; the expected growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the markets where it operates, including segments within those industries; expected changes or guidance in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the expected growth of its digital entertainment, e-commerce and digital financial services businesses; its expectations regarding growth in its user base, level of engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; its expectations regarding the use of proceeds from its financing activities, including its follow-on equity offerings and convertible notes offerings; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries, including the effects of any government orders or actions on its businesses; general economic, political, social and business conditions in its markets; and the impact of widespread health developments, including the COVID-19 pandemic, and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities, and the availability of effective vaccines or treatments) and the impact of economies reopening further to the COVID-19 pandemic. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to help evaluate our operating performance: “Adjusted EBITDA” for our digital entertainment segment represents operating income (loss) before share-based compensation and impairment of goodwill plus (a) depreciation and amortization expenses, and (b) the net effect of changes in deferred revenue and its related cost for our digital entertainment segment. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. “Adjusted EBITDA” for our e-commerce segment, digital financial services segment and other services segment represents operating income (loss) before share-based compensation plus depreciation and amortization expenses. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. “Total adjusted EBITDA” represents the sum of adjusted EBITDA of all our segments combined, plus unallocated expenses. We believe that the total adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. These non-GAAP financial measures have limitations as analytical tools. None of the above financial measures should be considered in isolation or construed as an alternative to revenue, net loss/income, or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to Sea’s data. We compensate for these limitations by reconciling the non-GAAP financial measures to their nearest U.S. GAAP financial measures, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on any single financial measure. The tables below present selected financial information of our reporting segments, the non-GAAP financial measures that are most directly comparable to GAAP financial measures, and the related reconciliations between the financial measures. Amounts are expressed in thousands of US dollars (“$”) except for number of shares & per share data. For the Three Months ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 400,165 109,486 61,841 (28,714 ) (199,914 ) 342,864 Net effect of changes in deferred revenue and its related cost (331,321 ) - - - - (331,321 ) Depreciation and Amortization 11,726 86,660 13,760 3,277 - 115,423 Share-based compensation - - - - 191,027 191,027 Impairment of goodwill 177,663 - - - - 177,663 Adjusted EBITDA 258,233 196,146 75,601 (25,437 ) (8,887 ) 495,656 For the Three Months ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 858,831 (941,028 ) (157,647 ) (59,138 ) (143,093 ) (442,075 ) Net effect of changes in deferred revenue and its related cost (266,399 ) - - - - (266,399 ) Depreciation and Amortization 10,133 63,291 7,834 2,279 - 83,537 Share-based compensation - - - - 132,797 132,797 Adjusted EBITDA 602,565 (877,737 ) (149,813 ) (56,859 ) (10,296 ) (492,140 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. For the Full Year ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 1,971,416 (2,013,360 ) (277,264 ) (252,162 ) (916,138 ) (1,487,508 ) Net effect of changes in deferred revenue and its related cost (879,809 ) - - - - (879,809 ) Depreciation and Amortization 43,821 322,806 48,704 13,013 - 428,344 Share-based compensation - - - - 705,896 705,896 Impairment of goodwill 177,663 - - - 177,280 354,943 Adjusted EBITDA 1,313,091 (1,690,554 ) (228,560 ) (239,149 ) (32,962 ) (878,134 ) For the Full Year ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 2,500,081 (2,766,566 ) (640,422 ) (177,633 ) (498,520 ) (1,583,060 ) Net effect of changes in deferred revenue and its related cost 240,109 - - - - 240,109 Depreciation and Amortization 35,767 212,345 23,498 7,422 - 279,032 Share-based compensation - - - - 470,324 470,324 Adjusted EBITDA 2,775,957 (2,554,221 ) (616,924 ) (170,211 ) (28,196 ) (593,595 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data For the Three Months ended December 31, For the Year ended December 31, 2021 2022 2021 2022 $ $ $ $ Revenue Service revenue Digital Entertainment 1,415,044 948,857 4,320,013 3,877,163 E-commerce and other services 1,482,665 2,231,133 4,564,617 7,463,173 Sales of goods 324,405 271,594 1,070,560 1,109,369 Total revenue 3,222,114 3,451,584 9,955,190 12,449,705 Cost of revenue Cost of service Digital Entertainment (374,783 ) (242,470 ) (1,230,082 ) (1,077,017 ) E-commerce and other services (1,235,351 ) (1,282,174 ) (3,825,826 ) (5,194,065 ) Cost of goods sold (301,252 ) (229,627 ) (1,003,547 ) (993,346 ) Total cost of revenue (1,911,386 ) (1,754,271 ) (6,059,455 ) (7,264,428 ) Gross profit 1,310,728 1,697,313 3,895,735 5,185,277 Operating income (expenses): Other operating income 72,294 68,453 287,946 279,184 Sales and marketing expenses (1,219,858 ) (473,620 ) (3,829,743 ) (3,269,223 ) General and administrative expenses (284,065 ) (352,321 ) (987,868 ) (1,437,612 ) Provision for credit losses (34,532 ) (175,103 ) (117,427 ) (513,690 ) Research and development expenses (286,642 ) (244,195 ) (831,703 ) (1,376,501 ) Impairment of goodwill – (177,663 ) – (354,943 ) Total operating expenses (1,752,803 ) (1,354,449 ) (5,478,795 ) (6,672,785 ) Operating (loss) income (442,075 ) 342,864 (1,583,060 ) (1,487,508 ) Interest income 10,924 54,336 36,082 115,515 Interest expense (47,555 ) (10,809 ) (136,876 ) (45,396 ) Investment loss, net (18,917 ) (123,004 ) (43,502 ) (207,331 ) Net (loss) gain on debt extinguishment (4,737 ) 199,697 (2,069 ) 199,697 Foreign exchange (loss) gain (10,710 ) (85,247 ) 14,241 (75,510 ) (Loss) Income before income tax and share of results of equity investees (513,070 ) 377,837 (1,715,184 ) (1,500,533 ) Income tax (expense) credit (105,609 ) 43,461 (332,865 ) (168,395 ) Share of results of equity investees 2,390 1,540 5,019 11,156 Net (loss) income (616,289 ) 422,838 (2,043,030 ) (1,657,772 ) Net (income) loss attributable to non-controlling interests (1,319 ) 3,960 (3,729 ) 6,351 Net (loss) income attributable to Sea Limited’s ordinary shareholders (617,608 ) 426,798 (2,046,759 ) (1,651,421 ) (Loss) Earnings per share: Basic (1.12 ) 0.76 (3.84 ) (2.96 ) Diluted (1.12 ) 0.72 (3.84 ) (2.96 ) Weighted-average shares used in (loss) earnings per share computation: Basic 553,635,479 560,326,301 532,705,796 558,119,948 Diluted 553,635,479 611,938,691 532,705,796 558,119,948 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ ASSETS Current assets Cash and cash equivalents 9,247,762 6,029,859 Restricted cash 1,551,635 1,549,574 Accounts receivable, net of allowance for credit losses of $5,772 and $12,818, as of December 31, 2021 and 2022 respectively 388,308 268,814 Prepaid expenses and other assets 1,401,863 1,798,651 Loans receivable, net of allowance for credit losses of $91,504 and $236,797, as of December 31, 2021 and 2022 respectively 1,500,954 2,053,767 Inventories, net 117,499 109,668 Short-term investments 911,281 864,258 Amounts due from related parties 16,095 13,421 Total current assets 15,135,397 12,688,012 Non-current assets Property and equipment, net 1,029,963 1,387,895 Operating lease right-of-use assets, net 649,680 957,840 Intangible assets, net 52,517 65,019 Long-term investments 1,052,861 1,253,593 Prepaid expenses and other assets 124,521 135,616 Loans receivable, net of allowance for credit losses of $6,172 and $2,022, as of December 31, 2021 and 2022 respectively 28,964 21,663 Restricted cash 38,743 17,724 Deferred tax assets 103,755 245,226 Goodwill 539,624 230,208 Total non-current assets 3,620,628 4,314,784 Total assets 18,756,025 17,002,796 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable 213,580 258,648 Accrued expenses and other payables 1,519,938 1,396,613 Deposits payable 465,850 1,316,395 Escrow payables and advances from customers 1,789,973 1,862,325 Amounts due to related parties 74,738 415 Borrowings 100,000 88,410 Operating lease liabilities 186,494 269,968 Convertible notes (1) – 31,237 Deferred revenue 2,644,463 1,535,083 Income tax payable 181,400 176,598 Total current liabilities 7,176,436 6,935,692 Non-current liabilities Accrued expenses and other payables 76,234 87,072 Operating lease liabilities 491,313 756,818 Deferred revenue 104,826 63,566 Convertible notes (1) 3,475,708 3,338,750 Deferred tax liabilities 6,992 9,967 Unrecognized tax benefits 107 107 Total non-current liabilities 4,155,180 4,256,280 Total liabilities 11,331,616 11,191,972 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ Shareholders’ equity Class A Ordinary shares 204 258 Class B Ordinary shares 74 23 Additional paid-in capital (1) 14,622,292 14,559,690 Accumulated other comprehensive loss (28,519 ) (111,215 ) Statutory reserves 6,144 12,490 Accumulated deficit (1) (7,201,498 ) (8,745,541 ) Total Sea Limited shareholders’ equity 7,398,697 5,715,705 Non-controlling interests 25,712 95,119 Total shareholders’ equity 7,424,409 5,810,824 Total liabilities and shareholders’ equity 18,756,025 17,002,796 (1) The Company adopted ASU 2020-06 on January 1, 2022 using modified retrospective method and the cumulative effects have been adjusted via retained earnings opening balance. As a result of adoption, our Convertible Notes balances have increased and additional paid-in capital and accumulated deficit have decreased accordingly. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Amounts expressed in thousands of US dollars (“$”) For the Three months ended December 31, For the Year ended December 31, 2021 2022 2021 2022 $ $ $ $ Net cash (used in) generated from operating activities (304,824 ) 319,691 208,649 (1,055,692 ) Net cash (used in) generated from investing activities (1,775,510 ) 51,522 (3,767,273 ) (2,428,809 ) Net cash generated from (used in) financing activities 385,993 (513,711 ) 7,401,589 400,256 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 6,509 109,112 (58,218 ) (143,511 ) Net (decrease) increase in cash, cash equivalents and restricted cash (1,687,832 ) (33,386 ) 3,784,747 (3,227,756 ) Cash, cash equivalents and restricted cash at beginning of the period 12,525,972 7,643,770 7,053,393 10,838,140 Cash, cash equivalents and restricted cash at end of the period (1) 10,838,140 7,610,384 10,838,140 7,610,384 (1) As of December 31, 2022, cash and cash equivalents of US$13,227 was included in assets held for sale within prepaid expenses and other assets. Net cash generated from investing activities amounted to US$51.5 million for the three months ended December 31, 2022. This was primarily attributable to net receipt of US$123.4 million from time deposits and liquid investment products for better cash yield management, offset by purchase of property and equipment of US$152.2 million to support the existing operations. Net cash used in financing activities amounted to US$513.7 million for the three months ended December 31, 2022. This was primarily attributable to cash used in repurchase of convertible notes of US$611.3 million. Net cash used in investing activities amounted to US$2.4 billion for the year ended December 31, 2022. This was primarily attributable to an increase in loans receivable of US$1.2 billion and purchase of property and equipment of US$924.2 million to support the growth of our businesses, as well as net placement of US$65.2 million into time deposits and liquid investment products for better cash yield management. Net cash generated from financing activities amounted to US$400.3 million for the year ended December 31, 2022. This was primarily attributable to increase in deposits payable of US$942.6 million offset by the cash used in repurchase of convertible notes of US$611.3 million. The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The Chief Operating Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment. Amounts are expressed in thousands of US dollars (“$”). For the Three Months ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 948,857 2,102,740 380,172 19,815 - 3,451,584 Operating income (loss) 400,165 109,486 61,841 (28,714 ) (199,914 ) 342,864 Non-operating income, net 34,973 Income tax credit 43,461 Share of results of equity investees 1,540 Net income 422,838 For the Three Months ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 1,415,044 1,595,075 197,531 14,464 - 3,222,114 Operating income (loss) 858,831 (941,028 ) (157,647 ) (59,138 ) (143,093 ) (442,075 ) Non-operating loss, net (70,995 ) Income tax expense (105,609 ) Share of results of equity investees 2,390 Net loss (616,289 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. For the Year ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 3,877,163 7,288,677 1,221,996 61,869 - 12,449,705 Operating income (loss) 1,971,416 (2,013,360 ) (277,264 ) (252,162 ) (916,138 ) (1,487,508 ) Non-operating loss, net (13,025 ) Income tax expense (168,395 ) Share of results of equity investees 11,156 Net loss (1,657,772 ) For the Year ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 4,320,013 5,122,959 469,774 42,444 - 9,955,190 Operating income (loss) 2,500,081 (2,766,566 ) (640,422 ) (177,633 ) (498,520 ) (1,583,060 ) Non-operating loss, net (132,124 ) Income tax expense (332,865 ) Share of results of equity investees 5,019 Net loss (2,043,030 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. View source version on businesswire.com: https://www.businesswire.com/news/home/20230306005889/en/Contacts For enquiries: Investors / analysts: ir@sea.com Media: media@sea.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Sea Limited Reports Fourth Quarter and Full Year 2022 Results By: Sea Limited via Business Wire March 07, 2023 at 06:30 AM EST Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the fourth quarter and full year ended December 31, 2022. “We are starting 2023 on a much stronger footing,” said Forrest Li, Sea’s Chairman and Group Chief Executive Officer. “Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom line improvements. We delivered positive total net income in the fourth quarter, demonstrating the strength and resilience of our underlying business model and the execution capabilities of our teams. As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem.” “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. While there may be near-term fluctuations in our performance, we remain highly confident in the long-term growth potential of our markets and fully focused on capturing this opportunity.” Fourth Quarter 2022 Highlights Group Total GAAP revenue was US$3.5 billion, up 7.1% year-on-year. Total gross profit was US$1.7 billion, up 29.5% year-on-year. Total net income turned positive to US$422.8 million, as compared to US$(616.3) million for the fourth quarter of 2021. Total net income was: negatively impacted by US$177.7 million impairment of goodwill related to certain historical investments for the digital entertainment business, and positively impacted by US$199.7 million net gain on debt extinguishment as discussed below, and approximately US$130 million in reversal of previous accruals for certain expenses (“accruals reversal”). As we made the management decision to strongly pivot to a clear focus on cost efficiency, there were accruals reversed during the quarter resulting from changes in previous estimations of certain expenses. Total adjusted EBITDA1 turned positive to US$495.7 million, as compared to US$(492.1) million for the fourth quarter of 2021. Total adjusted EBITDA was also positively impacted by approximately US$130 million of accruals reversal as mentioned above. As of December 31, 2022, cash, cash equivalents and short-term investments were US$6.9 billion, representing a net change of US$(401.6) million from September 30, 2022. Excluding cash consideration used to repurchase our outstanding convertible bonds with a gain as discussed below, cash, cash equivalents and short-term investments would have increased by US$209.8 million from September 30, 2022. In the fourth quarter, the Company repurchased US$817.2 million aggregate principal amount of the 0.25% convertible senior notes due 2026 (the “2026 CB”), for a cash consideration of US$611.3 million. This resulted in a US$199.7 million gain on debt extinguishment, inclusive of an accelerated deferred issuance cost of US$6.2 million, and US$7.7 million savings in future interest payments. As of the date hereof, approximately US$2.1 billion aggregate principal amount of the 2026 CB remained outstanding. E-commerce GAAP revenue was US$2.1 billion, up 31.8% year-on-year. Based on constant currency assumptions2, GAAP revenue was up 42.3% year-on-year. GAAP revenue included US$1.8 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 43.5% year-on-year. Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 53.9% year-on-year to US$1.1 billion. Value-added services revenue, mainly consisting of revenues related to logistics services, was up 29.2% year-on-year to US$0.7 billion. Adjusted EBITDA1 turned positive to US$196.1 million, as compared to US$(877.7) million for the fourth quarter of 2021. Adjusted EBITDA was positively impacted by approximately US$80 million of accruals reversal as described earlier. Asia markets recorded adjusted EBITDA of US$320.0 million, as compared to US$(525.8) million for the fourth quarter of 2021. Other markets recorded adjusted EBITDA of US$(123.9) million, as compared to US$(352.0) million for the fourth quarter of 2021. In Brazil, unit economics continued to improve significantly, with contribution margin loss per order improving 53.9% quarter-on-quarter to reach US$0.47. Gross orders were 1.7 billion, as compared to 2.0 billion for the fourth quarter of 2021. Gross merchandise value (“GMV”) was US$18.0 billion, as compared to US$18.2 billion for the fourth quarter of 2021. Based on constant currency assumptions2, GMV was up 7.7% year-on-year. Beginning 2023, we will transition from quarterly to annual disclosure of such operating metrics. Digital Entertainment GAAP revenue was US$948.9 million, as compared to US$892.9 million for the previous quarter. Bookings3 were US$543.6 million, as compared to US$664.7 million for the previous quarter. Adjusted EBITDA1 was US$258.2 million, as compared to US$289.9 million for the previous quarter. Adjusted EBITDA represented 47.5% of bookings for the fourth quarter of 2022, as compared to 43.6% for the previous quarter. Quarterly active users were 485.5 million, as compared to 568.2 million for the previous quarter. Quarterly paying users were 43.6 million, representing a paying user ratio of 9.0%, as compared to 9.1% for the previous quarter. Average bookings per user were US$1.1, as compared to US$1.2 for the previous quarter. Digital Financial Services GAAP revenue was US$380.2 million, up 92.5% year-on-year. Adjusted EBITDA1 turned positive to US$75.6 million, as compared to US$(149.8) million for the fourth quarter of 2021. As of the end of the fourth quarter of 2022, total loans receivable was US$2.1 billion, net of allowance for credit losses of US$238.8 million. Non-performing loans past due by more than 90 days as a percentage of our total gross loans receivable declined from less than 4% in the third quarter of 2022 to less than 2%. This was mainly due to the shortening of loan write-off period in a certain market from 180 days to 120 days in the fourth quarter based on our assessment of historical credit losses. Without this change in write-off period, the ratio would be about 5%. Full Year 2022 Highlights Group Total GAAP revenue was US$12.4 billion, up 25.1% year-on-year. Total gross profit was US$5.2 billion, up 33.1% year-on-year. Total net loss was US$1.7 billion, improving by 18.9% year-on-year. Total adjusted EBITDA1 was US$(878.1) million, as compared to US$(593.6) million for the full year of 2021. E-commerce GAAP revenue was US$7.3 billion, up 42.3% year-on-year. Based on constant currency assumptions2, GAAP revenue was up 49.1% year-on-year. GAAP revenue included US$6.2 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 52.0% year-on-year. Adjusted EBITDA1 was US$(1.7) billion, improving by 33.8% as compared to US$(2.6) billion for the full year of 2021. Gross orders totaled 7.6 billion, up 23.7% year-on-year. GMV was US$73.5 billion, up 17.6% year-on-year. Based on constant currency assumptions2, GMV was up 24.0% year-on-year. Digital Entertainment GAAP revenue was US$3.9 billion, as compared to US$4.3 billion for the full year of 2021. Bookings3 were US$2.8 billion, as compared to US$4.6 billion for the full year of 2021. Adjusted EBITDA1 was US$1.3 billion, as compared to US$2.8 billion for the full year of 2021. Adjusted EBITDA represented 47.7% of bookings for the full year of 2022, as compared to 60.4% for the full year of 2021. Digital Financial Services GAAP revenue was US$1.2 billion, up 160.1% year-on-year. Adjusted EBITDA1 was US$(228.6) million, as compared to US$(616.9) million for the full year of 2021. 1 For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”. 2 Current and comparative prior period local currency amounts are converted into United States dollars using the same exchange rates, rather than the actual exchange rates during the respective periods. 3 GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment. Unaudited Summary of Financial Results (Amounts are expressed in thousands of US dollars “$” except for per share data) For the Three Months ended December 31, For the Full Year ended December 31, 2021 2022 2021 2022 $ $ YOY% $ $ YOY% Revenue Service revenue Digital Entertainment 1,415,044 948,857 (32.9 )% 4,320,013 3,877,163 (10.3 )% E-commerce and other services 1,482,665 2,231,133 50.5 % 4,564,617 7,463,173 63.5 % Sales of goods 324,405 271,594 (16.3 )% 1,070,560 1,109,369 3.6 % 3,222,114 3,451,584 7.1 % 9,955,190 12,449,705 25.1 % Cost of revenue Cost of service Digital Entertainment (374,783 ) (242,470 ) (35.3 )% (1,230,082 ) (1,077,017 ) (12.4 )% E-commerce and other services (1,235,351 ) (1,282,174 ) 3.8 % (3,825,826 ) (5,194,065 ) 35.8 % Cost of goods sold (301,252 ) (229,627 ) (23.8 )% (1,003,547 ) (993,346 ) (1.0 )% (1,911,386 ) (1,754,271 ) (8.2 )% (6,059,455 ) (7,264,428 ) 19.9 % Gross profit 1,310,728 1,697,313 29.5 % 3,895,735 5,185,277 33.1 % Other operating income 72,294 68,453 (5.3 )% 287,946 279,184 (3.0 )% Sales and marketing expenses (1,219,858 ) (473,620 ) (61.2 )% (3,829,743 ) (3,269,223 ) (14.6 )% General and administrative expenses (3) (284,065 ) (352,321 ) 24.0 % (987,868 ) (1,437,612 ) 45.5 % Provision for credit losses (3) (34,532 ) (175,103 ) 407.1 % (117,427 ) (513,690 ) 337.5 % Research and development expenses (286,642 ) (244,195 ) (14.8 )% (831,703 ) (1,376,501 ) 65.5 % Impairment of goodwill - (177,663 ) - - (354,943 ) - Total operating expenses (1,752,803 ) (1,354,449 ) (22.7 )% (5,478,795 ) (6,672,785 ) 21.8 % Operating (loss) income (442,075 ) 342,864 (177.6 )% (1,583,060 ) (1,487,508 ) (6.0 )% Non-operating (loss) income, net (70,995 ) 34,973 (149.3 )% (132,124 ) (13,025 ) (90.1 )% Income tax (expense) credit (105,609 ) 43,461 (141.2 )% (332,865 ) (168,395 ) (49.4 )% Share of results of equity investees 2,390 1,540 35.6 % 5,019 11,156 122.3 % Net (loss) income (616,289 ) 422,838 (168.6 )% (2,043,030 ) (1,657,772 ) (18.9 )% (Loss) Earnings per share attributable to Sea Limited’s ordinary shareholders: Basic (1.12 ) 0.76 (167.9 )% (3.84 ) (2.96 ) (22.9 )% Diluted (1.12 ) 0.72 (164.3 )% (3.84 ) (2.96 ) (22.9 )% Change in deferred revenue of Digital Entertainment (333,300 ) (405,262 ) 21.6 % 276,352 (1,125,294 ) (507.2 )% Adjusted EBITDA for Digital Entertainment (1) 602,565 258,233 (57.1 )% 2,775,957 1,313,091 (52.7 )% Adjusted EBITDA for E-commerce (1) (877,737 ) 196,146 (122.3 )% (2,554,221 ) (1,690,554 ) (33.8 )% Adjusted EBITDA for Digital Financial Services (1) (149,813 ) 75,601 (150.5 )% (616,924 ) (228,560 ) (63.0 )% Adjusted EBITDA for Other Services (1) (56,859 ) (25,437 ) (55.3 )% (170,211 ) (239,149 ) 40.5 % Unallocated expenses (2) (10,296 ) (8,887 ) (13.7 )% (28,196 ) (32,962 ) 16.9 % Total adjusted EBITDA (1) (492,140 ) 495,656 (200.7 )% (593,595 ) (878,134 ) 47.9 % (1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”. (2) Unallocated expenses within total adjusted EBITDA are mainly related to general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operating Decision Maker (“CODM”) as part of segment performance. (3) Provision for credit losses were previously recorded within general and administrative expenses. Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021 Revenue Our total GAAP revenue increased by 7.1% to US$3.5 billion in the fourth quarter of 2022 from US$3.2 billion in the fourth quarter of 2021. Digital Entertainment: GAAP revenue was US$948.9 million compared to US$1.4 billion in the fourth quarter of 2021, primarily attributable to the ongoing moderation in user engagement and monetization. E-commerce and other services: GAAP revenue increased by 50.5% to US$2.2 billion in the fourth quarter of 2022 from US$1.5 billion in the fourth quarter of 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. Sales of goods: GAAP revenue was US$271.6 million, as compared to US$324.4 million in the fourth quarter of 2021. Cost of Revenue Our total cost of revenue decreased by 8.2% to US$1.8 billion in the fourth quarter of 2022 from US$1.9 billion in the fourth quarter of 2021. Digital Entertainment: Cost of revenue decreased by 35.3% to US$242.5 million in the fourth quarter of 2022 from US$374.8 million in the fourth quarter of 2021, which was largely in line with the decrease in digital entertainment revenue. E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined was US$1.3 billion, as compared to US$1.2 billion in the fourth quarter of 2021. Improvement in gross profit margins was mainly due to our better cost efficiencies. Cost of goods sold: Cost of goods sold decreased by 23.8% to US$229.6 million in the fourth quarter of 2022 from US$301.3 million in the fourth quarter of 2021. Other Operating Income Our other operating income was US$68.5 million and US$72.3 million in the fourth quarter of 2022 and 2021, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our total sales and marketing expenses decreased by 61.2% to US$473.6 million in the fourth quarter of 2022 from US$1.2 billion in the fourth quarter of 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”). For the Three Months ended December 31, 2021 2022 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 109,625 43,262 (60.5 )% E-commerce 840,727 379,369 (54.9 )% Digital Financial Services 228,729 29,918 (86.9 )% The decrease in sales and marketing expenses across all major reporting segments were mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 24.0% to US$352.3 million in the fourth quarter of 2022 from US$284.1 million in the fourth quarter of 2021. The increase was primarily driven by impairment costs incurred due to the exits from non-core markets and certain divestments. Provision for Credit Losses Our provision for credit losses increased by 407.1% to US$175.1 million in the fourth quarter of 2022 from US$34.5 million in the fourth quarter of 2021, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses decreased by 14.8% to US$244.2 million in the fourth quarter of 2022 from US$286.6 million in the fourth quarter of 2021, primarily due to the impact of the accruals reversal as described earlier. Impairment of Goodwill We recorded an impairment of goodwill of US$177.7 million in the fourth quarter of 2022, compared to nil in the fourth quarter of 2021. The goodwill impairment was primarily due to our strategic decisions to dispose of or shut down certain historical investments for the digital entertainment business. Non-operating Income or Losses, Net Non-operating income or losses consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) from debt extinguishment. We recorded a net non-operating income of US$35.0 million in the fourth quarter of 2022, as compared to a net non-operating loss of US$71.0 million in the fourth quarter of 2021. Our non-operating income in the fourth quarter of 2022 was mainly due to a US$199.7 million net gain from debt extinguishment, partially offset by investment losses recognized amid lower valuations in the broader market. Income Tax Credit or Expenses We had a net income tax credit of US$43.5 million in the fourth quarter of 2022, as compared to net income tax expense of US$105.6 million in the fourth quarter of 2021. The income tax credit was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, partially offset by income tax incurred by our digital entertainment business. Net Income or Loss As a result of the foregoing, we had net income of US$422.8 million in the fourth quarter of 2022, as compared to net loss of US$616.3 million in the fourth quarter of 2021. Basic and Diluted Earnings or Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders Basic earnings per share attributable to Sea Limited’s ordinary shareholders was US$0.76 in the fourth quarter of 2022, compared to basic loss per share attributable to Sea Limited’s ordinary shareholders of US$1.12 in the fourth quarter of 2021. Diluted earnings per share attributable to Sea Limited’s ordinary shareholders was US$0.72 in the fourth quarter of 2022. Full Year Ended December 31, 2022 Compared to Full Year Ended December 31, 2021 Revenue Our total GAAP revenue increased by 25.1% to US$12.4 billion for the full year ended December 31, 2022 from US$10.0 billion for the full year ended December 31, 2021. Digital Entertainment: GAAP revenue was US$3.9 billion for the full year ended December 31, 2022 from US$4.3 billion for the full year ended December 31, 2021, primarily attributable to the ongoing moderation in user engagement and monetization. E-commerce and other services: GAAP revenue increased by 63.5% to US$7.5 billion for the full year ended December 31, 2022 from US$4.6 billion for the full year ended December 31, 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. Sales of goods: GAAP revenue was US$1.1 billion for the full year ended December 31, 2022, relatively stable year-on-year. Cost of Revenue Our total cost of revenue increased by 19.9% to US$7.3 billion for the full year ended December 31, 2022 from US$6.1 billion for the full year ended December 31, 2021. Digital Entertainment: Cost of revenue decreased by 12.4% to US$1.1 billion for the full year ended December 31, 2022 from US$1.2 billion for the full year ended December 31, 2021, which was largely in line with the decrease in digital entertainment revenue. E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined increased by 35.8% to US$5.2 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021, primarily driven by higher costs of logistics from order growth and other costs related to the growth of e-commerce marketplace. Improvement in gross profit margins was mainly due to the growth of core marketplace revenue with higher gross profit margin. Cost of goods sold: Cost of goods sold was US$1.0 billion for the full year ended December 31, 2022. Other Operating Income Our other operating income was US$279.2 million for the full year ended December 31, 2022 from US$287.9 million for the full year ended December 31, 2021. Other operating income mainly consists of rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our total sales and marketing expenses decreased by 14.6% to US$3.3 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”). For the Full Year ended December 31, 2021 2022 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 357,106 268,061 (24.9 )% E-commerce 2,630,401 2,328,636 (11.5 )% Digital Financial Services 742,702 508,089 (31.6 )% The decrease in sales and marketing expenses across all major reporting segments was mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 45.5% to US$1.4 billion for the full year ended December 31, 2022 from US$987.9 million for the full year ended December 31, 2021. The increase was primarily due to the higher staff cost from higher average staff headcount over the year, as well as higher office facilities and related expenses to support the headcount growth. Provision for Credit Losses Our provision for credit losses increased by 337.5% to US$513.7 million for the full year ended December 31, 2022 from US$117.4 million for the full year ended December 31, 2021, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses increased by 65.5% to US$1.4 billion for the full year ended December 31, 2022 from US$831.7 million for the full year ended December 31, 2021, primarily due to the increase in research and development staff cost from higher average staff headcount over the year. Impairment of Goodwill We recorded an impairment of goodwill of US$354.9 million for the full year ended December 31, 2022, as compared to nil for the full year ended December 31, 2021. The goodwill impairment was primarily due to the change in carrying amount of goodwill associated with our prior acquisitions, mainly driven by the lower valuations amid the market uncertainties, and our strategic decision to dispose of or shut down certain historical investments for the digital entertainment business. Non-operating Income or Losses, Net Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) on debt extinguishment. We recorded a net non-operating loss of US$13.0 million for the full year ended December 31, 2022, as compared to a net non-operating loss of US$132.1 million for the full year ended December 31, 2021. Income Tax Expense We had a net income tax expense of US$168.4 million and US$332.9 million for the full year ended December 31, 2022 and 2021, respectively. The lower income tax expense was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, as well as lower income tax expense incurred by our digital entertainment business. Net Loss As a result of the foregoing, we had net loss of US$1.7 billion and US$2.0 billion for the full year ended December 31, 2022 and 2021, respectively. Basic and Diluted Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders Basic and diluted loss per share attributable to Sea Limited’s ordinary shareholders was US$2.96 for the full year ended December 31, 2022, as compared to US$3.84 for the full year ended December 31, 2021. Webcast and Conference Call Information The Company’s management will host a conference call today to review Sea’s business and financial performance. Details of the conference call and webcast are as follows: Date and time: 7:30 AM U.S. Eastern Time on March 7, 2023 8:30 PM Singapore / Hong Kong Time on March 7, 2023 Webcast link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=xHK3DVEZ Dial in numbers: US Toll Free: 1-888-317-6003 Hong Kong: 800-963-976 International: 1-412-317-6061 Singapore: 800-120-5863 United Kingdom: 08-082-389-063 Passcode for Participants: 6144794 A replay of the conference call will be available at the Company’s investor relations website (www.sea.com/investor/home). An archived webcast will be available at the same link above. About Sea Limited Sea Limited (NYSE: SE) is a leading global consumer internet company founded in Singapore in 2009. Its mission is to better the lives of consumers and small businesses with technology. Sea operates three core businesses across digital entertainment, e-commerce, as well as digital payments and financial services, known as Garena, Shopee and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest pan-regional e-commerce platform in Southeast Asia and Taiwan. SeaMoney is a leading digital payments and financial services provider in Southeast Asia. Forward-Looking Statements This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “could,” “will,” “expect,” “anticipate,” “aim,” “future,” “intend,” “plan,” “believe,” “estimate,” “likely to,” “potential,” “confident,” “guidance,” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Sea’s strategic and operational plans, contain forward-looking statements. Sea may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases, and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Sea’s goals and strategies; its future business development, financial condition, financial results, and results of operations; the expected growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the markets where it operates, including segments within those industries; expected changes or guidance in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the expected growth of its digital entertainment, e-commerce and digital financial services businesses; its expectations regarding growth in its user base, level of engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; its expectations regarding the use of proceeds from its financing activities, including its follow-on equity offerings and convertible notes offerings; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries, including the effects of any government orders or actions on its businesses; general economic, political, social and business conditions in its markets; and the impact of widespread health developments, including the COVID-19 pandemic, and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities, and the availability of effective vaccines or treatments) and the impact of economies reopening further to the COVID-19 pandemic. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to help evaluate our operating performance: “Adjusted EBITDA” for our digital entertainment segment represents operating income (loss) before share-based compensation and impairment of goodwill plus (a) depreciation and amortization expenses, and (b) the net effect of changes in deferred revenue and its related cost for our digital entertainment segment. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. “Adjusted EBITDA” for our e-commerce segment, digital financial services segment and other services segment represents operating income (loss) before share-based compensation plus depreciation and amortization expenses. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. “Total adjusted EBITDA” represents the sum of adjusted EBITDA of all our segments combined, plus unallocated expenses. We believe that the total adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. These non-GAAP financial measures have limitations as analytical tools. None of the above financial measures should be considered in isolation or construed as an alternative to revenue, net loss/income, or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to Sea’s data. We compensate for these limitations by reconciling the non-GAAP financial measures to their nearest U.S. GAAP financial measures, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on any single financial measure. The tables below present selected financial information of our reporting segments, the non-GAAP financial measures that are most directly comparable to GAAP financial measures, and the related reconciliations between the financial measures. Amounts are expressed in thousands of US dollars (“$”) except for number of shares & per share data. For the Three Months ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 400,165 109,486 61,841 (28,714 ) (199,914 ) 342,864 Net effect of changes in deferred revenue and its related cost (331,321 ) - - - - (331,321 ) Depreciation and Amortization 11,726 86,660 13,760 3,277 - 115,423 Share-based compensation - - - - 191,027 191,027 Impairment of goodwill 177,663 - - - - 177,663 Adjusted EBITDA 258,233 196,146 75,601 (25,437 ) (8,887 ) 495,656 For the Three Months ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 858,831 (941,028 ) (157,647 ) (59,138 ) (143,093 ) (442,075 ) Net effect of changes in deferred revenue and its related cost (266,399 ) - - - - (266,399 ) Depreciation and Amortization 10,133 63,291 7,834 2,279 - 83,537 Share-based compensation - - - - 132,797 132,797 Adjusted EBITDA 602,565 (877,737 ) (149,813 ) (56,859 ) (10,296 ) (492,140 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. For the Full Year ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 1,971,416 (2,013,360 ) (277,264 ) (252,162 ) (916,138 ) (1,487,508 ) Net effect of changes in deferred revenue and its related cost (879,809 ) - - - - (879,809 ) Depreciation and Amortization 43,821 322,806 48,704 13,013 - 428,344 Share-based compensation - - - - 705,896 705,896 Impairment of goodwill 177,663 - - - 177,280 354,943 Adjusted EBITDA 1,313,091 (1,690,554 ) (228,560 ) (239,149 ) (32,962 ) (878,134 ) For the Full Year ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 2,500,081 (2,766,566 ) (640,422 ) (177,633 ) (498,520 ) (1,583,060 ) Net effect of changes in deferred revenue and its related cost 240,109 - - - - 240,109 Depreciation and Amortization 35,767 212,345 23,498 7,422 - 279,032 Share-based compensation - - - - 470,324 470,324 Adjusted EBITDA 2,775,957 (2,554,221 ) (616,924 ) (170,211 ) (28,196 ) (593,595 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data For the Three Months ended December 31, For the Year ended December 31, 2021 2022 2021 2022 $ $ $ $ Revenue Service revenue Digital Entertainment 1,415,044 948,857 4,320,013 3,877,163 E-commerce and other services 1,482,665 2,231,133 4,564,617 7,463,173 Sales of goods 324,405 271,594 1,070,560 1,109,369 Total revenue 3,222,114 3,451,584 9,955,190 12,449,705 Cost of revenue Cost of service Digital Entertainment (374,783 ) (242,470 ) (1,230,082 ) (1,077,017 ) E-commerce and other services (1,235,351 ) (1,282,174 ) (3,825,826 ) (5,194,065 ) Cost of goods sold (301,252 ) (229,627 ) (1,003,547 ) (993,346 ) Total cost of revenue (1,911,386 ) (1,754,271 ) (6,059,455 ) (7,264,428 ) Gross profit 1,310,728 1,697,313 3,895,735 5,185,277 Operating income (expenses): Other operating income 72,294 68,453 287,946 279,184 Sales and marketing expenses (1,219,858 ) (473,620 ) (3,829,743 ) (3,269,223 ) General and administrative expenses (284,065 ) (352,321 ) (987,868 ) (1,437,612 ) Provision for credit losses (34,532 ) (175,103 ) (117,427 ) (513,690 ) Research and development expenses (286,642 ) (244,195 ) (831,703 ) (1,376,501 ) Impairment of goodwill – (177,663 ) – (354,943 ) Total operating expenses (1,752,803 ) (1,354,449 ) (5,478,795 ) (6,672,785 ) Operating (loss) income (442,075 ) 342,864 (1,583,060 ) (1,487,508 ) Interest income 10,924 54,336 36,082 115,515 Interest expense (47,555 ) (10,809 ) (136,876 ) (45,396 ) Investment loss, net (18,917 ) (123,004 ) (43,502 ) (207,331 ) Net (loss) gain on debt extinguishment (4,737 ) 199,697 (2,069 ) 199,697 Foreign exchange (loss) gain (10,710 ) (85,247 ) 14,241 (75,510 ) (Loss) Income before income tax and share of results of equity investees (513,070 ) 377,837 (1,715,184 ) (1,500,533 ) Income tax (expense) credit (105,609 ) 43,461 (332,865 ) (168,395 ) Share of results of equity investees 2,390 1,540 5,019 11,156 Net (loss) income (616,289 ) 422,838 (2,043,030 ) (1,657,772 ) Net (income) loss attributable to non-controlling interests (1,319 ) 3,960 (3,729 ) 6,351 Net (loss) income attributable to Sea Limited’s ordinary shareholders (617,608 ) 426,798 (2,046,759 ) (1,651,421 ) (Loss) Earnings per share: Basic (1.12 ) 0.76 (3.84 ) (2.96 ) Diluted (1.12 ) 0.72 (3.84 ) (2.96 ) Weighted-average shares used in (loss) earnings per share computation: Basic 553,635,479 560,326,301 532,705,796 558,119,948 Diluted 553,635,479 611,938,691 532,705,796 558,119,948 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ ASSETS Current assets Cash and cash equivalents 9,247,762 6,029,859 Restricted cash 1,551,635 1,549,574 Accounts receivable, net of allowance for credit losses of $5,772 and $12,818, as of December 31, 2021 and 2022 respectively 388,308 268,814 Prepaid expenses and other assets 1,401,863 1,798,651 Loans receivable, net of allowance for credit losses of $91,504 and $236,797, as of December 31, 2021 and 2022 respectively 1,500,954 2,053,767 Inventories, net 117,499 109,668 Short-term investments 911,281 864,258 Amounts due from related parties 16,095 13,421 Total current assets 15,135,397 12,688,012 Non-current assets Property and equipment, net 1,029,963 1,387,895 Operating lease right-of-use assets, net 649,680 957,840 Intangible assets, net 52,517 65,019 Long-term investments 1,052,861 1,253,593 Prepaid expenses and other assets 124,521 135,616 Loans receivable, net of allowance for credit losses of $6,172 and $2,022, as of December 31, 2021 and 2022 respectively 28,964 21,663 Restricted cash 38,743 17,724 Deferred tax assets 103,755 245,226 Goodwill 539,624 230,208 Total non-current assets 3,620,628 4,314,784 Total assets 18,756,025 17,002,796 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable 213,580 258,648 Accrued expenses and other payables 1,519,938 1,396,613 Deposits payable 465,850 1,316,395 Escrow payables and advances from customers 1,789,973 1,862,325 Amounts due to related parties 74,738 415 Borrowings 100,000 88,410 Operating lease liabilities 186,494 269,968 Convertible notes (1) – 31,237 Deferred revenue 2,644,463 1,535,083 Income tax payable 181,400 176,598 Total current liabilities 7,176,436 6,935,692 Non-current liabilities Accrued expenses and other payables 76,234 87,072 Operating lease liabilities 491,313 756,818 Deferred revenue 104,826 63,566 Convertible notes (1) 3,475,708 3,338,750 Deferred tax liabilities 6,992 9,967 Unrecognized tax benefits 107 107 Total non-current liabilities 4,155,180 4,256,280 Total liabilities 11,331,616 11,191,972 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ Shareholders’ equity Class A Ordinary shares 204 258 Class B Ordinary shares 74 23 Additional paid-in capital (1) 14,622,292 14,559,690 Accumulated other comprehensive loss (28,519 ) (111,215 ) Statutory reserves 6,144 12,490 Accumulated deficit (1) (7,201,498 ) (8,745,541 ) Total Sea Limited shareholders’ equity 7,398,697 5,715,705 Non-controlling interests 25,712 95,119 Total shareholders’ equity 7,424,409 5,810,824 Total liabilities and shareholders’ equity 18,756,025 17,002,796 (1) The Company adopted ASU 2020-06 on January 1, 2022 using modified retrospective method and the cumulative effects have been adjusted via retained earnings opening balance. As a result of adoption, our Convertible Notes balances have increased and additional paid-in capital and accumulated deficit have decreased accordingly. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Amounts expressed in thousands of US dollars (“$”) For the Three months ended December 31, For the Year ended December 31, 2021 2022 2021 2022 $ $ $ $ Net cash (used in) generated from operating activities (304,824 ) 319,691 208,649 (1,055,692 ) Net cash (used in) generated from investing activities (1,775,510 ) 51,522 (3,767,273 ) (2,428,809 ) Net cash generated from (used in) financing activities 385,993 (513,711 ) 7,401,589 400,256 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 6,509 109,112 (58,218 ) (143,511 ) Net (decrease) increase in cash, cash equivalents and restricted cash (1,687,832 ) (33,386 ) 3,784,747 (3,227,756 ) Cash, cash equivalents and restricted cash at beginning of the period 12,525,972 7,643,770 7,053,393 10,838,140 Cash, cash equivalents and restricted cash at end of the period (1) 10,838,140 7,610,384 10,838,140 7,610,384 (1) As of December 31, 2022, cash and cash equivalents of US$13,227 was included in assets held for sale within prepaid expenses and other assets. Net cash generated from investing activities amounted to US$51.5 million for the three months ended December 31, 2022. This was primarily attributable to net receipt of US$123.4 million from time deposits and liquid investment products for better cash yield management, offset by purchase of property and equipment of US$152.2 million to support the existing operations. Net cash used in financing activities amounted to US$513.7 million for the three months ended December 31, 2022. This was primarily attributable to cash used in repurchase of convertible notes of US$611.3 million. Net cash used in investing activities amounted to US$2.4 billion for the year ended December 31, 2022. This was primarily attributable to an increase in loans receivable of US$1.2 billion and purchase of property and equipment of US$924.2 million to support the growth of our businesses, as well as net placement of US$65.2 million into time deposits and liquid investment products for better cash yield management. Net cash generated from financing activities amounted to US$400.3 million for the year ended December 31, 2022. This was primarily attributable to increase in deposits payable of US$942.6 million offset by the cash used in repurchase of convertible notes of US$611.3 million. The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The Chief Operating Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment. Amounts are expressed in thousands of US dollars (“$”). For the Three Months ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 948,857 2,102,740 380,172 19,815 - 3,451,584 Operating income (loss) 400,165 109,486 61,841 (28,714 ) (199,914 ) 342,864 Non-operating income, net 34,973 Income tax credit 43,461 Share of results of equity investees 1,540 Net income 422,838 For the Three Months ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 1,415,044 1,595,075 197,531 14,464 - 3,222,114 Operating income (loss) 858,831 (941,028 ) (157,647 ) (59,138 ) (143,093 ) (442,075 ) Non-operating loss, net (70,995 ) Income tax expense (105,609 ) Share of results of equity investees 2,390 Net loss (616,289 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. For the Year ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 3,877,163 7,288,677 1,221,996 61,869 - 12,449,705 Operating income (loss) 1,971,416 (2,013,360 ) (277,264 ) (252,162 ) (916,138 ) (1,487,508 ) Non-operating loss, net (13,025 ) Income tax expense (168,395 ) Share of results of equity investees 11,156 Net loss (1,657,772 ) For the Year ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 4,320,013 5,122,959 469,774 42,444 - 9,955,190 Operating income (loss) 2,500,081 (2,766,566 ) (640,422 ) (177,633 ) (498,520 ) (1,583,060 ) Non-operating loss, net (132,124 ) Income tax expense (332,865 ) Share of results of equity investees 5,019 Net loss (2,043,030 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. View source version on businesswire.com: https://www.businesswire.com/news/home/20230306005889/en/Contacts For enquiries: Investors / analysts: ir@sea.com Media: media@sea.com
Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its financial results for the fourth quarter and full year ended December 31, 2022. “We are starting 2023 on a much stronger footing,” said Forrest Li, Sea’s Chairman and Group Chief Executive Officer. “Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom line improvements. We delivered positive total net income in the fourth quarter, demonstrating the strength and resilience of our underlying business model and the execution capabilities of our teams. As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem.” “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. While there may be near-term fluctuations in our performance, we remain highly confident in the long-term growth potential of our markets and fully focused on capturing this opportunity.” Fourth Quarter 2022 Highlights Group Total GAAP revenue was US$3.5 billion, up 7.1% year-on-year. Total gross profit was US$1.7 billion, up 29.5% year-on-year. Total net income turned positive to US$422.8 million, as compared to US$(616.3) million for the fourth quarter of 2021. Total net income was: negatively impacted by US$177.7 million impairment of goodwill related to certain historical investments for the digital entertainment business, and positively impacted by US$199.7 million net gain on debt extinguishment as discussed below, and approximately US$130 million in reversal of previous accruals for certain expenses (“accruals reversal”). As we made the management decision to strongly pivot to a clear focus on cost efficiency, there were accruals reversed during the quarter resulting from changes in previous estimations of certain expenses. Total adjusted EBITDA1 turned positive to US$495.7 million, as compared to US$(492.1) million for the fourth quarter of 2021. Total adjusted EBITDA was also positively impacted by approximately US$130 million of accruals reversal as mentioned above. As of December 31, 2022, cash, cash equivalents and short-term investments were US$6.9 billion, representing a net change of US$(401.6) million from September 30, 2022. Excluding cash consideration used to repurchase our outstanding convertible bonds with a gain as discussed below, cash, cash equivalents and short-term investments would have increased by US$209.8 million from September 30, 2022. In the fourth quarter, the Company repurchased US$817.2 million aggregate principal amount of the 0.25% convertible senior notes due 2026 (the “2026 CB”), for a cash consideration of US$611.3 million. This resulted in a US$199.7 million gain on debt extinguishment, inclusive of an accelerated deferred issuance cost of US$6.2 million, and US$7.7 million savings in future interest payments. As of the date hereof, approximately US$2.1 billion aggregate principal amount of the 2026 CB remained outstanding. E-commerce GAAP revenue was US$2.1 billion, up 31.8% year-on-year. Based on constant currency assumptions2, GAAP revenue was up 42.3% year-on-year. GAAP revenue included US$1.8 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 43.5% year-on-year. Core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was up 53.9% year-on-year to US$1.1 billion. Value-added services revenue, mainly consisting of revenues related to logistics services, was up 29.2% year-on-year to US$0.7 billion. Adjusted EBITDA1 turned positive to US$196.1 million, as compared to US$(877.7) million for the fourth quarter of 2021. Adjusted EBITDA was positively impacted by approximately US$80 million of accruals reversal as described earlier. Asia markets recorded adjusted EBITDA of US$320.0 million, as compared to US$(525.8) million for the fourth quarter of 2021. Other markets recorded adjusted EBITDA of US$(123.9) million, as compared to US$(352.0) million for the fourth quarter of 2021. In Brazil, unit economics continued to improve significantly, with contribution margin loss per order improving 53.9% quarter-on-quarter to reach US$0.47. Gross orders were 1.7 billion, as compared to 2.0 billion for the fourth quarter of 2021. Gross merchandise value (“GMV”) was US$18.0 billion, as compared to US$18.2 billion for the fourth quarter of 2021. Based on constant currency assumptions2, GMV was up 7.7% year-on-year. Beginning 2023, we will transition from quarterly to annual disclosure of such operating metrics. Digital Entertainment GAAP revenue was US$948.9 million, as compared to US$892.9 million for the previous quarter. Bookings3 were US$543.6 million, as compared to US$664.7 million for the previous quarter. Adjusted EBITDA1 was US$258.2 million, as compared to US$289.9 million for the previous quarter. Adjusted EBITDA represented 47.5% of bookings for the fourth quarter of 2022, as compared to 43.6% for the previous quarter. Quarterly active users were 485.5 million, as compared to 568.2 million for the previous quarter. Quarterly paying users were 43.6 million, representing a paying user ratio of 9.0%, as compared to 9.1% for the previous quarter. Average bookings per user were US$1.1, as compared to US$1.2 for the previous quarter. Digital Financial Services GAAP revenue was US$380.2 million, up 92.5% year-on-year. Adjusted EBITDA1 turned positive to US$75.6 million, as compared to US$(149.8) million for the fourth quarter of 2021. As of the end of the fourth quarter of 2022, total loans receivable was US$2.1 billion, net of allowance for credit losses of US$238.8 million. Non-performing loans past due by more than 90 days as a percentage of our total gross loans receivable declined from less than 4% in the third quarter of 2022 to less than 2%. This was mainly due to the shortening of loan write-off period in a certain market from 180 days to 120 days in the fourth quarter based on our assessment of historical credit losses. Without this change in write-off period, the ratio would be about 5%. Full Year 2022 Highlights Group Total GAAP revenue was US$12.4 billion, up 25.1% year-on-year. Total gross profit was US$5.2 billion, up 33.1% year-on-year. Total net loss was US$1.7 billion, improving by 18.9% year-on-year. Total adjusted EBITDA1 was US$(878.1) million, as compared to US$(593.6) million for the full year of 2021. E-commerce GAAP revenue was US$7.3 billion, up 42.3% year-on-year. Based on constant currency assumptions2, GAAP revenue was up 49.1% year-on-year. GAAP revenue included US$6.2 billion of GAAP marketplace revenue, which consists of core marketplace revenue and value-added services revenue and increased by 52.0% year-on-year. Adjusted EBITDA1 was US$(1.7) billion, improving by 33.8% as compared to US$(2.6) billion for the full year of 2021. Gross orders totaled 7.6 billion, up 23.7% year-on-year. GMV was US$73.5 billion, up 17.6% year-on-year. Based on constant currency assumptions2, GMV was up 24.0% year-on-year. Digital Entertainment GAAP revenue was US$3.9 billion, as compared to US$4.3 billion for the full year of 2021. Bookings3 were US$2.8 billion, as compared to US$4.6 billion for the full year of 2021. Adjusted EBITDA1 was US$1.3 billion, as compared to US$2.8 billion for the full year of 2021. Adjusted EBITDA represented 47.7% of bookings for the full year of 2022, as compared to 60.4% for the full year of 2021. Digital Financial Services GAAP revenue was US$1.2 billion, up 160.1% year-on-year. Adjusted EBITDA1 was US$(228.6) million, as compared to US$(616.9) million for the full year of 2021. 1 For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”. 2 Current and comparative prior period local currency amounts are converted into United States dollars using the same exchange rates, rather than the actual exchange rates during the respective periods. 3 GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment. Unaudited Summary of Financial Results (Amounts are expressed in thousands of US dollars “$” except for per share data) For the Three Months ended December 31, For the Full Year ended December 31, 2021 2022 2021 2022 $ $ YOY% $ $ YOY% Revenue Service revenue Digital Entertainment 1,415,044 948,857 (32.9 )% 4,320,013 3,877,163 (10.3 )% E-commerce and other services 1,482,665 2,231,133 50.5 % 4,564,617 7,463,173 63.5 % Sales of goods 324,405 271,594 (16.3 )% 1,070,560 1,109,369 3.6 % 3,222,114 3,451,584 7.1 % 9,955,190 12,449,705 25.1 % Cost of revenue Cost of service Digital Entertainment (374,783 ) (242,470 ) (35.3 )% (1,230,082 ) (1,077,017 ) (12.4 )% E-commerce and other services (1,235,351 ) (1,282,174 ) 3.8 % (3,825,826 ) (5,194,065 ) 35.8 % Cost of goods sold (301,252 ) (229,627 ) (23.8 )% (1,003,547 ) (993,346 ) (1.0 )% (1,911,386 ) (1,754,271 ) (8.2 )% (6,059,455 ) (7,264,428 ) 19.9 % Gross profit 1,310,728 1,697,313 29.5 % 3,895,735 5,185,277 33.1 % Other operating income 72,294 68,453 (5.3 )% 287,946 279,184 (3.0 )% Sales and marketing expenses (1,219,858 ) (473,620 ) (61.2 )% (3,829,743 ) (3,269,223 ) (14.6 )% General and administrative expenses (3) (284,065 ) (352,321 ) 24.0 % (987,868 ) (1,437,612 ) 45.5 % Provision for credit losses (3) (34,532 ) (175,103 ) 407.1 % (117,427 ) (513,690 ) 337.5 % Research and development expenses (286,642 ) (244,195 ) (14.8 )% (831,703 ) (1,376,501 ) 65.5 % Impairment of goodwill - (177,663 ) - - (354,943 ) - Total operating expenses (1,752,803 ) (1,354,449 ) (22.7 )% (5,478,795 ) (6,672,785 ) 21.8 % Operating (loss) income (442,075 ) 342,864 (177.6 )% (1,583,060 ) (1,487,508 ) (6.0 )% Non-operating (loss) income, net (70,995 ) 34,973 (149.3 )% (132,124 ) (13,025 ) (90.1 )% Income tax (expense) credit (105,609 ) 43,461 (141.2 )% (332,865 ) (168,395 ) (49.4 )% Share of results of equity investees 2,390 1,540 35.6 % 5,019 11,156 122.3 % Net (loss) income (616,289 ) 422,838 (168.6 )% (2,043,030 ) (1,657,772 ) (18.9 )% (Loss) Earnings per share attributable to Sea Limited’s ordinary shareholders: Basic (1.12 ) 0.76 (167.9 )% (3.84 ) (2.96 ) (22.9 )% Diluted (1.12 ) 0.72 (164.3 )% (3.84 ) (2.96 ) (22.9 )% Change in deferred revenue of Digital Entertainment (333,300 ) (405,262 ) 21.6 % 276,352 (1,125,294 ) (507.2 )% Adjusted EBITDA for Digital Entertainment (1) 602,565 258,233 (57.1 )% 2,775,957 1,313,091 (52.7 )% Adjusted EBITDA for E-commerce (1) (877,737 ) 196,146 (122.3 )% (2,554,221 ) (1,690,554 ) (33.8 )% Adjusted EBITDA for Digital Financial Services (1) (149,813 ) 75,601 (150.5 )% (616,924 ) (228,560 ) (63.0 )% Adjusted EBITDA for Other Services (1) (56,859 ) (25,437 ) (55.3 )% (170,211 ) (239,149 ) 40.5 % Unallocated expenses (2) (10,296 ) (8,887 ) (13.7 )% (28,196 ) (32,962 ) 16.9 % Total adjusted EBITDA (1) (492,140 ) 495,656 (200.7 )% (593,595 ) (878,134 ) 47.9 % (1) For a discussion of the use of non-GAAP financial measures, see “Non-GAAP Financial Measures”. (2) Unallocated expenses within total adjusted EBITDA are mainly related to general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the Chief Operating Decision Maker (“CODM”) as part of segment performance. (3) Provision for credit losses were previously recorded within general and administrative expenses. Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021 Revenue Our total GAAP revenue increased by 7.1% to US$3.5 billion in the fourth quarter of 2022 from US$3.2 billion in the fourth quarter of 2021. Digital Entertainment: GAAP revenue was US$948.9 million compared to US$1.4 billion in the fourth quarter of 2021, primarily attributable to the ongoing moderation in user engagement and monetization. E-commerce and other services: GAAP revenue increased by 50.5% to US$2.2 billion in the fourth quarter of 2022 from US$1.5 billion in the fourth quarter of 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. Sales of goods: GAAP revenue was US$271.6 million, as compared to US$324.4 million in the fourth quarter of 2021. Cost of Revenue Our total cost of revenue decreased by 8.2% to US$1.8 billion in the fourth quarter of 2022 from US$1.9 billion in the fourth quarter of 2021. Digital Entertainment: Cost of revenue decreased by 35.3% to US$242.5 million in the fourth quarter of 2022 from US$374.8 million in the fourth quarter of 2021, which was largely in line with the decrease in digital entertainment revenue. E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined was US$1.3 billion, as compared to US$1.2 billion in the fourth quarter of 2021. Improvement in gross profit margins was mainly due to our better cost efficiencies. Cost of goods sold: Cost of goods sold decreased by 23.8% to US$229.6 million in the fourth quarter of 2022 from US$301.3 million in the fourth quarter of 2021. Other Operating Income Our other operating income was US$68.5 million and US$72.3 million in the fourth quarter of 2022 and 2021, respectively. Other operating income mainly consists of rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our total sales and marketing expenses decreased by 61.2% to US$473.6 million in the fourth quarter of 2022 from US$1.2 billion in the fourth quarter of 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”). For the Three Months ended December 31, 2021 2022 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 109,625 43,262 (60.5 )% E-commerce 840,727 379,369 (54.9 )% Digital Financial Services 228,729 29,918 (86.9 )% The decrease in sales and marketing expenses across all major reporting segments were mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 24.0% to US$352.3 million in the fourth quarter of 2022 from US$284.1 million in the fourth quarter of 2021. The increase was primarily driven by impairment costs incurred due to the exits from non-core markets and certain divestments. Provision for Credit Losses Our provision for credit losses increased by 407.1% to US$175.1 million in the fourth quarter of 2022 from US$34.5 million in the fourth quarter of 2021, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses decreased by 14.8% to US$244.2 million in the fourth quarter of 2022 from US$286.6 million in the fourth quarter of 2021, primarily due to the impact of the accruals reversal as described earlier. Impairment of Goodwill We recorded an impairment of goodwill of US$177.7 million in the fourth quarter of 2022, compared to nil in the fourth quarter of 2021. The goodwill impairment was primarily due to our strategic decisions to dispose of or shut down certain historical investments for the digital entertainment business. Non-operating Income or Losses, Net Non-operating income or losses consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) from debt extinguishment. We recorded a net non-operating income of US$35.0 million in the fourth quarter of 2022, as compared to a net non-operating loss of US$71.0 million in the fourth quarter of 2021. Our non-operating income in the fourth quarter of 2022 was mainly due to a US$199.7 million net gain from debt extinguishment, partially offset by investment losses recognized amid lower valuations in the broader market. Income Tax Credit or Expenses We had a net income tax credit of US$43.5 million in the fourth quarter of 2022, as compared to net income tax expense of US$105.6 million in the fourth quarter of 2021. The income tax credit was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, partially offset by income tax incurred by our digital entertainment business. Net Income or Loss As a result of the foregoing, we had net income of US$422.8 million in the fourth quarter of 2022, as compared to net loss of US$616.3 million in the fourth quarter of 2021. Basic and Diluted Earnings or Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders Basic earnings per share attributable to Sea Limited’s ordinary shareholders was US$0.76 in the fourth quarter of 2022, compared to basic loss per share attributable to Sea Limited’s ordinary shareholders of US$1.12 in the fourth quarter of 2021. Diluted earnings per share attributable to Sea Limited’s ordinary shareholders was US$0.72 in the fourth quarter of 2022. Full Year Ended December 31, 2022 Compared to Full Year Ended December 31, 2021 Revenue Our total GAAP revenue increased by 25.1% to US$12.4 billion for the full year ended December 31, 2022 from US$10.0 billion for the full year ended December 31, 2021. Digital Entertainment: GAAP revenue was US$3.9 billion for the full year ended December 31, 2022 from US$4.3 billion for the full year ended December 31, 2021, primarily attributable to the ongoing moderation in user engagement and monetization. E-commerce and other services: GAAP revenue increased by 63.5% to US$7.5 billion for the full year ended December 31, 2022 from US$4.6 billion for the full year ended December 31, 2021, primarily driven by the improved monetization in our e-commerce business and the growth of our credit business. Sales of goods: GAAP revenue was US$1.1 billion for the full year ended December 31, 2022, relatively stable year-on-year. Cost of Revenue Our total cost of revenue increased by 19.9% to US$7.3 billion for the full year ended December 31, 2022 from US$6.1 billion for the full year ended December 31, 2021. Digital Entertainment: Cost of revenue decreased by 12.4% to US$1.1 billion for the full year ended December 31, 2022 from US$1.2 billion for the full year ended December 31, 2021, which was largely in line with the decrease in digital entertainment revenue. E-commerce and other services: Cost of revenue for our e-commerce and other services segment combined increased by 35.8% to US$5.2 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021, primarily driven by higher costs of logistics from order growth and other costs related to the growth of e-commerce marketplace. Improvement in gross profit margins was mainly due to the growth of core marketplace revenue with higher gross profit margin. Cost of goods sold: Cost of goods sold was US$1.0 billion for the full year ended December 31, 2022. Other Operating Income Our other operating income was US$279.2 million for the full year ended December 31, 2022 from US$287.9 million for the full year ended December 31, 2021. Other operating income mainly consists of rebates from e-commerce related logistics services providers. Sales and Marketing Expenses Our total sales and marketing expenses decreased by 14.6% to US$3.3 billion for the full year ended December 31, 2022 from US$3.8 billion for the full year ended December 31, 2021. The table below sets forth the breakdown of the sales and marketing expenses of our major reporting segments. Amounts are expressed in thousands of US dollars (“$”). For the Full Year ended December 31, 2021 2022 YOY% Sales and Marketing Expenses $ $ Digital Entertainment 357,106 268,061 (24.9 )% E-commerce 2,630,401 2,328,636 (11.5 )% Digital Financial Services 742,702 508,089 (31.6 )% The decrease in sales and marketing expenses across all major reporting segments was mainly attributable to our efforts to continue optimizing operating costs and achieving higher cost efficiencies. General and Administrative Expenses Our general and administrative expenses increased by 45.5% to US$1.4 billion for the full year ended December 31, 2022 from US$987.9 million for the full year ended December 31, 2021. The increase was primarily due to the higher staff cost from higher average staff headcount over the year, as well as higher office facilities and related expenses to support the headcount growth. Provision for Credit Losses Our provision for credit losses increased by 337.5% to US$513.7 million for the full year ended December 31, 2022 from US$117.4 million for the full year ended December 31, 2021, primarily driven by the growth in our loan book. Research and Development Expenses Our research and development expenses increased by 65.5% to US$1.4 billion for the full year ended December 31, 2022 from US$831.7 million for the full year ended December 31, 2021, primarily due to the increase in research and development staff cost from higher average staff headcount over the year. Impairment of Goodwill We recorded an impairment of goodwill of US$354.9 million for the full year ended December 31, 2022, as compared to nil for the full year ended December 31, 2021. The goodwill impairment was primarily due to the change in carrying amount of goodwill associated with our prior acquisitions, mainly driven by the lower valuations amid the market uncertainties, and our strategic decision to dispose of or shut down certain historical investments for the digital entertainment business. Non-operating Income or Losses, Net Non-operating income or losses mainly consist of interest income, interest expense, investment gain (loss), and foreign exchange gain (loss), and gain (loss) on debt extinguishment. We recorded a net non-operating loss of US$13.0 million for the full year ended December 31, 2022, as compared to a net non-operating loss of US$132.1 million for the full year ended December 31, 2021. Income Tax Expense We had a net income tax expense of US$168.4 million and US$332.9 million for the full year ended December 31, 2022 and 2021, respectively. The lower income tax expense was primarily due to recognition of deferred tax assets from carried forward losses for our e-commerce business, as well as lower income tax expense incurred by our digital entertainment business. Net Loss As a result of the foregoing, we had net loss of US$1.7 billion and US$2.0 billion for the full year ended December 31, 2022 and 2021, respectively. Basic and Diluted Loss Per Share Attributable to Sea Limited’s Ordinary Shareholders Basic and diluted loss per share attributable to Sea Limited’s ordinary shareholders was US$2.96 for the full year ended December 31, 2022, as compared to US$3.84 for the full year ended December 31, 2021. Webcast and Conference Call Information The Company’s management will host a conference call today to review Sea’s business and financial performance. Details of the conference call and webcast are as follows: Date and time: 7:30 AM U.S. Eastern Time on March 7, 2023 8:30 PM Singapore / Hong Kong Time on March 7, 2023 Webcast link: https://event.choruscall.com/mediaframe/webcast.html?webcastid=xHK3DVEZ Dial in numbers: US Toll Free: 1-888-317-6003 Hong Kong: 800-963-976 International: 1-412-317-6061 Singapore: 800-120-5863 United Kingdom: 08-082-389-063 Passcode for Participants: 6144794 A replay of the conference call will be available at the Company’s investor relations website (www.sea.com/investor/home). An archived webcast will be available at the same link above. About Sea Limited Sea Limited (NYSE: SE) is a leading global consumer internet company founded in Singapore in 2009. Its mission is to better the lives of consumers and small businesses with technology. Sea operates three core businesses across digital entertainment, e-commerce, as well as digital payments and financial services, known as Garena, Shopee and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest pan-regional e-commerce platform in Southeast Asia and Taiwan. SeaMoney is a leading digital payments and financial services provider in Southeast Asia. Forward-Looking Statements This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “could,” “will,” “expect,” “anticipate,” “aim,” “future,” “intend,” “plan,” “believe,” “estimate,” “likely to,” “potential,” “confident,” “guidance,” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business, financial and market outlook, and projections from its management in this announcement, as well as Sea’s strategic and operational plans, contain forward-looking statements. Sea may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases, and other written materials, and in oral statements made by its officers, directors, or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Sea’s goals and strategies; its future business development, financial condition, financial results, and results of operations; the expected growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in the markets where it operates, including segments within those industries; expected changes or guidance in its revenue, costs or expenditures; its ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content; the expected growth of its digital entertainment, e-commerce and digital financial services businesses; its expectations regarding growth in its user base, level of engagement, and monetization; its ability to continue to develop new technologies and/or upgrade its existing technologies; its expectations regarding the use of proceeds from its financing activities, including its follow-on equity offerings and convertible notes offerings; growth and trends of its markets and competition in its industries; government policies and regulations relating to its industries, including the effects of any government orders or actions on its businesses; general economic, political, social and business conditions in its markets; and the impact of widespread health developments, including the COVID-19 pandemic, and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities, and the availability of effective vaccines or treatments) and the impact of economies reopening further to the COVID-19 pandemic. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use the following non-GAAP financial measures to help evaluate our operating performance: “Adjusted EBITDA” for our digital entertainment segment represents operating income (loss) before share-based compensation and impairment of goodwill plus (a) depreciation and amortization expenses, and (b) the net effect of changes in deferred revenue and its related cost for our digital entertainment segment. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. “Adjusted EBITDA” for our e-commerce segment, digital financial services segment and other services segment represents operating income (loss) before share-based compensation plus depreciation and amortization expenses. We believe that the segment adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. “Total adjusted EBITDA” represents the sum of adjusted EBITDA of all our segments combined, plus unallocated expenses. We believe that the total adjusted EBITDA helps to identify underlying trends in our operating results, enhancing their understanding of the past performance and future prospects. These non-GAAP financial measures have limitations as analytical tools. None of the above financial measures should be considered in isolation or construed as an alternative to revenue, net loss/income, or any other measure of performance or as an indicator of our operating performance. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to Sea’s data. We compensate for these limitations by reconciling the non-GAAP financial measures to their nearest U.S. GAAP financial measures, all of which should be considered when evaluating our performance. We encourage you to review our financial information in its entirety and not rely on any single financial measure. The tables below present selected financial information of our reporting segments, the non-GAAP financial measures that are most directly comparable to GAAP financial measures, and the related reconciliations between the financial measures. Amounts are expressed in thousands of US dollars (“$”) except for number of shares & per share data. For the Three Months ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 400,165 109,486 61,841 (28,714 ) (199,914 ) 342,864 Net effect of changes in deferred revenue and its related cost (331,321 ) - - - - (331,321 ) Depreciation and Amortization 11,726 86,660 13,760 3,277 - 115,423 Share-based compensation - - - - 191,027 191,027 Impairment of goodwill 177,663 - - - - 177,663 Adjusted EBITDA 258,233 196,146 75,601 (25,437 ) (8,887 ) 495,656 For the Three Months ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 858,831 (941,028 ) (157,647 ) (59,138 ) (143,093 ) (442,075 ) Net effect of changes in deferred revenue and its related cost (266,399 ) - - - - (266,399 ) Depreciation and Amortization 10,133 63,291 7,834 2,279 - 83,537 Share-based compensation - - - - 132,797 132,797 Adjusted EBITDA 602,565 (877,737 ) (149,813 ) (56,859 ) (10,296 ) (492,140 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. For the Full Year ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 1,971,416 (2,013,360 ) (277,264 ) (252,162 ) (916,138 ) (1,487,508 ) Net effect of changes in deferred revenue and its related cost (879,809 ) - - - - (879,809 ) Depreciation and Amortization 43,821 322,806 48,704 13,013 - 428,344 Share-based compensation - - - - 705,896 705,896 Impairment of goodwill 177,663 - - - 177,280 354,943 Adjusted EBITDA 1,313,091 (1,690,554 ) (228,560 ) (239,149 ) (32,962 ) (878,134 ) For the Full Year ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Operating income (loss) 2,500,081 (2,766,566 ) (640,422 ) (177,633 ) (498,520 ) (1,583,060 ) Net effect of changes in deferred revenue and its related cost 240,109 - - - - 240,109 Depreciation and Amortization 35,767 212,345 23,498 7,422 - 279,032 Share-based compensation - - - - 470,324 470,324 Adjusted EBITDA 2,775,957 (2,554,221 ) (616,924 ) (170,211 ) (28,196 ) (593,595 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data For the Three Months ended December 31, For the Year ended December 31, 2021 2022 2021 2022 $ $ $ $ Revenue Service revenue Digital Entertainment 1,415,044 948,857 4,320,013 3,877,163 E-commerce and other services 1,482,665 2,231,133 4,564,617 7,463,173 Sales of goods 324,405 271,594 1,070,560 1,109,369 Total revenue 3,222,114 3,451,584 9,955,190 12,449,705 Cost of revenue Cost of service Digital Entertainment (374,783 ) (242,470 ) (1,230,082 ) (1,077,017 ) E-commerce and other services (1,235,351 ) (1,282,174 ) (3,825,826 ) (5,194,065 ) Cost of goods sold (301,252 ) (229,627 ) (1,003,547 ) (993,346 ) Total cost of revenue (1,911,386 ) (1,754,271 ) (6,059,455 ) (7,264,428 ) Gross profit 1,310,728 1,697,313 3,895,735 5,185,277 Operating income (expenses): Other operating income 72,294 68,453 287,946 279,184 Sales and marketing expenses (1,219,858 ) (473,620 ) (3,829,743 ) (3,269,223 ) General and administrative expenses (284,065 ) (352,321 ) (987,868 ) (1,437,612 ) Provision for credit losses (34,532 ) (175,103 ) (117,427 ) (513,690 ) Research and development expenses (286,642 ) (244,195 ) (831,703 ) (1,376,501 ) Impairment of goodwill – (177,663 ) – (354,943 ) Total operating expenses (1,752,803 ) (1,354,449 ) (5,478,795 ) (6,672,785 ) Operating (loss) income (442,075 ) 342,864 (1,583,060 ) (1,487,508 ) Interest income 10,924 54,336 36,082 115,515 Interest expense (47,555 ) (10,809 ) (136,876 ) (45,396 ) Investment loss, net (18,917 ) (123,004 ) (43,502 ) (207,331 ) Net (loss) gain on debt extinguishment (4,737 ) 199,697 (2,069 ) 199,697 Foreign exchange (loss) gain (10,710 ) (85,247 ) 14,241 (75,510 ) (Loss) Income before income tax and share of results of equity investees (513,070 ) 377,837 (1,715,184 ) (1,500,533 ) Income tax (expense) credit (105,609 ) 43,461 (332,865 ) (168,395 ) Share of results of equity investees 2,390 1,540 5,019 11,156 Net (loss) income (616,289 ) 422,838 (2,043,030 ) (1,657,772 ) Net (income) loss attributable to non-controlling interests (1,319 ) 3,960 (3,729 ) 6,351 Net (loss) income attributable to Sea Limited’s ordinary shareholders (617,608 ) 426,798 (2,046,759 ) (1,651,421 ) (Loss) Earnings per share: Basic (1.12 ) 0.76 (3.84 ) (2.96 ) Diluted (1.12 ) 0.72 (3.84 ) (2.96 ) Weighted-average shares used in (loss) earnings per share computation: Basic 553,635,479 560,326,301 532,705,796 558,119,948 Diluted 553,635,479 611,938,691 532,705,796 558,119,948 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ ASSETS Current assets Cash and cash equivalents 9,247,762 6,029,859 Restricted cash 1,551,635 1,549,574 Accounts receivable, net of allowance for credit losses of $5,772 and $12,818, as of December 31, 2021 and 2022 respectively 388,308 268,814 Prepaid expenses and other assets 1,401,863 1,798,651 Loans receivable, net of allowance for credit losses of $91,504 and $236,797, as of December 31, 2021 and 2022 respectively 1,500,954 2,053,767 Inventories, net 117,499 109,668 Short-term investments 911,281 864,258 Amounts due from related parties 16,095 13,421 Total current assets 15,135,397 12,688,012 Non-current assets Property and equipment, net 1,029,963 1,387,895 Operating lease right-of-use assets, net 649,680 957,840 Intangible assets, net 52,517 65,019 Long-term investments 1,052,861 1,253,593 Prepaid expenses and other assets 124,521 135,616 Loans receivable, net of allowance for credit losses of $6,172 and $2,022, as of December 31, 2021 and 2022 respectively 28,964 21,663 Restricted cash 38,743 17,724 Deferred tax assets 103,755 245,226 Goodwill 539,624 230,208 Total non-current assets 3,620,628 4,314,784 Total assets 18,756,025 17,002,796 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable 213,580 258,648 Accrued expenses and other payables 1,519,938 1,396,613 Deposits payable 465,850 1,316,395 Escrow payables and advances from customers 1,789,973 1,862,325 Amounts due to related parties 74,738 415 Borrowings 100,000 88,410 Operating lease liabilities 186,494 269,968 Convertible notes (1) – 31,237 Deferred revenue 2,644,463 1,535,083 Income tax payable 181,400 176,598 Total current liabilities 7,176,436 6,935,692 Non-current liabilities Accrued expenses and other payables 76,234 87,072 Operating lease liabilities 491,313 756,818 Deferred revenue 104,826 63,566 Convertible notes (1) 3,475,708 3,338,750 Deferred tax liabilities 6,992 9,967 Unrecognized tax benefits 107 107 Total non-current liabilities 4,155,180 4,256,280 Total liabilities 11,331,616 11,191,972 UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”) As of December 31, 2021 2022 $ $ Shareholders’ equity Class A Ordinary shares 204 258 Class B Ordinary shares 74 23 Additional paid-in capital (1) 14,622,292 14,559,690 Accumulated other comprehensive loss (28,519 ) (111,215 ) Statutory reserves 6,144 12,490 Accumulated deficit (1) (7,201,498 ) (8,745,541 ) Total Sea Limited shareholders’ equity 7,398,697 5,715,705 Non-controlling interests 25,712 95,119 Total shareholders’ equity 7,424,409 5,810,824 Total liabilities and shareholders’ equity 18,756,025 17,002,796 (1) The Company adopted ASU 2020-06 on January 1, 2022 using modified retrospective method and the cumulative effects have been adjusted via retained earnings opening balance. As a result of adoption, our Convertible Notes balances have increased and additional paid-in capital and accumulated deficit have decreased accordingly. UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Amounts expressed in thousands of US dollars (“$”) For the Three months ended December 31, For the Year ended December 31, 2021 2022 2021 2022 $ $ $ $ Net cash (used in) generated from operating activities (304,824 ) 319,691 208,649 (1,055,692 ) Net cash (used in) generated from investing activities (1,775,510 ) 51,522 (3,767,273 ) (2,428,809 ) Net cash generated from (used in) financing activities 385,993 (513,711 ) 7,401,589 400,256 Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash 6,509 109,112 (58,218 ) (143,511 ) Net (decrease) increase in cash, cash equivalents and restricted cash (1,687,832 ) (33,386 ) 3,784,747 (3,227,756 ) Cash, cash equivalents and restricted cash at beginning of the period 12,525,972 7,643,770 7,053,393 10,838,140 Cash, cash equivalents and restricted cash at end of the period (1) 10,838,140 7,610,384 10,838,140 7,610,384 (1) As of December 31, 2022, cash and cash equivalents of US$13,227 was included in assets held for sale within prepaid expenses and other assets. Net cash generated from investing activities amounted to US$51.5 million for the three months ended December 31, 2022. This was primarily attributable to net receipt of US$123.4 million from time deposits and liquid investment products for better cash yield management, offset by purchase of property and equipment of US$152.2 million to support the existing operations. Net cash used in financing activities amounted to US$513.7 million for the three months ended December 31, 2022. This was primarily attributable to cash used in repurchase of convertible notes of US$611.3 million. Net cash used in investing activities amounted to US$2.4 billion for the year ended December 31, 2022. This was primarily attributable to an increase in loans receivable of US$1.2 billion and purchase of property and equipment of US$924.2 million to support the growth of our businesses, as well as net placement of US$65.2 million into time deposits and liquid investment products for better cash yield management. Net cash generated from financing activities amounted to US$400.3 million for the year ended December 31, 2022. This was primarily attributable to increase in deposits payable of US$942.6 million offset by the cash used in repurchase of convertible notes of US$611.3 million. The Company has three reportable segments, namely digital entertainment, e-commerce and digital financial services. The Chief Operating Decision Maker (“CODM”) reviews the performance of each segment based on revenue and certain key operating metrics of the operations and uses these results for the purposes of allocating resources to and evaluating the financial performance of each segment. Amounts are expressed in thousands of US dollars (“$”). For the Three Months ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 948,857 2,102,740 380,172 19,815 - 3,451,584 Operating income (loss) 400,165 109,486 61,841 (28,714 ) (199,914 ) 342,864 Non-operating income, net 34,973 Income tax credit 43,461 Share of results of equity investees 1,540 Net income 422,838 For the Three Months ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 1,415,044 1,595,075 197,531 14,464 - 3,222,114 Operating income (loss) 858,831 (941,028 ) (157,647 ) (59,138 ) (143,093 ) (442,075 ) Non-operating loss, net (70,995 ) Income tax expense (105,609 ) Share of results of equity investees 2,390 Net loss (616,289 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. For the Year ended December 31, 2022 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 3,877,163 7,288,677 1,221,996 61,869 - 12,449,705 Operating income (loss) 1,971,416 (2,013,360 ) (277,264 ) (252,162 ) (916,138 ) (1,487,508 ) Non-operating loss, net (13,025 ) Income tax expense (168,395 ) Share of results of equity investees 11,156 Net loss (1,657,772 ) For the Year ended December 31, 2021 Digital Entertainment E- commerce Digital Financial Services Other Services(1) Unallocated expenses(2) Consolidated $ $ $ $ $ $ Revenue 4,320,013 5,122,959 469,774 42,444 - 9,955,190 Operating income (loss) 2,500,081 (2,766,566 ) (640,422 ) (177,633 ) (498,520 ) (1,583,060 ) Non-operating loss, net (132,124 ) Income tax expense (332,865 ) Share of results of equity investees 5,019 Net loss (2,043,030 ) (1) A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”. (2) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance. View source version on businesswire.com: https://www.businesswire.com/news/home/20230306005889/en/