Sea posts $12.4 billion surge after cost-cutting push

Sea, South-east Asia’s largest tech firm, continues to adjust to a fallout in demand for its core games operations. PHOTO: BLOOMBERG

NEW YORK – Sea shares shot up 36 per cent in its biggest single-day jump after the gaming and e-commerce company posted a smaller-than-expected quarterly loss, helped by drastic cost cuts. 

Sea has cut about 7,000 jobs, or roughly 10 per cent of its workforce, in the past six months, according to a person familiar with the matter. It has also closed down operations in India and some European and Latin American markets to trim costs.

Headcount reduction is an “ongoing exercise”, said chief corporate officer Wang Yanjun during a conference call, signalling more cuts may be in the works.

While growth is decelerating, the pathway to profitability for Sea’s e-commerce arm Shopee is “becoming clear”, said Morgan Stanley analyst Mark Goodridge in a note to investors.

The company has said that it will “work towards” breaking even for Shopee on an adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) basis by the end of 2023.

Sea’s adjusted Ebitda loss widened to US$357.7 million (S$490 million) from US$165.5 million a year ago, the company said on Tuesday. Analysts had estimated US$457.4 million on average. Net loss stood at US$569 million, little changed from 2021. Sales at Shopee climbed 32 per cent to US$1.9 billion.

The results prompted CGS-CIMB analyst Ong Khang Chuen to raise his recommendation on the company to “add” from “hold”.

Sea’s market valuation climbed to US$35 billion after the report, adding US$9 billion (S$12 billion) in a single day. That is still far below its peak valuation of more than US$200 billion in 2021.

South-east Asia’s largest tech firm continues to adjust to a fallout in demand for its core games operations. Revenue at its digital-entertainment arm Garena tumbled 19 per cent in its biggest year-on-year drop ever, as hit mobile game Free Fire’s momentum wanes.

Sea cut its full-year forecast for Garena’s bookings to between US$2.6 billion and US$2.8 billion, from its previous guidance of US$2.9 billion to US$3.1 billion, set to be its first annual decline. It said it is not providing financial guidance for 2023. 

The decision of management to not provide future guidance will “no doubt” add more uncertainty on future forecast, said Citigroup analyst Alicia Yap in a note to investors. BLOOMBERG

Follow ST on LinkedIn and stay updated on the latest career news, insights and more.