Digital gaming and e-commerce firm Sea Ltd. posted its first-ever quarterly profit, sending its New York-listed shares soaring and boosting the fortunes of its billionaire cofounder Forrest Li by $919 million overnight.
Sea reported late Tuesday a net profit of $422.8 million for the fourth quarter, reversing a year earlier net loss of $616.3 million. Its total revenue improved 7.1% to $3.4 billion, and e-commerce platform Shopee also became profitable.
“We are starting 2023 on a much stronger footing,” Li, Sea’s chairman and group CEO, said in a statement. “Our decisive pivot to focus on efficiency and profitability since late last year is already driving meaningful bottom line improvements.”
Sea turned profitable on the back of massive cost-cutting measures that included retrenching thousands of staff, salary cuts and reducing sales and marketing expenses by 61% to $473.6 million during the quarter. Shopee has largely pulled back from its global expansion drive, shutting down operations in India and Europe to focus on key markets in Southeast Asia, Taiwan and Brazil.
“As we continue this transition and maintain our focus on sustainable growth, our approach is to do less but do it better as we serve our users across our digital ecosystem,” Li said. “Given the macro uncertainty and our recent strong pivot, we are closely monitoring the market environment and we will continue to adjust our pace and fine-tune our operations accordingly.”
The turnaround in the fourth quarter helped narrow Sea’s full-year net loss to $1.7 billion from $2 billion in the previous year. Total group revenues jumped 25% to $12.5 billion in 2022, with e-commerce sales rising 64% to $7.5 billion, and contributions from digital entertainment declined 10% to $3.9 billion. While digital entertainment remains Sea’s most profitable business, contributions have dwindled after India banned its flagship mobile game Free Fire in February.
With Sea turning profitable, the company’s shares jumped 22% to $80.06 on Tuesday in New York trading, the highest close in six months. The stock rally boosted Li’s net worth to over $5 billion, compared with $4.2 billion when the list of Singapore’s 50 Richest was last published in September, Forbes data showed.
Li cofounded Sea with Gang Ye and David Chen in 2009, the year the trio launched online gaming platform Garena. Six years later, Sea started Shopee in Singapore and has since become a regional e-commerce behemoth. Originally from mainland China, the partners are now naturalized Singapore citizens.