SEA Limited

Earnings Call Beating Expectations Big Time

Author

simon severino
March 06, 2025

Sea Limited (SE) reported Q4 2024 and FY2024 Earnings on 4th March 2025.

  • Revenue: $5B v $4.63B est. (+36.9% YoY)

  • EPS: $0.40 v $0.44 est.

Revenue had a big top-line beat, considering growth was only expected to be 28%.

Earnings came in below expectations but is not a key concern considering that the magnitude of earnings is not important at this point.

This was an extremely impressive quarter by all regards.

Stock was up +12% after the earnings report and closed +7% amidst a weak day.

Key Earnings Highlights:

E-Comm (Shopee) Revenue: $3.7B (+41.3% YoY)

DFS (SeaMoney) LPO: $5.1B (+63.9% YoY)

DE (Garena) Bookings: $543.2M (+19% YoY)

  • All 3 business segments are growing extremely well.

  • Firstly, Shopee is growing extremely well, with 36.9% YoY growth rates frankly something I wasnā€™t expecting, even with my own bullish prospects.

  • SeaMoney is growing as per usual, and while it has slowed down in Q4, it is not necessarily a concern considering the law of large numbers.

  • Garena is particularly impressive with Free Fire being seen as a ā€œdead gameā€ to analysts just a few quarters ago.

E-Commerce / Shopee:

Strong Growth & Focus on Profitability:

  • Shopee surpassed $100B in GMV in FY2024. This is now the 3rd largest e-commerce business in the world by GMV, only behind Amazon and Alibaba.

  • Full-Year Adj. EBITDA positive

  • Delivered 28% YoY GMV growth for FY2024, exceeding guidance

  • Guiding for 20% YoY GMV growth for FY2025

  • Strong performance in Brazil with positive adjusted EBITDA for the 2nd consecutive quarter. Avg monthly active buyers grew by >40% YoY.

Ad Effectiveness Improving:

  • Ad revenue rose >50% YoY in Q4 2024

  • Ad take rate improved by >50bps YoY.

Logistics and Content:

  • Almost half of SPX Express orders in Asia were delivered in <2 days.

  • Logistics cost-per-order reduced by 5 cents YoY in 4Q 2024.

  • Average daily unique streamers & viewers up >40% and >30% respectively

  • Live Streaming now counts for ~15% of all orders.

My Personal Thoughts:

  • This is a business that is growing exceptionally well, in spite of fears of competition from TikTok Shop.

  • Metrics have shown that TikTok Shop is growing extremely quickly and I see that in-person as well. It is a formidable competitor. Yet, Shopee has proven time and time again that it is #1 and TikTok Shop is likely stealing market share from the likes of Lazada and Tokopedia.

  • Strong growth in Brazil is particularly encouraging as it is a key lever for future growth. Management clearly understands that emerging markets are where their competencies are at. They have tried and failed in Europe but are incredible at what they do in SEA, Taiwan and now LatAm.

  • Ad take rates going up are a clear sign that the business is sustainable.

  • SPX Express is one of the key gems of the Shopee business, and is THE differentiating factor between Shopee and other e-comm businesses in the region

  • The content ecosystem growing like a weed is encouraging and not surprising considering the partnership with YouTube.

Digital Financial Services / SeaMoney:

Robust Growth without Excessive Risk:

  • Loans principal outstanding grew >60% YoY in Q4 2024

  • SeaMoney added 5 million first-time borrowers in Q4 2024

  • Consumer and SME loans active users grew >60% YoY reaching >26 million

  • NPL90+ ratio remains stable and low at 1.2%

Driving Off-Shopee Growth:

  • SeaMoney plans to diversify off-Shopee to give itself access to a much larger pool of consumer spend

  • Across Asia markets, off-Shopee loans accounted for about 1/2 of total loan book

  • Credit Card penetration is still very low in most markets, SPayLater product by SeaMoney acts almost as a virtual credit card

My Personal Thoughts:

  • SeaMoney has been the least talked about business of the 3 and in my opinion, the most under-rated. In fact, of the 3 businesses, I expect SeaMoney to have the greatest long-term potential.

  • Adding 5 million first-time borrowers in a quarter is pretty insane. That is 20 million people a year, or 4x the size of Singaporeā€™s population.

  • NPL ratio staying at 1.2% despite 60% growth shows prudence by management and is again, very encouraging.

  • I think SeaMoney is currently at the stage where they simply need to keep using the same strategy to gain more users. This will be followed by the stage where they introduce new products and improve profitability. For now, growth is strong and management is doing the right thing. No qualms here.

Digital Entertainment / Garena:

Free Fire:

  • Annual bookings grew by 34% YoY. Average DAUs grew 28% YoY, standing well above 100 million.

  • Free Fire was the worldā€™s largest mobile game by average DAUs in 2024.

  • Africa has become one of the fastest growing regions; active users in Nigeria surged 90% YoY in Dec 2024.

Localised Content + High-Profile Collabs:

  • Started 2025 with a Free Fire and Naruto collaboration

  • Celebrated local festivals with thematic in-game elements

  • Collaborated with Demon Slayer and Blue Lock

  • Free Fire has accumulated more than one trillion views to date

Key Earnings Call Highlights:

On YouTube Collaboration:

ā€œWe continue to see positive momentum from our collaboration with YouTube, which enables video viewers to make seamless purchases from Shopee. In Indonesia, average daily orders attributed to YouTube content in January this year have grown more than sixfold since the collaboration first launched in September last year. We are also seeing promising results since launching the collaboration in Thailand and Vietnam, and we look forward to expanding this partnership to more markets this year.ā€

With TikTok dominating on the video commerce end, it is encouraging to see that Shopee is trying their hand at it, and seemingly being extremely successful too. In terms of video content, it is hard to see past the big 3: TikTok, YouTube, Instagram. It is therefore key for Shopee that they work closely with YouTube. Relying on their standalone Live-Streaming within the app is not sufficient.

On Free Fire:

ā€œWe like to focus on capturing the local trends and hot topics, embedding them into the game to make it relevant, both on a global and local level. Free Fire is not just a game anymore, it has become a phenomenon from a hot topic, trending topic standpoint across social media. This helps us continually attract more users and to keep our existing users engaged.ā€

On Shopee Take Rates:

ā€œRegarding the take rate, there are two parts. One, the commission part, and other is ad take rates. On both fronts, we see potential room to grow. The fluctuations of seasonalities will not impact the trend drastically but it will impact it. However, we think we can still grow it even with seasonality effects.ā€

Itā€™s good to hear that management still believes there is flexibility and potential for take rates to continue increasing considering they have increased quite a bit in the past few years. It is an encouraging sign that likely shows competition is not that large of a threat to the business at this point and the moat created by its SPX logistics business is likely larger than most envision.

Conclusion:

Overall, this was a great quarter for Sea Limited, exceeding our expectations.

Management is executing extremely well on all 3 businesses. The only reason it is not a position in our portfolio is the China risk.

The coming quarters will certainly be tricky as comps are much tougher compared to 2022/2023. I will re-evaluate this quarter by quarter and also look out for any changes in the competitive landscape, especially with regard to e-commerce.

However, the primary secular thesis is the demographic tailwind in Singapore, supported by an exceptional management team. SE is on top of my watchlist right now. Access my complete watchlist in our community.

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