Snail Inc. Q1 2023 Earnings Call
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Speaker 2: Good afternoon, ladies and gentlemen, and thank you for standing by.
Speaker 2: Welcome to the snail corporation first quarter 2023 earnings call. At this time, all participants aren't elicit only mode. A question and answer session will follow the formal presentation. Should you require operator assistance during the conference, please press star zero to signal operator. Please note this conference is being recorded.
Speaker 2: I will now turn the conference over to your host, Jake Pisano with ICR. Thank you, you may begin.
Speaker 3: Thank you. Good afternoon and welcome to snail angst first quarter 2023 earnings conference call and webcast.
Speaker 3: On today's call are Jim Tsai, Snell's Chief Executive Officer, and Heidi Chow, Snell's Chief Financial Officer. By now, everyone should have access to the company's first quarter 2023 earnings press release filed today after market close.
Speaker 3: This is also available on the investor relations section of Snail Inc.'s website at www.snail.com.
Speaker 3: 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 as described in the company's press release and other filings with the SEC.
Speaker 3: On today's call, we will refer to bookings and EBITDA, which are non-GAAP financial measures that provide useful information for our investors.
Speaker 3: You will find a historical reconciliation of bookings in Ibadah to the corresponding GAAP measures in the earnings press release and the company's SEC filings. And now I would like to turn the call over to Jim. Jim. Thank you and hello everyone.
Speaker 4: It is a pleasure to speak with you on our first quarter 2023 results.
Speaker 4: The beginning of the year continues to show strong engagement for our products with continued growth of our user base.
Speaker 4: During the three months ended March 31st, 2023, we saw 1.7 million units compared to 1.3 million units in the prior year period.
Speaker 4: Our video games continue to provide highly engaging, differentiated, entertainment experience that provide a combination of challenge to progress and grow player engagement. In Q1 of 2023, we saw playtime on our Aksyrias
Speaker 4: player base a result of the many promotions ran over the previous 15 months.
Speaker 4: Through March 31, 2023, our art franchise game had been played for a total of 3.2 billion hours within average playing time per user of more than 160 hours and with the top.
Speaker 4: 20 white percent of all players spending over 100 hours in the game.
Speaker 4: According to data related to the Steam platform, as you all know, the gaming industry is rapidly evolving. We have had the difficult decision to delay the release of Oc2. We want to ensure that Oc2 lifts up to our fans high-end, low-end, and low-end devices.
Speaker 4: We believe that the extra time will allow our team to create an even more captivating and engaging gaming experience. We are in constant communication with the developer to ensure milestone is made against the new timeline. You can expect up to in 2024 the extra time will allow us to do.
Speaker 4: gaming experience. The Unreal Engine 5 offers several advanced features such as real-time ray tracing, dynamic global illumination, and the Nanite virtualized geometry system.
Speaker 4: These features will allow us to bring the app survival world to life like never before with the stunning visuals, enhanced performance, and smooth gameplay. We understand that this decision may come as a surprise, especially with the anticipation surrounding the release of app 2.
Speaker 4: However, we believe that the remastered version of the original Op. Survival game will provide an incredible experience for both our new and existing players, laying the foundation for the strong and successful Op. 2 launch. In conclusion, we are confident that remastering Op. Survival will be a great opportunity for players to learn and play.
Speaker 4: with the Unreal Engine 5 will bring unprecedented value to our players and set a new benchmark for the gaming industry. We appreciate your understanding and support as we work towards delivering unforgettable off-survival experience and outstanding up to.
Speaker 4: We are thrilled to announce that in addition to our survival extended DLC our team is currently working on multiple new DLC for the up franchise
Speaker 4: This coming DLCs would offer a variety of unique experience and challenges and environments expanding the art universe and keeping our player engaged.
Speaker 4: While we cannot review specific details about this upcoming DOC's at this time, we can assure you that our team is dedicated to delivering captivating content that pushed the boundaries of the off-expired.
Speaker 4: and challenges that weigh them in this new, forthcoming expansions.
Speaker 4: flash, engaging content, we believe that the combination of the remaster of the Bible Assended, the upcoming DOC and the continued development of the Act II will offer an exceptional gaming experience that sets a new benchmark for the industry. I will now...
Speaker 4: hand it over to Heidi to review the financial highlights from the quarter.
Speaker 4: over to Heidi to review the financial highlights from the quarter. Thank you.
Speaker 5: 31, 2023 was 13.5 million, a decrease of 14.6 million or 52% compared to the three months and March 31, 2022.
Speaker 5: in the average sales price per unit.
Speaker 5: Additionally, deferred revenue and one-time payment related to contracts with certain platforms.
Speaker 5: Arc sales decreased by 3.1 million.
Speaker 5: Deferred revenue from contrast decreased by $2.5 million and one off-payment decreased by $8.5 million.
Speaker 5: Sales of the smaller titles decreased by a collective 700,000.
Speaker 5: These decreases in the company's smaller title were partially upset by an increase of $200,000 in revenue related to West Hunt. Net loss was $3 million for the three months ended March 31, 2023 as compared to a net income of $2 million.
Speaker 5: of $5.8 million for the three months ended March 31, 2022.
Speaker 5: Representing a decrease of 8.8 million.
Speaker 5: The decrease was primarily due to a decrease in revenue of $14.6 million.
Speaker 5: An increase in research and development expenses of 1.2 million can let decrease in interest income related to 500,000.
Speaker 5: An increasing interest expense of 100,000 of set by a decrease in royalties of 3.2 million.
Speaker 5: A decrease in license cost and license right amortization of 1.3 million.
Speaker 5: a decrease in merchant and engine fees of $500,000.
Speaker 5: and a decrease in the company's tax provision of 2.3 million.
Speaker 5: We present bookings and EBITDA because they are key operating measures.
Speaker 5: used by our management to assess our financial performance. Bookings adjust for the impact of deferral, and we believe provides a useful indicator of sales in a given period.
Speaker 5: For the three months ended March 31st, 2023, bookings decreased by 48% to 13.3 million.
Speaker 5: compared to the same three-month period of the prior year, primarily as a result of a decline in ARK-related revenue. For the three months ended March 31, 2023, EBITDA was a loss of $3.4 million versus a gain of $7.3 million in the same three-month period of the prior year.
Speaker 5: This is mainly due to the decrease in revenue.
Speaker 5: 1 million versus 12.9 million as of December 31, 2022.
Speaker 5: To review our detailed financial statements, please refer to the earnings press release and 10-Q filing. Thank you for joining us today, and now let's go to the questions.
Speaker 2: Operator. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If you wish to remove your question from the queue, please press star 2.
Speaker 2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Speaker 2: Our first question is from Pat McCann with Noble Capital.
Speaker 6: Hey, thanks for taking my questions. My first question has to do with the ARC sales in the quarter. Can you speak to the sale price or discounts offered on the ARC units that were sold in Q1 relative to the prior year period?
Speaker 6: I guess I'm thinking that with game prices tending to decline as the game ages, I'm wondering kind of where the revenue per unit is shaping up so far this year relative to 2022.
Speaker 5: Hi Pat. This is Heidi. Great question. Actually in Q1 of 2023 we did do a sale and we marked down our selling price for the base game somewhere around a 30% discount and it offered to our band.
Speaker 7: players
Speaker 6: the game. Um. Gotcha. Thanks. Um my next question was about survival ascended. Um can you can you just sort of gauge the excitement level and the gaming community for that and maybe to break it down a little further. Uh you know what? What is the
Speaker 6: ARC 2 coming next year.
Speaker 6: coming next year? Yeah, that's that question.
Speaker 4: Jim I think right now the review and the community is actually a bit next I would say originally the original.
Speaker 4: expectation was as an upgrade from the original App Survival Evolved and all the DLC. So, upgrades meaning the definition of all the new maps and new features as a new DLC, as a paid DLC or non-paid DLC.
Speaker 4: a different game, all the Last of Us. They have remastered and repackaged in retail and selling with the same price. So you can expect this is a completely different version of the art.
Speaker 4: and It's almost like you from ps4 and become a ps5 version but it's a new content and it's the And the our survival ascendant is not just the the master game, but also all the DLC all together
Speaker 4: So, expected to enjoy the mass quantity and also the quality that is on the assent. And with the updated information that's been released, I think we gain certain of the support from the core friends. They think this is done.
Speaker 6: going to be fantastic and very excited of the Ascendant to be released. Okay, thanks. And then my last question was regarding just your pipeline. If you could give any updates on any news on Ark, the animated series, and when that might be
Speaker 6: getting released, and then if there are any details you can give at this time about sort of the timeline for your DLC releases here in 2023 and between now and when Arc 2 releases.
Yes, hi, this is Jim. Thank you guys. That's a great question. So, um, things we ought to delay actually in now.
now to app 2. There's a separate DLC in the pipeline. The Ascendant is one of them. And the Ascendant is starting with Unreal 5 and then they come in more DLCs. One or two DLC that the pipeline will be released before the app 2.
And they are all in Unreal 5. And other than that, we had a lot of people
going with the Mac platform and then the animated series, the TV series. Matter of fact, it's been almost done. We're just trying to collaborate with the video platform.
and to have the release date. But I'm sure that there will be more content to be released between now and October . Great, thanks so much. Those are all the questions I have.
Thank you for the question. As a reminder, to ask a question, please press star 1.
As there are no more questions, this concludes not only the question and the session but also the conference today. We thank you for your participation. You may discapitalize at this time.
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