Second Quarter 2019 Results August 20, 2019
Disclaimer This presentation by Sea Limited (“Sea”) 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 “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, statements that are not historical facts, including statements about Sea’s beliefs and expectations, the business and financial outlook and projections, and 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 and results of operations; the growth in, and market size of, the digital entertainment, e-commerce and digital financial services industries in our region, including segments within those industries; changes in its revenue, costs or expenditures; its ability to continue to source and offer new and attractive online games and to offer other engaging digital entertainment content; the growth of its e-commerce platform; the growth of its digital financial services platform; the growth in its user base and level of engagement; its ability to continue to develop new technologies and/or upgrade its existing technologies; growth of and trends of competition in its industry; government policies and regulations relating to its industry; and general economic and business conditions in the markets it has businesses. Further information regarding these and other risks is included in Sea’s filings with the SEC. All information provided in this presentation is as of the date hereof, and Sea undertakes no obligation to update any forward-looking statement, except as required under applicable law. This presentation contains certain financial measures that are not recognized under generally accepted accounting principles in the U.S. (“GAAP”), including “adjusted revenue”, “total adjusted revenue”, “adjusted EBITDA” and “total adjusted EBITDA” The reconciliation of those measures to the most comparable GAAP measures is contained within this presentation. The non-GAAP measures have limitations as an analytical tool and you should not consider them in isolation or as a substitute for an analysis of the Company’s results under GAAP. This presentation does not contain all relevant information relating to Sea or its securities, particularly with respect to the risks and special considerations involved with an investment in the securities of Sea. Nothing contained in this presentation shall be relied upon as a promise or representation as to the past or future performance of Sea.
Robust Revenue Growth 203% YoY Growth in Total Adjusted 219% YoY Growth in DE Adjusted Revenue 2 Revenue 1 443.2 US$ Millions 393.3 US$ Millions 231.4 EC Adjusted Revenue DE Adjusted Revenue Other Services Revenue 4 DFS Adjusted Revenue 144.6 139.1 665.4 42.0 2.8 2Q 3Q 4Q 1Q 2Q 177.4 2018 2018 2018 2019 2019 202% YoY Growth in EC Adjusted Revenue 3 2.6% 2.6% 3.7% 4.2% 4.6% US$ Millions 177.4 149.2 126.9 219.6 18.2 443.2 71.2 3.4 58.8 58.8 139.1 2Q 3Q 4Q 1Q 2Q 2018 2018 2018 2019 2019 2Q 2018 2Q 2019 EC Adjusted Revenue as a % of GMV Note: Financial figures are unaudited. 1: Sum of digital entertainment (“DE”) adjusted revenue, e - commerce (“EC”) adjusted revenue, digital financial services (“DFS”) adjusted revenue, and other services revenue. For details on reconciliation, please refer to slide 6. 2: Digital entertainment revenue plus change in digital entertainment deferred revenue. 2 3: Revenue of the e-commerce segment (currently consisting of marketplace revenue and product revenue) plus certain revenues that were net-off against their corresponding sales incentives. 4: A combination of multiple business activities that does not meet the quantitative thresholds to qualify as reportable segment s are grouped together as “Other Services.”
Digital Entertainment: Continued Growth of User Base Garena Garena Quarterly Active Users Quarterly Paying Users Millions Millions 26.1 310.5 271.6 20.7 216.2 176.1 160.6 11.9 7.2 6.6 2Q 3Q 4Q 1Q 2Q 2Q 3Q 4Q 1Q 2Q 2018 2018 2018 2019 2019 2018 2018 2018 2019 2019 3
E-commerce: Extending Our Leading Position Across the Region Shopee Shopee Gross Orders GMV Millions US$ Millions 3,827.8 3,529.3 246.3 3,425.2 206.9 203.5 2,690.9 158.5 2,221.8 127.8 2Q 3Q 4Q 1Q 2Q 2Q 3Q 4Q 1Q 2Q 2018 2018 2018 2019 2019 2018 2018 2018 2019 2019 4
Non-GAAP Revenue Total Adjusted Revenue US$ Millions US$ Millions 665.4 665.4 42.0 42.0 2.8 2.8 578.8 33.5 2.8 177.4 177.4 149.2 219.6 18.2 443.2 443.2 3.4 393.3 58.8 139.1 2Q 2018 2Q 2019 1Q 2019 2Q 2019 DE Adjusted Revenue EC Adjusted Revenue DFS Adjusted Revenue Other Services Revenue Note: Financial figures are unaudited. 5
Reconciliation between GAAP and non-GAAP Revenue US$ Thousands 2Q 2018 2Q 2019 Digital Entertainment Revenue 108,029 229,478 Changes in deferred revenue 31,073 213,707 Digital Entertainment Adjusted Revenue 139,102 443,185 E-commerce Revenue 54,655 1 162,615 1 Sales incentives net-off 4,160 14,834 E-commerce Adjusted Revenue 58,815 2 177,449 2 Group Revenue 183,779 436,151 Changes in deferred revenue 31,073 213,707 Sales incentives net-off 4,707 15,558 Total Adjusted Revenue 219,559 665,416 Note: Financial figures are unaudited. 1: For 2Q 2019, revenue of $162,615 included marketplace revenue of $122,955 and product revenue of $39,660 net of sales incentives. For 2Q 2018, revenue of $54,655 included marketplace revenue of $33,160 and product revenue of $21,495 net of sales incentives. 2: For 2Q 2019, adjusted revenue of $177,449 included marketplace revenue of $137,789 and product revenue of $39,660. For 2Q 2018, adjusted revenue of $58,815 included marketplace revenue of $37,320 and product revenue of $21,495. 6
Non-GAAP EBITDA Total Adjusted EBITDA US$ Millions US$ Millions 263.8 263.8 225.8 48.6 (188.3) (248.3) (6.8) (248.3) (235.3) (12.9) (18.1) (161.9) (2.5) (5.0) (11.9) (18.1) (11.0) (3.3) (8.5) (5.0) (32.0) (2.1) (11.0) (3.3) 2Q 2018 2Q 2019 1Q 2019 2Q 2019 DE Adjusted EBITDA EC Adjusted EBITDA DFS Adjusted EBITDA Other Services Adjusted EBITDA Unallocated Expenses Note: Financial figures are unaudited. Please refer to the appendix for details on reconciliation between GAAP and non-GAAP figures. 7
Cost and Expense Trends Cost of Revenue Sales & Marketing Expenses US$ Millions US$ Millions 198.1 338.7 165.1 175.2 2Q 2018 2Q 2019 2Q 2018 2Q 2019 General & Administrative Expenses R&D Expenses US$ Millions US$ Millions 101.3 35.1 51.8 12.9 2Q 2018 2Q 2019 2Q 2018 2Q 2019 Note: Financial figures are unaudited. 8
Net Loss Net loss excluding share-based compensation and Net Loss changes in fair value of the 2017 convertible notes US$ Millions US$ Millions (198.7) (250.8) (215.1) (280.1) 2Q 2018 2Q 2019 2Q 2018 2Q 2019 Note: Financial figures are unaudited. Please refer to the appendix for details on reconciliation between Net Loss and Net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes. 9
Cash and Cash Equivalents Cash and Cash Equivalents US$ Millions 2,308.1 1,347.4 1,002.8 170.1 2016 2017 2018 2Q 2019 Note: Financial figure for 2Q 2019 is unaudited. 10
Raised Full Year 2019 Guidance Guidance US$1.6 Billion to US$1.7 Billion 142.0% to 157.2% YoY Growth Digital Entertainment Adjusted Revenue (Previous: US$1.2 Billion to US$1.3 Billion) US$780 Million to US$820 Million 168.3% to 182.1% YoY Growth E-Commerce Adjusted Revenue (Previous: US$630 Million to US$660 Million) 11
Garena Shopee AirPay APPENDIX
Reconciliation between GAAP and non-GAAP EBITDA US$ Thousands 2Q 2018 2Q 2019 Digital Entertainment Operating income / (loss) 15,137 98,126 Net effect of changes in deferred revenue & related cost 24,872 161,283 Depreciation and amortization 8,603 4,351 Digital Entertainment Adjusted EBITDA 48,612 263,760 E-commerce Operating income / (loss) (195,034) (269,648) Net effect of changes in deferred revenue & related cost - - Depreciation and amortization 6,719 21,397 E-commerce Adjusted EBITDA (188,315) (248,251) Group Operating income / (loss) (219,517) (234,519) Net effect of changes in deferred revenue & related cost 24,872 161,283 Depreciation and amortization 17,802 29,040 Share-based compensation 14,913 33,226 Total Adjusted EBITDA (161,930) (10,970) Note: Financial figures are unaudited. 13
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