Sea Limited Reports First Quarter 2019 Results

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Sea Limited (NYSE: SE) (“Sea” or the “Company”) today announced its
financial results for the quarter ended March 31, 2019.

First Quarter 2019 Highlights

Group
- Total adjusted revenue was US$578.8 million, up 193.8%
  year-on-year from US$197.0 million for the first quarter of 2018
  and up 48.7% quarter-on-quarter from US$389.3 million for the
  fourth quarter of 2018.
- Total adjusted EBITDA was US$(32.0) million, compared to
  US$(144.7) million for the first quarter of 2018 and US$(203.6)
  million for the fourth quarter of 2018.
Digital Entertainment
- Adjusted revenue was US$393.3 million, up 169.3% year-on-year from
  US$146.0 million for the first quarter of 2018 and an increase of
  70.0% quarter-on-quarter from US$231.4 million for the fourth
  quarter of 2018.
- Adjusted EBITDA was US$225.8 million, up 310.5% year-on-year from
  US$55.0 million for the first quarter of 2018 and an increase of
  114.7% quarter-on-quarter from US$105.2 million for the fourth
  quarter of 2018.
- Adjusted EBITDA margin increased to 57.4% for the first quarter of
  2019, from 37.7% for the first quarter of 2018 and 45.5% for the
  fourth quarter of 2018.
- Quarterly active users (“QAUs”) reached 271.6 million, an increase
  of 114.4% year-on-year from 126.7 million for the first quarter of
  2018 and up 25.6% quarter-on-quarter from 216.2 million for the
  fourth quarter of 2018.
- Quarterly paying users grew strongly, accounting for 7.6% of QAUs
  for the first quarter of 2019, increasing from 5.7% for the same
  period in 2018, and 5.5% in the fourth quarter of 2018.
- Average revenue per user was US$1.4 compared to US$1.2 for the
  first quarter of 2018 and US$1.1 for the fourth quarter of 2018.
- Free Fire continued to grow and recently achieved more than
  450 million registered users and more than 50 million peak daily
  active users from over 130 markets worldwide. According to App
  Annie, in the first quarter of 2019, Free Fire was the
  second most downloaded mobile game globally across the Apple App
  Store and Google Play Store combined and the top mobile game in
  Latin America by monthly active users and downloads¹.
- Our inaugural Free Fire World Cup attracted more than 27 million
  online views in total and recorded peak concurrent viewers of over
  1.1 million on YouTube.
- In April 2019, we held Garena World 2019, our region’s largest
  eSports event, in Bangkok, Thailand. The event attracted
  approximately 270 thousand visitors, with total online views for
  the various tournaments topping 30 million.
- We recently announced that we will be publishing Call of Duty®:
  Mobile, a mobile version of the classic action game developed
  jointly by Activision and Tencent Games, under our right of first
  refusal arrangement with Tencent.

¹ Latin America rankings data for App Annie is based on
Argentina, Brazil, Chile, Colombia, Mexico, and Uruguay. No monthly
active user data available for Uruguay.

E-commerce
- Adjusted revenue was US$149.2 million, up 342.1% year-on-year from
  US$33.7 million for the first quarter of 2018. It was also up
  17.6% quarter-on-quarter from US$126.9 million for the fourth
  quarter of 2018.
- Adjusted revenue included US$102.0 million of marketplace revenue¹,
  up 362.6% year-on-year from US$22.0 million for the first quarter
  of 2018 and up 16.4% quarter-on-quarter from US$87.6 million for
  the fourth quarter of 2018, and US$47.2 million of product revenue²,
  up 303.6% year-on-year from US$11.7 million for the first quarter
  of 2018 and up 20.2% quarter-on-quarter from US$39.3 million in
  the fourth quarter of 2018.
- Gross merchandise value (“GMV”) was US$3.5 billion, an increase of
  81.8% year-on-year from US$1.9 billion for the first quarter of
  2018 and up 3.0% quarter-on-quarter from US$3.4 billion for the
  fourth quarter of 2018.
- Adjusted revenue as a percentage of GMV increased to 4.2% in the
  first quarter of 2019, up from 3.7% in the previous quarter and
  1.7% for the same period a year ago.
- Gross orders for the quarter totaled 203.5 million, an increase of
  82.7% year-on-year from 111.4 million for the first quarter of
  2018 and on par with the 206.9 million for the fourth quarter of
  2018.
- Sales and marketing as a percentage of GMV further decreased to
  4.2% in the first quarter of 2019, down from 5.4% in the previous
  quarter and 6.6% for the same period a year ago. Sales and
  marketing expenses in absolute dollar terms decreased
  quarter-on-quarter in the first quarter of 2019 to US$147.9
  million compared to US$184.5 million in the fourth quarter of 2018.
- Adjusted EBITDA was US$(235.3) million, compared to US$(179.6)
  million for the first quarter of 2018 and US$(277.5) million for
  the fourth quarter of 2018.
- In Taiwan, Shopee recorded a positive quarterly adjusted EBITDA
  before allocation of the headquarters’ common expenses in the
  first quarter of 2019.
- In Indonesia, Shopee’s largest market, Shopee recorded 83.5
  million orders in the first quarter of 2019, or a daily average of
  0.9 million, further extending its leadership as the largest
  e-commerce platform in the market.
- According to App Annie, in the first quarter of 2019, Shopee was
  the most downloaded app in the Shopping Category in Southeast Asia
  and in Taiwan.

¹ Marketplace revenue mainly consists of transaction-based
fees and advertising income and revenue generated from other value-added
services.

² Product revenue mainly consists of revenue generated from
direct sales.

Unaudited Summary of Financial Results (Amounts are expressed in thousands of US dollars “$”)

	For the Three Months ended March 31,
	2018		2019
	$		$		YOY%

Revenue
Service revenue
Digital Entertainment	110,658		173,399		56.7	%
E-commerce and other services	32,451		130,663		302.6	%
Sales of goods	11,935		47,804		300.5	%
	155,044		351,866		126.9	%

Cost of revenue
Cost of service
Digital Entertainment	(63,572	)	(84,642	)	33.1	%
E-commerce and other services	(70,793	)	(174,365	)	146.3	%
Cost of goods sold	(12,154	)	(53,403	)	339.4	%
	(146,519	)	(312,410	)	113.2	%
Gross profit	8,525		39,456		362.8	%
Other operating income	729		3,453		373.7	%
Sales and marketing expenses	(152,149	)	(177,978	)	17.0	%
General and administrative expenses	(44,487	)	(75,628	)	70.0	%
Research and development expenses	(10,712	)	(28,509	)	166.1	%
Total operating expenses	(206,619	)	(278,662	)	34.9	%
Operating loss	(198,094	)	(239,206	)	20.8	%
Non-operating loss, net	(18,247	)	(442,780	)⁽¹⁾	2,326.6	%
Income tax credit (expense)	755		(7,205	)	(1,054.3	)%
Share of results of equity investees	(583	)	(418	)	(28.3	)%
Net loss	(216,169	)	(689,609	)	219.0	%
Net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes	(186,702	)	(237,290	)	27.1	%

Adjusted revenue of Digital Entertainment ⁽²⁾	146,030		393,306		169.3	%
Adjusted revenue of E-commerce ⁽²⁾	33,744		149,191		342.1	%
Adjusted revenue of Digital Financial Services ⁽²⁾	3,923		2,836		(27.7	)%
Revenue of Other Services	13,342		33,485		151.0	%
Total adjusted revenue ⁽²⁾	197,039		578,818		193.8	%

Adjusted EBITDA for Digital Entertainment ⁽²⁾	55,004		225,816		310.5	%
Adjusted EBITDA for E-commerce ⁽²⁾	(179,649	)	(235,253	)	31.0	%
Adjusted EBITDA for Digital Financial Services ⁽²⁾	(8,570	)	(11,912	)	39.0	%
Adjusted EBITDA for Other Services ⁽²⁾	(9,868	)	(8,484	)	(14.0	)%
Unallocated expenses ⁽³⁾	(1,591	)	(2,130	)	33.9	%
Total adjusted EBITDA ⁽²⁾	(144,674	)	(31,963	)	(77.9	)%

⁽¹⁾ This was primarily due to fair value loss of $436.1
million on the 2017 convertible notes as our share prices during the
quarter significantly exceeded the conversion prices of the 2017
convertible notes.

⁽²⁾ For a discussion of the use of non-GAAP financial
measures, see “Non-GAAP Financial Measures.”

⁽³⁾ Unallocated expenses are mainly related to share-based
compensation and general and corporate administrative costs such as
professional fees and other miscellaneous items that are not allocated
to segments. These expenses are excluded from segment results as they
are not reviewed by the Chief Operation Decision Maker (“CODM”) as part
of segment performance.

Three Months Ended March 31, 2019 Compared to Three Months Ended
March 31, 2018

Revenue

The table below sets forth revenue and adjusted revenue generated from
our reported segments. Amounts are expressed in thousands of US dollars
(“$”).

	For the Three Months ended March 31,
	2018		2019
	$	% of revenue	$	% of revenue	YOY%
		% of revenue		% of revenue
Revenue
Service revenue
Digital Entertainment	110,658	71.4	173,399	49.3	56.7	%
E-commerce and other services	32,451	20.9	130,663	37.1	302.6	%
Sales of goods	11,935	7.7	47,804	13.6	300.5	%
Total revenue	155,044	100.0	351,866	100.0	126.9	%

	2018		2019
	$	% of total adjusted revenue	$	% of total adjusted revenue	YOY%
		% of total adjusted revenue		% of total adjusted revenue	YOY%

Adjusted revenue
Service revenue
Digital Entertainment	146,030	74.1	393,306	67.9	169.3	%
E-commerce and other services	39,074	19.8	137,615	23.8	252.2	%
Sales of goods	11,935	6.1	47,897	8.3	301.3	%
Total adjusted revenue	197,039	100.0	578,818	100.0	193.8	%

Our total revenue increased by 126.9% to US$351.9 million in the first
quarter of 2019 from US$155.0 million in the first quarter of 2018. Our
total adjusted revenue increased by 193.8% to US$578.8 million in the
first quarter of 2019 from US$197.0 million in the first quarter of
2018. These increases were mainly driven by the growth in each of the
segments detailed as follows:

Digital Entertainment: Revenue increased by 56.7% to US$173.4
million in the first quarter of 2019 from US$110.7 million in the
first quarter of 2018. Adjusted revenue increased by 169.3% to
US$393.3 million in the first quarter of 2019 from US$146.0 million in
the first quarter of 2018. This increase was primarily due to the
increase of our active user base as well as the deepened paying user
penetration as we continue to bring new and engaging content to our
users and enhance the game and monetization features based on a deep
understanding of local preferences and conditions as well as our
strong efforts in eSports and community-building.
E-commerce and other services: Revenue increased by 302.6% to
US$130.7 million in the first quarter of 2019 from US$32.5 million in
the first quarter of 2018. Adjusted revenue increased by 252.2% to
US$137.6 million in the first quarter of 2019 from US$39.1 million in
the first quarter of 2018. This increase was primarily driven by the
growth of our e-commerce marketplace, and development in each of our
marketplace revenue streams – transaction-based fees, value-added
services, and advertising. As we deepened our relationships and
engagement with sellers and buyers, and enhanced our e-commerce
ecosystem, more users are using our integrated and value-added
services, as well as ancillary services we provide.

Sales of goods: Revenue increased by 300.5% to US$47.8 million
in the first quarter of 2019 from US$11.9 million in the first quarter
of 2018. Adjusted revenue increased by 301.3% to US$47.9 million in
the first quarter of 2019 from US$11.9 million in the first quarter of
2018. The increase was primarily due to the increase in our product
offerings.

Cost of Revenue

Our total cost of revenue increased by 113.2% to US$312.4 million in the
first quarter of 2019 from US$146.5 million in the first quarter of 2018.

Digital Entertainment: Cost of revenue increased by 33.1% to
US$84.6 million in the first quarter of 2019 from US$63.6 million in
the first quarter of 2018. The increase was largely in line with
revenue growth in our digital entertainment business. Improvement in
gross profit margins was largely due to higher share from our
self-developed game.
E-commerce and other services: Cost of revenue for our
e-commerce and other services combined increased by 146.3% to US$174.4
million in the first quarter of 2019 from US$70.8 million in the first
quarter of 2018. The increase was primarily due to costs incurred in
line with the expansion of our e-commerce marketplace, higher bank
transaction fees driven by GMV growth from our e-commerce business,
higher costs associated with other ancillary services we provided to
our e-commerce platform users, as well as higher staff compensation
and benefit costs.
Cost of goods sold: Cost of goods sold increased by 339.4% to
US$53.4 million in the first quarter of 2019 from US$12.2 million in
the first quarter of 2018. The increase was largely in line with the
increase in our product offerings.

Other Operating Income

Our other operating income increased by 373.7% to US$3.5 million in the
first quarter of 2019 from US$0.7 million in the first quarter of 2018.
The increase was primarily due to an increase in sponsorship from
partners who participated in our events and tournaments.

Sales and Marketing Expenses

Our total sales and marketing expenses increased by 17.0% to US$178.0
million in the first quarter of 2019 from US$152.1 million in the first
quarter of 2018. The table below sets forth the breakdown of the sales
and marketing expenses of our two major reporting segments. Amounts are
expressed in thousands of US dollars (“$”).

	For the Three Months ended March 31,
	2018	2019	YOY%
Sales and Marketing Expenses	$	$

Digital Entertainment	16,243	19,989	23.1%
E-commerce	127,198	147,897	16.3%

Digital Entertainment: Sales and marketing expenses increased
by 23.1% to US$20.0 million in the first quarter of 2019 from US$16.2
million in the first quarter of 2018. The increase was primarily due
to the new game launch.

	For the Three Months ended March 31,
	2018	2019
Digital Entertainment	$	$

Sales and marketing expenses	16,243	19,989
Adjusted revenue	146,030	393,306
Sales and marketing expenses as a percentage of adjusted revenue	11.1%	5.1%

Sales and marketing expenses as a percentage of adjusted revenue
decreased to 5.1% in the first quarter of 2019 from 11.1% in the first
quarter of 2018 as we continue to improve the efficiency of our
marketing efforts.

E-commerce: Sales and marketing expenses increased by 16.3% to
US$147.9 million in the first quarter of 2019 from US$127.2 million in
the first quarter of 2018. The increase in marketing efforts was
aligned with our strategy to fully capture the market growth
opportunity and was primarily attributable to the ramping up of
offline and online digital marketing as well as higher staff
compensation and benefit costs.

	For the Three Months ended March 31,
	2018	2019
E-commerce	$	$

Sales and marketing expenses	127,198	147,897
GMV	1,941,403	3,529,326
Sales and marketing expenses as a percentage of GMV	6.6%	4.2%

Sales and marketing expenses as a percentage of GMV decreased to 4.2% in
the first quarter of 2019 from 6.6% in the first quarter of 2018 as we
continue to improve the efficiency of our marketing efforts.

General and Administrative Expenses

Our general and administrative expenses increased by 70.0% to US$75.6
million in the first quarter of 2019 from US$44.5 million in the first
quarter of 2018. This increase was primarily due to the expansion of our
staff force and the increase in office facilities and related expenses.

Research and Development Expenses

Our research and development expenses increased by 166.1% to US$28.5
million in the first quarter of 2019 from US$10.7 million in the first
quarter of 2018, primarily due to the increase in research and
development staff force.

Non-operating Income or Losses, Net

Non-operating income or losses consist of interest income, interest
expense, investment gain (loss), fair value change for the 2017
convertible notes and foreign exchange gain (loss). We recorded a net
non-operating loss of US$442.8 million in the first quarter of 2019,
compared to a net non-operating loss of US$18.2 million in the first
quarter of 2018. This was primarily due to fair value loss of US$436.1
million on the 2017 convertible notes as our share prices during the
quarter significantly exceeded the conversion prices of the 2017
convertible notes.

Income Tax Expense

We had a net income tax expense of US$7.2 million in the first quarter
of 2019 and net income tax credit of US$0.8 million in the first quarter
of 2018. The income tax expense in the first quarter of 2019 was
primarily due to withholding tax and corporate income tax expenses
incurred by our digital entertainment segment, partially offset by
deferred tax assets recognized during the period.

Share of Results of Equity Investees

We had share of loss of equity investees of US$0.4 million in the first
quarter of 2019, compared with US$0.6 million in the first quarter of
2018.

Net Loss

As a result of the foregoing, we had net losses of US$689.6 million and
US$216.2 million in the first quarter of 2019 and 2018, respectively.
The higher net losses were primarily due to fair value loss of US$436.1
million recognized in the quarter arising from fair value accounting
treatment for the 2017 convertible notes issued before our IPO.

Net Loss Excluding Share-based Compensation and Changes in Fair
Value of the 2017 Convertible Notes

Net loss excluding share-based compensation and changes in fair value of
the 2017 convertible notes, was US$237.3 million and US$186.7 million in
the first quarter of 2019 and 2018, respectively.

Webcast and Conference Call Information

The Company’s management will host a conference call today to review
Sea’s business and financial performance.

Details of the conference call and webcast are as follows:

Date and time:	8:00 PM U.S. Eastern Time on May 21, 2019
	8:00 AM Singapore / Hong Kong Time on May 22, 2019

Webcast link:	https://services.choruscall.com/links/se190521.html

Dial in numbers:	US Toll Free: 1-888-317-6003	Hong Kong: 800-963-976
	International: 1-412-317-6061	Singapore: 800-120-5863
	United Kingdom: 08-082-389-063

Passcode for Participants: 9462467

A replay of the conference call will be available at the Company’s
investor relations website (https://www.seagroup.com/investor/financials).
An archived webcast will be available at the same link above.

About Sea Limited

Sea’s mission is to better the lives of the consumers and small
businesses of our region with technology. Our region includes the key
markets of Indonesia, Taiwan, Vietnam, Thailand, the Philippines,
Malaysia and Singapore. Sea operates three businesses across digital
entertainment, e-commerce, and digital financial services, known as
Garena, Shopee, and AirPay, respectively.

Forward-Looking Statements

This announcement 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,” “guidance,” and similar statements. Among other things,
statements that are not historical facts, including statements about
Sea’s beliefs and expectations, the business, financial and market
outlook, and projections from its management in this announcement, as
well as 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, financial results, and results of operations; the
growth in, and market size of, the digital entertainment, e-commerce and
digital financial services industries in the region, including segments
within those industries; changes in its revenue, costs or expenditures;
its ability to continue to source, develop and offer new and attractive
online games and to offer other engaging digital entertainment content;
the growth of its digital entertainment, e-commerce and digital
financial services businesses and platforms; the growth in its user
base, level of user engagement, and monetization; its ability to
continue to develop new technologies and/or upgrade its existing
technologies; growth and trends of its markets and competition in its
industries; government policies and regulations relating to its
industries; and general economic and business conditions in the region.
Further information regarding these and other risks is included in Sea’s
filings with the SEC. All information provided in this press release and
in the attachments is as of the date of this press release, and Sea
undertakes no obligation to update any forward-looking statement, except
as required under applicable law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared
and presented in accordance with U.S. GAAP, we use the following
non-GAAP financial measures to help evaluate our operating performance:

“Adjusted revenue” of our digital entertainment segment represents
revenue of the digital entertainment segment plus change in digital
entertainment deferred revenue. This financial measure is used as an
approximation of cash spent by our users in the applicable period that
is attributable to our digital entertainment segment. Although other
companies may present such measures related to gross billings
differently or not at all, we believe that the adjusted revenue of our
digital entertainment segment provides useful information to investors
about the segment’s core operating results, enhancing their
understanding of our past performance and future prospects.
“Adjusted revenue” of our e-commerce segment represents 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. This financial measure enables our
investors to follow trends in our e-commerce monetization capability
over time and is a useful performance measure.
“Adjusted revenue” of our digital financial services segment
represents revenue of the digital financial services segment plus
certain revenues that were net-off against their corresponding sales
incentives.
“Total adjusted revenue” represents the sum of the adjusted revenue of
our digital entertainment segment, the adjusted revenue of our
e-commerce segment, the adjusted revenue of our digital financial
services segment, and the revenue of our other services. This
financial measure enables our investors to follow trends in our
overall group monetization capability over time and is a useful
performance measure.
“Adjusted EBITDA” for our digital entertainment segment represents
operating income (loss) before share-based compensation plus (a)
depreciation and amortization expenses, and (b) the net effect of
changes in deferred revenue and its related cost for our digital
entertainment segment. Although other companies may calculate adjusted
EBITDA differently or not present it at all, we believe that the
segment adjusted EBITDA helps to identify underlying trends in our
operating results, enhancing their understanding of the past
performance and future prospects.
“Adjusted EBITDA” for our e-commerce segment, digital financial
services segment and other services segment represents operating
income (loss) before share-based compensation plus depreciation and
amortization expenses. Although other companies may calculate adjusted
EBITDA differently or not present it at all, we believe that the
segment adjusted EBITDA helps to identify underlying trends in our
operating results, enhancing their understanding of the past
performance and future prospects.
“Total adjusted EBITDA” represents the sum of adjusted EBITDA of all
our segments combined, plus unallocated expenses. Although other
companies may calculate adjusted EBITDA differently or not present it
at all, we believe that the total adjusted EBITDA helps to identify
underlying trends in our operating results, enhancing their
understanding of the past performance and future prospects.

These non-GAAP financial measures have limitations as analytical tools.
None of the above financial measures should be considered in isolation
or construed as an alternative to revenue, net loss/income, or any other
measure of performance or as an indicator of our operating performance.
These non-GAAP financial measures presented here may not be comparable
to similarly titled measures presented by other companies. Other
companies may calculate similarly titled measures differently, limiting
their usefulness as comparative measures to Sea’s data. We compensate
for these limitations by reconciling the non-GAAP financial measures to
their nearest U.S. GAAP financial measures, all of which should be
considered when evaluating our performance. We encourage you to review
our financial information in its entirety and not rely on any single
financial measure.

The tables below present selected unaudited financial information of our
reporting segments, the non-GAAP financial measures that are most
directly comparable to GAAP financial measures, and the related
reconciliations between the financial measures. Amounts are
expressed in thousands of US dollars (“$”).

	For the Three Months ended March 31, 2019
	Digital Entertainment	E- commerce	Digital Financial Services	Other Services⁽³⁾	Unallocated expenses⁽⁴⁾	Consolidated
	$	$	$	$	$	$


Revenue	173,399	142,694⁽¹⁾	2,288	33,485	–	351,866
Changes in deferred revenue	219,907	–	–	–	–	219,907
Sales incentives net-off	–	6,497	548	–	–	7,045
Adjusted revenue	393,306	149,191⁽²⁾	2,836	33,485	–	578,818

Operating income (loss)	56,470	(253,473)	(12,461)	(11,413)	(18,329)	(239,206)
Net effect of changes in deferred revenue and its related cost	165,501	–	–	–	–	165,501
Depreciation and Amortization	3,845	18,220	549	2,929	–	25,543
Share-based compensation	–	–	–	–	16,199	16,199
Adjusted EBITDA	225,816	(235,253)	(11,912)	(8,484)	(2,130)	(31,963)

	For the Three Months ended March 31, 2018
	Digital Entertainment	E- commerce	Digital Financial Services	Other Services⁽³⁾	Unallocated expenses⁽⁴⁾	Consolidated
	$	$	$	$	$	$


Revenue	110,658	27,344⁽¹⁾	3,700	13,342	–	155,044
Changes in deferred revenue	35,372	–	–	–	–	35,372
Sales incentives net-off	–	6,400	223	–	–	6,623
Adjusted revenue	146,030	33,744⁽²⁾	3,923	13,342	–	197,039

Operating income (loss)	18,788	(184,052)	(9,058)	(11,510)	(12,262)	(198,094)
Net effect of changes in deferred revenue and its related cost	28,195	–	–	–	–	28,195
Depreciation and Amortization	8,021	4,403	488	1,642	–	14,554
Share-based compensation	–	–	–	–	10,671	10,671
Adjusted EBITDA	55,004	(179,649)	(8,570)	(9,868)	(1,591)	(144,674)

⁽¹⁾ For the first quarter of 2019, revenue of $142,694
included marketplace revenue of $95,566 and product revenue of $47,128
net of sales incentives. For the first quarter of 2018, revenue of
$27,344 included marketplace revenue of $15,644 and product revenue of
$11,700 net of sales incentives.

⁽²⁾ For the first quarter of 2019, adjusted revenue of
$149,191 included marketplace revenue of $101,970 and product revenue of
$47,221. For the first quarter of 2018, adjusted revenue of $33,744
included marketplace revenue of $22,044 and product revenue of $11,700.

⁽³⁾A combination of multiple business activities that does
not meet the quantitative thresholds to qualify as reportable segments
are grouped together as “Other Services.”

⁽⁴⁾ Unallocated expenses are mainly related to share-based
compensation and general and corporate administrative costs such as
professional fees and other miscellaneous items that are not allocated
to segments. The expenses are excluded from segment results as they are
not reviewed by the CODM as part of segment performance.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Amounts expressed in thousands of US dollars (“$”) except for number of shares & per share data

	For the Three Months ended March 31,
	2018	2019
	$	$

Revenue
Service revenue
Digital Entertainment	110,658	173,399
E-commerce and other services	32,451	130,663
Sales of goods	11,935	47,804


Total revenue	155,044	351,866

Cost of revenue
Cost of service
Digital Entertainment	(63,572)	(84,642)
E-commerce and other services	(70,793)	(174,365)
Cost of goods sold	(12,154)	(53,403)


Total cost of revenue	(146,519)	(312,410)


Gross profit	8,525	39,456


Operating income (expenses):
Other operating income	729	3,453
Sales and marketing expenses	(152,149)	(177,978)
General and administrative expenses	(44,487)	(75,628)
Research and development expenses	(10,712)	(28,509)


Total operating expenses	(206,619)	(278,662)


Operating loss	(198,094)	(239,206)
Interest income	3,091	4,012
Interest expense	(8,582)	(10,066)
Investment gain, net	7,515	2,047
Changes in fair value of the 2017 convertible notes	(18,796)	(436,120)⁽¹⁾
Foreign exchange loss	(1,475)	(2,653)


Loss before income tax and share of results of equity investees	(216,341)	(681,986)
Income tax credit (expense)	755	(7,205)
Share of results of equity investees	(583)	(418)


Net loss	(216,169)	(689,609)

Net loss (profit) attributable to non-controlling interests	556	(746)


Net loss attributable to Sea Limited’s ordinary shareholders	(215,613)	(690,355)


Net loss excluding share-based compensation and changes in fair value of the 2017 convertible notes	(186,702)	(237,290)


Loss per share:
Basic and diluted	(0.64)	(1.86)


Shares used in loss per share computation:
Basic and diluted	335,147,405	370,724,164

⁽¹⁾ Fair value loss of $436.1 million on the 2017 convertible
notes was recorded as our share prices during the quarter significantly
exceeded the conversion prices of the 2017 convertible notes.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”)

	As of December 31, 2018	As of March 31, 2019
	$	$


ASSETS
Current assets
Cash and cash equivalents	1,002,841	2,362,523
Restricted cash	254,100	301,049
Accounts receivable, net	97,782	147,603
Prepaid expenses and other assets	312,387	350,959
Inventories, net	37,689	25,880
Short-term investments	690	581
Amounts due from related parties	5,224	3,921


Total current assets	1,710,713	3,192,516

Non-current assets
Property and equipment, net	192,357	232,963
Operating lease right-of-use assets, net	–	173,326
Intangible assets, net	12,887	13,963
Long-term investments	111,022	107,125
Prepaid expenses and other assets	69,065	90,430
Restricted cash	2,371	16,393
Deferred tax assets	63,302	69,304
Goodwill	30,952	30,952


Total non-current assets	481,956	734,456


Total assets	2,192,669	3,926,972

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”)

	As of December 31, 2018	As of March 31, 2019
	$	$


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	37,163	38,096
Accrued expenses and other payables	636,880	653,975
Advances from customers	29,355	28,531
Amount due to related parties	46,025	64,816
Short-term bank borrowings	856	981
Operating lease liabilities	–	41,332
Deferred revenue	426,675	573,659
Income tax payable	9,539	8,718


Total current liabilities	1,186,493	1,410,108


Non-current liabilities
Accrued expenses and other payables	7,894	9,408
Long-term bank borrowings	1,026	927
Operating lease liabilities	–	142,521
Deferred revenue	171,262	245,027
Convertible notes	1,061,796	581,770
Deferred tax liabilities	679	578
Unrecognized tax benefits	2,974	2,670


Total non-current liabilities	1,245,631	982,901


Total liabilities	2,432,124	2,393,009

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS Amounts expressed in thousands of US dollars (“$”)

	As of December 31, 2018	As of March 31, 2019
	$	$

Shareholders’ equity

Class A Ordinary shares	94	150
Class B Ordinary shares	76	76
Additional paid-in capital	1,809,232	4,276,011
Accumulated other comprehensive income	15,199	11,355
Statutory reserves	46	46
Accumulated deficit	(2,067,786)	(2,758,141)


Total Sea Limited shareholders’ (deficit) equity	(243,139)	1,529,497
Non-controlling interests	3,684	4,466


Total shareholders’ (deficit) equity	(239,455)	1,533,963


Total liabilities and shareholders’ (deficit) equity	2,192,669	3,926,972

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Amounts expressed in thousands of US dollars (“$”)

	For the Three Months ended March 31,
	2018	2019
	$	$


Net cash used in operating activities	(94,360)	(17,815)
Net cash used in investing activities	(21,837)	(91,250)
Net cash (used in) generated from financing activities	(545)	1,527,875
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash	6,166	1,843
Net (decrease) increase in cash, cash equivalents and restricted cash	(110,576)	1,420,653
Cash, cash equivalents and restricted cash at beginning of the period	1,444,978	1,259,312


Cash, cash equivalents and restricted cash at end of the period	1,334,402	2,679,965

1 UNAUDITED SEGMENT INFORMATION

The Company has three reportable segments, namely digital entertainment,
e-commerce and digital financial services. The Chief Operation Decision
Maker (“CODM”) reviews the performance of each segment based on revenue
and certain key operating metrics of the operations and uses these
results for the purposes of allocating resources to and evaluating the
financial performance of each segment. Amounts are expressed in
thousands of US dollars (“$”).

	For the Three Months ended March 31, 2019
	Digital Entertainment	E- commerce	Digital Financial Services	Other Services⁽¹⁾	Unallocated expenses⁽²⁾	Consolidated
	$	$	$	$	$	$

Revenue	173,399	142,694	2,288	33,485	–	351,866

Operating income (loss)	56,470	(253,473)	(12,461)	(11,413)	(18,329)	(239,206)
Non-operating loss, net						(442,780)
Income tax expense						(7,205)
Share of results of equity investees						(418)
Net loss						(689,609)

	For the Three Months ended March 31, 2018
	Digital Entertainment	E- commerce	Digital Financial Services	Other Services⁽¹⁾	Unallocated expenses⁽²⁾	Consolidated
	$	$	$	$	$	$

Revenue	110,658	27,344	3,700	13,342	–	155,044

Operating income (loss)	18,788	(184,052)	(9,058)	(11,510)	(12,262)	(198,094)
Non-operating loss, net						(18,247)
Income tax credit						755
Share of results of equity investees						(583)
Net loss						(216,169)

⁽¹⁾A combination of multiple business activities that does
not meet the quantitative thresholds to qualify as reportable segments
are grouped together as “Other Services.”

⁽²⁾ Unallocated expenses are mainly related to share-based
compensation and general and corporate administrative costs such as
professional fees and other miscellaneous items that are not allocated
to segments. The expenses are excluded from segment results as they are
not reviewed by the CODM as part of segment performance.

SUPPLEMENTAL OPERATIONAL METRICS

		For the Three Months ended December 31, 2018	For the Three Months ended March 31, 2019

Digital Entertainment	Unit

Quarterly active users	millions	216.2	271.6
Monthly active users (last month)	millions	135.7	170.3
Quarterly paying users	millions	11.9	20.7
Average revenue per user	US$	1.1	1.4
Average revenue per paying user	US$	19.4	19.0

E-commerce

Gross GMV	US$ millions	3,425.2	3,529.3
Gross orders	millions	206.9	203.5

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