Q3 2023 Snail Inc Earnings Call

Thank you for standing by and welcome to <unk>, Inc. 's third quarter 2023 earnings conference call and webcast I would now like to turn the call over to Jake Bassano Vice President at ICR. Thank you. Please go.

Thank you good afternoon, welcome to <unk> third quarter 2023 earnings conference call and webcast.

Today's call are Jim Si cheap.

Chief Executive Officer, and hired each out Chief financial Officer by now everyone should have access to the company's third quarter 2023 earnings press release filed today after market closed.

This earnings press release is available on the Investor Relations section of <unk> website at Www Dot Dot com.

During this call management may make forward looking statements regarding future events and the future financial performance of the company actual.

Actual events and results may differ materially from our expectations and forward looking statements are subject to risks and uncertainties.

Refer to the company's most recent 10-Q10-K and other SEC.

<unk> filings.

The company makes these forward looking statements as of today and disclaims any duty to update them.

On today's call we will refer.

Two bookings and EBITDA, which are non-GAAP financial measures that provide useful information for the company as investors you will find a historical reconciliation of bookings and EBITDA to the corresponding GAAP measures in the earnings press release, and the company's SEC filings.

And now I will turn the call over to Jim.

Thank you Jay and Hello, everyone. It's a pleasure to speak with you about our third quarter results about two weeks ago, we launched the highly anticipated operating make up.

Survival ascend it we are incredibly proud of the snail, and studio wildcard teens and appreciate all the passion effort and creativity in getting this gain in front of millions of players as today, we have sold over 600000 survival the sending copies on the steam platform. During the first 10 days following the survival of the ascend at lunch.

We sold one and a half X units compared to the same 10 day period of the original survival developed launch for the same 10 day period survival ascend it had an average daily active users of 258000, which is a healthy increase of seven and a half ex of the average daily active user of doing the same 10 day period up there.

Regional survival evolve launch the increased daily active user reflects our commitment to creating an enjoyable experience for our player base or in addition to unit sold and daily active users, we are seeing tremendous excitement and commitment and our player base survival attended players had a mass over $14 8 million hours of play time today.

We are thrilled to participate in the successful survival. The ascendant launch at the number of units sold on steam has exceeded our expectations. We are making significant progress on our strategy to build communities attract and retain new and existing players and continue growing player base. We know we have a passionate and excited fan base.

Things have been playing up for eight years and now they can enjoy a fully re imagined version using the next generation of video game technology with Unreal engine. Five we are excited about the upcoming release of the survival. The ascend to Xbox version and the Playstation version with cross platform play with steam on day, one survival ascend.

It will also feature a full cost platform that in between the consoles and PC, enabling user generated content monetization opportunities to create a shared economy with our loyal fan base. This virtuous monetization cycle will allow our survival to send it to transform into evergreen content with an extended lifecycle with the launch survive.

The ascend it we are thrilled to see existing players forging the way to the re imagined version of the game I'll play a basin survival that vault is active and we look forward to transitioning those players to experience the new re imagined version.

I'll now hand, it over to Heidi to review, our financial highlights from the quarter.

Thank you, Tim Hello, everyone and thank you for joining our third quarter call.

Net revenue for the three months ended September $32023 9 million compared to $15 6 million.

The three months ended September 32022.

The decrease in net revenue was due to a onetime contract revenue recognized from deferred revenue in free week promotion in the amount of Formula One Ian.

Correct in the three months ended September 2022.

In 2023.

And the decrease in sales of arc due to a lower average selling price.

So and in game purchases decreased by 2 million.

Sales of the company's smaller titles decreased spot color.

<unk> hundred out there.

Net loss was $12 4 million for the three months ended September 32023, as compared to a net loss of $1 5 million for the three months ended September 30 of 2022.

The decrease was primarily due to a decrease in revenue of $6 6 million.

The increase in research and development expenses of $1 2 million an increase.

The increase in interest expense of approximately 100000.

And the increase in Internet server and data center cost of 300000, partially offset by a decrease in royalties of 900 to Hudson.

The decrease in nicely cough and license rights amortization of one seven.

A decrease in merchandise ngl's fee of 500000.

The decrease in general and administrative expenses of $1 million.

Increase in other income, resulting in a decrease in the company's tax provision of 800000.

We present bookings and EBITDA, because they arent key non-GAAP operating measures used by management to assess financial performance.

Bookings adjusted for the impact of Stifel.

And we believe provides a useful indicator of cells given current rates.

For the three months ended September 32020 bookings were $10 five <unk> compared to $11 3 million.

Same three months period.

Hi, yes.

For the three months ended September 30 of 2023, EBITDA was a loss of $5 1 million versus a loss of $1 5 million in the third.

Three months period of the prior year.

This is mainly due to the decrease in revenue.

As of September 32023.

Restricted cash was $4 9 million versus $12 9 million as of December 31, 2022.

She will review our detailed financial statements. Please refer to the earnings press release, our most recent 10-Q and our 10-K filing.

Thank you for joining us today and now we're ready for our first question.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad.

Three don't pump technology request questions will be taken in the order received and should you wish to cancel your request. Please press. The star followed we did too if youre using a speakerphone. Please keep your handset before pressing any Keith. Your first question comes from the line of Matt Mccann from Noble capital markets. Please go ahead.

Hey, Thanks for taking my questions and congratulations on the successful launch of survival extended my first question has to do with with the pricing.

It looks like.

Youre charging around its going for around $45 on steam and please correct me if.

If I have any numbers wrong, but I am wondering what is the differential between.

What youre getting for arc survival ascended versus.

The price point that arc survival evolved has has.

At this point in time.

Much more are you getting now that you've.

You've relaunched the game and you're able to charge a premium price again.

Yes.

Thank you Paul.

The question to Peter.

Peter So.

What you're getting with our survival extended.

What time price, where it includes all of the not only the base game for the DLC that will be converted at a time.

The Arkansas and diversion.

One large package price for all of the content previously released.

<unk> said that.

<unk> spread will evolve.

Got you okay.

And then what is what sort of the average price for.

Survival evolved.

Around at this point.

Yes.

I believe are probably involved.

I think $15 on.

<unk>.

And so that is only for the base case and so.

Yes.

And catch up on the content Dolby would you have to pay for the base game, but each additional paid DLC that youre looking to acquire.

Got you. Thanks, and then my next question was just.

How you guys view the the early success of survival evolved.

Survival ascended I'm sorry.

As an indicator for the demand for our two has it changed.

Sort of your expectations for arc two in 2024, given just how how.

Strong launch.

You just had.

Yes.

Well.

The results were seeing is definitely.

<unk> as we look forward and see how the.

Market so.

Continuing to grow our new user base past seven.

Seven or eight years here now.

It's definitely a positive thing for us to see the amount of attention.

He is receiving.

Two we will have varying gameplay from arc.

And so we strongly believe that <unk> will continue to.

Pushed the <unk>.

The envelope as far as how much of our technology.

Required to play the game and enjoy the content thats the highest fidelity.

For Umbriel pipe.

Got you and if I may just squeeze in a couple of more.

I'm wondering about the.

The bridge loan with the Toronto and if that is.

If everything if that is sort of the loop has sort of been closed on that with the revenue shares from.

Survival ascended.

And if so.

Just to clarify going forward forward the only.

Lingering commitment there is just for the trial to be the sole server server provider for for the Ark franchise going forward for for seven years.

Nothing really else.

Sure.

The other component to that that I'm missing.

Great question, Pat business Heidi.

Actually with Machado, what we have is the loan is more of a operational alone is not a what we have is.

It is a separate transaction.

Yes.

The official start about we're doing office will serve as Machado. However for auto user base for any up I'll now official service it is not.

And two machado so that difference.

Okay, and then is the did the.

Yeah.

Is the Toronto I think it was <unk>.

$4 million is that is that.

Paid off at this point.

After the launch.

Our plan is to pay it off.

Secondly is the payment terms is depends.

Our future AR cash cash flow.

So it's not a.

Revenue sharing but the paint okay coming out of my mouth right.

So so basically is there is a specified terms and.

And then we will make a payment according with the terms, but is not sharing about revenue.

Got you okay.

Yeah.

Okay great.

Okay with that.

I will.

That's all I have for now but thank you.

Congratulations on the strong start for our survival extended.

Thank you.

Thank you there are no further question at this time. Please proceed.

Thank you ladies and gents.

Thank you there are no further question at this time.

Ladies and gentlemen that does.

This concludes our conference for today.

Participating you may all disconnect.

Okay.