E-commerce and gaming company Sea (NYSE:SE) beat analysts' expectations in Q4 FY2023, with revenue up 4.8% year on year to $3.62 billion. It made a GAAP loss of $0.19 per share, down from its profit of $0.70 per share in the same quarter last year.

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“I am happy to share that we have achieved our first full year of annual profit since our IPO,” said Forrest Li, Sea’s Chairman and Chief Executive Officer.

Founded in 2009 and a publicly traded company since 2017, Sea (NYSE:SE) started as a gaming platform and has since expanded to offer a variety of services such as e-commerce, digital payments, and financial services across Southeast Asia.

Online Marketplace

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.

Sales Growth

Sea's revenue growth over the last three years has been exceptional, averaging 55.9% annually. This quarter, Sea beat analysts' estimates but reported lacklustre 4.8% year-on-year revenue growth.

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Usage Growth

As an online marketplace, Sea generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

Sea has been struggling to grow its users, a key performance metric for the company. Over the last two years, its users have declined 30.3% annually to 39.7 million. This is one of the lowest rates of growth in the consumer internet sector.

In Q4, Sea's users decreased by 3.9 million, a 8.9% drop since last year.

Revenue Per User

Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Sea because it measures how much the company earns in transaction fees from each user. Furthermore, ARPU gives us unique insights as it's a function of a user's average order size and Sea's take rate, or "cut", on each order.

Sea's ARPU growth has been exceptional over the last two years, averaging 73.1%. Although its users have shrunk during this time, the company's ability to successfully increase prices demonstrates its platform's enduring value for existing users. This quarter, ARPU grew 15.1% year on year to $91.10 per user.

Key Takeaways from Sea's Q4 Results

It was good to see Sea narrowly top analysts' revenue and adjusted EBITDA expectations this quarter. Guidance was not given. Overall, this was a solid quarter for Sea, especially the big beat on adjusted EBITDA and profitability. The stock is up 12.6% after reporting and currently trades at $57.48 per share.

So should you invest in Sea right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.