The New York Stock Exchange-listed company on Tuesday posted a net loss of US$931 million for the quarter ended June, widening from US$433 million a year earlier on higher overhead costs and allowances for credit losses.
The online gaming and e-commerce group also recorded a US$177 million goodwill impairment charge, due to lower valuations of past acquisitions amid a market downturn.
“While we have strong resources and are well on track to achieve our self-sufficiency targets, we are nevertheless rapidly prioritising profitability and cash flow management,” Chairman and CEO Forrest Li said during an earnings call on Tuesday.
Group revenue was US$2.9 billion, up 29% on the year, driven by its e-commerce arm Shopee and digital financial services.
Shares in Sea fell nearly 14% on Tuesday, closing at US$77.43. The stock is down 65% so far this year.
The company’s shift in priorities underscores the change in tide for tech companies that saw rapid growth during the Covid-19 pandemic. Investor scrutiny is growing amid uncertainties like inflation and rising interest rates.
In a surprise move, Sea on Tuesday suspended its e-commerce guidance for the year, a move Li said was prompted by a “highly volatile and unpredictable macro environment”. In May, the company cut its full-year revenue outlook for this segment to US$8.5 billion at the low end of its forecast range from the previous US$8.9 billion.
Following its listing on the NYSE in 2017, Sea had secured large funding from investors to accelerate the expansion of its e-commerce arm Shopee beyond core markets, entering Latin America, Europe and India.
But the company is seeing slower online retail sales and weaker growth in these new markets as economies reopen. Sea has been refocusing on its core markets like Southeast Asia, Taiwan and Brazil. This year, it exited India and France less than a year after entering them in October 2021.
Sea’s e-commerce arm is retrenching with cuts to an undisclosed number of employees in its food delivery and online payment teams in Southeast Asia, according to local reports in June. The business is also cutting staff in Latin American markets, such as Mexico, Argentina and Chile.
“In our efforts to adapt to increasing macro uncertainties,” Sea said in its earnings report, “we are proactively shifting our strategies to further focus on efficiency and optimisation for the long-term strength and profitability of the e-commerce business”.
Yet measures to improve cost efficiency are “not as simple” as job cuts, noted Yanjun Wang, Sea’s chief corporate officer. She said that “it’s important to focus on the efficiency of the ecosystem”, pointing to operating expenses like marketing and logistics.
Even as it shifts away from testing markets, challenges remain for Sea’s core businesses, which could take time to monetise some of its new initiatives. Revenue for Garena, the cash cow gaming business, was US$900 million, down 12% as users that had been stuck at home during the pandemic spent less time online.
Quarterly paying users of its gaming business fell 39% to 56.1 million. The business is still heavily reliant on its main title Free Fire. As the company aims to diversify its content, Wang said the company may release some new titles “later this year” but noted there won’t be an “immediate meaningful, significant impact” on earnings.