Thread by @heymaxkoh

My thoughts on Sea Limited's $SE Q3 earnings.

Took some time to digest the financials and the earnings call.

Here's the breakdown and my take:

1. Garena

Bookings last 5 quarters:

0.94b, 1b, 1.1b, 1.2b, 1.2b

(increase of 55m, 100, 100, flat)

YoY growth: 108%, 115, 68, 27

QoQ growth: 6%, 10, 9, 0

* Bookings growth is stagnant

2. Garena Quarterly active users:

572m, 611m, 648, 725, 729

(increase 38, 38, 76, 4)

YoY increase: 72%, 61, 45, 27

QoQ: 7%, 6, 12, 1

* User growth also stagnant

3. Shopee

GMV: 9.3b, 12b, 12.6b, 15b, 16.8

(increase 2.6, 0.7, 2.4, 1.8b)

YoY: 113%, 103, 88, 81%

QoQ: 28%, 6, 19, 12%

4. GAAP rev: 619m, 842, 922, 1200, 1500

(increase of 223, 80, 278, 300)

Marketplace rev: 467m, 628, 716, 905, 1200

(increase of 161, 88, 189, 295)

Gross orders 741m, 1000, 1100, 1400, 1700

(increase of 258, 100, 300, 300)

*Chugging along nicely!

5. SeaMoney

TPV: 2.2b, 2.9, 3.4, 4.1, 4.6

(increase 0.7, 0.5, 0.7, 0.5)

YoY: 240%, 156, 109%
QoQ: 32%, 17, 21, 12%

Qtrly paying users: 18m, 23, 26, 33, 39

(increase 5, 3, 6.6, 6.6m)

YoY: 161%, 118, 121
QoQ: 13%, 25, 20

*Chugging along nicely!

6. My thoughts:

Garena slowdown in bookings and user growth

Qtrly users only increased by 4m this quarter. One of the smallest increases ever???

Was initially disappointed.

But dug deeper into the earnings call, and got more clarity...

7. Management emphasizes:

Their focus is to turn FF into a long term franchise by adding more features and content.

Examples:

- Sau Paulo fashion show
- Partenrship w Venom movie

Their execution so far indeed walks the talk.

Past examples: one punch man, street fighter

8. While Garena may not be a fast growing business unit moving forward...

It will continue to supply cash to Shopee if they can keep up the content.

Bonus points if they innovate and keep growing.

But I now see Garena's role as a stable cash generator.

Moving onto Shopee...

9. I'm impressed by their revenue growth!

Marketplace revenue had the highest jump this quarter, growing by almost 300m in one quarter.

It’s consistently growing faster than GMV since last few quarters.

10. This tells me 2 things

a) they’re improving their ability to monetize the platform

b) Indicates growing scale and dominance vs competitors, hence they’re willing to monetize more.

11. Gross orders increasing steady at 300m these last 2 quarters.

How can I be unhappy?!

And come on, they're lapping the blowout covid quarters in Q2 and Q3 2020...

But yet still growing TRIPLE DIGITS for both their gross orders and GAAP revenue!

These are solid results.

12. Okay I get it.

This was NOT a blowout quarter.

The market is disappointed.

Garena's stagnation is also a disappointment to me.

But overall growth is still chugging along quite steady.

Shopee revenue and gross orders are marching upwards steadily with no hiccups.

13. Management sounded confident in the earnings call as usual.

They're expanding Shopee into new countries and replicating the playbook.

FF also rolling out lots of new content to engage users (Venom, 1v1 and 2v2, fashion week), and keep them sticky.

END.

This was a solid quarter in my books if you consider the WHOLE business.

Will have to watch Garena to see how they execute on the content.

But I will expect more stable revenues moving fwd from them.

As for Shopee, monetization is on track.

Hang on for the ride!

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I share my journey on how I attained financial freedom before age 30, by investing in great companies.