Snail Q2 2023 Earnings Call Transcript

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August 14, 2023

There are 2 speakers on the call.

Operator

Good day, and welcome to the Snell Inc. 2023 Earnings Conference Call. All participants will be in listen only mode. Please note that this event is being recorded. At this time, I'd like to turn the conference over to Jim Tsai, Chief Executive Officer.

Operator

Please go ahead.

Speaker 1

Thank you for standing by and welcome to Snail Inc. As Q2 2023 earnings conference call and webcast. By now, everyone should have access to the company's Q2 2023 earnings press release filed today aftermarket close. This is available on the Investor Relations section of Snail Inc. Website at www.snail.com.

Speaker 1

During this call, management may make forward looking statements within the meaning of federal securities laws. These forward looking statements are subject to the risks and uncertainties described in the company's press release and other filings with the SEC. On today's call, we will refer to bookings and EBITDA, which are non GAAP financial measures that provide helpful information for our investors. Edited to the corresponding GAAP measures in the earnings press release and the company's SEC filings. I am excited to update you on our survival ascended title.

Speaker 1

The DLC has passed OQC test and is in the final stages of development. As announced to the community last month, the game will be released in October 2023 for Xbox Series XS PlayStation 5 and PC. It remains on track for release in October. Aside from exciting features like next generation optimized content, including The Island, A Revenge, Survival of the Fittest and other DLCs and maps, including Scorched Earth, Aberration, Extinction, Genesis Part 1 and Part 2, Fyodor, Ragnarok, The Center, Lost Island, Del Gero and Crystal Isles. Our survival incentive will also feature full cross platform modding between the consoles and PC, enabling user generated content to a level of functionality never before seen in console games.

Speaker 1

This will enable users to sell their content at premium prices. Over time, we plan to build this to become a reliable revenue stream for Snail, while giving OX survival ascended the opportunity to develop evergreen content and sales lifecycle. The economics of this are still in flux and will be finalized before launch. We are seeing tremendous feedback and excitement from ARK fans ready for a fresh new title and experience. Let's take a moment to talk about ARK survival evolve.

Speaker 1

It continues to generate 1,000,000 of dollars per month. Nintendo Switch continues to grow in sales as more DLCs are released on that platform. After the launch of Ark Survival ascended in Q4 2023, Studio Wildcard plans to release 2 brand new expansion packs for that game in 2024 along with Completely revamped and Envision ARK Mobile game in partnership with Growth Street Games. Finally, ARK 2 continues development alongside ARK Survival Ascended and is planned for a Q4 2024 release built upon our survival Ascendids application framework. Consumer merchandise and other corporate partnerships is anticipated to grow significantly in later 2023 and through 2024 with the release of the animated series during which time we plan to announce an exciting partnership later this year and various premium mod expansions that will incorporate well known external pre existing intellectual properties during the 3 months ended June 30, 2023.

Speaker 1

We sold 0 900,000 units compared to 1,600,000 in the prior year period. Our video games continue to provide highly engaging differentiated entertainment experiences that offers a combination of challenges to progress and grow player engagement. We sell 101,000,000 playtime hours on our OX series of games during this period. The increase in playtime is mainly due to the continuous growth of OX's hardcore fans through June 30, 2023. Our OX franchise game has been played for a total of 3,300,000,000 hours with an average playing time per user of more than 162 hours and with the top 21% of all players spending over 100 hours in the game according to data related to the Steam platform.

Speaker 1

Now let's review our financial highlights from the quarter. Net revenues for the 3 months ended June 30, 2023 was $9,900,000 compared to $15,500,000 for the 3 months ended June 30, 2022. The decrease in net revenues was due to a decrease in sales of ARC, partially attributed to a decrease in the number of days on sale in one of our primary platform partners and partially due to the upcoming release of ARC, Survival Ascended. ARK sales and in game purchases decreased by $5,300,000 Sales of the company's smaller titles decreased by $600,000 These decreases in the company's smaller titles were partially offset by an increase of $100,000 in revenue related to West Hunt. Net loss was $4,100,000 for the 3 months ended June 30, 2023 as compared to a net loss of $1,000,000 for the 3 months ended June 30, 2022.

Speaker 1

The decrease was primarily due to a decrease in revenue of $5,600,000 an increase in research and development expense of $1,000,000 an increase in interest expense of $100,000 and an increase in Internet, server and data center costs of $300,000 partially offset by a decrease in royalties of 1 point 2 $1,000,000 a decrease in merchant and engine fees of $500,000 and a decrease in the company's tax provision of $800,000 We present bookings in EBITDA because they are key operating measures used by our management to assess our financial performance. Bookings adjust for the impact of deferrals and we believe provides a useful indicator of sales in a given period. For the 3 months ended June 30, 2023, bookings were $9,300,000 compared to $15,100,000 in the same 3 month period of the prior year, primarily as a result of the decline in ARK related revenues. For the 3 months ended June 30, 2023, EBITDA was a loss of $4,800,000 versus a loss of $1,100,000 in the same 3 month period of the prior year. This is mainly due to the decrease in revenues.

Speaker 1

As of June 30, 2023, our unrestricted cash was $3,000,000 versus 12 $900,000 as of December 31, 2022. To review our detailed financial statements, please refer to the earnings press release and 10 kelvin filings. Thank you for joining us today. And now this concludes our Q2 2023 earnings conference call and webcast. Should you have any questions, please submit to investors snail.com.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

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Key Takeaways

  • Snail’s highly anticipated ARK Survival Ascended DLC has passed its OQC test and remains on track for an October 2023 release on Xbox Series X|S, PlayStation 5, and PC, featuring next-gen optimized content and full cross-platform modding to unlock a new revenue stream.
  • ARK Survival Evolved continues to generate about $1 million in monthly revenue with growing Nintendo Switch sales, and Studio Wildcard plans two new expansion packs in 2024 alongside a revamped ARK Mobile game.
  • Research and development on ARK 2 is underway for a Q4 2024 launch using the Survival Ascended framework, and the company expects consumer merchandise, corporate partnerships, and an animated series to drive growth later this year and into 2024.
  • For Q2 2023, Snail reported net revenues of $9.9 million, down from $15.5 million a year ago, leading to a net loss of $4.1 million compared to $1.0 million in Q2 2022 and an EBITDA loss of $4.8 million versus $1.1 million.
  • Bookings fell to $9.3 million from $15.1 million year-over-year, and unrestricted cash declined to $3.0 million as of June 30, 2023, from $12.9 million at the end of 2022.
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Earnings Conference Call
Snail Q2 2023
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