Second Quarter 2023 and Subsequent Financial and Business Highlights
- Revenue was
$9.9 million for the three months endedJune 30, 2023 , compared to revenue of$15.5 million in the prior year period, representing a decrease of$5.6 million year over year. The decrease in net revenues was due to a decrease in sales of ARK, 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 ARK: Survival Ascended. ARK sales and in-game purchases decreased by$5.3 million . Sales of the Company’s smaller titles decreased by a collective$0.6 million . These decreases in the Company’s smaller titles were partially offset by an increase of$0.1 million in revenue related to West Hunt. - ARK: Survival Evolved. In the three months ended
June 30, 2023 , ARK: Survival Evolved averaged a total of 240,522 daily active users (“DAUs”) versus 359,077 DAUs in the prior year period.- ARK units sold decreased for the second quarter 2023 compared to the same period last year; approximately 0.9 million vs. 1.6 million, respectively.
- Through
June 30, 2023 , total playtime for the ARK franchise amounted to 3.3 billion hours with an average playing time per user of more than 162 hours and with the top 21.0% of all players spending over 100 hours in the game, according to data from the Steam platform.
- ARK units sold decreased for the second quarter 2023 compared to the same period last year; approximately 0.9 million vs. 1.6 million, respectively.
- Net loss was
$4.1 million for the three months endedJune 30, 2023 as compared to a net loss of$1.0 million for the three months endedJune 30, 2022 , representing a decrease of$3.1 million . The decrease was primarily due to a decrease in revenue of$5.6 million , an increase in research and development expense of$1.0 million , an increase in interest expense of$0.1 million , and an increase in internet, server, and data costs of$0.3 million , partially offset by a decrease in royalties of$1.2 million , a decrease in license cost and license right amortization of$1.6 million , a decrease in merchant and engine fees of$0.5 million , and a decrease in the Company’s tax provision of$0.8 million . - Bookings for the three months ended
June 30, 2023 decreased by$5.8 million , or 38.5%, compared to the three months endedJune 30, 2022 , primarily as a result of a decrease in ARK revenues and in game purchases which contributed to$5.3 million of the decrease during the three months endedJune 30, 2023 . The decrease in ARK revenues during the three months endedJune 30, 2023 was due partially to fewer sales days in the period and the anticipated release of ARK: Survival Ascended. - Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter of 2023 was a loss of
$4.8 million compared to a loss of$1.1 million in the prior year period. - As of
June 30, 2023 , unrestricted cash was$3.0 million versus$12.9 million as ofDecember 31, 2022 .
Use of Non-GAAP Financial Measures
In addition to the financial results determined in accordance with
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 | Six months ended | ||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||
(in millions) | (in millions) | ||||||||||||
Total net revenue | $ | 9.9 | $ | 15.5 | $ | 23.4 | $ | 43.5 | |||||
Change in deferred net revenue | (0.6 | ) | (0.4 | ) | (0.8 | ) | (3.0 | ) | |||||
Bookings | $ | 9.3 | $ | 15.1 | $ | 22.6 | $ | 40.5 | |||||
We define EBITDA as net income (loss) before (i) interest expense, (ii) interest income, (iii) income tax provision (benefit from) and (iv) depreciation and amortization expense. The following table provides a reconciliation from net income (loss) to EBITDA:
Three months ended | Six months ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
(in millions) | (in millions) | ||||||||||||||
Net (loss) income | $ | (4.1 | ) | $ | (1.0 | ) | $ | (7.1 | ) | $ | 4.8 | ||||
Interest income and interest income – related parties | - | (0.1 | ) | (0.1 | ) | (0.6 | ) | ||||||||
Interest expense and interest expense – related parties | 0.3 | 0.2 | 0.6 | 0.4 | |||||||||||
(Benefit from) provision for income taxes | (1.1 | ) | (0.3 | ) | (1.9 | ) | 1.2 | ||||||||
Depreciation and amortization expense, property and equipment | 0.1 | 0.1 | 0.2 | 0.3 | |||||||||||
EBITDA | $ | (4.8 | ) | $ | (1.1 | ) | $ | (8.3 | ) | $ | 6.1 | ||||
Webcast Details
The Company will host a webcast at
About
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:
investors@snail.com
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
Further information on risks, uncertainties and other factors that could affect Snail’s financial results are included in its filings with the
Condensed Consolidated Balance Sheets
(Unaudited)
ASSETS | |||||||||
Current Assets: | |||||||||
Cash and cash equivalents | $ | 2,960,160 | $ | 12,863,817 | |||||
Restricted escrow deposit | 1,025,193 | 1,003,804 | |||||||
Accounts receivable, net of allowances for credit losses of | 4,963,566 | 6,758,024 | |||||||
Accounts receivable - related party, net | 11,733,226 | 11,344,184 | |||||||
Loan and interest receivable - related party | 102,745 | 101,753 | |||||||
Prepaid expenses - related party | 2,500,000 | - | |||||||
Prepaid expenses and other current assets | 12,216,801 | 10,565,141 | |||||||
Total current assets | 35,501,691 | 42,636,723 | |||||||
Restricted cash and cash equivalents | 1,113,960 | 6,374,368 | |||||||
Prepaid expenses - related party | 5,582,500 | 5,582,500 | |||||||
Property, plant and equipment, net | 4,881,629 | 5,114,799 | |||||||
Intangible assets, net - license - related parties | 326,087 | 1,384,058 | |||||||
Intangible assets, net - other | 272,119 | 272,521 | |||||||
Deferred income taxes | 9,490,241 | 7,602,536 | |||||||
Other noncurrent assets | 180,778 | 198,668 | |||||||
Operating lease right-of-use assets, net | 3,032,069 | 3,606,398 | |||||||
Total assets | $ | 60,381,074 | $ | 72,772,571 | |||||
LIABILITIES, NONCONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY | |||||||||
Current Liabilities: | |||||||||
Accounts payable | $ | 8,658,585 | $ | 9,452,391 | |||||
Accounts payable - related party | 19,611,207 | 19,918,259 | |||||||
Accrued expenses and other liabilities | 2,678,848 | 1,474,088 | |||||||
Interest payable - related parties | 527,770 | 527,770 | |||||||
Revolving loan | 6,000,000 | 9,000,000 | |||||||
Short term note | 2,916,667 | 5,416,666 | |||||||
Current portion of promissory note | 2,845,303 | 86,524 | |||||||
Current portion of deferred revenue | 4,125,505 | 4,335,404 | |||||||
Current portion of operating lease liabilities | 1,437,140 | 1,371,227 | |||||||
Total current liabilities | 48,801,025 | 51,582,329 | |||||||
Accrued expenses | 384,150 | 457,024 | |||||||
Promissory note, net of current portion | - | 3,221,963 | |||||||
Deferred revenue, net of current portion | 4,660,343 | 5,216,042 | |||||||
Operating lease liabilities, net of current portion | 2,191,465 | 2,930,529 | |||||||
Total liabilities | 56,036,983 | 63,407,887 | |||||||
Commitments and contingencies | |||||||||
Stockholders' Equity: | |||||||||
Class A common stock, | 925 | 925 | |||||||
Class B common stock, | 2,875 | 2,875 | |||||||
Additional paid-in capital | 25,708,907 | 23,436,942 | |||||||
Accumulated other comprehensive loss | (286,173 | ) | (307,200 | ) | |||||
Accumulated deficit | (11,914,059 | ) | (4,863,250 | ) | |||||
13,512,475 | 18,270,292 | ||||||||
(3,671,806 | ) | (3,414,713 | ) | ||||||
9,840,669 | 14,855,579 | ||||||||
Noncontrolling interests | (5,496,578 | ) | (5,490,895 | ) | |||||
Total stockholders' equity | 4,344,091 | 9,364,684 | |||||||
Total liabilities, noncontrolling interests and stockholders' equity | $ | 60,381,074 | $ | 72,772,571 | |||||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
Three months ended | Six months ended | ||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Revenues, net | $ | 9,892,253 | $ | 15,463,522 | $ | 23,350,741 | $ | 43,518,113 | |||||||||
Cost of revenues | 9,335,765 | 12,259,514 | 20,196,702 | 27,973,329 | |||||||||||||
Gross profit | 556,488 | 3,204,008 | 3,154,039 | 15,544,784 | |||||||||||||
Operating expenses: | |||||||||||||||||
General and administrative | 3,937,234 | 4,250,882 | 8,462,985 | 9,046,094 | |||||||||||||
Research and development | 1,200,842 | 179,050 | 2,574,639 | 363,006 | |||||||||||||
Advertising and marketing | 168,292 | 212,039 | 272,841 | 370,710 | |||||||||||||
Depreciation and amortization | 118,110 | 138,791 | 233,170 | 307,108 | |||||||||||||
Total operating expenses | 5,424,478 | 4,780,762 | 11,543,635 | 10,086,918 | |||||||||||||
(Loss) income from operations | (4,867,990 | ) | (1,576,754 | ) | (8,389,596 | ) | 5,457,866 | ||||||||||
Other income (expense): | |||||||||||||||||
Interest income | 19,791 | 17,705 | 51,264 | 33,077 | |||||||||||||
Interest income - related parties | 499 | 130,695 | 992 | 581,623 | |||||||||||||
Interest expense | (296,237 | ) | (186,213 | ) | (590,820 | ) | (352,268 | ) | |||||||||
Interest expense - related parties | - | (1,496 | ) | - | (3,222 | ) | |||||||||||
Other income | - | 296,969 | 8,175 | 299,653 | |||||||||||||
Foreign currency transaction (loss) gain | (21,845 | ) | 7,916 | (24,212 | ) | 5,510 | |||||||||||
Total other (expense) income, net | (297,792 | ) | 265,576 | (554,601 | ) | 564,373 | |||||||||||
(Loss) income before (benefit from) provision for income taxes | (5,165,782 | ) | (1,311,178 | ) | (8,944,197 | ) | 6,022,239 | ||||||||||
(Benefit from) provision for income taxes | (1,081,887 | ) | (327,347 | ) | (1,887,705 | ) | 1,202,303 | ||||||||||
Net (loss) income | (4,083,895 | ) | (983,831 | ) | (7,056,492 | ) | 4,819,936 | ||||||||||
Net (loss) income attributable to non-controlling interests | (4,464 | ) | 70,466 | (5,683 | ) | 63,176 | |||||||||||
Net (loss) income attributable to | (4,079,431 | ) | (1,054,297 | ) | (7,050,809 | ) | 4,756,760 | ||||||||||
Comprehensive income statement: | |||||||||||||||||
Other comprehensive income (loss) related to currency translation adjustments, net of tax | 18,707 | (31,199 | ) | 21,027 | (82,402 | ) | |||||||||||
Total comprehensive (loss) income | $ | (4,060,724 | ) | $ | (1,085,496 | ) | $ | (7,029,782 | ) | $ | 4,674,358 | ||||||
Net (loss) income attributable to Class A common stockholders: | |||||||||||||||||
Basic | $ | (879,665 | ) | $ | (1,054,297 | ) | $ | (1,522,005 | ) | $ | 4,756,760 | ||||||
Diluted | $ | (879,665 | ) | $ | (1,054,297 | ) | $ | (1,522,005 | ) | $ | 4,756,760 | ||||||
Net loss attributable to Class B common stockholders: | |||||||||||||||||
Basic | $ | (3,199,766 | ) | $ | - | $ | (5,528,804 | ) | $ | - | |||||||
Diluted | $ | (3,199,766 | ) | $ | - | $ | (5,528,804 | ) | $ | - | |||||||
(Loss) income per share attributable to Class A and B common stockholders: | |||||||||||||||||
Basic | $ | (0.11 | ) | $ | (0.03 | ) | $ | (0.19 | ) | $ | 0.14 | ||||||
Diluted | $ | (0.11 | ) | $ | (0.03 | ) | $ | (0.19 | ) | $ | 0.14 | ||||||
Weighted-average shares used to compute income per share attributable to Class A common stockholders: | |||||||||||||||||
Basic | 7,901,145 | 35,000,000 | 7,914,096 | 35,000,000 | |||||||||||||
Diluted | 7,901,145 | 35,000,000 | 7,914,096 | 35,000,000 | |||||||||||||
Weighted-average shares used to compute income per share attributable to Class B common stockholders: | |||||||||||||||||
Basic | 28,748,580 | - | 28,748,580 | - | |||||||||||||
Diluted | 28,748,580 | - | 28,748,580 | - | |||||||||||||
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Six Month Period Ended | 2023 | 2022 | |||||||
Cash flows from operating activities: | |||||||||
Net (loss) income | $ | (7,056,492 | ) | $ | 4,819,936 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | |||||||||
Amortization - intangible assets - license | - | 250,000 | |||||||
Amortization - intangible assets - license, related parties | 1,057,971 | 3,701,959 | |||||||
Amortization - intangible assets - other | 402 | 448 | |||||||
Amortization - loan origination fees | 20,726 | 12,557 | |||||||
Depreciation and amortization - property and equipment | 233,170 | 307,108 | |||||||
Stock-based compensation expense | 385,365 | - | |||||||
Gain on lease termination | - | (122,533 | ) | ||||||
Gain on paycheck protection program and economic injury disaster loan forgiveness | - | (174,436 | ) | ||||||
Loss on disposal of fixed assets | - | 2,433 | |||||||
Interest income from shareholder loan | - | (580,878 | ) | ||||||
Interest income from restricted escrow deposit | (21,389 | ) | - | ||||||
Deferred Taxes | (1,887,705 | ) | - | ||||||
Changes in assets and liabilities: | |||||||||
Accounts receivable | 1,794,458 | 4,730,110 | |||||||
Accounts receivable - related party | (389,042 | ) | (2,505,580 | ) | |||||
Prepaid expenses - related party | (2,500,000 | ) | (4,375,000 | ) | |||||
Prepaid expenses and other current assets | 234,940 | (984,632 | ) | ||||||
Other noncurrent assets | (2,903 | ) | (15,944 | ) | |||||
Accounts payable | (701,488 | ) | 1,323,972 | ||||||
Accounts payable - related party | (307,052 | ) | (222,536 | ) | |||||
Accrued expenses | 1,131,886 | 363,240 | |||||||
Interest receivable - related parties | (992 | ) | - | ||||||
Interest payable - related parties | - | 1,994 | |||||||
Lease liabilities | (98,822 | ) | (69,188 | ) | |||||
Deferred revenue | (765,599 | ) | (3,021,554 | ) | |||||
Net cash (used in) provided by operating activities | (8,872,566 | ) | 3,441,476 | ||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | - | (5,256 | ) | ||||||
Repayment on Pound Sand note | - | 1,496,063 | |||||||
Net cash provided by investing activities | - | 1,490,807 | |||||||
Cash flows from financing activities: | |||||||||
Repayments on promissory note | (46,517 | ) | (38,759 | ) | |||||
Repayments on short-term note | (2,916,666 | ) | (2,083,333 | ) | |||||
Repayments on revolving loan | (3,000,000 | ) | - | ||||||
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 | |||||||
Cash dividend declared and paid | - | (8,200,000 | ) | ||||||
Purchase of treasury stock | (257,093 | ) | - | ||||||
Payments of offering costs in accounts payable | (92,318 | ) | - | ||||||
Net cash used in financing activities | (6,312,594 | ) | (363,985 | ) | |||||
Effect of currency translation on cash and cash equivalents | 21,095 | (63,694 | ) | ||||||
Net (decrease) increase in cash and cash equivalents, and restricted cash and cash equivalents | (15,164,065 | ) | 4,504,604 | ||||||
Cash and cash equivalents, and restricted cash and cash equivalents – beginning of period | 19,238,185 | 16,554,115 | |||||||
Cash and cash equivalents, and restricted cash and cash equivalents – end of period | $ | 4,074,120 | $ | 21,058,719 | |||||
Supplemental disclosures of cash flow information | |||||||||
Cash paid during the period for: | |||||||||
Interest | $ | 568,908 | $ | 339,710 | |||||
Income taxes | $ | 270,802 | $ | 828,012 | |||||
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 finance activity during the period for: | |||||||||
Refund of dividend withholding tax overpayment | $ | 1,886,600 | $ | - | |||||
Gain on paycheck protection program and economic injury disaster loan forgiveness | $ | - | $ | (174,436 | ) | ||||
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