Finance

Snail, Inc. Reports Third Quarter 2022 Financial Results


Snail, Inc.

Snail, Inc.

CULVER CITY, Calif., Dec. 15, 2022 (GLOBE NEWSWIRE) — Snail, Inc. (Nasdaq: SNAL) (“Snail” or “the Company”), a leading, global independent developer and publisher of interactive digital entertainment, today announced third quarter 2022 financial results for the quarter ended September 30, 2022. These third quarter results are prior to the exchange of stock and reflect the activities of Snail Games USA Inc. and its subsidiaries.

Jim Tsai, Chief Executive Officer of Snail, commented: “We are thrilled to share our first earnings report as a public company. Our goal of creating immersive gaming experiences and products will be supported by our access to the capital markets. We look forward to continuing to execute against our product roadmap and provide high-end entertainment experiences for consumers around the world.”

Third Quarter 2022 and Subsequent Business Highlights

  • ARK: Survival Evolved. In the three-month period ended September 30, 2022, ARK: Survival Evolved averaged a total of 328,583 daily active users (“DAUs”) versus 221,336 DAUs in the prior year period.

    • 4.4x growth in new install for the third quarter 2022 vs. third quarter 2021; 6.4M vs. 1.2M, respectively. Growth is largely due to Epic Games’ Free Week.

    • Units sold sustained for the third quarter 2022 compared to same period last year; 1.1M vs. 1.2M, respectively. Units sold includes game and DLCs.

    • Through September 30, 2022, total playtime amounts to 2.9 billion hours.

  • IPO. On November 9, 2022, the Company completed its initial public offering (“IPO”), in which it issued and sold 3,000,000 shares of Class A common stock at a public offering price of $5.00 per share for gross proceeds to the Company of approximately $15.0 million. Concurrently with the IPO, the stockholders of Snail Games USA collectively exchanged 500,000 shares of Snail Games USA common stock for 6,251,420 shares of Class A common stock and 28,748,580 shares of Class B common stock of Snail, Inc.

  • Share Repurchase Program. On November 10, 2022, the Company’s board of directors approved and established a new share repurchase program (the “Share Repurchase Program”) to reacquire shares of Snail, Inc.’s Class A common stock. The maximum aggregate value of the shares repurchased shall not exceed $5.0 million, and there is no fixed expiration date on the Share Repurchase Program. The exact number of shares of Class A common stock and timing and method of the repurchase are at the discretion of the CEO, CFO and Treasurer. As of December 13, 2022, 1,090,877 shares of Class A common stock were repurchased pursuant to the Share Repurchase Program and the average price paid per share was $2.98.

Third Quarter 2022 Financial Highlights

  • Revenue decreased by 36.1% to $15.6 million for third quarter of 2022 from $24.4 million over the same period in the prior year primarily as a result of a decrease in ARK units sold. ARK related revenues decreased by $8.5 million attributable to the age of the game and sales normalizing in 2022 after the initial release of Genesis II in June 2021. One off payments and revenue recognized for previous contract payments were the cause of $3.3 million of the $8.5 million decrease in ARK revenue, with reduced sales of ARK and ARK mobile responsible for the remaining $5.2 million decrease.

  • Net loss for the third quarter of 2022 was $1.5 million compared to net income of $3.8 million in the prior year period due to the reduced sales of ARK, static licensing fees, and increased general and administrative costs.

  • Bookings for the three months ended September 30, 2022, decreased by $6.9 million, or 37.9%, to $11.3 million, compared to the prior year period, primarily as a result of a decline in ARK-related revenues.

  • EBITDA for the third quarter of 2022 was a loss of $1.5 million compared to a gain of $4.6 million in the prior year period.

  • As of September 30, 2022, cash was $9.0 million. This cash balance does not reflect the net proceeds from IPO of approximately $12.0 million, which occurred on November 9, 2022.

Heidy Chow, Chief Financial Officer of Snail stated: “We are pleased with the continued engagement in our ARK series of games. We want to remind investors that we are committed to investing in our brand and fostering long-term growth. This includes focusing on the upcoming release of ARK 2, launching additional products, and implementing initiatives that enhance our product suite and improve our speed to market.”

Use of Non-GAAP Financial Measures

In addition to the financial results determined in accordance with U.S. generally accepted accounting principles, or GAAP, Snail believes Bookings and EBITDA, as non-GAAP measures, are useful in evaluating its operating performance. Bookings and EBITDA are non-GAAP financial measures that are presented as supplemental disclosures and should not be construed as alternatives to net income (loss) or revenue as indicators of operating performance, nor as alternatives to cash flow provided by operating activities as measures of liquidity, both as determined in accordance with GAAP. Snail supplementally presents Bookings and EBITDA because they are key operating measures used by management to assess financial performance. Bookings adjusts for the impact of deferrals and, Snail believes, provides a useful indicator of sales in a given period. EBITDA adjusts for items that Snail believes do not reflect the ongoing operating performance of its business, such as certain non-cash items, unusual or infrequent items or items that change from period to period without any material relevance to its operating performance. Management believes Bookings and EBITDA are useful to investors and analysts in highlighting trends in Snail’s operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which Snail operates and capital investments.

Bookings is defined as the net amount of products and services sold digitally or physically in the period. Bookings is equal to revenues excluding the impact from deferrals. Below is a reconciliation of total net revenue to Bookings, the closest GAAP financial measure.

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

 

(in millions)

 

(in millions)

Total net revenue

$

15.6

 

$

24.4

 

 

$

59.1

 

$

83.2

 

Change in deferred net revenue

 

(4.3

)

 

(6.2

)

 

 

(7.3

)

 

(11.4

)

Bookings

$

11.3

 

$

18.2

 

 

$

51.8

 

$

71.8

 

 

 

 

 

 

 

We define EBITDA as net income (loss) before (i) interest expense, (ii) interest income, (iii) income tax provision (benefit) and (iv) depreciation and amortization expense. The following table provides a reconciliation from net income (loss) to EBITDA :

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

 

2021

 

 

 

2022

 

 

2021

 

 

(in millions)

 

(in millions)

Net income (loss)

$

(1.5

)

$

3.8

 

 

$

3.2

 

$

17.0

 

Interest income and interest income-related parties

 

 

 

(0.4

)

 

 

(0.6

)

 

(1.1

)

Interest expense and interest expense-related parties

 

0.3

 

 

0.1

 

 

 

0.6

 

 

0.3

 

Income tax provision (benefit)

 

(0.4

)

 

0.9

 

 

 

0.8

 

 

4.2

 

Depreciation and amortization expense

 

0.1

 

 

0.2

 

 

 

0.4

 

 

0.6

 

EBITDA

$

(1.5

)

$

4.6

 

 

$

4.4

 

$

21.0

 

 

 

 

 

 

 

Webcast Details

The Company will host a webcast at 5:00 PM ET today to discuss the third quarter 2022 financial results. Participants may access the live webcast and replay on the Company’s investor relations website at https://investor.snail.com/. The earnings call may also be accessed by dialing 1 (877) 451-6152 from the United States, or by dialing 1 (201) 389-0879 internationally.

About Snail, Inc.

Snail is a leading, global independent developer and publisher of interactive digital entertainment for consumers around the world, with a premier portfolio of premium games designed for use on a variety of platforms, including consoles, PCs and mobile devices.

Contacts:

Investors:

[email protected]

Forward-Looking Statements

This press release contains statements that constitute forward-looking statements. Many of the forward-looking statements contained in this press release can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “may,” “predict,” “continue,” “estimate” and “potential,” or the negative of these terms or other similar expressions. Forward-looking statements appear in a number of places in this press release and include, but are not limited to, statements regarding Snail’s intent, belief or current expectations. These forward-looking statements include information about possible or assumed future results of Snail’s business, financial condition, results of operations, liquidity, plans and objectives. The statements Snail makes regarding the following matters are forward-looking by their nature: growth prospects and strategies; launching new games and additional functionality to games that are commercially successful; expectations regarding significant drivers of future growth; its ability to retain and increase its player base and develop new video games and enhance existing games; competition from companies in a number of industries, including other casual game developers and publishers and both large and small, public and private Internet companies; its ability to attract and retain a qualified management team and other team members while controlling its labor costs; its relationships with third-party platforms such as Xbox Live and Game Pass, PlayStation Network, Steam, Epic Games Store, Google Stadia, the Apple App Store, the Google Play Store and the Amazon Appstore; the size of addressable markets, market share and market trends; its ability to successfully enter new markets and manage international expansion; protecting and developing its brand and intellectual property portfolio; costs associated with defending intellectual property infringement and other claims; future business development, results of operations and financial condition; the effects of the COVID-19 pandemic and the ongoing conflict involving Russia and Ukraine on its business and the global economy generally; rulings by courts or other governmental authorities; the Share Repurchase Program, including expectations regarding the timing and manner of repurchases made under the program; its plans to pursue and successfully integrate strategic acquisitions; assumptions underlying any of the foregoing.

Further information on risks, uncertainties and other factors that could affect Snail’s financial results are included in its filings with the Securities and Exchange Commission (the “SEC”) from time to time, including its Quarterly Report on Form 10-Q and other periodic reports on Forms 10-K and 10-Q filed or to be filed with the SEC. You should not rely on these forward-looking statements, as actual outcomes and results may differ materially from those expressed or implied in the forward-looking statements as a result of such risks and uncertainties. All forward-looking statements in this press release are based on management’s beliefs and assumptions and on information currently available to Snail, and Snail does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

 

 

 

 

Snail Games USA Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

 

 

 

 

 

September 30, 2022

 

December 31, 2021

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current Assets:

 

 

 

Cash

$

9,044,666

 

 

$

10,164,338

 

Accounts receivable, net of allowances for doubtful accounts of $19,929 and $31,525, respectively

 

4,596,313

 

 

 

12,244,785

 

Accounts receivable – related party, net

 

12,239,430

 

 

 

8,435,823

 

Loan and interest receivable – related party

 

101,249

 

 

 

203,408

 

Prepaid expenses – related party, net of long-term portion

 

1,500,000

 

 

 

3,145,000

 

Prepaid expenses and other current assets

 

11,704,897

 

 

 

11,017,007

 

Total current assets

 

39,186,555

 

 

 

45,210,361

 

 

 

 

 

Restricted cash and cash equivalents

 

6,368,016

 

 

 

6,389,777

 

Prepaid expenses – related party

 

6,520,000

 

 

 

 

Property, plant and equipment, net

 

5,245,271

 

 

 

5,678,701

 

Intangible assets, net – license – related parties

 

3,235,038

 

 

 

8,787,976

 

Intangible assets, net – license

 

 

 

 

250,000

 

Intangible assets, net – other

 

275,600

 

 

 

277,148

 

Deferred income taxes

 

8,191,051

 

 

 

8,191,051

 

Other noncurrent assets

 

194,032

 

 

 

199,919

 

Operating lease right-of-use assets, net

 

3,887,326

 

 

 

5,100,912

 

Total assets

$

73,102,889

 

 

$

80,085,845

 

 

 

 

 

LIABILITIES, NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

Accounts payable

$

6,765,934

 

 

$

3,871,510

 

Accounts payable – related party

 

22,330,781

 

 

 

23,733,572

 

Accrued expenses and other liabilities

 

2,375,610

 

 

 

2,975,475

 

Loan payable – related parties

 

 

 

 

400,000

 

Interest payable – related parties

 

527,770

 

 

 

528,439

 

Revolving loan

 

9,000,000

 

 

 

9,000,000

 

Short term note

 

6,666,667

 

 

 

 

Notes payable

 

 

 

 

216,329

 

Current portion of long-term debt

 

79,425

 

 

 

77,348

 

Current portion of deferred revenue

 

3,934,693

 

 

 

11,005,517

 

Current portion of operating lease liabilities

 

1,339,172

 

 

 

1,688,965

 

Total current liabilities

 

53,020,053

 

 

 

53,497,155

 

 

 

 

 

Accrued expenses

 

454,438

 

 

 

 

Long-term debt, net of current portion

 

2,825,390

 

 

 

2,885,434

 

Deferred revenue, net of current portion

 

9,048,505

 

 

 

9,275,417

 

Operating lease liabilities, net of current portion

 

3,285,679

 

 

 

4,375,786

 

Total liabilities

 

68,634,064

 

 

 

70,033,792

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

Common stock, $0.01 par value, 1,000,000 shares authorized, 500,000 shares issued and outstanding

 

5,000

 

 

 

5,000

 

Additional paid-in capital

 

12,881,055

 

 

 

94,159,167

 

Due from shareholder – loan receivable

 

 

 

 

(91,388,176

)

Due from shareholder – interest receivable

 

 

 

 

(2,965,346

)

Accumulated other comprehensive loss

 

(343,277

)

 

 

(266,557

)

Retained earnings (accumulated deficit)

 

(2,593,035

)

 

 

16,045,231

 

Total Snail Games USA Inc. equity

 

9,949,743

 

 

 

15,589,319

 

Noncontrolling interests

 

(5,480,918

)

 

 

(5,537,266

)

Total equity

 

4,468,825

 

 

 

10,052,053

 

Total liabilities, noncontrolling interests and equity

$

73,102,889

 

 

$

80,085,845

 

 

 

 

 

Snail Games USA Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)

 

 

 

 

 

 

 

 

 

For The

 

For The

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Revenues, net

$

15,614,171

 

 

$

24,361,019

 

 

$

59,132,284

 

 

$

83,200,198

 

Cost of revenues

 

11,468,961

 

 

 

15,478,327

 

 

 

37,744,863

 

 

 

48,381,061

 

Gross profit

 

4,145,210

 

 

 

8,882,692

 

 

 

21,387,421

 

 

 

34,819,137

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

General and administrative

 

5,434,013

 

 

 

3,997,917

 

 

 

16,177,534

 

 

 

13,053,478

 

Research and development

 

116,624

 

 

 

216,798

 

 

 

479,630

 

 

 

588,207

 

Advertising and marketing

 

198,417

 

 

 

148,752

 

 

 

569,127

 

 

 

265,812

 

Depreciation and amortization

 

128,536

 

 

 

208,896

 

 

 

435,644

 

 

 

638,659

 

Total operating expenses

 

5,877,590

 

 

 

4,572,363

 

 

 

17,661,935

 

 

 

14,546,156

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(1,732,380

)

 

 

4,310,329

 

 

 

3,725,486

 

 

 

20,272,981

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest income

 

12,712

 

 

 

21,230

 

 

 

45,789

 

 

 

71,857

 

Interest income – related parties

 

505

 

 

 

420,164

 

 

 

582,128

 

 

 

1,128,397

 

Interest expense

 

(261,070

)

 

 

(114,447

)

 

 

(613,338

)

 

 

(304,918

)

Interest expense – related parties

 

 

 

 

(2,016

)

 

 

(3,222

)

 

 

(5,983

)

Other income

 

19,500

 

 

 

31,247

 

 

 

319,153

 

 

 

482,790

 

Foreign currency transaction gain (loss)

 

16,169

 

 

 

(15,987

)

 

 

21,679

 

 

 

(80,755

)

Equity in loss of unconsolidated entity

 

 

 

 

 

 

 

 

 

 

(314,515

)

Total other income (expense), net

 

(212,184

)

 

 

340,191

 

 

 

352,189

 

 

 

976,873

 

 

 

 

 

 

 

 

 

Income (loss) before provision for income taxes

 

(1,944,564

)

 

 

4,650,520

 

 

 

4,077,675

 

 

 

21,249,854

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

(398,998

)

 

 

891,538

 

 

 

803,305

 

 

 

4,214,245

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(1,545,566

)

 

 

3,758,982

 

 

 

3,274,370

 

 

 

17,035,609

 

 

 

 

 

 

 

 

 

Net gain (loss) attributable to non-controlling interests

 

(6,828

)

 

 

(125,881

)

 

 

56,348

 

 

 

(489,499

)

 

 

 

 

 

 

 

 

Net income (loss) attributable to Snail Games USA Inc.

 

(1,538,738

)

 

 

3,884,863

 

 

 

3,218,022

 

 

 

17,525,108

 

 

 

 

 

 

 

 

 

Comprehensive income statement:

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

5,682

 

 

 

382,088

 

 

 

(76,720

)

 

 

421,048

 

Total other comprehensive income (loss)

$

(1,533,056

)

 

$

4,266,951

 

 

$

3,141,302

 

 

$

17,946,156

 

 

 

 

 

 

 

 

 

Snail Games USA Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 

 

 

 

Nine Months Ended September 30,

 

2022

 

 

 

2021

 

 

 

 

 

Cash flows from operating activities:

 

 

 

Net income

$

3,274,370

 

 

$

17,035,609

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

Amortization – intangible assets – license

 

250,000

 

 

 

450,000

 

Amortization – intangible assets – license, related parties

 

5,552,938

 

 

 

10,675,193

 

Amortization – intangible assets – other

 

672

 

 

 

6,149

 

Amortization – loan origination fees

 

19,149

 

 

 

22,388

 

Depreciation and amortization – property and equipment

 

435,644

 

 

 

638,659

 

Gain on lease termination

 

(122,533

)

 

 

 

Gain on paycheck protection program and economic injury disaster loan forgiveness

 

(174,436

)

 

 

(392,200

)

Gain on disposal of fixed assets

 

(17,067

)

 

 

 

Interest income from shareholder loan

 

(580,878

)

 

 

(1,074,881

)

Deferred taxes

 

 

 

 

2,682

 

Decrease in non-controlling interest – dissolution of subsidiary

 

 

 

 

39,340

 

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

7,648,432

 

 

 

5,049,456

 

Accounts receivable – related party

 

(3,803,606

)

 

 

2,542,956

 

Prepaid expenses – related party

 

(4,875,000

)

 

 

 

Prepaid expenses and other current assets

 

(2,232,406

)

 

 

(5,689,750

)

Other noncurrent assets

 

(15,228

)

 

 

241,422

 

Accounts payable

 

2,905,024

 

 

 

(390,331

)

Accounts payable – related party

 

(1,402,791

)

 

 

311,024

 

Accrued expenses

 

(127,993

)

 

 

700,163

 

Interest payable – related parties

 

1,490

 

 

 

5,983

 

Lease liabilities

 

(103,782

)

 

 

(130,090

)

Deferred revenue

 

(7,297,736

)

 

 

(11,389,985

)

Net cash (used in) provided by operating activities

 

(665,737

)

 

 

18,653,787

 

 

 

 

 

Cash flows from investing activities:

 

 

 

Loan provided to related party

 

 

 

 

(24,506,321

)

Repayment on loan provided by related party

 

(300,000

)

 

 

 

Acquisition of license rights – related party

 

 

 

 

(5,000,000

)

Purchases of property and equipment

 

(5,256

)

 

 

(3,403

)

Proceeds from sale of property and equipment

 

19,500

 

 

 

 

Repayment on Pound Sand note

 

1,496,063

 

 

 

 

Investment at cost

 

 

 

 

(895

)

Net cash provided by (used in) investing activities

 

1,210,307

 

 

 

(29,510,619

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Repayments on long-term debt

 

(57,967

)

 

 

(6,731,666

)

Repayments on short-term note

 

(3,333,333

)

 

 

 

Borrowings on long-term debt

 

 

 

 

2,904,815

 

Borrowings on short-term note

 

10,000,000

 

 

 

 

Payments on paycheck protection program and economic injury disaster loan

 

(90,198

)

 

 

 

Refund of payments on paycheck protection program and economic injury disaster loan

 

48,305

 

 

 

 

Borrowings on revolving loan

 

 

 

 

6,500,000

 

Cash dividend declared and paid

 

(8,200,000

)

 

 

 

Net cash (used in) provided by financing activities

 

(1,633,193

)

 

 

2,673,149

 

 

 

 

 

Effect of currency translation on cash and cash equivalents

 

(52,810

)

 

 

380,403

 

 

 

 

 

Net decrease in cash, and restricted cash and cash equivalents

 

(1,141,433

)

 

 

(7,803,280

)

 

 

 

 

Cash, and restricted cash and cash equivalents – beginning of period

 

16,554,115

 

 

 

33,902,707

 

 

 

 

 

Cash, and restricted cash and cash equivalents – end of period

$

15,412,682

 

 

$

26,099,427

 

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

Cash paid during the period for:

 

 

 

Interest

$

594,189

 

 

$

105,577

 

Income taxes

$

831,400

 

 

$

3,300,000

 

Noncash transactions during the period for:

 

 

 

Loan and interest payable – related parties

$

103,890

 

 

$

 

Loan and interest receivable – related parties

$

(103,890

)

 

$

 

Loan and interest from shareholder

$

94,934,400

 

 

$

 

Dividend distribution

$

(94,934,400

)

 

$

 

Noncash financing activity during the period:

 

 

 

Gain on paycheck protection program and economic injury disaster loan forgiveness

$

(174,436

)

 

$

(392,200

)

 

 

 

 



Source link

Leave a Response