(Reuters) -Singaporean tech firm Sea Ltd missed first-quarter profit estimates on Tuesday, as its digital entertainment revenue halved and it took a one-time charge of more than $100 million.
Sea shares dropped 12.5% to $77.05 and headed for their worst day in six months, dulling this year’s strong gains booked on a cost-cutting plan involving thousands of job cuts, the closure of some operations and a lower marketing budget.
The company’s operating expenses fell by more than a fifth in the quarter ended March 31, with marketing spends down 60.2%. It helped Singapore-based Sea report a profit of $87.3 million, compared with a loss of $580.1 million a year ago.
But its per-share profit of 15 cents missed analysts’ estimates of 40 cents, according to Refinitiv, because of an impairment charge of $117.9 million for a prior undisclosed acquisition.
Sea also doubled the funds it set aside for potentially sour loans in its SeaMoney financial services business to $177.44 million, as the unit’s loan book grew.
Rising interest rates have in recent months pressured digital finance firms that were operating in a loose monetary policy environment until last year.
Sea is also facing a slowdown in gaming and online shopping demand, after a pandemic-led boom that had helped it hit a peak market value of over $200 billion in late 2021. Its shares are down 76% from their record high.
Revenue rose 4.9% to $3.04 billion in the quarter, lower than the 7% growth recorded in the December quarter and 64% rise seen a year earlier. It also missed estimates of $3.07 billion.
Digital entertainment revenue tanked 52.5% on a slump in the company’s gaming arm. Sea has, however, started seeing some recovery, CEO Forrest Li said.
“In the quarter and into April, we started to see some initial signs of recovery in the active user base of our largest game, Free Fire,” he said.
(Reporting by Chavi Mehta and Aditya Soni in Bengaluru; Editing by Nivedita Bhattacharjee and Rashmi Aich)
