Sea Limited Reports Second Quarter 2018 Results

SINGAPORE,Aug. 22,2018 -- Sea Limited (NYSE: SE) ("Sea" or the "Company") today announced its financial results for the quarter ended June 30,2018.

"Sea again delivered strong results in the second quarter of 2018 as we capitalized on our ability to anticipate and quickly adapt to evolving industry dynamics," said Forrest Li,Chairman and Group Chief Executive Officer of Sea. "Shopee continued to expand rapidly across all markets,strengthening its leadership in the region. Our monetization strategy for Shopee is delivering ahead of expectations,even at this early stage. Marketplace revenue surged by more than 69% sequentially to US$37.3 million,as more merchants invested in our value-added services to deepen engagement with their customers. GMV increased more than 14% sequentially to US$2.2 billion,while sales and marketing expenses as a percentage of GMV continued to decline as our growing scale enabled further cost efficiencies."

Mr. Li continued,"In digital entertainment,our efforts to deepen our diversification into mobile games,self-development,and new markets globally are yielding encouraging results. In the month of June,self-developed game revenue accounted for approximately 13% of adjusted digital entertainment revenue,a new record high,driven by the breakout success of our first self-developed global hit,Free Fire."

Second Quarter 2018 Key Metrics

- Group

Total adjusted revenue was US$219.6 million,up 71.0% year-on-year from US$128.4 million for the second quarter of 2017 and up 11.4% quarter-on-quarter from US$197.0 million for the first quarter of 2018.

Total adjusted EBITDA was US$(161.9) million,compared to US$(50.9) million for the second quarter of 2017 and US$(144.7) million for the first quarter of 2018.

- Digital Entertainment

Adjusted revenue was US$139.1 million,up 19.0% year-on-year from US$116.9 million for the second quarter of 2017 and a decrease of 4.7% quarter-on-quarter from US$146.0 million for the first quarter of 2018. The quarter-on-quarter drop was primarily attributable to a decrease in the number of paying users in Vietnam,as a result of measures launched in April by Vietnam's leading mobile operators to restrict the use of prepaid telco cards for online game top-ups. We are actively strengthening alternative top-up channels to assist our paying users in Vietnam.

Adjusted EBITDA was US$48.6 million,up 20.8% year-on-year from US$40.2 million for the second quarter of 2017 and decreased 11.6% quarter-on-quarter from US$55.0 million for the first quarter of 2018.

Quarterly active users ("QAUs") reached 160.6 million,an increase of 150.2% year-on-year from 64.2 million for the second quarter of 2017 and up 26.8% quarter-on-quarter from 126.7 million for the first quarter of 2018.

Average revenue per user ("ARPU") was US$0.9 compared to US$1.8 for the second quarter of 2017 and US$1.2 for the first quarter of 2018.

- E-commerce

Gross merchandise value ("GMV") was US$2.2 billion,an increase of 170.6% year-on-year from US$821.2 million for the second quarter of 2017 and up 14.4%quarter-on-quarter from US$1.9 billion for the first quarter of 2018.

Gross orders for the quarter totaled 127.8 million,an increase of 180.9% year-on-year from 45.5 million for the second quarter of 2017 and up 14.7% quarter-on-quarter from 111.4 million for the first quarter of 2018.

Adjusted revenue was US$58.8 million,up 2,164.7% year-on-year from US$2.6 million for the second quarter of 2017 and up 74.3% quarter-on-quarter from US$33.7 million for the first quarter of 2018. Adjusted revenue included US$37.3 million of marketplace revenue1 and US$21.5 million of product revenue2.

Adjusted EBITDA was US$(188.3) million,compared to US$(76.2) million for the second quarter of 2017 and US$(179.6) million for the first quarter of 2018.

Sales and marketing as a percentage of GMV stood at 6.2%,and improved from 6.8% for the second quarter of 2017 and 6.6% for the first quarter of 2018.

- Digital Financial Services

Gross transaction value of our digital financial services as a whole ("GTV") was US$2.5 billion,an increase of 608.0% year-on-year from US$348.0 million for the second quarter of 2017 and up 44.7% quarter-on-quarter from US$1.7 billion for the first quarter of 2018.The growth was attributable to the payment processing services provided by AirPay to Shopee in most of our markets,which,depending on the operational arrangement in each relevant market,may include payments from buyers to Shopee accounts under Shopee Guarantee as well as outgoing payments from Shopee accounts to Shopee seller accounts that are operationally handled by AirPay.

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

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

Strategic Business Updates

Digital Entertainment

As growing smartphone penetration continues to improve access to online games globally,Garena has taken steps to leverage our leading position in the industry and our clear competitive strengths to capture the growth opportunities ahead. In particular,we have focused on three key strategic initiatives – moving from PC-only to mobile-first,moving from pure game publishing to both game publishing and development,and expanding from a regional footprint to a global presence.

These efforts continue to generate positive results. In June 2018,approximately 73% of our adjusted revenue for digital entertainment was derived from mobile games,approximately 13% was generated by our self-developed game,and approximately 7% was derived from outside the seven core markets in our region.

Free Fire,our first self-developed hit game,remains one of the leading games in the battle royale category in our region,and during the quarter was among the top-ranked games in its category in the App Store and on the Google Play Store in several non-core markets,including Brazil and Mexico. Its daily active user ("DAU") count has reached a record high of more than 16 million. With the development of various monetization features in the game such as the season pass concept,we see encouraging results from monetizing the game,which accounted for an increasingly significant share of our adjusted revenue for digital entertainment.

Moreover,we continue to explore opportunities to expand the focus of our game business to capture new trends and opportunities,including those related to esports and game streaming,to further enhance our user engagement and develop additional avenues of income.

For example,Garena was one of the organizers of the Arena of Valor World Cup ("AOV World Cup") held in Los Angeles in late July. Garena organized a series of tournaments across the region leading to the final. In our markets,the competitions in aggregate attracted over 33 million views online across all streaming platforms,with the final attracting over 5 million views. We believe the enthusiasm generated by the esports and streaming activities further enhanced the user engagement of the game,which has recently achieved a record high DAU count of more than 14 million.

Our efforts to foster strong community engagement around our key titles on streaming platforms continued to gain traction. According to research by Newzoo on the global esports streaming market,two of our esports channels – Garena and Vietnam Esports TV – ranked in the top five Youtube channels globally in terms of esports hours viewed during the first quarter of 2018.

E-commerce

In the second quarter of 2018,Shopee continued to demonstrate robust growth in GMV,gross orders,and adjusted revenue,complemented by continuing efficiency improvements.

We also recorded significant growth in marketplace revenue of 69.3% quarter-on-quarter,well ahead of the GMV growth rate,as a larger number of sellers made use of our expanding suite of offerings,from advertising tools to value-added services such as fulfilment and logistics.

Shopee is also benefiting from ever-improving economies of scale as the number of buyers and sellers on the platform grows,and users build greater loyalty to the platform. During the quarter,sales and marketing expenses as a percentage of GMV fell once again to 6.2%,compared to 6.6% in the first quarter of 2018.

Other Developments

Convertible Notes Offering

In June 2018,we raised US$575 million in aggregate principal amount of 2.25% convertible senior notes due 2023. The offering size was increased from the original US$400 million to US$500 million to address investor demand,and the subsequent full exercise by the initial purchasers of a 15% 'greenshoe' option brought the total offering to US$575 million.

The additional capital further bolsters our balance sheet,and strengthens our ability to address the evolving needs of the users in our region,be they in digital entertainment,e-commerce,or digital financial services. The net proceeds from this offering will be used for business expansion and other general corporate purposes.

Unaudited Summary of Financial Results

(Amounts are expressed in thousands of US dollars "$")

For the Three Months

ended June 30,

2017

2018

$

$

YOY%

Revenue

Digital Entertainment

91,459

108,029

18.1%

Others

10,088

75,750

650.9%

101,547

183,779

81.0%

Cost of revenue

Digital Entertainment

(52,892)

(61,981)

17.2%

Others

(22,814)

(113,216)

396.3%

(75,706)

(175,197)

131.4%

Gross profit

25,841

8,582

(66.8)%

Other operating income

163

1,707

947.2%

Sales and marketing expenses

(74,087)

(165,075)

122.8%

General and administrative expenses

(27,644)

(51,849)

87.6%

Research and development expenses

(6,739)

(12,882)

91.2%

Total operating expenses

(108,307)

(228,099)

110.6%

Operating loss

(82,466)

(219,517)

166.2%

Non-operating loss,net

(7,193)

(30,752)

327.5%

Income tax (expense) credit

(2,230)

170

(107.6)%

Share of results of equity investees

(230)

(689)

199.6%

Net loss

(92,119)

(250,788)

172.2%

Adjusted net loss (1)

(86,871)

(198,715)

128.7%

Adjusted revenue of Digital Entertainment (1)

116,892

139,102

19.0%

Adjusted revenue of E-commerce (1)

2,597

58,815

2,164.7%

Adjusted revenue of Digital Financial Services (1)

5,342

3,413

(36.1)%

Revenue of Other Services

3,596

18,229

406.9%

Total adjusted revenue (1)

128,427

219,559

71.0%

Adjusted EBITDA for Digital Entertainment (1)

40,243

48,612

20.8%

Adjusted EBITDA for E-commerce (1)

(76,233)

(188,315)

(147.0)%

Adjusted EBITDA for Digital Financial Services (1)

(11,044)

(6,780)

38.6%

Adjusted EBITDA for Other Services (1)

(2,664)

(12,937)

(385.6)%

Unallocated expenses (2)

(1,165)

(2,510)

(115.5)%

Total adjusted EBITDA (1)

(50,863)

(161,930)

(218.4)%

(1) For a discussion of the use of non-GAAP financial measures,see "Non-GAAP Financial Measures."

(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. 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 June 30,2018 Compared to Three Months Ended June 30,2017

Revenue

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

For the Three Months ended June 30,

2017

2018

$

% of

revenue

$

% of

revenue

YOY%

Revenue

Digital Entertainment

91,459

90.1

108,029

58.8

18.1%

E-commerce

1,150

1.1

54,655

29.7

4,652.6%

Digital Financial Services

5,342

5.3

2,866

1.6

(46.3)%

Other Services

3,596

3.5

18,229

9.9

406.9%

101,547

100.0

183,779

100.0

81.0%

2017

2018

$

% of total

adjusted

revenue

$

% of total

adjusted

revenue

YOY%

Adjusted revenue of Digital Entertainment

116,892

91.0

139,102

63.4

19.0%

Adjusted revenue of E-commerce

2,597

2.0

58,815

26.8

2,164.7%

Adjusted revenue of Digital Financial Services

5,342

4.2

3,413

1.6

(36.1)%

Revenue of Other Services

3,596

2.8

18,229

8.2

406.9%

Total adjusted revenue

128,427

100.0

219,559

100.0

71.0%

Our total revenue increased by 81.0% to US$183.8 million in the second quarter of 2018 from US$101.5 million in the second quarter of 2017. Our total adjusted revenue increased by 71.0% to US$219.6 million in the second quarter of 2018 from US$128.4 million in the second quarter of 2017. These increases were mainly driven by the growth in each of the segments detailed as follows:

Digital Entertainment: Revenue increased by 18.1% to US$108.0 million in the second quarter of 2018 from US$91.5 million in the second quarter of 2017. Adjusted revenue increased by 19.0% to US$139.1 million in the second quarter of 2018 from US$116.9 million in the second quarter of 2017. This increase was primarily due to improvements in monetization of our existing games and the launch of new games.

E-commerce: Revenue increased by 4,652.6% to US$54.7 million in the second quarter of 2018 from US$1.2 million in the second quarter of 2017. Adjusted revenue increased by 2,164.7% to US$58.8 million in the second quarter of 2018 from US$2.6 million in the second quarter of 2017. This increase was primarily due to the growth of our GMV and the additional services and product offerings we introduced to sellers under 'Service by Shopee,' 'Shopee Logistics Service,' as well as the other value-added services.

Digital Financial Services: Revenue decreased by 46.3% to US$2.9 million in the second quarter of 2018 from US$5.3 million in the second quarter of 2017. Adjusted revenue decreased by 36.1% to US$3.4 million in the second quarter of 2018 from US$5.3 million in the second quarter of 2017,as we switched to focus our efforts on strengthening our infrastructure to support our existing platforms. The decrease was also in part due to the restrictive measures imposed by Vietnam's leading mobile operators on using prepaid telco cards for online game top-ups.

Other Services: Revenue increased by 406.9% to US$18.2 million in the second quarter of 2018 from US$3.6 million in the second quarter of 2017. The increase was primarily due to ancillary services we provide to our e-commerce platform users.

Cost of Revenue

Our total cost of revenue increased by 131.4% to US$175.2 million in the second quarter of 2018 from US$75.7 million in the second quarter of 2017.

Digital Entertainment: Cost of revenue increased by 17.2% to US$62.0 million in the second quarter of 2018 from US$52.9 million in the second quarter of 2017. The increase was primarily due to the increase in royalty payments to game developers as well as in other costs directly associated with our digital entertainment segment which were largely in line with the revenue growth of our business.

Others: Cost of revenue for our other segments combined increased by 396.3% to US$113.2 million in the second quarter of 2018 from US$22.8 million in the second quarter of 2017. The increase was primarily due to the costs incurred following the launch of 'Service by Shopee,' and direct sales at the end of 2017; 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.

Sales and Marketing Expenses

Our total sales and marketing expenses increased by 122.8% to US$165.1 million in the second quarter of 2018 from US$74.1 million in the second quarter of 2017. The table below sets forth the breakdown of our sales and marketing expenses of our two major reporting segments. Amounts are expressed in thousands of US dollars ("$").

For the Three Months

ended June 30,

2017

2018

YOY%

Sales and Marketing Expenses

$

$

Digital Entertainment

11,858

18,916

59.5%

E-commerce

55,906

138,042

146.9%

Digital Entertainment: Sales and marketing expenses increased by 59.5% to US$18.9 million in the second quarter of 2018 from US$11.9 million in the second quarter of 2017. The increase was primarily due to the launch of new games and our continued efforts to expand the user bases of our existing games.

For the Three Months

ended June 30,

2017

2018

Digital Entertainment

$

$

Sales and marketing expenses

11,916

Adjusted revenue

116,892

139,102

Sales and marketing expenses as a percentage of adjusted revenue

10.1%

13.6%

Sales and marketing expenses as a percentage of adjusted revenue increased to 13.6% in the second quarter of 2018 from 10.1% in the second quarter of 2017. This was mainly due to increased expenses on the launching of new games,while the monetization impact of these new games was not fully captured within the same period.

E-commerce: Sales and marketing expenses increased by 146.9% to US$138.0 million in the second quarter of 2018 from US$55.9 million in the second quarter of 2017. The increase in marketing efforts was aligned with our strategy to fully capture the market growth opportunity and was primarily attributable to shipping and other promotions on our platform that were designed to increase our user base and enhance user engagement.

For the Three Months

ended June 30,

2017

2018

E-commerce

$

$

Sales and marketing expenses

55,042

GMV

821,175

2,221,789

Sales and marketing expenses as a percentage of GMV

6.8%

6.2%

Sales and marketing expenses as a percentage of GMV was 6.2% in the second quarter of 2018 and improved from 6.8% in the second quarter of 2017.

General and Administrative Expenses

Our general and administrative expenses increased by 87.6% to US$51.8 million in the second quarter of 2018 from US$27.6 million in the second quarter of 2017. This increase was primarily due to the expansion of our staff force,the increase in office facilities and related expenses,as well as the increase in professional fees and other expenses.

Research and Development Expenses

Our research and development expenses increased by 91.2% to US$12.9 million in the second quarter of 2018 from US$6.7 million in the second quarter of 2017,primarily due to the increase in our research and development staff force as we expanded and enriched our product offerings.

Non-operating Income or Losses,Net

Non-operating income or losses consists of interest income,interest expense,investment gain (loss),fair value change for convertible debts and foreign exchange gain (loss). The amount was a net non-operating loss of US$30.8 million in the second quarter of 2018,compared to a net non-operating loss of US$7.2 million in the second quarter of 2017. This was primarily due to a fair value loss of US$37.2 million recognized in the quarter arising from the fair value accounting treatment for the convertible debts raised before our initial public offering.

Income Tax Expense

We had a net income tax benefit of US$0.2 million in the second quarter of 2018,which was primarily due to the deferred tax assets we recognized in our digital entertainment segment in the second quarter of 2018.

Share of Results of Equity Investees

We had share of losses of equity investees of US$0.7 million in the second quarter of 2018,compared with US$0.2 million in the second quarter of 2017.

Net Loss

As a result of the foregoing,we had net losses of US$250.8 million and US$92.1 million in the second quarter of 2018 and 2017,respectively.

Adjusted Net Loss

Adjusted net loss,which is net loss adjusted to remove share-based compensation expenses and fair value change for convertible debts,was US$198.7 million and US$86.9 million in the second quarter of 2018 and 2017,respectively.

Webcast and Conference Call Information

Mr. Forrest Li,Founder,Chairman and Group Chief Executive Officer; Mr. Tony Hou,Group Chief Financial Officer; and Mr. Alan Hellawell,Group Chief Strategy Officer,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 21 August 2018

8:00 AM Singapore / Hong Kong Time on 22 August 2018

Webcast link:

https://services.choruscall.com/links/se180821.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:

1518348

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.

For enquiries,please contact:

Investors / analysts: ir@seagroup.com

Media: media@seagroup.com

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 platforms across digital entertainment,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 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 commission income that were net-off against 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 service revenue that were net-off against 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 net loss" represents net loss before share-based compensation and changes in fair value of convertible debts. We believe that the adjusted net loss helps to identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that are included in net loss. The use of adjusted net loss has its limitations in that it does not include all items that impact the net loss or income for the period,and share-based compensation and changes in fair value of convertible debts are significant expenses.

"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,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 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 June 30,2018

Digital

Entertainment

E-

commerce

Digital

Financial

Services

Other

Services(3)

Unallocated

expenses(4)

Consolidated

$

$

$

$

$

$

Revenue

108,029

54,655(1)

2,866

18,229

-

183,779

Changes in deferred revenue

31,073

-

-

-

-

31,073

Sales incentives net-off

-

4,160

547

-

-

4,707

Adjusted revenue

139,102

58,815(2)

3,413

18,229

-

219,559

Operating income (loss)

15,137

(195,034)

(7,297)

(14,900)

(17,423)

(219,517)

Net effect of changes in deferred

revenue and its related cost

24,872

-

-

-

-

24,872

Depreciation and amortization

8,603

6,719

517

1,963

-

17,802

Share-based compensation

-

-

-

-

14,913

14,913

Adjusted EBITDA

48,612

(188,315)

(6,780)

(12,937)

(2,510)

(161,930)

For the Three Months ended June 30,2017

Digital

Entertainment

E-

commerce

Digital

Financial

Services

Other

Services(3)

Unallocated

expenses(4)

Consolidated

$

$

$

$

$

$

Revenue

91,459

1,150(1)

5,596

-

101,547

Changes in deferred revenue

25,433

-

-

-

-

25,433

Sales incentives net-off

-

1,447

-

-

-

1,447

Adjusted revenue

116,892

2,597(2)

5,596

-

128,427

Operating income (loss)

16,020

(77,438)

(11,309)

(3,326)

(6,413)

(82,466)

Net effect of changes in deferred

revenue and its related cost

17,336

-

-

-

-

17,336

Depreciation and amortization

6,887

1,205

265

662

-

9,019

Share-based compensation

-

-

-

-

5,248

5,248

Adjusted EBITDA

40,243

(76,233)

(11,044)

(2,664)

(1,165)

(50,863)

(1) For the second quarter of 2018,revenue of $54,655 included marketplace revenue of $33,160 and product revenue of $21,495,net of sales incentives. For the second quarter of 2017,revenue of $1,150 was entirely marketplace revenue.

(2) For the second quarter of 2018,adjusted revenue of $58,815 included marketplace revenue of $37,320 and product revenue of $21,495. For the second quarter of 2017,revenue of $2,597 was entirely marketplace revenue.

(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 Six Months

ended June 30,

2017

2018

$

$

Revenue

Digital Entertainment

179,045

218,687

Others

16,447

120,136

Total revenue

195,492

338,823

Cost of revenue

Digital Entertainment

(102,169)

(125,553)

Others

(40,375)

(196,163)

Total cost of revenue

(142,544)

(321,716)

Gross profit

52,948

17,107

Operating income (expenses):

Other operating income

381

2,436

Sales and marketing expenses

(137,985)

(317,224)

General and administrative expenses

(52,852)

(96,336)

Research and development expenses

(12,991)

(23,594)

Total operating expenses

(203,447)

(434,718)

Operating loss

(150,499)

(417,611)

Interest income

473

5,350

Interest expense

(8,997)

(11,555)

Investment (loss) gain

(359)

8,478

Changes in fair value of convertible debts

-

(55,956)

Foreign exchange (loss) gain

(789)

4,684

Loss before income tax and share of results of equity investees

(160,171)

(466,610)

Income tax (expense) credit

(4,162)

925

Share of results of equity investees

(862)

(1,272)

Net loss

(165,195)

(466,957)

Net loss attributable to non-controlling interests

51

641

Net loss attributable to Sea Limited's ordinary shareholders

(165,144)

(466,316)

Adjusted net loss(1)

(153,834)

(385,417)

Loss per share:

Basic and diluted

(0.94)

(1.39)

Shares used in loss per share computation:

Basic and diluted

174,988,779

336,531,721

(1) For a discussion of the use of non-GAAP financial measures,see "Non-GAAP Financial Measures."

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

Amounts expressed in thousands of US dollars ("$")

As of

December 31,

As of

June 30,

2017

2018

$

$

ASSETS

Current assets

Cash and cash equivalents

1,347,361

1,477,140

Restricted cash

95,300

154,207

Accounts receivable,net

61,846

55,114

Prepaid expenses and other assets

186,181

270,026

Inventories,net

9,790

16,906

Short-term investment

18,000

−

Amounts due from related parties

2,235

5,904

Total current assets

1,720,713

1,979,297

Non-current assets

Property and equipment,net

74,348

121,920

Intangible assets,net

37,333

29,591

Long-term investments

28,216

71,006

Prepaid expenses and other assets

46,297

63,801

Restricted cash

2,317

2,369

Deferred tax assets

48,104

56,428

Goodwill

30,952

30,952

Total non-current assets

267,567

376,067

Total assets

1,280

2,355,364

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

Amounts expressed in thousands of US dollars ("$")

As of

December 31,

2017

2018

$

$

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

8,644

33,920

Accrued expenses and other payables

285,248

404,900

Advances from customers

27,155

24,716

Amount due to related parties

36,790

32,668

Short-term bank borrowings

2,013

−

Deferred revenue

268,241

273,688

Income taxes payable

9,614

8,031

Total current liabilities

637,705

777,923

Non-current liabilities

Accrued expenses and other payables

7,547

8,429

Deferred revenue

133,481

184,841

Convertible debts

726,950

1,145,836

Deferred tax liabilities

4,378

3,954

Unrecognized tax benefits

3,088

2,938

Total non-current liabilities

875,444

1,345,998

Total liabilities

1,513,149

2,123,921

Shareholders' equity

Class A ordinary shares

91

94

Class B ordinary shares

76

76

Additional paid-in capital

1,564,656

1,776,246

Accumulated other comprehensive income

10,701

24,984

Statutory reserves

46

46

Accumulated deficit

(1,106,545)

(1,572,861)

Total Sea Limited shareholders' equity

469,025

228,585

Non-controlling interests

6,106

2,858

Total shareholders' equity

475,131

231,443

Total liabilities and shareholders' equity

1,364

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts expressed in thousands of US dollars ("$")

For the Six Months

ended June 30,

2017

2018

$

$

Net cash used in operating activities

(115,731)

(283,113)

Net cash used in investing activities

(17,393)

(61,851)

Net cash generated from financing activities

626,976

544,791

Effect of foreign exchange rate changes on cash,cash equivalents and restricted cash

3,486

(11,089)

Net increase in cash,cash equivalents and restricted cash

497,338

188,738

Cash,cash equivalents and restricted cash at beginning of the period

190,824

1,444,978

Cash,cash equivalents and restricted cash at end of the period

688,162

1,633,716

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 June 30,2018

Digital

Entertainment

E-

commerce

Digital

Financial S

ervices

Other

Services(1)

Unallocated

expenses(2)

Consolidated

$

$

$

$

$

$

Revenue

108,655

2,779

Operating income (loss)

15,517)

Non-operating loss,net

(30,752)

Income tax credit

170

Share of results of equity investees

(689)

Net loss

(250,788)

For the Three Months ended June 30,2017

Digital

Entertainment

E-

commerce

Digital

Financial

Services

Other

Services(1)

Unallocated

expenses(2)

Consolidated

$

$

$

$

$

$

Revenue

91,150

5,547

Operating income (loss)

16,466)

Non-operating loss,net

(7,193)

Income tax expense

(2,230)

Share of results of equity investees

(230)

Net loss

(92,119)

(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 March 31,

2018

For the Three Months

ended June 30,

2018

Digital Entertainment

Unit

Quarterly active users

millions

126.7

160.6

Monthly active users (last month)

millions

77.4

90.6

Quarterly paying users

millions

7.2

6.6

Average revenue per user

US$

1.2

0.9

Average revenue per paying user

US$

20.3

21.1

E-commerce

Gross GMV

US$ millions

1,941.4

2,221.8

Gross orders

millions

111.4

127.8

Digital Financial Services

GTV

US$ millions

1,702.2

2,463.9