Sea Ltd [SE] Filings

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:

(Title of Class)

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

(Title of Class)

 

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

526,812,214 Class A ordinary shares and 45,527,793 Class B ordinary shares, par value US$0.0005 per share, as of December 31, 2023

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

			Page
INTRODUCTION			5
PART I			7
	ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS		7
	ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE		7
	ITEM 3. KEY INFORMATION		7
	ITEM 4. INFORMATION ON THE COMPANY		47
	ITEM 4A. UNRESOLVED STAFF COMMENTS		91
	ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS		91
	ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		114
	ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		124
	ITEM 8. FINANCIAL INFORMATION		125
	ITEM 9. THE OFFER AND LISTING		126
	ITEM 10. ADDITIONAL INFORMATION		127
	ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		140
	ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		140
PART II			142
	ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		142
	ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		142
	ITEM 15. CONTROLS AND PROCEDURES		142
	ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT		143
	ITEM 16B. CODE OF ETHICS		143
	ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES		143
	ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		144
	ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		144
	ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		144
	ITEM 16G. CORPORATE GOVERNANCE		144
	ITEM 16H. MINE SAFETY DISCLOSURE		145
	ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS		145
	ITEM 16J. INSIDER TRADING POLICIES		145
	ITEM 16K. CYBERSECURITY		145
PART III			146
	ITEM 17. FINANCIAL STATEMENTS		146
	ITEM 18. FINANCIAL STATEMENTS		146
	ITEM 19. EXHIBITS		147

•

“2023 convertible notes” refers to our 2.25% convertible senior notes due 2023, which were issued in June 2018;

•

“2024 convertible notes” refers to our 1.00% convertible senior notes due 2024, which were issued in November 2019;

•

“2025 convertible notes” refers to our 2.375% convertible senior notes due 2025, which were issued in May 2020;

•

“2026 convertible notes” refers to our 0.25% convertible senior notes due 2026, which were issued in September 2021;

•

“active users” in the context of digital entertainment refers to the number of unique accounts that interacted with our mobile and PC online games in a particular period. A single account that plays more than one online game or in more than one market is counted as more than one active user. “Game QAUs” refers to the aggregate number of active users during the quarterly period;

•

“ADSs” refers to the American Depositary Shares, each of which represents one of our Class A ordinary shares, par value US$0.0005 per share;

•

“China” or “PRC” refers to the People’s Republic of China excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau;

•

“gross merchandise value” or “GMV” refers to the value of orders of products and services on our Shopee marketplace. Our calculation of GMV for our e-commerce platform includes shipping and other charges;

•

“orders” refers to each confirmed order from a transaction between a buyer and a seller for products and services on our e-commerce platform, even if such order includes multiple items, during the specified period, regardless of whether the transaction is settled or if the item is returned;

•

“paying users” refers to the number of unique accounts through which a payment is made in our online games in a particular period. A unique account through which payments are made in more than one online game or in more than one market is counted as more than one paying user. “Game QPUs” refers to the aggregate number of paying users during the quarterly period;

•

“shares” or “ordinary shares” refer to our Class A ordinary shares, par value US$0.0005 per share, and our Class B ordinary shares, par value US$0.0005 per share;

•

“Southeast Asia” refers to Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam;

•

“SME” refers to small medium sized enterprises; and

•

“we,” “us,” “our company,” “our group,” “our” or “Sea” refers to Sea Limited, a Cayman Islands company, its consolidated subsidiaries and its consolidated affiliated entities, including its variable interest entities, or VIEs, and their subsidiaries and consolidated affiliated entities.

•

our goals and strategies;

•

our future business development, financial condition, financial results, and results of operations;

•

changes in, and market size of, the e-commerce, digital financial services, and digital entertainment industries in the markets where we operate, including segments within those industries;

•

expected changes or guidance in our revenue, costs or expenditures;

•

our ability to continue to source, develop and offer new and attractive online games and to offer other engaging digital entertainment content;

•

the expected monetization of our e-commerce, digital financial services, and digital entertainment businesses;

•

our expectations regarding growth in our user base, level of engagement and monetization;

•

our ability to continue to develop new technologies and/or upgrade our existing technologies;

•

growth and trends of our markets and competition in our industries;

•

government policies and regulations relating to our industries, including the effects of any government orders or actions on our businesses;

•

general economic, political, social and business conditions in our markets; and

•

the impact of widespread health developments.

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

ITEM 3.

KEY INFORMATION

•

We may fail to maintain or grow the size of our user base or the level of engagement of our users.

•

Changes in macro-economic, geopolitical or social conditions or government policies, or government actions or restrictions, globally and in our markets could have a material adverse effect on our business and operations.

•

We have a history of net losses and we may not remain profitable in the future.

•

Our results of operations are subject to fluctuations.

•

We may fail to monetize our businesses effectively.

•

Any future occurrence of natural disasters, epidemics, pandemics or other outbreaks, or other catastrophic events could also adversely affect our business.

•

We may not succeed in managing or expanding our business across the expansive and diverse markets in which we operate.

•

We are subject to extensive and changing laws and government regulations across our business.

•

We may fail to compete effectively.

•

Existing or future investments or acquisitions may not be successful.

•

We have a limited operating history for some of our businesses.

•

Our businesses involve third parties over whose actions we have no control.

•

Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.

•

We may be subject to intellectual property-related risks.

•

We may be liable for security breaches and attacks against our or our third-party partners’ platforms and network, particularly with regard to confidential user information and personal or other data or any other privacy or data protection compliance issue, and our platforms and games may contain unforeseen “bugs”, vulnerabilities or errors.

•

We collect, process, transmit, and store personal information in connection with the operation of our businesses and are subject to complex and evolving international laws and regulations regarding privacy and data protection.

•

We may use artificial intelligence in our business, and challenges with properly managing its use could adversely affect our results of operations.

•

We face uncertainties relating to the growth and profitability of the e-commerce industry in our markets and we may face challenges and uncertainties in implementing our e-commerce strategy.

•

We face risks related to logistics and fulfillment.

•

We may be held liable for actions by our marketplace participants.

•

We may suffer losses relating to the products we sell on Shopee.

•

We face uncertainties and risks relating to our digital financial services business.

•

We face risks related to our credit and banking businesses.

•

Our banking business may subject us to additional material business, operational, financial, legal and compliance requirements and risks.

•

We face risks related to our insurance business.

•

We could be held liable if our digital financial services and products are used for fraudulent, illegal or improper purposes.

•

We derive a significant portion of digital entertainment revenue and gross profit from a limited number of online games.

•

We have a limited track record in game development and global game distribution.

•

We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with user generated content.

•

Our games are subject to scrutiny regarding the appropriateness of their content.

•

We rely on technology and internet infrastructure, data center and cloud service providers and telecommunications networks in the markets where we operate.

•

We may fail to attract, motivate and retain the key members of our management team or other experienced and capable employees.

•

We face manpower-related risks.

•

We may be subject to risks related to litigation and regulatory proceedings.

•

We rely on structural arrangements to establish control over certain entities and government authorities may determine that these arrangements do not comply with existing laws and regulations. We are also subject to other risks relating to such structural arrangements.

•

we fail to maintain the popularity of our platforms among users;

•

we are unable to maintain the quality of our existing content and services;

•

we are unsuccessful in innovating or introducing new, best-in-class content and services;

•

we fail to adapt to changes in user preferences, market trends or advancements in technology;

•

technical, regulatory, governmental or other reasons prevent us from delivering our content or services in a timely and reliable manner, or at all, or otherwise affect the user experience;

•

there are user concerns related to privacy, data protection, safety, fund security or other factors;

•

monetization and cost reduction measures by us cause users to reduce their activity on our platforms or shift to other platforms;

•

new games cause players to shift from our existing games without growing the overall size of our user base or online games platform;

•

there are adverse changes to our platforms or offerings that are mandated by, or that we elect to make, to address legislation, regulation, government orders, or litigation, including settlements or consent decrees;

•

our users fail to accept or comply with our terms of service or the privacy policies that we have implemented or may implement, or we adopt terms, policies, or procedures that are perceived negatively by our users;

•

our marketing campaigns or promotional strategies fail to achieve the intended effect among users – for example, users may develop negative perceptions towards our marketing campaigns or promotional strategies;

•

we are unable to achieve the expected synergies among our businesses, we are unable to achieve synergies in a cost-effective manner, or we fail to balance the interests of all participants in our ecosystem;

•

we fail to maintain the brand image of our platforms or our reputation is damaged or changes negatively; or

•

changes to demographic trends or economic development affect our markets.

•

user acceptance of a digital economy, especially in the new markets to which we may expand in the future;

•

lack of experience operating in these new markets, including our ability to understand different user behaviors and/or culture in new markets and roll-out relevant products and services localized to each market’s needs or preferences;

•

challenges in adapting our approach and strategies in existing markets to new markets;

•

recruiting and retaining talented and capable management and employees in various markets;

•

our ability to appropriately deploy resources and management attention that otherwise would be focused on the development of our existing markets and businesses;

•

limited technology infrastructure and low levels of use of the internet;

•

challenges caused by distance, language and cultural differences, and local and regional competitive landscapes;

•

providing content and services that appeal to the tastes and preferences of users in a larger number of markets;

•

implementing our businesses in a manner that complies with local laws and practices, which may differ significantly from market to market, including laws regarding data protection, privacy, network security, cybersecurity, encryption and payments;

•

maintaining adequate internal and accounting control across various markets, each with its own accounting principles that must be reconciled to U.S. GAAP upon consolidation;

•

compliance with privacy laws and data security laws and compliance costs across different legal systems;

•

currency exchange rate fluctuations;

•

protectionist laws and business practices that could, among other things, hinder our ability to execute our business strategies and put us at a competitive disadvantage relative to domestic companies, including restrictions on foreign ownership;

•

actions by governments or others to restrict access to our products and services, whether these actions are taken for political, security or other reasons, or that may cause us to discontinue our operations in a particular market;

•

complex local tax regimes;

•

differing, complex and potentially adverse customs, import/export laws, tax rules and regulations or other trade barriers or restrictions which may be applicable to transactions conducted through cross-border e-commerce business, related compliance obligations and consequences of non-compliance, and any new developments in these areas;

•

establishing strategic partnerships, as well as maintaining our relationships with any of our existing or future strategic partners;

•

potential political, economic and social instability, including future major geopolitical events, and related actions taken by other countries in response, or perceived, threatened or actual security concerns; and

•

higher costs associated with doing business in a larger number of markets.

•

we may fail to successfully achieve the intended objectives;

•

our investments or acquisitions may be viewed negatively by customers, financial markets or investors;

•

the costs of identifying and consummating these transactions may be significant;

•

acquisitions and the subsequent integration of new assets and businesses into our own could require significant management attention and could divert resources from our existing businesses;

•

we may have difficulty in transitioning and integrating the business, technologies, products, personnel or operations of the acquired businesses;

•

we may face unforeseen operating challenges;

•

our relationships with existing employees, customers and business partners of our group, or those of the target, may be impaired;

•

we may assume pre-existing contractual relationships of an acquired company that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business;

•

an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company;

•

we may face challenges associated with managing additional and/or geographically remote businesses;

•

investments and acquisitions could result in the use of substantial amounts of cash or significant capital contributions, which could limit other potential uses for our cash;

•

investments and acquisitions could result in increased leverage, dilutive issuances of equity securities, adverse tax consequences, goodwill impairment charges, investment impairment charges or write-offs, and amortization expenses for other intangible assets;

•

if we incur debt to fund any investments or acquisitions, such debt may subject us to material restrictions on our ability to conduct our business, including financial maintenance covenants;

•

we may need to issue new shares as acquisition consideration or to raise additional capital to fund the acquisition consideration, which may dilute our existing investors’ interest in us;

•

we may assume unknown material liabilities of acquired companies, or may be exposed to claims and disputes by shareholders and third parties, including intellectual property claims and disputes;

•

we may be unsuccessful in accurately projecting revenue, cost or other metrics of the invested or acquired entity in the due diligence process;

•

the invested or acquired assets or businesses may not generate the financial results we expect; and

•

the market value of our investments or acquisitions may fluctuate, particularly in volatile markets, or they may become obsolete.

•

risks relating to third-party sellers on our platforms and merchant partners, including deficiencies in the quality of products, misrepresentations of or about products, listing or sale of restricted or prohibited products, failure to comply with applicable laws and regulations, and potential intellectual property issues (see “—We may be subject to intellectual property-related risks”);

•

risks relating to third-party publishing or distribution channels we use to make our applications available for download, such as the iOS App Store and the Google Play Store;

•

risks relating to content generated by third parties and any user generated content in our games (see “—We rely on third-party game developers for some of our digital entertainment content and also allow our users to contribute and interact with user generated content”), e-commerce platform, or other platforms, including content posted in real-time, which may be illegal, obscene, defamatory, infringing or otherwise inappropriate or unlawful;

•

risks relating to third-party payment service providers we depend on to provide users with various payment options or mobile wallet top-up options, such as the iOS App Store and the Google Play Store, payment on delivery, bank transfers, direct carrier billing, credit cards, debit cards, telecommunication card and over-the-counter top-up and payment through other third-party payment services;

•

risks relating to services by third-party logistics service providers (see “—We face risks related to logistics and fulfillment”);

•

risks relating to third party developers and independent software vendors;

•

risks relating to third party collection agents in relation to our credit products and loans receivable;

•

risks relating to manpower agencies and independent contractors (see “—We face manpower-related risks”);

•

risks relating to business process outsourcing vendors, including customer service agents;

•

risks relating to users’ personal data that is received or used by third parties in connection with our services, such as when sellers or third-party payments or logistics providers receive user information in connection with payment services or order fulfillment;

•

risks relating to third party banks, insurance, lending and wealth management service providers providing services on our platforms. If such third party service providers engage in activities that are negligent, fraudulent, or otherwise harm the interest of users subscribing to such services or products through our platforms, we may be subject to legal and financial harm, including potential contractual or non-contractual liability, reputational damage, litigation risk and/or user loss even if due to actions or activities not related to, attributable to or caused by us, or within our control;

•

risks relating to users of our services or platforms who engage in fraud or other conduct that violates our terms of service, other policies, or the law;

•

risks relating to our business and/or banking partners or counterparties being sanctioned and/or otherwise being found to have violated our agreements, other policies, or the law;

•

risks relating to third-party data center providers and cloud services for the storing of data from our users and operations, including any risks relating to users’ personal data hosted by such service providers. In addition, we do not control the operation of these facilities and rely on contracts to employ their use. The owners of the data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer our servers and other infrastructure to new data center facilities, or change to other service providers, and we may incur significant costs and possible lengthy service interruptions in connection with doing so; and

•

damage to our reputation if third parties on our platforms or our other business partners do not properly perform their functions and negatively affect our users’ experience with our platforms.

•

the growth rate of internet, broadband, personal computer and smartphone penetration and usage in our markets, including any changes or fluctuations in growth rates and/or usage;

•

the trust and confidence level of e-commerce consumers, as well as changes in customer demographics and consumer tastes and preferences;

•

the selection, pricing and popularity of products that online sellers offer;

•

attracting and retaining a wide range of merchants, brands and retailers;

•

providing effective technologies, infrastructure and services that meet the evolving needs of consumers and merchants;

•

economic landscape, macro-economics, and consumer discretionary spending;

•

competition from online and offline players, such as alternative retail channels or business models that better address the needs or preferences of consumers, including social commerce or multi-category service e-commerce platforms;

•

the differing and quickly changing laws and regulations applicable to e-commerce businesses in our markets, including any required licenses or permits, exposure to additional liability, including for conduct by or content originating from third parties, and new labor legislation or changes to any employment or independent contractor classification frameworks; and

•

the development of logistics (especially last-mile delivery and warehousing infrastructure), payment and other ancillary services associated with e-commerce.

•

revoking the business licenses and/or operating licenses of such entities;

•

discontinuing or placing restrictions or onerous conditions on the operations of our VIEs or Thai subsidiaries, or on our operations through any transactions between our company or our Cayman Islands or Singapore subsidiaries on the one hand and our VIEs, subsidiaries of such VIEs or our Thai subsidiaries on the other hand;

•

imposing fines, prohibiting payments by our VIEs or their shareholders to us as contemplated in the contractual arrangements with our VIEs, confiscating income from us, our Cayman Islands or Singapore subsidiaries, VIEs or Thai subsidiaries, or imposing other requirements with which such entities may not be able to comply;

•

imposing criminal penalties, including fines and imprisonment on our VIEs or Thai subsidiaries, their shareholders or directors;

•

requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with our VIEs and their shareholders, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over our VIEs or Thai subsidiaries; or

•

restricting or prohibiting us from providing funding to our business and operations in Vietnam and Thailand.

•

imposing fines between NT$120,000 (US$3,919) to NT$25,000,000 (US$816,460) and further fines if the non-compliance is not rectified as ordered;

•

ordering us to reduce any direct or indirect ownership or control by PRC investors in our company;

•

requesting us to divest some or all of our ownership or control in our operating entities in Taiwan;

•

suspending the rights of shareholders of our Taiwan operating entities; and

•

discontinuing the operations and revoking the business licenses of our Taiwan operating entities.

•

variations in our quarterly or annual revenue, earnings and cash flow;

•

guidance or other projections we may provide to the public, including any changes or failure to meet any guidance or other projections;

•

announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;

•

announcements of new content and services or plans of expansion or exits by us or our competitors;

•

changes in financial estimates by securities analysts and data providers, or our failure to meet these estimates or the expectations of investors;

•

downgrades by industry or securities analysts that publish research or reports on us;

•

detrimental adverse publicity about us, our businesses or our industries or investor sentiment with respect to our competitors, our shareholders and investors, and our industry in general;

•

additions or departures of key personnel;

•

release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities, including the perception that these sales could occur;

•

dilution of the ownership interests of our ADS holders due to conversions of our 2024, 2025 and 2026 convertible notes, which we may choose to settle by issuing ADSs, or from the unwinding of capped call transactions in connection with our 2024 and 2025 convertible notes;

•

current or potential litigation, government actions or regulatory investigations, including class actions;

•

volatility in the stock market, including price and volume fluctuations in the overall stock market, changing trends in the economy, interest rate hikes or other interest rate-related decisions; and

•

general political, economic, or market conditions, or other events or factors, including those resulting from war, incidents of terrorism, pandemics, and other disruptive external events, or responses to these events.

•

we have failed to timely provide the depositary with our notice of meeting and related voting materials;

•

we have instructed the depositary that we do not wish a discretionary proxy to be given;

•

we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or

•

a matter to be voted on at the meeting would have a material adverse impact on shareholders.

ITEM 4.

INFORMATION ON THE COMPANY

•

Our people define us.    Sea shall be a place where talented people thrive at scale, enjoy freedom of ideas and achieve the unimaginable. It shall be a magnet for the smartest, the most creative and the most driven.

•

Our products and services differentiate us.    We aspire to better every life we touch and make the world an ever more connected community through innovative products and services.

•

Our institution will outlast us.    We strive to build an institution that will last for generations and evolve with time, and that is founded upon our core values.

•

We serve.    Our customers are the sole arbiter of the value of our products and services. We strive to meet unmet needs and serve the underserved.

•

We adapt.    Rapid change is the only constant in the digital age of ours. We embrace change, celebrate it and always strive to be a thought leader that influences it.

•

We run.    We are in a constant race to success while grappling with rapidly shifting forces. We move faster, better and with more urgency every day.

•

We commit.    Our work is our commitment. We commit to our values, institution, customers and partners. We commit to each other. Above all, we commit to doing the best we can and being the best we are.

•

We stay humble.    We have traveled a long way from our humble beginning and yet, we never lose our humility in our continual quest for greater heights.

•

Shopee is the largest e-commerce platform in Southeast Asia and Taiwan. It also has a significant presence in Latin America. Since its inception, Shopee has adopted a mobile-first approach and is a highly scalable marketplace platform that connects buyers and sellers. Shopee provides users with a convenient, safe and trusted shopping environment that is supported by integrated payment, logistics, fulfillment, and other value-added services. Our users enjoy the social nature of Shopee’s platform, where users can follow, rate and easily browse for discovery to enhance their retail experience. We also empower sellers with various tools and support and other value-added services for them to better engage with their buyers. We monetize Shopee mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics. We also purchase products from manufacturers and third parties and sell them directly to buyers on our Shopee platform.

•

SeaMoney is a leading digital financial services provider in Southeast Asia with a growing presence in Brazil. SeaMoney currently offers consumer and SME credit, mobile wallet, banking and insurtech services.

•

Garena is a global game developer and publisher. Garena provides users with access to popular and engaging mobile and PC online games that we develop, curate, license and localize for each market. We also promote esports in our markets to strengthen our game ecosystem and increase user engagement.

•

Seller Verification.    Sellers on the Shopee platform are subject to verification process and must agree to our standard terms of service before opening a seller account.

•

Listing Screening.    Shopee has adopted a set of policies and procedures to prevent and remove listings of inappropriate or illegal goods and to screen out repeat offenders. All listings on the Shopee platform first undergo automated screenings against a list of illegal product names, categories and descriptions. We have developed this list based on local regulations and it is frequently updated by our local teams to reflect the latest regulatory requirements. Listings posted by sellers which are deemed to be of high risk based on our screening will not be visible on our platform until they are manually cleared by our operations and compliance teams. Listings that are not cleared due to regulatory violations or other violations of our terms of use will be permanently removed, and the seller will not be able to edit or re-submit the same product listing. We may suspend or remove accounts that repeatedly submit illegal or inappropriate listings. Moreover, users and other third parties may report listings that they believe to be illegal, inappropriate or offensive for our further review.

•

Shopee Guarantee.    We provide “Shopee Guarantee,” a free service to facilitate transactions on the Shopee platform. Under Shopee Guarantee, we hold payments made by buyers in certain designated Shopee Guarantee account held by us until the ordered products are received or deemed to have been received by the buyer. After this, we release the payment to the seller. If the purchased products are never delivered to or received by the buyer, we will return the funds to them. Shopee Guarantee is available for all transactions executed through the Shopee platform. We believe that Shopee Guarantee reduces settlement risks and improves transaction efficiency and security.

•

Dispute Resolution.    We have on-the-ground teams to help resolve disputes between buyers and sellers. In the case of a dispute, a buyer may submit supporting evidence through our dispute resolution system and seek compensation from the seller.

		For the Three Months Ended
		March 31, 2023				June 30, 2023				September 30, 2023				December 31, 2023
Bookings  (US$ in billions)(1)			0.5				0.4				0.4				0.5
Game QAUs (in millions)			491.6				544.5				544.1				528.7
Game QPUs (in millions)			37.6				43.1				40.5				39.7

(1)

GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue. This operating metric is used as an approximation of cash spent by our users in the applicable period that is attributable to our digital entertainment segment.

•

imposing fines between NT$120,000 (US$3,919) to NT$25,000,000 (US$816,460) and further fines if the non-compliance is not rectified as ordered;

•

ordering the violator to reduce any direct or indirect ownership or control by PRC investors;

•

requesting the violator to divest some or all of its investment or control in its invested entities in Taiwan;

•

suspending the rights of shareholders; and

•

discontinuing the operations and revoking the business licenses of its invested entities in Taiwan.

(i)

a natural person who is not a citizen of Thailand;

(ii)

a juristic person not established in Thailand;

(iii)

a juristic person established in Thailand with half or more of the shares constituting its capital held by (i) or (ii) or half or more of the total capital of such juristic person invested by (i) or (ii); and

(iv)

a juristic person established in Thailand with half or more of the shares constituting its capital held by (i), (ii) or (iii), or half or more of the total capital of such juristic person invested by (i), (ii) or (iii).

•

Garena Online Private Limited, our wholly-owned subsidiary established in Singapore operating our digital entertainment business;

•

Shopee Limited, our wholly-owned subsidiary established in the Cayman Islands holding certain of our e-commerce subsidiaries;

•

Shopee Singapore Private Limited, our wholly-owned subsidiary established in Singapore operating our e-commerce business in Singapore;

•

PT Shopee International Indonesia, our wholly-owned subsidiary established in Indonesia operating our e-commerce business in Indonesia;

•

Sea Services Limited, our wholly-owned subsidiary established in the Cayman Islands which is an investment holding company for certain of our subsidiaries used mainly for holding treasury investments such as available-for-sale sovereign bonds and corporate bonds; and

•

Sea Services Holdings Limited, our wholly-owned subsidiary established in the Cayman Islands which is an investment holding company primarily holding treasury investments such as available-for-sale sovereign bonds and corporate bonds.

•

exercise effective control over our VIEs, including the ability to direct the VIE shareholders to vote at our direction and have the ability to replace each of them as a VIE shareholder;

•

receive substantially all of the economic benefits and absorb losses of our VIEs; and

•

have an exclusive call option to purchase all or part of the equity interests in and/or assets of our VIEs when and to the extent permitted by the relevant laws.

ITEM 4A.

UNRESOLVED STAFF COMMENTS

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

•

In our e-commerce business, we closely monitor the number of transactions per active buyer. We optimize the assortment of our product categories on our marketplace and build convenient tools to attract sellers. We monetize our e-commerce business mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics. We may consider other monetization methods in order to capture additional revenue streams. We also purchase products from manufacturers and third parties and sell them directly to buyers on our Shopee platform.

•

In our digital financial services business, we mainly monetize by earning interest and fees from our credit and banking businesses, charging fees from our mobile wallet services and by earning premium or commission from our insurance business.

•

In our digital entertainment business, our primary source of revenue is the sale of in-game items. We focus on developing and curating the best content and localizing that content to cater to the tastes and preferences of each of our unique markets. We maximize the in-game user experience to keep our users highly engaged and increase the likelihood of in-game spending so as to maximize revenue. To do so, we provide a high-quality entertainment experience, adopt effective pricing strategies for each market and game, and leverage our platform’s cross-selling tools to support long-term user engagement with our games.

		For the Year Ended December 31,
		2021								2022								2023
		US$				Percentage of Total Revenue				US$				Percentage of Total Revenue				US$				Percentage of Total Revenue
		(thousands, except for percentages)
Service revenue
E-commerce			4,071,856				40.9				6,187,620				49.7				7,885,185				60.3
Digital Financial Services			469,747				4.7				1,221,996				9.8				1,759,422				13.5
Digital Entertainment			4,320,013				43.4				3,877,163				31.1