Snail, Inc. Announces Third Quarter 2022 Financial Results

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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 results reflect activities of Snail Games USA Inc. as well as its subsidiaries.

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

The Third Quarter 2022, and the Subsequent Business Highlights

  • Survival Evolved in the ARK. For the three-month period ending September 30, 20,22 ARK: Survival Evolved averaged a total of 328,583 daily active users (“DAUs”) versus 221,336 DAUs in the prior year period.

    • Growth in new installations for the third quarter 2022 was 4.4x higher than that of the third quarter 2021, 6.4M vs. 1,2M, respectively. Growth is largely due to Epic Games’ Free Week.

    • The third quarter 2022 saw a decrease in units sold compared to last year’s. It was 1.1 million vs. the 1.2M. Included in the units sold are DLCs and games.

    • The total amount of playtime is 2.9 billion hours through September 30, 2022.

  • 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. The IPO was simultaneously completed by Snail Games USA stockholders who exchanged 500,000 shares for 6,251,420 Class A shares and 28,748,580 Class B shares of Snail, Inc. common stock.

  • Program for Share Repurchase. 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 Share Repurchase program has no expiration date and cannot have a maximum aggregate of more than $5.0 million in shares. The CEO, Treasurer, and CFO can determine the exact number of shares and the method of repurchase. On December 13, 2022 1,090.877 shares of Class A stock were repurchased through the Share Repurchase program. The average share price was $2.98.

Financial Highlights for the Third Quarter of 2022

  • The decrease in revenue from $24.4 million to $15.6 millions in the third quarter 2022 was primarily responsible for the 36.1% drop in revenue ARK Sold units ARK The game’s age, and normalized sales in 2022 after its initial release, led to a decrease of $8.5 million in related revenues. Genesis II In June 2021. $3.3 million of the $8.5million decrease was due to one-off payments and revenue from previous contract payments. ARK Revenue, reduced sales ARK And ARK Mobile is responsible for the $5.2 Million decrease.

  • The third quarter of 2022 saw a net loss of $1.5 million, compared with a net income of $3.8million in the previous year. This was due to the lower sales. ARKStatic licensing fees and higher general and administrative cost.

  • The three-month period ending September 30, 2022 saw bookings drop by $6.9million, or 37.9% to $11.3million, compared with the previous year. This is primarily due to a decrease in demand for hotels. ARK-related revenues.

  • EBITDA in the third quarter 2022 was $1.5 million lower than the $4.6 million gain for the previous year.

  • Cash stood at $9.0million as of September 30, 2022. This cash balance does in fact not reflect the $12.0 million net proceeds of the IPO on November 9, 2022.

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

Non-GAAP Financial Instruments

Snail believes Bookings (a non-GAAP measure) are valuable in evaluating the company’s operating performance. EBITDA, Bookings, and other non-GAAP financial metrics are not intended to be used as indicators of operating results. Snail supplements Bookings and EBITDA as they are critical operating measures that management uses to evaluate financial performance. Bookings adjusts for deferrals, and Snail believes it provides an indicator of sales volume in a given period. EBITDA adjusts items that Snail believes don’t reflect its ongoing operating performance. This includes items that aren’t cash items or those that change between periods without having any material impact on its operating results. 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 are the net sales of digital or physical products and services during the period. Bookings excludes deferred revenue. Below is a reconciliation for total net revenue to Bookings. This is the closest GAAP financial indicator.

 

Three Months End
September 30,

 

Nine months of work completed
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

)

Book 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 shows a reconciliation between net income (loss), and EBITDA.

 

 

 

 

 

 

 

Three Months End
September 30,

 

Nine Months End
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

 

Amortization expense and depreciation

 

0.1

 

 

0.2

 

 

 

0.4

 

 

0.6

 

EBITDA

$

(1.5

)

$

4.6

 

 

$

4.4

 

$

21.0

 

 

 

 

 

 

 

Webcast Details

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

About Snail, Inc.

Snail, a global independent developer and publisher, is a leader in interactive digital entertainment. It offers a range of premium games for a variety platforms, including mobile and PCs.

Contacts:

Investors:

[email protected]

Forward-Looking Statements

Forward-looking statements can be found in this press release. 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. Forward-looking statements are made by Snail regarding the following topics: growth prospects, strategies, launching new games, additional functionality to existing games, and competition from companies within a variety of industries including, but not limited to, Microsoft Xbox Live and Game Pass, Steam, Epic Games Stores, Google Stadia and Amazon Appstores. They also include information about Snail’s ability to attract and keep qualified management teams and other team members, as well as costs associated with intellectual property infringement, costs associated with protecting its brand and its plans for repurchases and how they will be done under the Share Repurchases, expectations of the program, and the program, and the timing and method of repurchases.

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. These forward-looking statement should not be relied on as actual outcomes or results could differ materially as a result. 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 to doubtful accounts of $19 929 and $31,525, respective

 

4,596,313

 

 

 

12,244,785

 

Accounts receivable, related party, net

 

12,239,430

 

 

 

8,435,823

 

Related party – Loan and interest receivable

 

101,249

 

 

 

203,408

 

Prepaid expenses – related party net of long-term portion

 

1,500,000

 

 

 

3,145,000

 

Prepaid expenses and other assets

 

11,704,897

 

 

 

11,017,007

 

Total assets

 

39,186,555

 

 

 

45,210,361

 

 

 

 

 

Restricted cash or cash equivalents

 

6,368,016

 

 

 

6,389,777

 

Prepaid expenses – Related party

 

6,520,000

 

 

 

 

Net property, plant, and equipment

 

5,245,271

 

 

 

5,678,701

 

Intangible assets, net-license – related parties

 

3,235,038

 

 

 

8,787,976

 

License for intangible assets and net

 

 

 

 

250,000

 

Intangible assets net – Other

 

275,600

 

 

 

277,148

 

Deferred income tax

 

8,191,051

 

 

 

8,191,051

 

Other assets not currently in use

 

194,032

 

 

 

199,919

 

Net operating lease rights-of-use assets

 

3,887,326

 

 

 

5,100,912

 

Total assets

$

73,102,889

 

 

$

80,085,845

 

 

 

 

 

LIABILITIES, NONCONTROLLING INTERRESTS AND EQUITY

 

 

 

 

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

6,765,934

 

 

$

3,871,510

 

Accounts payable – Related Party

 

22,330,781

 

 

 

23,733,572

 

Other liabilities and accrued costs

 

2,375,610

 

 

 

2,975,475

 

Loan payable to related parties

 

 

 

 

400,000

 

Interest payable to related parties

 

527,770

 

 

 

528,439

 

Revolving loan

 

9,000,000

 

 

 

9,000,000

 

Note for short term

 

6,666,667

 

 

 

 

Notes payable

 

 

 

 

216,329

 

Current portion of long-term credit

 

79,425

 

 

 

77,348

 

Current portion 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

 

 

 

 

Net of the current portion, long-term debt

 

2,825,390

 

 

 

2,885,434

 

Deferred revenue, net current portion

 

9,048,505

 

 

 

9,275,417

 

Net of the current portion, operating lease liabilities

 

3,285,679

 

 

 

4,375,786

 

Total liabilities

 

68,634,064

 

 

 

70,033,792

 

 

 

 

 

Contingencies and commitments

 

 

 

 

 

 

 

Equity:

 

 

 

Common stock, $0.01 Par Value, 1,000,000 shares approved, 500,000 shares issued, and outstanding

 

5,000

 

 

 

5,000

 

Additional paid in capital

 

12,881,055

 

 

 

94,159,167

 

Due to shareholder – loan receivable

 

 

 

 

(91,388,176

)

Shareholder – Interest

 

 

 

 

(2,965,346

)

Other comprehensive loss

 

(343,277

)

 

 

(266,557

)

Retained earnings (accumulated surplus)

 

(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, equity and non-controlling interests

$

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 End
September 30,

 

Nine Months End
September 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Net Revenues

$

15,614,171

 

 

$

24,361,019

 

 

$

59,132,284

 

 

$

83,200,198

 

Revenues cost

 

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

 

Amortization and depreciation

 

128,536

 

 

 

208,896

 

 

 

435,644

 

 

 

638,659

 

Operating expenses

 

5,877,590

 

 

 

4,572,363

 

 

 

17,661,935

 

 

 

14,546,156

 

 

 

 

 

 

 

 

 

Operation-related income (loss)

 

(1,732,380

)

 

 

4,310,329

 

 

 

3,725,486

 

 

 

20,272,981

 

 

 

 

 

 

 

 

 

Other income (expenses).

 

 

 

 

 

 

 

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

 

Gain (or loss) in foreign currency transactions

 

16,169

 

 

 

(15,987

)

 

 

21,679

 

 

 

(80,755

)

Equity in the loss of an unconsolidated entity

 

 

 

 

 

 

 

 

 

 

(314,515

)

Total other income (expense), net

 

(212,184

)

 

 

340,191

 

 

 

352,189

 

 

 

976,873

 

 

 

 

 

 

 

 

 

Income (loss), before 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

 

 

 

 

 

 

 

 

 

Non-controlling interest is responsible for net loss

 

(6,828

)

 

 

(125,881

)

 

 

56,348

 

 

 

(489,499

)

 

 

 

 

 

 

 

 

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 Cash Flows
(Unaudited)

 

 

 

 

Nine Months Ended September 30

 

2022

 

 

 

2021

 

 

 

 

 

Cash flows from operations:

 

 

 

Net income

$

3,274,370

 

 

$

17,035,609

 

Operative activities provide adjustments to reconcile net income and net cash.

 

 

 

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

 

Property and equipment: Depreciation, amortization

 

435,644

 

 

 

638,659

 

Lease terminations: Gain

 

(122,533

)

 

 

 

Get a paycheck protection program or an economic injury catastrophe loan forgiveness

 

(174,436

)

 

 

(392,200

)

Dispose of fixed assets and get a return

 

(17,067

)

 

 

 

Interest income from a shareholder loan

 

(580,878

)

 

 

(1,074,881

)

Deferred taxes

 

 

 

 

2,682

 

Reduced non-controlling interest – dissolution

 

 

 

 

39,340

 

 

 

 

 

 

 

 

 

Asset and liability changes:

 

 

 

 

 

 

 

Receivables

 

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 assets

 

(2,232,406

)

 

 

(5,689,750

)

Other 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 to related parties

 

1,490

 

 

 

5,983

 

Lease liabilities

 

(103,782

)

 

 

(130,090

)

Deferred revenue

 

(7,297,736

)

 

 

(11,389,985

)

Operating activities generate net cash.

 

(665,737

)

 

 

18,653,787

 

 

 

 

 

Cash flows from investing activities

 

 

 

A loan provided to a related party

 

 

 

 

(24,506,321

)

Repayment of loan granted by another party

 

(300,000

)

 

 

 

Acquisition of license rights – related party

 

 

 

 

(5,000,000

)

Equipment and property purchases

 

(5,256

)

 

 

(3,403

)

Proceeds from the sale of equipment and property

 

19,500

 

 

 

 

Repayment of Pound Sand Note

 

1,496,063

 

 

 

 

Investment at cost

 

 

 

 

(895

)

Net cash from (used in) investment activities

 

1,210,307

 

 

 

(29,510,619

)

 

 

 

 

Cash flows from financing activities

 

 

 

Repayments of long-term debt

 

(57,967

)

 

 

(6,731,666

)

Repayments of short-term notes

 

(3,333,333

)

 

 

 

Long-term borrowings

 

 

 

 

2,904,815

 

Borrowing on short-term notes

 

10,000,000

 

 

 

 

Payroll protection program payments and an economic injury loan

 

(90,198

)

 

 

 

Refund of the payments for the economic injury loan and paycheck protection program

 

48,305

 

 

 

 

Revolving loan borrowers

 

 

 

 

6,500,000

 

Cash dividend declared, paid

 

(8,200,000

)

 

 

 

Financing activities provide net cash (used in).

 

(1,633,193

)

 

 

2,673,149

 

 

 

 

 

Cash and cash equivalents: Effect of currency translation

 

(52,810

)

 

 

380,403

 

 

 

 

 

Cash equivalents and cash substitutes, net decrease in cash

 

(1,141,433

)

 

 

(7,803,280

)

 

 

 

 

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

 

16,554,115

 

 

 

33,902,707

 

 

 

 

 

End of period cash, cash equivalents and restricted cash

$

15,412,682

 

 

$

26,099,427

 

 

 

 

 

Additional disclosures regarding cash flow information

 

 

 

Cash was paid for the following:

 

 

 

Interest

$

594,189

 

 

$

105,577

 

Income taxes

$

831,400

 

 

$

3,300,000

 

Noncash transactions are allowed during the following:

 

 

 

Loan and interest payments – Related parties

$

103,890

 

 

$

 

Related parties: Loan and interest receivable

$

(103,890

)

 

$

 

Shareholders can borrow and pay interest

$

94,934,400

 

 

$

 

Dividend distribution

$

(94,934,400

)

 

$

 

Noncash financing activities in the following period:

 

 

 

Get a paycheck protection program or an economic injury catastrophe loan forgiveness

$

(174,436

)

 

$

(392,200

)

 

 

 

 

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