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spk06: Thank you for standing by, and welcome to Snail Inc.' 's fourth quarter and full year 2022 earnings conference call and webcast. I would now like to turn the call over to Jake Pisano, Vice President at ICR.
spk00: Thank you, and good afternoon, and welcome to Snail Inc.' 's fourth quarter and full year 2022 earnings conference call and webcast. On today's call are Jim Tsai, Snail's Chief Executive Officer, and Heidi Chow, Snail's Chief Financial Officer. By now, everyone should have access to the company's fourth quarter and full year 2022 earnings press release filed today after market close. This is also available on the investor relations section of Snail Inc.' 's website at www.snail.com. During this call, management may make forward-looking statements within the meaning of the 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. On today's call, we will refer to bookings and EBITDA, which are non-GAAP financial measures that provide useful information for our 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 would like to turn the call over to Jim.
spk03: Thank you. And hello, everyone. It's a pleasure to speak with you on our 2022 fourth quarter and four-year earnings call. For those of you not familiar with now, we are a leading global independent developer and publisher of interactive digital entertainment for consumers. We have built a premium portfolio of premium video games designed for use on a variety of platforms including console, PC, and mobile devices. We have had many great accomplishments in 2022 that I would like to briefly highlight. First, in November, we officially began trading on NASDAQ. This marked a tremendous milestone for our company, and we are excited to leverage the resource from NASDAQ as we continue our journey into 2023. We are thrilled to announce that Ox Survival Evolved has achieved incredible success on the Nintendo Switch platform over the past five years. We owe it to all to our passionate community of players who have demonstrated unbelievable loyalty to our game and brand. Your support has helped us reach new heights, and we are excited to share some of our recent accomplishments with you. Since its launch on the Nintendo Switch in 2018, our survival evolved has continued to sell strong year after year. In 2018, we sold 150,406 units of the game on the platform, which was just the beginning of our journey. In 2019, we sold 57,404 units And despite the challenge faced in 2020, we managed to sell 92,169 units of the game on the Nintendo Switch platform. As the gaming industry continued to evolve, we kept pushing ourselves to deliver the best possible experience for our players. In 2021, we saw a whopping 135,150 units of Survival Evolved, which was a testament to our commitment to creating an immersive and engaging survival game. And even in 2022, we continue to achieve success with a total of 159,065 units of Survival Evolved, sold on the Nintendo Switch. I am pleased to announce that our retail package sale of Ox Survival Evolved games has remained sustainable and continues to thrive despite the game's age of over seven years. It is a testament to the game's popularity and our team's dedication to ensuring that the game remains relevant to its players. It is not easy for a game product that has been in the market for over seven years to occupy the retail shop shelf space and continue to sell at a steady pace. As we move forward, we are committed to ensuring the game remains relevant and exciting for our players. We will continue to invest in its development and introduce new features to keep the game fresh and engaging. In November 2022, we relaunched the Nintendo Switch version of the Ark Survival Evolved with a continuous success. Ark has been on Nintendo's digital bestsellers list, and it was ranked number nine bestselling game in Japan in the fourth week of February. In February, we launched the new Arc Render Rock map, which continues to grow players' engagement on the Switch platform. And the new expansion map is expected to release for Nintendo Switch in April. Beyond that, we have a total of eight more maps that we expect to release for the platform over this year of 2023. including a survival of the city battle royale mode. And we expect the game's player base on Switch will continue to grow with each of them. Later this year, we expect to relaunch a new mobile version of Survival Evolved for iOS and Android. This new version will feature all of the monetized content and maps, gameplay mechanics, and overhaul performance, and visual, which exists on the PC and console version of ARC. We saw strong user engagement during the year with ARC in playing more than 425 million hours. We saw 5.5 million units during the year compared to 6.6 million units in the prior year. This is directly related to the seasonality of our business since we did not release any new title or a DLC during 2022. With that being said, I'd like to touch on our initiatives for 2023. We are excited to announce our upcoming plan for ARCH, the beloved open-world survival game that has captivated millions of players worldwide. we have three major updates to share with you today. Firstly, we are thrilled to announce that a new title built exclusively for the Xbox Series S and S. and PlayStation 5 consoles in its development and expect it to be available later this year. This new art game will be powered by Unreal Engine version 5, which will take art's immersive and realistic gameplay to the next level. We can't wait to share more detail about this exciting new addition to the art franchise in the coming months. Secondly, We are excited to reveal that a new art expansion pack is also expected to come this year, available on all platforms. We are also striving to push the boundary of what's possible with art. The expansion will introduce new creatures, biomes, gameplay mechanics to challenge even the most seasoned survivors. We can't wait to see how the art community will adapt and thrive in this new environment. Finally, we have heard your feedback and are pleased to announce that we expect to reveal an updated art content roadmap in the next few months. This roadmap will detail our plans for the game over the next year, including new content release, balance changes, and quality of life improvements, we want to ensure that the art experience continues to evolve and improve, and we can't wait to share our plans with you. Later this year, we expect to release our flagship title of two. This completely revamped game developed on Unreal Engine 5 will offer players an immersive gaming experience with improved graphics and new features. including advanced technologies in enhanced animation and dynamic environments that would evolve based on players' actions. We can't wait for players to experience all that ARK 2 has to offer. With that, I would like to share the latest progress on ARK 2, a breakthrough in integrating core game mechanics into Unreal Engine 5. With this next-generation technology, we can take the immersive and realistic gameplay of R2 to new heights. We believe this will be a game changer for the franchise, and we cannot wait to share more detail with you in the coming months. We have reached significant milestones in our game vertical slide testing. Our game has worked tirelessly to ensure that every aspect of OP2 meets and exceeds our community's high expectations. We are excited to see how our players will respond to the new features and mechanics that we have tested. We have successfully built out a massive content production process for OP2, from new creatures and biomes and gameplay mechanics and storyline. We are committed to delivering the most immersive and engaging of experience yet. Our team has been working very hard to bring this version to light, and we can't wait to share more detail about the content we have installed for you. We are grateful for the continuous support of our dedicated community, and we want to assure you that we are working hard to make Arc 2 the best it can be. We are excited about the depth of games and design our current product roadmap entails. We plan to continuously evaluate and invest our content strategy to improve further and innovate our games. We seek opportunity to expand our gaming pipeline and develop media, and esports content related to our game. For example, we continue building out the West Hunt title published by Wandering Wizard. The social deduction game has performed exceptionally and yielded a higher return than the initial investment. We recently launched West Hunt One Data on March 23rd, and the Nintendo Switch port It's expected to be released shortly. Wondering Wizard promoted this title at PAX E's export a few days ago. In summary, we are excited to build on our existing platform mode games and titles. This includes acquiring new IP and providing multi-platform entertainment franchises to create new entertainment mediums for our consumers. By lifting on NASDAQ, we now have the resource to focus on the execution and design of our next-generation games and entertainment experiences. We are currently focused on the development of Orc 2, which will provide our customers with an even better gaming experience and take advantage of recent innovations in game development. I will now hand it over to Heidi to reveal our financial highlights from the quarter.
spk05: Thank you, Jim. Hello, everyone, and thank you for joining our fourth quarter and full year 2022 call. Revenues for the three months ended December 31st, 2022 were $15.3 million, a 35% decrease compared to $23.5 million in 2021. The decrease was primarily a result of a decrease in ART unit sold. ART-related revenue decreased by $4.8 million attributable to the age of the game and sales normalized in 2022 after the initial release of Genesis 2 in June 2021. One-off payments and revenue recognized for previous contract payments offset $1.2 million of the $6 million decrease in AHRQ and AHRQ mobile sales. Net loss for the fourth quarter of 2022 was $2.3 million compared to net loss of $9.1 million in the prior year period due to the reduced sales of AHRQ, steady licensing fees, increased general and administrative costs, and the increase in research and development expenses. Revenue for the year ended December 31st, 2022 was $74.4 million, a decrease of $32.3 million or 30% compared to revenue for the year ended December 31st, 2021. The decrease in net revenue was due to a decrease in sales of art attributable to the age of the game and increasing the number of free week promotions in 2022 and the Genesis 2 releases in 2021. There were no DLC releases in 2022 and no free download promotions in 2021. ARC sales decreased by $33 million and deferred revenue from contracts decreased by $3.7 million, offset by additional one-off payment in 2022 of $7.5 million. Sales of our smaller title decreased by a collective $3.1 million and were partially offset by $500,000 earned in 2022 from the release of West Hunt. Net income for the full year of 2022 was $1 million compared to net income of $7.9 million in the prior year period due to the reduced sales of art, static licensing fees, increased general and administrative costs, and an increase in research and development expenses. We present booking and 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 three months ended December 31st, 2022, bookings decreased by 8.8 million or 43% compared to the same three-month period of the prior year, primarily as a result of decline in ARC-related revenues. For the three months ended December 31st, 2022, EBITDA was a loss of 5.3 million versus a loss of 11.8 million in the same three-month period of the prior year. This is mainly due to the decrease in revenue. Bookings for the year ended December 31st, 2022 decreased by $28.8 million or 31% to $63.7 million compared to the prior year period, primarily as a result of a decline in art-related revenue. The decrease is primarily due to the decrease of art sales in 2022 due to the age of the game, free download promotions, and no DLC release during the year ended December 31st, 2022, while 2021 saw the releases of our Genesis 2 DLC and none of the free download promotions. EBITDA for the year ended December 31st, 2022 was a loss of $700,000 compared to a gain of $9.2 million in the prior year period. As of December 31st, 2022, our unrestricted cash was $12.9 million versus $10.2 million as of December 31st, 2021. To review our detailed financial statement, please refer to the earnings press release and 10-K filing. We will not be providing 2023 financial guidance at this time. Thank you for joining us today, and now let's go to the questions. Operator?
spk06: Thank you. And ladies and gentlemen, at this time, we will be conducting our 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. You may press the star key followed by the number 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, to ask a question, press star 1 on your telephone keypad. Our first question comes from Pat McCann with Noble Capital. Please state your question.
spk08: Hey, thanks for taking my questions. My first question relates to the games and DLCs outside of ARK 2 and just the ARK franchise. With the other games you offer, could you give sort of an update on what might be the release schedule for any of those games, any alternative games?
spk02: Here in 2023, that is.
spk04: Thank you, Pat. And this is Heidi. Quick question. So in 2023, other than the R2, what we plan is we are currently working on DLCs. So during the 2023, we will not only have DLC that we'll be releasing, we are also working on our current game with the Unreal 5 engine. And all of these will be released in 2023. OK.
spk08: And then also I was wondering with ARK 2 and I guess with the wish list on Steam, I take it as that's kind of a way to judge some of the anticipation for the game ahead of its release. I was wondering if there's any color you could give on what kind of clamor you're seeing from gaming fans for ARK 2, maybe via Steam wish list or any other ways you can kind of judge what the level of excitement is and whether that's up to expectations.
spk04: Thank you, Pat. Great question. Actually, you know, we know that ARC has a lot of great fans. People are waiting for ARC 2 to come out. And we do notice that currently we're seeing more than almost 1.4 million people are actually at ARC on their wish list at this moment right now.
spk08: Gotcha. Okay, thanks. And then I had a question about just sort of the esports genre in general and the opportunities that could provide to the company. Is there any color you could provide on the appetite for esports in the sandbox survival game genre and what the prospects for ARK would be?
spk01: Yes. Hi, this is Jim Tai, CEO of Snell.
spk03: I would take this question. It's a good question that this genre of survival game has been on for more than five, six years. And we've been always thinking about how to bring this IP to a different genre like esports. And we actually just relaunched the survival of the cities is trained to be an esports. But the esports genre that we're talking about We want to be very different. And also this eSports Survival General has been in the market and will continue testing. And we are very patient and we are listening to the players. We are continuing updating. But on this year, particularly early this year, that you are able to see a lot of good feedback on the relaunch of the Ask Survival to Fitness.
spk08: Gotcha. Okay. And then one more question, if I may, would just be with regard to ARK 2. Is there any expansion of gaming platforms or consoles that ARK 2 will expand the franchise to over and above what the original ARK game was available on?
spk01: So, yes. Thank you. This is Jim again.
spk03: Yeah, we actually will learn from the ARK, the progress in history, how the DLC launched after the ARK. But very importantly is that we want to listen to the player, what would they like and how they respond when the ARK 2 launches and how we can update the ARK 2 and more DLC and what type of DLC that we can train when the ARK 2 launches. Gotcha.
spk08: Okay, thanks so much. That's all I have. Thank you.
spk06: Another reminder to the audience to ask a question, press star one. We'll pause for another moment to see if there are any additional questions.
spk02: There appears to be no additional questions. Actually, one just came in one moment.
spk06: This question comes from Jay Kim with Alpine Global. Please state your question.
spk09: Just curious. If we could revisit the last question. If we look at the number of devices out there, Xbox, PlayStation, console, excuse me, PC, switch, will the playability, availability of Arc 2 be pretty much the same as last year, or will you be supporting something like Steam Deck or other platforms? Will there be the same number, or do you think there'll be a net gain of the platform?
spk06: Sir, we can't hear you that well. Could you take yourself off speakerphone and repeat the question?
spk09: It's my headset. Hold on a second.
spk02: Can you hear me better?
spk06: Yes, much better. Go ahead.
spk07: okay um so what i'm wondering is you know last year you had um you know the major consoles the uh pcs uh switch uh this year looks like um the steam deck is is becoming a you know a a real thing um is there any is there an opportunity for AHRQ to be available on an additional device for this coming year, for 2030?
spk02: Hi, this is Jim. Hi, Jay.
spk03: Good to hear voice again. Good question. I think if we look back to the AHRQ progression, And obviously, at the end of the day, we want this R to be on every platform that it can be. We try to be on the cloud server computing gaming platform. We've been on Steam by a little bit years, not just the DLC, but we deploy to a different platform. I don't want to say slowly, but we're just progressing cautiously because we want when the platform update is not just a conversion of the platform, but also accumulate all the players' reviews and their recommendations to have the best version moving forward. So on the Arc 2, it will be the same. We're starting with PC and Xbox because it provides the best cross-platform play experience. And we will learn that because Arc is an actual as well. It's very important of the multiplayer. And then we will either DLC or new platform deploy. It will come at a time when we have more players coming in and what their suggestions But at the end, we would have all the platform that's available, either is existing platform like Switch and mobile, or maybe that's a new platform, and then we will continue to explore.
spk02: Okay. All right. Thank you.
spk01: You're welcome.
spk06: There are no further questions at this time. I'll hand the floor back to our management for any closing remarks.
spk02: Thank you. Thank you, everyone, for joining our conference call. Thank you. I'm sorry to disconnect now. Have a good day.
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