Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information-D. Risk Factors" and elsewhere in this annual report.

A.	Operating Results

Overview

Sea operates three key businesses-Shopee, SeaMoney and Garena. Each of our businesses provides a distinct and compelling value proposition to our users, and we believe each exhibits strong virtuous cycle dynamics. We develop, curate and localize the content and services on our platforms to serve a highly diverse population across multiple markets and regulatory regimes.

Since our founding, we have achieved significant scale and growth. Our total revenue increased from US$12.4 billion in 2022 to US$16.8 billion in 2024, a CAGR of 16.2%. We had gross profit of US$5.2 billion, US$5.8 billion and US$7.2 billion in 2022, 2023 and 2024, respectively. We incurred net loss of US$1.7 billion, net income of US$162.7 million and US$447.8 million in 2022, 2023 and 2024, respectively.

Major Factors Affecting Our Results of Operations

Our results of operations and financial condition are affected by general factors driving the e-commerce,digital financial services, digital entertainment and other industries in our markets, including demographic and macro-economic growth, technology adoption trends, and the digital transformation of industries.

Our results of operations are also directly affected by certain factors specific to us, including the following:

Size of Our User Base

Our revenue is largely driven by the number of users and the level of user engagement across our three businesses, subject to other factors such as macro-economics, geopolitics and consumer spending power. In our e-commercebusiness, the larger the number of sellers and buyers on the platform, the larger the number and value of transactions which over time will drive advertising and transaction-based fee revenue for us. In our digital financial services business, the larger the number of users, the greater the potential to generate revenue. In our digital entertainment business, due to our freemium business model, the higher the number of active users in our games, the larger the number of users likely to make in-gamepurchases.

User Engagement and Monetization

As our level of user engagement increases, the potential for user spending and consequently our revenue also increases. A critical component of maximizing the monetization potential of each of our businesses is providing high-quality content and services and pricing our content and services correctly. Monetization is also dependent upon our ability to convert active users into paying users, and then increase revenue per paying user. For example:

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In our e-commercebusiness, 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-commercebusiness 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.

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

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In our digital entertainment business, our primary source of revenue is the sale of in-gameitems. 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-gameuser experience to keep our users highly engaged and increase the likelihood of in-gamespending 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.

Benefits of Our Platforms

Our platforms benefit from internal dynamics that allow us to increase our scale and user engagement quickly and in a cost-effective manner. Our businesses enjoy network effects, virtuous cycles and synergies across our platforms.

We benefit from the network effects resulting from the significant social aspects of our platforms. For example, because game players find it highly beneficial to join a platform with a large number of other game players, each new player that joins creates value for the existing community. This encourages current users to invite new users to our platforms, which allows us to grow our user base with moderate acquisition cost and increases the likelihood that users will remain active and engaged and therefore spend on our platforms.

Each of our three businesses is a multi-sided platform which benefits from virtuous cycle dynamics. Thus, as our platforms grow, they become more valuable to each of our users and this increases their potential spending opportunities. For example, as the number of buyers on our Shopee platform increases, Shopee attracts an increasing number of sellers, resulting in increases in the volume and variety of products available on the platform, which increases the purchasing opportunities for each of those buyers. In addition, other platform services and support services such as payment and logistics services benefit and improve the user experience for both buyers and sellers. This results in greater monetization potential as the size of each platform grows.

Finally, synergies among our digital financial services business and each of our e-commerceand digital entertainment businesses allow us to increase our user base and use cases, and benefit our monetization and cost efficiencies. At the same time, the large user base on Shopee may also increasingly explore other services and product offerings available on our digital financial services platform, such as our credit, banking and insurtech services.

Optimization of Our Cost and Expense Structure

Our cost and expense structure has several broad components: sales and marketing expenses, consisting primarily of customer acquisition and retention expenses for all our business segments; costs of logistics, including expenses for warehousing, for our e-commercebusiness; funding costs as well as credit and default costs, for our consumer and SME credit business; payment channel costs, royalties, amortized license fees and hosting costs for our digital entertainment business; staff compensation and welfare costs and expenses, which are spread among different functions; research and development expenses; and other costs and expenses across our businesses that are mainly fixed in nature. By offering our own mobile wallet and payment processing services, we strive to effectively reduce our payment channel costs and capture value that may otherwise go to third-party payment service providers. Our scale in our digital entertainment business has enabled us to optimize our variable costs, as has our operating scale for e-commerceand digital financial services.

Foreign Exchange Rates

Our reporting currency is the U.S. dollar and changes in currency exchange rates may materially affect our reported results and consolidated trends. We earn revenue denominated in local currencies of our markets in Southeast Asia, Taiwan and Brazil, among other currencies, while some of our costs and expenses are paid in other foreign currencies. We do not rely on any single currency as we earn revenue in different local currencies across our markets and keep a significant cash position in U.S. dollars.

Our expenses may become higher and our revenue and operating metrics may become lower than would be the case if exchange rates were stable or if we were operating and reporting in one currency. For example, if the U.S. dollar weakens relative to currencies in our local markets, our revenue and operating expenses will be higher than if currencies had remained constant. Likewise, if the U.S. dollar strengthens relative to currencies in our local markets, our revenue and operating expenses will be lower than if currencies had remained constant. Movements in foreign currency exchange rates may have a material adverse effect on our results of operations, which may cause our financial and operational metrics reported in the U.S. dollar to be not fully representative of the underlying business performance. We believe that our diversification in geographic coverage benefits our shareholders over the long-term. We may also enter into foreign currency derivative transactions to hedge potential foreign exchange risks. See "Item 3. Key Information-D. Risk Factors-Business and Operational Related Risks-Risks Applicable Across Multiple Businesses-Fluctuations in foreign currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars."

Description of Certain Statement of Operations Items

Revenue

We currently generate revenue primarily from our e-commercebusiness, digital financial services business and digital entertainment business. The table below sets forth our revenue breakdown.

		For the Year Ended December 31,
		2022								2023								2024
		US$				Percentage of Total Revenue				US$				Percentage of Total Revenue				US$				Percentage of Total Revenue
		(thousands, except for percentages)
Service revenue
E-commerce			6,187,620				49.7				7,885,185				60.3				10,862,263				64.6
Digital Financial Services			1,221,996				9.8				1,759,422				13.5				2,367,739				14.1
Digital Entertainment			3,877,163				31.1				2,172,009				16.6				1,910,589				11.3
Other Services(1)			53,557				0.5				125,769				1.0				120,672				0.7
Sales of goods(2)			1,109,369				8.9				1,121,175				8.6				1,558,603				9.3
Total revenue			12,449,705				100.0				13,063,560				100.0				16,819,866				100.0

(1)	Other services are a combination of multiple business activities that do not meet the quantitative threshold to qualify as reportable segments.

(2)	Sales of goods revenue mainly comes from our e-commercebusiness.

The table below sets forth the revenue from external customers based on the geographical locations where the services were provided or goods were sold, both in absolute amount and as a percentage of total revenue for the periods indicated.

		For the Year Ended December 31,
		2022								2023								2024
		US$				Percentage of Total Revenue				US$				Percentage of Total Revenue				US$				Percentage of Total Revenue
		(thousands, except for percentages)
Southeast Asia			8,321,249				66.8				9,179,527				70.3				11,774,003				70.0
Latin America			2,043,918				16.4				2,193,758				16.8				3,276,281				19.5
Rest of Asia			1,727,187				13.9				1,496,433				11.4				1,591,487				9.4
Rest of the world			357,351				2.9				193,842				1.5				178,095				1.1
Total revenue			12,449,705				100.0				13,063,560				100.0				16,819,866				100.0

E-commerce

E-commerceservice revenue consists of revenue generated from our e-commercemarketplace services and logistics services. Revenue from products owned and sold by us on our Shopee platform was recorded under sales of goods revenue as discussed below. Our e-commerceservice revenue constituted 49.7%, 60.3% and 64.6% of our total revenue during 2022, 2023 and 2024, respectively.

We monetize Shopee's marketplace model mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics.

Digital Financial Services

We generate revenue from our digital financial services business primarily from earning interest and fees from our credit and banking businesses, earning fees from our mobile wallet services and our insurance business. For loans receivable, interest and fees earned are recognized over the period of the loan based on the effective interest method. Our digital financial services revenue constituted 9.8%, 13.5% and 14.1% of our total revenue during 2022, 2023 and 2024, respectively.

Digital Entertainment

We generate revenue from our digital entertainment business primarily by selling in-gameitems to our game players. We recognize revenue ratably over the estimated service period. Our revenue generated from digital entertainment accounted for 31.1%, 16.6% and 11.3% of our total revenue in 2022, 2023 and 2024, respectively.

The primary driver for revenue in our digital entertainment business is the size of our active user base and the level of user engagement. Due to the freemium business model of our immersive games, the higher the number of active users on our games, the greater the likelihood of such users to make in-gamepurchases. Therefore, we believe Game QAU is a key metric to help us understand both the active user base and user engagement on our games.

Sales of Goods

Sales of goods revenue mainly comes from our e-commercebusiness. While we primarily operate as a marketplace, we also purchase products from manufacturers or third parties directly and sell on our Shopee platform under our official store to meet buyers' demand for such products. Bulk purchasing and direct product sales for specific product categories also enable us to offer better product assortment and more competitive prices to our buyers.

Cost of Revenue

Our cost of revenue primarily consists of direct expenses in generating revenue from our businesses. The table below sets forth our cost of revenue breakdown.

		For the Year Ended December 31,
		2022								2023								2024
		US$				Percentage of Total Revenue				US$				Percentage of Total Revenue				US$				Percentage of Total Revenue
		(thousands, except for percentages)
Cost of service
E-commerce			4,885,586				39.3				5,171,361				39.6				7,165,351				42.6
Digital Financial Services			254,138				2.0				279,745				2.1				348,424				2.1
Digital Entertainment			1,077,017				8.7				672,481				5.1				610,586				3.7
Other Services(1)			54,341				0.4				78,937				0.6				40,026				0.2
Cost of goods sold			993,346				8.0				1,027,389				7.9				1,450,391				8.6
Total cost of revenue			7,264,428				58.4				7,229,913				55.3				9,614,778				57.2

(1)	Other services are a combination of multiple business activities that do not meet the quantitative threshold to qualify as reportable segments.

E-commerce

Our cost of revenue for e-commerceservices primarily consists of expenses associated with our logistics and other value-added services, bank transaction fees for transactions conducted through our Shopee platform, server and hosting costs, and staff compensation and welfare costs, which include share-based compensation.

Digital Financial Services

Our cost of revenue for digital financial services primarily consists of server and hosting costs, interest expenses for customer deposits under our banking business, interest expenses related to our credit business, bank transaction fees, amortization costs for internally developed software, commissions we pay to counter operators, and staff compensation and welfare costs, which include share-based compensation.

Digital Entertainment

Our cost of revenue for digital entertainment primarily consists of payment channel costs, recognized as expenses over the performance obligation period, royalties, and other fees relating to our use of various third-party intellectual properties. Other costs include server and hosting costs, upfront licensing fees, which are fixed and amortized over the shorter of estimated useful life or game licensing period, and staff compensation and welfare costs, which include the share-based compensation.

Sales of Goods

Our cost of revenue for sales of goods is mainly attributable to the goods we purchase from manufacturers and third parties and sell directly to buyers on our Shopee platform.

Gross Profit

Our gross profit is defined as total revenue minus total cost of revenue.

Gross Margin

Our gross margin is defined as total gross profit, as a percentage of total revenue. The basis for gross margin for each of our business segments and the reason for the variations in the gross margins are mainly due to the different nature of our businesses. For example, gross margins in our digital entertainment segment are relatively high mainly because of the digital nature of the production and sale of the virtual items in our games. By comparison, e-commerceinvolves more significant physical operations, including logistics which includes costs associated with the storage and delivery of the goods sold by sellers on Shopee. As such, our e-commercehas lower gross margins compared to our digital entertainment business.

Operating Income and Expenses

Our operating expenses consist of sales and marketing expenses, general and administrative expenses, provision for credit losses, research and development expenses and impairment of goodwill, net of other operating income. The table below sets forth our operating expenses, both in absolute amount and as a percentage of total revenue, for the periods indicated.

		For the Year Ended December 31,
		2022								2023								2024
		US$				Percentage of Total Revenue				US$				Percentage of Total Revenue				US$				Percentage of Total Revenue
		(thousands, except for percentages)
Other operating income			(279,184	)			(2.2	)			(221,021	)			(1.7	)			(180,443	)			(1.1	)
Sales and marketing expenses			3,269,223				26.3				2,779,223				21.3				3,472,686				20.6
General and administrative expenses			1,437,612				11.5				1,134,724				8.7				1,267,706				7.6
Provision for credit losses			513,690				4.1				633,942				4.8				776,937				4.6
Research and development expenses			1,376,501				11.0				1,164,126				8.9				1,206,050				7.2
Impairment of goodwill			354,943				2.9				117,875				0.9				-				-
Total operating expenses			6,672,785				53.6				5,608,869				42.9				6,542,936				38.9

Other Operating Income

Our other operating income consists primarily of rebates from e-commercerelated logistic services provided by third parties.

Sales and Marketing Expenses

Our sales and marketing expenses consist primarily of online and offline advertising expenses, sales incentives, and staff compensation and welfare expenses, which include share-based compensation for our employees engaged in sales and marketing functions. Our excess sales incentive, representing the sales incentive given exceeding the revenue we expect to receive on a transaction-by-transactionbasis, was less than 10% of total revenue in 2024.

General and Administrative Expenses

Our general and administrative expenses consist primarily of facilities and other overhead expenses, depreciation and amortization expenses, impairment losses, external professional service expenses, and staff compensation and welfare expenses, which include share-based compensation for our employees engaged in general and administrative functions.

Provision for Credit Losses

Our provision for credit losses relates primarily to our credit business. Our provision for credit losses could increase with the growth of our lending activity and loans receivable or if the credit environment worsens. Changes in our lending activity, including regional mix and tenure variation, during the year may impact our annual credit loss provisioning expense during the year.

Research and Development Expenses

Our research and development expenses consist primarily of staff compensation and welfare expenses, which include share-based compensation for our employees engaged in product development functions. We believe developing our platforms and content is extremely important to achieving our strategic objectives.

Impairment of Goodwill

We test goodwill for impairment at least annually and evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Goodwill impairment is recognized as the excess of goodwill allocated to the reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

Results of Operations

The table below sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of our total revenue. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

		For the Year Ended December 31,
		2022								2023								2024
		US$				Percentage of Total Revenue				US$				Percentage of Total Revenue				US$				Percentage of Total Revenue
		(thousands, except for percentages)
Selected Consolidated Statements of Operations Data:
Revenue:
Service revenue			11,340,336				91.1				11,942,385				91.4				15,261,263				90.7
Sales of goods			1,109,369				8.9				1,121,175				8.6				1,558,603				9.3
Total revenue			12,449,705				100.0				13,063,560				100.0				16,819,866				100.0
Cost of revenue:
Cost of service			(6,271,082	)			(50.4	)			(6,202,524	)			(47.4	)			(8,164,387	)			(48.6	)
Cost of goods sold			(993,346	)			(8.0	)			(1,027,389	)			(7.9	)			(1,450,391	)			(8.6	)
Total cost of revenue			(7,264,428	)			(58.4	)			(7,229,913	)			(55.3	)			(9,614,778	)			(57.2	)
Gross profit			5,185,277				41.6				5,833,647				44.7				7,205,088				42.8
Operating income (expenses):
Other operating income			279,184				2.2				221,021				1.7				180,443				1.1
Sales and marketing expenses			(3,269,223	)			(26.3	)			(2,779,223	)			(21.3	)			(3,472,686	)			(20.6	)
General and administrative expenses			(1,437,612	)			(11.5	)			(1,134,724	)			(8.7	)			(1,267,706	)			(7.6	)
Provision for credit losses			(513,690	)			(4.1	)			(633,942	)			(4.8	)			(776,937	)			(4.6	)
Research and development expenses			(1,376,501	)			(11.0	)			(1,164,126	)			(8.9	)			(1,206,050	)			(7.2	)
Impairment of goodwill			(354,943	)			(2.9	)			(117,875	)			(0.9	)			-				-
Total operating expenses			(6,672,785	)			(53.6	)			(5,608,869	)			(42.9	)			(6,542,936	)			(38.9	)
Operating (loss) income			(1,487,508	)			(11.9	)			224,778				1.7				662,152				3.9
Interest income			115,515				0.9				331,310				2.6				365,817				2.2
Interest expense			(45,396	)			(0.4	)			(41,075	)			(0.3	)			(38,341	)			(0.2	)
Net investment loss			(207,331	)			(1.7	)			(125,656	)			(1.0	)			(250,220	)			(1.5	)
Net gain on debt extinguishment			199,697				1.6				38,550				0.3				42,621				0.2
Foreign exchange (loss) gain			(75,510	)			(0.6	)			4,487				0.0				(3,246	)			(0.0	)
(Loss) Income before income tax and share of results of equity investees			(1,500,533	)			(12.1	)			432,394				3.3				778,783				4.6
Income tax expense			(168,395	)			(1.4	)			(262,680	)			(2.0	)			(321,168	)			(1.9	)
Share of results of equity investees			11,156				0.1				(7,032	)			(0.1	)			(9,788	)			(0.1	)
Net (loss) income			(1,657,772	)			(13.3	)			162,682				1.2				447,827				2.7

		For the Year Ended December 31,
		2022				2023				2024
		(US$ thousands)
Gross profit/(loss):
Services
E-commerce			1,302,034				2,713,824				3,696,912
Digital Financial Services			967,858				1,479,677				2,019,315
Digital Entertainment			2,800,146				1,499,528				1,300,003
Other Services			(784	)			46,832				80,646
Sales of goods			116,023				93,786				108,212
Total gross profit			5,185,277				5,833,647				7,205,088

		For the Year Ended December 31,
		2022				2023				2024
		(Percentage)
Gross margin:
Services
E-commerce			21.0				34.4				34.0
Digital Financial Services			79.2				84.1				85.3
Digital Entertainment			72.2				69.0				68.0
Other Services			(1.5	)			37.2				66.8
Sales of goods			10.5				8.4				6.9
Total gross margin			41.6				44.7				42.8

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Revenue

Our total revenue increased by 28.8% from US$13.1 billion in 2023 to US$16.8 billion in 2024.

•

E-commerce:Our e-commerceservice revenue increased by 37.8% from US$7.9 billion in 2023 to US$10.9 billion in 2024. This is mainly due to the growth of GMV, as GMV grew 28.0% from US$78.5 billion in 2023 to US$100.5 billion in 2024. Average order value on Shopee decreased slightly to approximately US$9 in 2024, as compared to approximately US$10 in 2023, while our orders volume grew 33.0% from 8.2 billion in 2023 to 10.9 billion in 2024.

•

Digital Financial Services:Our digital financial services revenue increased by 34.6% from US$1.8 billion in 2023 to US$2.4 billion in 2024. This is mainly due to growth of our credit business as our lending activities increased and our loans receivable grew from US$2.5 billion as at December 31, 2023 to US$4.2 billion as at December 31, 2024.

•

Digital Entertainment:Our digital entertainment revenue decreased by 12.0% from US$2.2 billion in 2023 to US$1.9 billion in 2024. The decrease was primarily driven by higher bookings in 2022 compared to 2023, which resulted in more revenue being deferred and subsequently recognized in 2023. On the other hand, bookings for 2024 is higher than 2023, as average Game QAUs increased by 18.0% from 527.2 million in 2023 to 622.3 million in 2024, while average Game QPUs increased by 25.5% from 40.2 million in 2023 to 50.5 million in 2024.

•

Sales of goods: Revenue increased by 39.0% from US$1.1 billion in 2023 to US$1.6 billion in 2024, primarily due to the increase in our product offerings.

Cost of Revenue

Our total cost of revenue increased by 33.0% from US$7.2 billion in 2023 to US$9.6 billion in 2024.

•

E-commerce:Cost of revenue increased by 38.6% from US$5.2 billion in 2023 to US$7.2 billion in 2024. The increase was primarily driven by the increase in logistics costs as orders volume grew 33.0% from 8.2 billion in 2023 to 10.9 billion in 2024.

•

Digital Financial Services:Cost of revenue increased by 24.6% from US$279.7 million in 2023 to US$348.4 million in 2024, primarily driven by interest expenses due to the growth in customer deposits under our banking business, and server and hosting expenses.

•

Digital Entertainment: Cost of revenue dropped by 9.2% from US$672.5 million in 2023 to US$610.6 million in 2024, primarily from payment channel costs, which was largely in line with the decrease in digital entertainment revenue.

•

Cost of goods sold: Cost of goods sold increased by 41.2% from US$1.0 billion in 2023 to US$1.5 billion in 2024. The increase was largely in line with the increase in our revenue from sales of goods.

Gross Profit

As a result of the foregoing, our gross profit grew 23.5% from US$5.8 billion in 2023 to US$7.2 billion in 2024. Our gross margin was 44.7% in 2023, as compared to 42.8% in 2024, primarily due to a shift in gross profit mix. The contribution from our higher-margin digital entertainment business decreased, while our lower-margin e-commercebusiness made up a larger share of our gross profit.

Other Operating Income

Our other operating income decreased by 18.4% from US$221.0 million in 2023 to US$180.4 million in 2024 primarily due to lower rebates from e-commercerelated logistics services providers.

Sales and Marketing Expenses

Our sales and marketing expenses increased by 25.0% from US$2.8 billion in 2023 to US$3.5 billion in 2024. The increase in sales and marketing expenses in 2024 was mainly from our e-commerceand digital financial services businesses. The increase in marketing expenses for our e-commercebusiness was primarily driven by online marketing efforts and higher marketing incentives, as we continue to grow the e-commercebusiness across our markets. The increase in marketing expenses for our digital financial services business was primarily driven by investments in user acquisition and user retention.

General and Administrative Expenses

Our general and administrative expenses increased by 11.7% from US$1.1 billion in 2023 to US$1.3 billion in 2024. The increase was primarily due to an increase in staff compensation and welfare expenses from higher staff headcount, as well as one-timeexpenses related to the settlement of two securities class actions in 2024.

Provision for Credit Losses

Our provision for credit losses increased by 22.6% from US$633.9 million in 2023 to US$776.9 million in 2024, primarily driven by an increase in lending activity during the year, in line with the growth in our loan book as our loans receivable increased by 67.4%, from US$2.5 billion as at December 31, 2023 to US$4.2 billion as at December 31, 2024.

Research and Development Expenses

Our research and development expenses were relatively stable at US$1.2 billion for 2023 and 2024.

Impairment of Goodwill

We recorded nil impairment of goodwill in 2024, compared to US$117.9 million in 2023. The goodwill impairment in 2023 was primarily due to the change in carrying amount of goodwill associated with our prior acquisition.

Other Income, Expenses, Gains and Losses

Our interest income, interest expense, net investment loss, net gain on debt extinguishment, and foreign exchange (loss) gain was a net income of US$207.6 million in 2023 compared to US$116.6 million in 2024. The lower non-operatingincome was mainly due to higher investment losses recognized in 2024, partially offset by higher interest income.

Income before Income Tax and Share of Results of Equity Investees

As a result of the foregoing, we had income before income tax and share of results of equity investees of US$432.4 million in 2023 and US$778.8 million in 2024.

Income Tax Expense

We had an income tax expense of US$262.7 million in 2023 and US$321.2 million in 2024. The higher income tax expense was primarily due to higher income tax expenses incurred by our e-commerceand digital financial services businesses.

Share of Results of Equity Investees

We had share of loss of equity investees of US$7.0 million in 2023 and US$9.8 million in 2024.

Net Income

As a result of the foregoing, we had net income of US$162.7 million in 2023 compared to US$447.8 million in 2024.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenue

Our total revenue increased by 4.9% from US$12.4 billion in 2022 to US$13.1 billion in 2023.

•

E-commerce:Our e-commerceservice revenue increased by 27.4% from US$6.2 billion in 2022 to US$7.9 billion in 2023. This is mainly due to improved monetization, as e-commerceservice revenue over GMV improved from 8.4% in 2022 to 10.0% in 2023, as set forth in the table below. Average order value on Shopee remained stable year-on-year,at approximately US$10.

		For the Year Ended December 31,
		2022		2023
		(US$ billions, except for percentages)
E-commerceservice revenue		6.2		7.9
GMV		73.5		78.5
E-commerceservice revenue / GMV		8.4%		10.0%

•

Digital Financial Services:Our digital financial services revenue increased by 44.0% from US$1.2 billion in 2022 to US$1.8 billion in 2023. This is mainly due to growth of our credit business as our lending activities increased and our loans receivable grew from US$2.1 billion as at December 31, 2022 to US$2.5 billion as at December 31, 2023.

•

Digital Entertainment:Our digital entertainment revenue decreased by 44.0% from US$3.9 billion in 2022 to US$2.2 billion in 2023. This decrease was primarily attributable to the moderation in active and paying user base. Average Game QAUs decreased by 7.9% from 572.2 million in 2022 to 527.2 million in 2023, while average Game QPUs decreased by 24.3% from 53.1 million in 2022 to 40.2 million in 2023.

•

Sales of goods: Revenue was relatively stable at US$1.1 billion for 2022 and 2023.

Cost of Revenue

Our total cost of revenue remained relatively stable at US$7.2 billion in 2023 as increases in cost of revenue for our e-commerceand digital financial services businesses were offset by decrease in cost of revenue for our digital entertainment business.

•

E-commerce:Cost of revenue increased by 5.8% from US$4.9 billion in 2022 to US$5.2 billion in 2023. The increase was primarily driven by the increase in logistics costs as orders volume grew 8.8% from 7.6 billion in 2022 to 8.2 billion in 2023.

•

Digital Financial Services:Cost of revenue increased by 10.1% from US$254.1 million in 2022 to US$279.7 million in 2023, primarily driven by interest expenses in line with the growth of our loan book and increases in customer deposits under our banking business, amortization costs of internally developed software, and server and hosting expenses.

•

Digital Entertainment: Cost of revenue dropped by 37.6% from US$1.1 billion in 2022 to US$672.5 million in 2023, primarily from payment channel costs, which was largely in line with the decrease in digital entertainment revenue.

•

Cost of goods sold: Cost of goods sold was relatively stable at US$1.0 billion for 2022 and 2023.

Gross Profit

As a result of the foregoing, our gross profit grew 12.5% from US$5.2 billion in 2022 to US$5.8 billion in 2023. Our gross margins improved from 41.6% in 2022 to 44.7% in 2023.

Other Operating Income

Our other operating income decreased by 20.8% from US$279.2 million in 2022 to US$221.0 million in 2023 primarily due to lower rebates from e-commercerelated logistics services providers.

Sales and Marketing Expenses

Our sales and marketing expenses decreased by 15.0% from US$3.3 billion in 2022 to US$2.8 billion in 2023 due to our efforts to optimize operating costs and achieve higher cost efficiencies in our digital financial services and digital entertainment businesses.

General and Administrative Expenses

Our general and administrative expenses decreased by 21.1% from US$1.4 billion in 2022 to US$1.1 billion in 2023. The decrease was primarily due to a decrease in staff compensation and welfare expenses from lower staff headcount, as well as lower cost of office facilities and related expenses driven by cost saving initiatives in our business operations. In addition, in 2022, we incurred certain one-timeimpairment costs due to exits from non-coremarkets and certain divestments.

Provision for Credit Losses

Our provision for credit losses increased by 23.4% from US$513.7 million in 2022 to US$633.9 million in 2023, primarily driven by an increase in lending activity during the year, in line with the growth in our loan book as our loans receivable increased by 21.3%, growing from US$2.1 billion as at December 31, 2022 to US$2.5 billion as at December 31, 2023. As our loan cycle was generally less than one year in the past two years, an increase in our lending activity during the year therefore tended to increase our annual credit loss provisioning expense during the year at a higher rate than our outstanding gross loans receivable balance at year-end.

Research and Development Expenses

Our research and development expenses decreased by 15.4% from US$1.4 billion in 2022 to US$1.2 billion in 2023. The decrease was primarily due to the decrease in staff compensation and welfare expenses from lower headcount driven by cost saving initiatives in our business operation.

Impairment of Goodwill

We recorded an impairment of goodwill of US$117.9 million in 2023, compared to US$354.9 million in 2022. The goodwill impairment in 2023 was primarily due to the change in carrying amount of goodwill associated with our prior acquisition.

Other Income, Expenses, Gains and Losses

Our interest income, interest expense, net investment loss, net (loss) gain on debt extinguishment, and foreign exchange gain (loss) was a net loss of US$13.0 million in 2022, compared to a net income of US$207.6 million in 2023. The improvement was mainly due to higher interest income, lower investment loss, and a net foreign exchange gain of US$4.5 million in 2023, as compared to net foreign exchange loss of US$75.5 million in 2022. The improvement was partially offset by lower gain on debt extinguishment of US$38.6 million recognized in 2023, as compared to gain on debt extinguishment of US$199.7 million recognized in 2022 as we repurchased our 2026 convertible notes in both periods.

Loss or Income before Income Tax and Share of Results of Equity Investees

As a result of the foregoing, we had loss before income tax and share of results of equity investees of US$1.5 billion in 2022, compared to income before income tax and share of results of equity investees of US$432.4 million in 2023.

Income Tax Expense

We had an income tax expense of US$168.4 million in 2022 and US$262.7 million in 2023. The higher income tax expense was primarily due to higher income tax credit recognized in 2022 as a result of recognition of deferred tax assets from carried forward losses for our e-commercebusiness, partially offset by lower income tax expense incurred by our digital entertainment business.

Share of Results of Equity Investees

We had share of profit of equity investees of US$11.2 million in 2022, compared to share of loss of equity investees of US$7.0 million in 2023.

Net Loss or Income

As a result of the foregoing, we had net loss of US$1.7 billion in 2022, compared to net income of US$162.7 million in 2023.

Segment Reporting

We have three reportable segments, namely, e-commerce,digital financial services and digital entertainment. The chief operating decision maker ("CODM"), comprising our senior management team, 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.

Information about segments during the years ended December 31, 2022, 2023 and 2024 presented were as follows:

		For the Year ended December 31, 2024
		E-commerce				Digital Financial Services				Digital Entertainment				Other Services(1)				Total
		(US$ thousands)
Revenue			12,415,231				2,367,739				1,910,589				126,307				16,819,866
Less(2)
Cost of revenue			(8,611,530	)			(348,424	)			(610,586	)			-
Sales and marketing expenses			(2,966,084	)			(298,386	)			(117,556	)			-
Provision for credit losses			-				(771,407	)			-				-
Other operating expenses(3)			(977,048	)			(292,020	)			(203,626	)			(170,210	)
Operating segment (loss) income			(139,431	)			657,502				978,821				(43,903	)			1,452,989
Unallocated expenses(4)																			(790,837	)
Operating income																			662,152
Non-operatingincome, net																			116,631
Income tax expense																			(321,168	)
Share of results of equity investees																			(9,788	)
Net income																			447,827

		For the Year ended December 31, 2023
		E-commerce				Digital Financial Services				Digital Entertainment				Other Services(1)				Total
		(US$ thousands)
Revenue			9,000,848				1,759,422				2,172,009				131,281				13,063,560
Less(2)
Cost of revenue			(6,194,900	)			(279,745	)			(672,481	)			-
Sales and marketing expenses			(2,510,693	)			(116,445	)			(104,721	)			-
Provision for credit losses			-				(630,300	)			-				-
Other operating expenses(3)			(845,725	)			(242,723	)			(216,936	)			(188,009	)
Operating segment (loss) income			(550,470	)			490,209				1,177,871				(56,728	)			1,060,882
Unallocated expenses(4)																			(836,104	)
Operating income																			224,778
Non-operatingincome, net																			207,616
Income tax expense																			(262,680	)
Share of results of equity investees																			(7,032	)
Net income																			162,682

		For the Year ended December 31, 2022
		E-commerce				Digital Financial Services				Digital Entertainment				Other Services(1)				Total
		(US$ thousands)
Revenue			7,288,677				1,221,996				3,877,163				61,869				12,449,705
Less(2)
Cost of revenue			(5,871,475	)			(254,058	)			(1,077,017	)			-
Sales and marketing expenses			(2,328,636	)			(508,089	)			(268,061	)			-
Provision for credit losses			-				(494,622	)			-				-
Other operating expenses(3)			(1,101,926	)			(242,491	)			(560,669	)			(314,031	)
Operating segment (loss) income			(2,013,360	)			(277,264	)			1,971,416				(252,162	)			(571,370	)
Unallocated expenses(4)																			(916,138	)
Operating loss																			(1,487,508	)
Non-operatingloss, net																			(13,025	)
Income tax expense																			(168,395	)
Share of results of equity investees																			11,156
Net loss																			(1,657,772	)

(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)	The significant expenses categories and amounts align with the segment-level information that is regularly provided to the CODM.

(3)

Other operating expenses for E-commerceand Digital Entertainment include general and administrative expenses, research and development expenses, provision for credit losses and other operating income. Other operating expenses for Digital Financial Services include general and administrative expenses, research and development expenses and other operating income.

(4)

Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, 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 CODM as part of segment performance.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands and our primary business operations are conducted through our subsidiaries, branch offices and consolidated affiliated entities. Under the current laws of the Cayman Islands, we are not subject to tax on income or capital gains.

Singapore

Our subsidiaries incorporated in Singapore are subject to the Singapore corporate tax of 17% in 2022, 2023 and 2024. Garena Online Private Limited was granted a five-year development and expansion incentive by the Singapore Economic Development Board, or the EDB, commencing from January 1, 2022, which grant a concessionary tax rate of 10.5% from January 1, 2022 to December 31, 2026 on qualifying income, subject to certain terms and conditions imposed by the EDB.

Others

Subsidiaries incorporated in other jurisdictions are subject to the respective applicable corporate income tax rates of those jurisdictions.

B. Liquidity and Capital Resources

Cash Flows and Working Capital

Our principal sources of liquidity have historically been cash generated from operating activities and financing activities including customer deposits under our banking business. The principal driver of our operating cash flows is cash received from sales of our services and products, including proceeds from our sales of in-gamevirtual items in our digital entertainment business, fees from paid advertising services, transaction-based fees, value-added services and proceeds from direct sales of goods in our e-commercebusiness, interest and fees received from our credit and banking businesses, fees from our mobile wallet services and from our insurance business, offset by operating expenses.

As of December 31, 2022, 2023 and 2024, we had US$7.6 billion, US$4.2 billion and US$4.1 billion, respectively, in cash, cash equivalents and restricted cash. Cash and cash equivalents consist of cash on hand, demand deposits and money market funds placed with banks and other financial institutions which are unrestricted as to withdrawal and use and have original maturities of three months or less. Restricted cash mainly comprise monies received that are held in escrow in connection with our e-commercebusiness and mobile wallet in connection with our digital financial services business. Our cash, cash equivalents and restricted cash are primarily denominated in U.S. dollars as well as in local currencies of the markets where we operate. We believe that our cash and cash equivalents, together with cash generated from operating and short-term investments, will be sufficient to meet our anticipated cash needs and obligations for the next 12 months. We may also access capital markets or credit facilities should we require additional working capital.

The following table sets forth a summary of our cash flows for the periods indicated:

		For the Year Ended December 31,
		2022				2023				2024
		(US$ thousands)
Net cash (used in) generated from operating activities			(1,055,692	)			2,079,688				3,277,420
Net cash used in investing activities			(2,428,809	)			(5,804,462	)			(5,040,846	)
Net cash generated from financing activities			400,256				366,011				1,684,493
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash			(143,511	)			(7,964	)			(83,139	)
Net decrease in cash, cash equivalents and restricted cash			(3,227,756	)			(3,366,727	)			(162,072	)
Cash, cash equivalents and restricted cash at beginning of year			10,838,140				7,610,384				4,243,657
Cash, cash equivalents and restricted cash at end of year(1)			7,610,384				4,243,657				4,081,585

(1)	As of December 31, 2022, cash and cash equivalents of US$13.2 million was included in assets held for sale within prepaid expenses and other assets.

Operating Activities

Net cash generated from operating activities amounted to US$3.3 billion in 2024 compared to net cash generated from operating activities of US$2.1 billion in 2023. The difference was mainly due to increase in net income of US$285.1 million and increase in change in deferred revenue of US$607.1 million.

The main drivers for the increase in net income are:

•

higher e-commerceand digital financial services gross profits in 2024 due to growth of GMV from our e-commercebusiness and growth of the credit business;

•

partially offset by higher sales and marketing expenses in 2024 primarily driven by online marketing efforts, user acquisition and retention, and higher marketing incentives as we continue to grow our businesses; and

•

higher general and administrative expenses in 2024 primarily due to an increase in staff cost from higher staff headcount, as well as one-timeexpenses related to the settlement of two securities class actions in 2024.

The increase in change in deferred revenue is due to stronger bookings in 2024 for our digital entertainment business. Bookings refer to GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue and are used as an approximation of cash spent by our users.

Net cash generated from operating activities amounted to US$2.1 billion in 2023 compared to net cash used in operating activities of US$1.1 billion in 2022. The difference was mainly due to increase in net income of US$1.8 billion, increase in change in deferred revenue of US$768.1 million and increase in change in accrued expenses and other payables of US$494.2 million in 2023 compared to 2022.

The main drivers for the increase in net income and increase in change in deferred revenue are:

•

higher e-commerceand digital financial services gross profits in 2023 due to improved monetization of our e-commercebusiness and growth of the credit business;

•

lower sales and marketing expenses in 2023 due to our efforts to optimize operating costs and achieve higher cost efficiencies in our digital financial services and digital entertainment businesses; and

•

lower general and administrative expenses in 2023 due to a decrease in staff compensation and welfare expenses from lower staff headcount, and lower cost of office facilities and related expenses driven by cost saving initiatives in our business operations and certain one-timeimpairment costs incurred in 2022 due to the exits from non-coremarkets and certain divestments;

•

partially offset by the decline in bookings in 2023 for our digital entertainment business due to the moderation in active and paying user base. Bookings refer to GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue and are used as an approximation of cash spent by our users.

The increase in change in accrued expenses and other payables is due to:

•

a general increase in 2023 in payables to our logistics providers in our e-commercebusiness in line with orders volume growth; and

•

a general increase in sales and marketing expenses payable by our e-commercebusiness in the second half of 2023, as compared to that of the second half in 2022, which is in line with the increase in investments in growing the e-commercebusiness in 2023 as opposed to the focus on cost saving initiatives in our business operations in 2022.

Investing Activities

Net cash used in investing activities amounted to US$5.0 billion in 2024. This was primarily attributable to purchase of investments of US$9.6 billion mainly consisting of time deposits and liquid investment products, an increase in loans receivable of our credit business of US$2.5 billion and purchase of property and equipment of US$318.1 million. These were partially offset by proceeds from maturity and disposal of investments of US$7.4 billion.

Net cash used in investing activities amounted to US$5.8 billion in 2023. This was primarily attributable to purchase of investments of US$8.3 billion mainly consisting of time deposits and liquid investment products, an increase in loans receivable of our credit business of US$1.0 billion and purchase of property and equipment of US$241.6 million. These were partially offset by proceeds from maturity and disposal of investments of US$3.5 billion.

Net cash used in investing activities amounted to US$2.4 billion in 2022. This was primarily attributable to purchase of investments of US$2.6 billion mainly consisting of time deposits and liquid investment products, an increase in loans receivable of our credit business of US$1.2 billion and purchase of property and equipment of US$924.2 million. These were partially offset by proceeds from maturity and disposal of investments of US$2.3 billion.

Financing Activities

Net cash generated from financing activities amounted to US$1.7 billion in 2024. This was primarily attributable to an increase in bank customer deposits of US$1.3 billion and settlement of capped call for the 2024 convertible notes of US$429.0 million.

Net cash generated from financing activities amounted to US$366.0 million in 2023. This was primarily attributable to an increase in bank customer deposits of US$389.3 million, as well as net proceeds from other funding sources related to the credit business of US$223.8 million, partially offset by the cash used in repurchase of convertible notes of US$204.6 million and repayment of bank borrowings of US$49.0 million.

Net cash generated from financing activities amounted to US$400.3 million in 2022, primarily attributable to an increase in bank customer deposits of US$942.6 million, partially offset by the repurchase of convertible notes of US$611.3 million.

Material Cash Requirements

Our material cash requirements as of December 31, 2024 and any subsequent interim period mainly include our convertible notes obligations, capital expenditures, other short-term working capital commitments, bank customer deposits, and other contractual cash obligations. We believe that our cash and cash equivalents, together with cash generated from operating and short-term investments, will be sufficient to meet our anticipated cash needs and obligations for the next 12 months.

Convertible Notes

Our convertible notes obligations, including scheduled interest, were approximately US$2.7 billion as of December 31, 2024, based on the contractual maturity assuming no conversion subsequent to December 31, 2024.

In November 2019, we completed an offering of 1.00% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2024 convertible notes. These 2024 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S.persons in compliance with Regulation S under the Securities Act. These 2024 convertible notes matured in December 2024. Prior to 2024, holders of an aggregate of US$998.0 million principal amount of our 2024 convertible notes elected to convert their notes. In 2024, holders of the remaining US$152.0 million principal amount of our 2024 convertibles notes elected to convert prior to the notes' maturity in December 2024.

In connection with the pricing of the 2024 convertible notes, we entered into capped call transactions with certain financial institutions. During the year ended December 31, 2024, we settled such capped call transactions of the 2024 convertible notes. The proceeds received were recorded as an increase in additional paid-incapital.

In May 2020, we completed an offering of 2.375% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2025 convertible notes. These 2025 convertible notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S.persons in compliance with Regulation S under the Securities Act. The notes will mature in December 2025. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business on the business day immediately preceding September 1, 2025; or (ii) anytime on or after September 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date. On or after May 19, 2023, we may redeem for cash all or any part of the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may also redeem for cash all but not part of the notes at any time if less than US$100 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 11.0549 ADSs per US$1,000 principal amount (equivalent to approximately US$90.46 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. As of March 31, 2025, holders of an aggregate of US$0.5 million principal amount of our 2025 convertible notes have elected to convert, and approximately US$1.15 billion principal amount of our 2025 convertible notes remained outstanding.

In connection with the pricing of the 2025 convertible notes, we have entered into capped call transactions with certain financial institutions. These capped call transactions are generally expected to reduce the potential dilution with respect to our ADSs and Class A ordinary shares upon conversion of the 2025 convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, upon any conversion of the notes, with such reduction of potential dilution or offset of cash payments, as the case may be, subject to a cap based on the cap price of the capped call transactions. The cap price of the capped call transactions will initially be US$136.54 per ADS, and is subject to certain adjustments under the terms of the capped call transactions.

In September 2021, we completed a registered offering of 0.25% convertible senior notes in an aggregate principal amount of US$2.875 billion, or the 2026 convertible notes. The notes will mature in September 2026. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions as defined in the indenture prior to the close of business on the business day immediately preceding June 15, 2026; or (ii) anytime on or after June 15, 2026 until the close of business on the second scheduled trading day immediately preceding the maturity date. On or after September 15, 2024, we may redeem for cash all or any part of the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. We may also redeem for cash all but not part of the notes at any time if less than US$250 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted or redeemed, we will repay the full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 2.0964 ADSs per US$1,000 principal amount (equivalent to approximately US$477.01 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting holders. During fiscal year 2024, we repurchased US$329.4 million aggregate of principal amount of our 2026 convertible notes. As of March 31, 2025, approximately US$1.33 billion aggregate of principal amount of our 2026 convertible notes remained outstanding.

For further information, refer to Note 13 - Convertible Notes in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."

Capital Expenditures

Our capital expenditures amounted to US$976.3 million, US$258.3 million and US$321.6 million in 2022, 2023 and 2024, respectively. Capital expenditure was incurred for purchases of property and equipment and software, and costs for developing software for internal use. We will continue to make capital expenditures to meet the needs of our business and expect that our cash and cash equivalents, together with cash generated from operating and short-term investments will meet our capital expenditure needs in the foreseeable future.

Deposits Payable

As of December 31, 2024, our consolidated balance sheets had deposits payable of US$2.7 billion, which are customer deposits from our banking business.

Other Contractual Cash Obligations

Our operating lease obligations, including imputed interest, were US$1.4 billion as of December 31, 2024, of which US$313.5 million is payable within the next 12 months. Our obligations for leases that have not yet commenced, including imputed interest, were US$501.5 million as of December 31, 2024, of which US$18.1 million is payable within the next 12 months. For further information on our leases, refer to Note 9 - Leases in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."

We have purchase commitments of US$116.4 million as of December 31, 2024, including US$50.7 million to purchase property and equipment and hosting services, US$4.0 million committed licensing fee payable for the licensing of game titles, and US$61.7 million commitment to invest in certain companies. The aggregate of our purchase commitments payable within the next 12 months is US$96.2 million. For further information, refer to Note 23 - Commitments and Contingencies in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."

We have commitments to pay a minimum guarantee of royalty fees to game developers for certain online games we licensed. As of December 31, 2024, the minimum guarantee commitment amounted to US$30.9 million for launched games as well as licensed but yet to be launched games, of which US$29.3 million is payable within the next 12 months. For further information, refer to Note 23 - Commitments and Contingencies in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."

Our banking business in Singapore, Indonesia and the Philippines have commitments to extend credit to our respective customers under committed facilities. As of December 31, 2024, bank customers can draw down on a total undrawn credit limit of US$0.2 million under such committed facilities.

Holding Company Structure

Sea Limited is a holding company that does not have substantive operations. We conduct our operations primarily through our subsidiaries, branch offices and our consolidated affiliated entities. As a result, our ability to pay dividends depends upon, among others, dividends paid by our subsidiaries. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

In addition, as determined in accordance with local regulations, our subsidiaries and VIEs in certain of our markets may be restricted from paying us dividends offshore or from transferring a portion of their assets to us, either in the form of dividends, loans or advances, unless certain requirements are met, and regulatory approvals are obtained.

See "Item 3. Key Information-D. Risk Factors-Markets Related Risks-The ability of our subsidiaries to distribute dividends to us may be subject to restrictions under the laws of their respective jurisdictions." Even though we currently do not require any such dividends, loans or advances from our entities for working capital and other funding purposes, we may in the future require additional cash resources from them due to changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to our shareholders.

Certain of the markets in which we have significant subsidiaries or principal operating entities, including Indonesia, Thailand and Taiwan, require those subsidiaries to establish and fund statutory reserves. Indonesian laws require a limited liability company to reserve a certain amount from its net profit each year as a reserve fund until such fund amounts to at least 20% of its issued and paid-upcapital. Thailand regulations require a private limited liability company to allocate at least 5% of its retained earnings into a legal reserve fund at the time the dividend is paid until and unless the legal reserve fund reaches 10% of the company's registered capital. The legal reserve is not available for dividend distribution. Taiwan laws require a limited liability company to set aside 10% of annual net income (less prior years' losses, if any, and applicable income taxes) as legal reserve until the accumulated legal reserve equals the paid-incapital of such company before such company can distribute any dividend.

C.	Research and Development, Patents and Licenses, etc.

Research and Development

Costs incurred in connection with the planning and post-implementation phases of the development of software for internal use are expensed. Costs incurred in the application development phase are capitalized when certain criteria are met. Capitalization ceases and the costs are amortized over the software's estimated useful life when the software is ready for its intended use.

Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior to technological feasibility being established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Technological feasibility is established upon completion of all the activities that are necessary to substantiate that the software product can be produced in accordance with its design specifications, including functions, features, and technical performance requirements. None of such costs were capitalized for any of the periods presented.

Intellectual Property

See "Item 4. Information on the Company-B. Business Overview-Intellectual Property."

D.	Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2024 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.

E.	Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reporting of, among other things, assets and liabilities, disclosure of contingent assets and liabilities and revenue and expenses. We regularly evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and other factors that we believe to be relevant under the circumstances. Since our financial reporting process inherently relies on the use of judgments, estimates and assumptions, our actual results could differ from what we expect.

We believe that the following accounting policies reflect the significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements. For additional information, see the disclosure included in Note 2 - Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."

Recognition of Digital Entertainment Revenue

We distribute online games, including self-developed games and licensed games from game developers, through our PC and mobile based applications and certain app stores. We offer many ways for users to purchase in-gameitems, including through online payment gateways, bank transfers, credit cards, mobile phone billing and prepaid cards (including our own prepaid cards which are sold through agents). As we control the service of providing games to the users and have a direct contractual arrangement with our paying users and have the right to determine the price to be paid by such users, the gross proceeds collected from these channels represent revenue to be recognized, and the amounts retained by these channels based on a predetermined percentage represent our cost of revenue to be recognized.

Revenue is recognized over the performance obligation period. We recognize an implied obligation to the paying users to continue to provide hosting services and access to the purchased virtual items within the online games over an estimated performance obligation period. Such performance obligation period is determined in accordance with the estimated average lifespan of the paying user or virtual items sold.

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Item-based revenue model. Virtual items have different lifespan patterns: time-based, consumable and durable.

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Time-based virtual items are items with a stated expiration time. Revenue attributable to a time-based virtual item is recognized ratably over the period based on the time unit of the item.

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Consumable virtual items are items that can be consumed by a specific user action and have limitations on repeated use. Revenue attributable to a consumable virtual item is recognized upon consumption.

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Durable virtual items are items that provide the user with continuing benefits over an extended period of time. Revenue attributable to a durable virtual item is recognized ratably over its average lifespan.

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User-based revenue model. We track paying users' activeness within each game where the user-based revenue model is used to estimate paying users' average lifespan. Paying users are defined as inactive when they have reached a period of inactivity such that it is reasonable to believe that these users will not return to a specific game.

Determining the estimated performance obligation period requires management's judgment and thus involves uncertainty. Future users' usage patterns and playing behaviors may change and differ from the historical usage patterns and playing behaviors, leading to a change in the estimated performance obligation period.

Our weighted-average performance obligation period for our paying users used for the purposes of revenue recognition was 17 months as of December 31, 2024. Based on the deferred revenue and payment channel costs amounts as at December 31, 2024, a one-monthdecrease in the average paying user lifespan for each of our online games would result in an approximately US$27.9 million decrease in deferred revenue balance and US$4.9 million decrease in deferred payment channel costs. Conversely, a one-monthincrease in the average paying user lifespan for each of our games would result in an approximately US$19.9 million increase in deferred revenue balance and US$3.4 million increase in deferred payment channel costs balance.

Investment in Equity Securities

Our investments in equity securities for which (1) we do not have the ability to exercise significant influence and (2) are without readily determinable fair value, are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment in the same investee.

We evaluate these securities at each reporting period to determine whether there are indicators that the investment may be impaired (i.e. whether the fair value of these equity securities is less than the current carrying value). Such evaluation includes reviewing the investee's cash position, recent financings, projected and historical financial performance, cash flow forecasts and current and future financing needs. If, based on this evaluation, we have a reason to believe that the fair value of the investment is less than the carrying value, we then estimate the fair value and record an impairment loss equal to the difference between the fair value of the investment and its carrying amount.

In such circumstances, the fair value of the investment is measured using the Market Adjusted Option Pricing Model Backsolve, which is determined by using information including but not limited to the pricing of recent rounds of financing of the investees, liquidity factors and a selection of comparable companies. The most significant unobservable input used in this model is the market adjustment. Market adjustment represents the estimated range of changes in industry valuations since the investee's last external valuation. As at December 31, 2024, a 5 percentage points increase in the market adjustment input would have resulted in a decrease in the impairment charges by approximately US$5.4 million. Conversely, a 5 percentage points decrease would have resulted in an increase in the impairment charges by approximately US$5.7 million.

Share-based Compensation - share options

Share-based compensation from share option grants is measured at fair value on grant date and recognized as compensation expense over the requisite service period (which is generally the vesting period) in the consolidated statements of operations. We applied the Black-Scholes option pricing model in determining the estimated fair value of the share options on grant date. This model requires the input of assumptions, most of which are not subject to significant estimation uncertainty. The expected term of the option for which employees are likely to exercise their share options is based on the simplified method due to insufficient relevant historical exercise data to provide a reasonable basis to estimate expected term. The risk-free rate used is based on the US Treasury Yields at the time of grant which is generally objectively determinable.

The estimated stock price volatility assumption used in the Black-Scholes option pricing model is judgmental and changes to the volatility assumption could significantly affect the estimated fair value of our share options and hence the amount of compensation expense that we recognize in our consolidated financial statements.

There were no new share options granted during the year ended December 31, 2024.

Income Taxes

We account for income taxes using the liability method. We determine deferred tax assets and liabilities based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that are in effect in the period in which the differences are expected to reverse. Determining the likelihood that our net deferred tax assets will be realized from future taxable income may require certain judgment. The accounting for deferred tax represents our best estimates of certain future events. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-notthat some portion, or all, of the deferred tax assets will not be realized. Changes in estimates, due to unanticipated events or otherwise, could have a material effect on our consolidated financial statements.

Impairment of Long-lived Assets in E-commerceSegment

We evaluate our long-lived assets for impairment when there are events or changes in circumstances which indicate that the carrying amounts of the long-lived assets may not be recoverable. Due to the losses incurred by the E-commercesegment, we evaluate the related long-lived assets for impairment at the asset group level by comparing the carrying amount of the asset group to the recoverable value determined by forecasted undiscounted cash flows expected to be generated by this asset group. If the carrying amount of the asset group exceeds the forecasted undiscounted cash flows, we would then be required to compare the estimated fair value of the asset group to its carrying amount to determine the amount of impairment, if any, to record against the long-lived assets in the asset group. As of December 31, 2024, our long-lived assets in the E-commercesegment amounted to approximately 88.5% of our total long-lived assets and no impairment had been provided.

The accounting estimates related to impairment of long-lived assets is critical due to the magnitude of the carrying amount of long-lived assets and management's judgment is required in estimating the recoverable value (undiscounted cash flows) of the asset group, which are sensitive to key assumptions such as projected revenue and sales and marketing expenses. As at December 31, 2024, the recoverable value assessed exceeded the carrying amount of the asset group by a substantial margin.

Goodwill Impairment

Goodwill is tested for impairment annually, or whenever events or changes in circumstances indicate that it might be impaired. For the impairment assessment on goodwill, we make a qualitative assessment to determine whether quantitative impairment testing is necessary. The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, and overall financial performance of the reporting unit, among other factors. If the qualitative assessment indicates that it is more likely than not that the carrying value of the reporting unit exceeds its fair value, we then perform a quantitative test to calculate the estimated fair value of the reporting unit. We record goodwill impairment if the carrying amount of the reporting unit exceeds its fair value.

We performed our annual goodwill impairment testing in the fourth quarter of 2024. Our reporting units with material goodwill had estimated fair value exceeded the carrying value by more than 10%.

Allowance for Credit Losses

We established allowances for credit losses for accounts receivable, loans receivable, off-balancesheet loan commitments and available-for-saleinvestments, the most significant of which is the allowances associated with our consumer and SME loans receivable from our digital financial services business.

For our consumer and SME loans receivable, we establish a provision matrix applied on the portfolio segmented by factors such as geographic region and products that are considered to have similar credit characteristics and risk of loss. We compute our allowance for credit loss based on our historical lifetime credit loss experience, adjusted for relevant forward-looking factors. We utilize models such as transition matrix method based on roll rates and then transformed, taking into account expected future delinquency rate to estimate the likelihood that a loan will default over a given period of time, net of any estimated recoveries. These models utilize information that is available at the reporting date about past events, current conditions, estimated recovery rate and macro-economic forecasts. As at December 31, 2024, a relative 5% decrease in the estimated recovery rate would have resulted in an increase in the allowance for credit losses by approximately US$17.9 million. Conversely, a relative 5% increase in the estimated recovery rate would have resulted in a decrease in the allowance for credit losses by approximately US$21.7 million.

Recent Accounting Pronouncements

The recent accounting pronouncement adopted during the year ended December 31, 2024 is discussed and included in Note 2(z) - Summary of Significant Accounting Policies - Recently adopted accounting pronouncements in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."

The recently issued accounting pronouncements not yet adopted during the year ended December 31, 2024 is discussed and included in Note 2(aa) - Summary of Significant Accounting Policies - Recently issued accounting pronouncements not yet adopted in the accompanying notes to consolidated financial statements included in "Item 17. Financial Statements."