Snail, Inc. Class A Common Stock (SNAL) Q4 2024 Earnings Report, Transcript and Summary

Welcome everyone, thank you for joining us today. I am very excited to share with you our results for the quarter and full year, as well as provide you with some updates regarding our portfolio, specifically our Arc franchise. With the release of the Extinction DLC and part three of the Boss Total Sales DLC for ASA in the fourth quarter, we continue to capitalize on the increasing popularity of the franchise by engaging new players and continuing to excite our existing community through innovative updates and launches within the Arc franchise. We remain committed to being pioneers in the world of interactive entertainment, including strategic investments in advanced AI technologies that enhance both creativity and productivity. Now, I will provide some updates on the Arc franchise. During the fourth quarter, we released the highly anticipated next-gen Arc mobile game, ARC Ultimate Mobile Edition, on iOS and Android platforms. In the December launch month, over two million users downloaded the mobile game across the two mobile platforms. Through December 31, 2024, AUGS has been paid for 3.9 million billing hours, with an average playing time per user of 162.1 hours. Additionally, as we highlighted previously, the top 21.3% of all players have spent over 100 hours immersed in the game. According to data from Steam, we are thrilled with the continued success of the Arc franchise and to see so many players entrenched themselves in the ARC universe. Before I hand the call off to Peter Kang and Heidy Kingwan Chow to discuss our results in more detail, let's quickly go over the financials from the quarter. For the fourth quarter of 2024, Snail, Inc. Class A Common Stock generated net revenue of $26.2 million, a decrease from the $28.6 million in the fourth quarter of 2023. In the fourth quarter of 2024, net revenue includes the recognition of $8.0 million in revenue from the release of Extinction and part three of Boss Totals, up sales of $15.5 million, and BellRite sales of $1.0 million. Thank you all again for joining. With that, I will now hand the call over to Peter Kang, our Senior Vice President, Director of Business Development and Operations, to review our product roadmap and share some key developments. Peter?

Thank you, Tony. Hello, everyone. Thanks for joining us today. I'd like to provide some updates on each of our core franchises. First, an update on BellRite. As of the end of 2024, we have sold over 367,000 units to date, and the wish list count for the game remains over one million. Regarding Honeycomb, the world beyond is a survival sandbox game set on an exuberant planet, Soda Seven. Explore its vast world and face challenges on your bioengineering journey. Crossbreed plants or animals, gather resources, craft items, and conduct experiments in order to develop new species. Honeycomb continues to represent Snail Games' dedication to providing a unique gameplay experience within their survival genre. We are excited to release this game in 2025. Echoes of Elysium is an airship RPG set in the procedural world of Velezium. Gather resources to design, build, and live on your customized airship. Alone or with friends, take to the skies, discover clockwork wonders that clash with ancient mysteries in an untamed paradise. Robots at Midnight bash through games of hostile robots and corrupt bosses in this stylish and punchy action RPG. Robots at Midnight is a retro-futuristic, soul-like game that takes place on Yub, a world now in ruins. Built as a luxury destination, the planet is overrun with dangers, challenging for any human to endure. Be home before midnight. Moving on to our indie publishing label, Wandering Wizard. As mentioned previously, we have expanded our publishing catalog with several games signed earlier this year: The Cecil, The Journey Begins, Chasmofear, Castle of Secrets, and Stone Guard. All of these indie titles will be gradually released in our pipeline. At the end of 2024, Wandering Wizard has many game titles at various stages of development and has maintained our commitment to identifying new opportunities that emphasize gameplay excellence and clear market fit. Let's turn now to the Arc franchise. For ARC Survival Ascended, we released the Extinction DLC and part three of the Bob's Tall Tale DLC in the fourth quarter. On the mobile side, we released the highly anticipated revamp of the original Arc mobile game, Arc Ultimate Mobile Edition, in December of 2024. Through the year-end, Arc Ultimate Mobile Edition has accumulated more than two million downloads. Looking ahead to 2025, we are proud to celebrate the launch of the Astrios map as an official partner DLC for ARC Survival Ascended. A significant evolution from its origins as a community-created mod by acclaimed mapmaker Necatis. Now fully supported as a paid DLC, the Astrios map infuses the Arc universe with a rich Greek mythology twist, delivering immersive new environments and challenges that transform the overall gameplay experience. We are excited to announce the ten-year anniversary ARC Survival Evolved Aquatica DLC, a fully underwater gameplay experience. Waking up on Aquatica, a crash-landed arc submerged with a vast underworld water biome, survivors are thrust into exotic challenges never before encountered. Extreme environmental hazards, crushing pressures, rapid currents, and a host of extraordinary creatures await within the mysterious depths.

On the Quantica,

survivors will uncover the potential source of element and catch a glimpse of what the future holds for those bold enough to endure. Aquatica is the first official DLC to tell a non-canonical myth-pickled story, expanding the arc universe into new dimensions of survival.

We are excited for the next chapter in the ARC universe

with the release of Arc Lost Colony DLC for ARC Survival Ascended towards the end of the year. Arc Lost Colony is a full-size canonical expansion pack featuring a new map, creatures, items, structures, and the continuation of the story of Arc.

I will now pass the call out to Heidy Kingwan Chow

to discuss our financial results in more detail.

Thank you, Peter. And hello, everyone. Thank you for joining us. As mentioned, net revenue for the three months ended December 31, 2024, was $26.2 million, as compared to $28.6 million in the three months ended December 31, 2023. The decrease in revenues during the three months ended December 31, 2024, was due to a reduction in sales of Arc that was partially offset by the recognition of deferred revenue upon the release of Arc Survival Extended DLCs noted in our financial statements. Net revenue for the year ended December 31, 2024, was $84.5 million, as compared to $60.9 million in the prior year period. The increase in net revenues was due to an increase in recognition of deferred revenue of $32.2 million related to the ARC franchise, an increase in sales of BellRite of $5.9 million, partially offset by a decrease in total ARK sales of $13 million, a decrease in ARC mobile sales of $1 million, and a decrease in the company's other titles of $700,000. Net income in the fourth quarter of 2024 was $1.1 million versus $2.4 million in the fourth quarter of 2023. The decrease in net income is a result of increased research and development costs of $3 million to support our future game releases, partially offset by an increase in gross profit of $1.4 million and a decrease in advertising and marketing expenses of $900,000. Net income for the year ended December 31, 2024, increased significantly to $1.8 million versus a net loss of $9.1 million in the prior year period due to an increase in net revenue of $23.6 million, increased general and administrative expenses, partially offset by increased research and development costs of $6.5 million, increased cost of revenue of $5.9 million, and a decrease in income tax benefit of $3 million. Bookings for the three months ended December 31, 2024, were $17 million, as compared to $52.6 million for the three months ended December 31, 2023.

The decrease in booking is

due mainly to the release of Arc Survival Ascended in the fourth quarter of 2023. Bookings for the year ended December 31, 2024, were $75.7 million, as compared to $85.7 million in the prior year period. Bookings decreased by $10 million or 11.7% compared to the year ended December 31, 2023, because of increased sales at a higher ASP driven by the release of Arc Survival Ascended in the fourth quarter of 2023. The releases of Box Hotels and BellRite, along with the Arc Survival Extended DLC Scorched Earth in April 2024, Aberration in September 2024, and Extinction in December 2024, partially offset the decrease in unit sales in 2024. But each product release was at a lower ASP than the initial release of Arc Survival Ascended. Additionally, the company recognized $13.2 million from deferred revenue upon the release of Scorched Earth, Aberration, and the first two parts of Bob's Hotels in 2024, and the first $6.7 million in revenues during the year ended December 31, 2024, for the ARC survival extended DLCs have not yet released, as compared to $22 million in revenue deferred during the year ended December 31, 2023, for the Arc Survival Ascended DLC and part of Bob's Tall Tales that have not yet launched. EBITDA for the quarter was $1.6 million versus $3.6 million in the prior year period. The $2 million or 55.6% decrease in EBITDA was due to a decrease in net income of $1.3 million, a decrease in interest expenses and interest expenses related to the party of $400,000, and a decrease in provision of income taxes of $300,000. EBITDA for the year was $3.2 million versus a loss of $9.7 million in the prior year period. The $12.9 million or 133.4% increase in EBITDA was primarily because of an increase in net income of $10.9 million and a decrease in the benefit from income taxes of $3 million, partially offset by decreasing interest expense and interest expense related to the party of $800,000. As of December 31, 2024, unrestricted cash and cash equivalents were $7.3 million. To review our detailed financial statements, please refer to the earnings press release and most recent 10-Q and our 10-K filings. Thank you all for joining us today. We will now open the line for Q&A. Operator,

Thank you. We will now be conducting a question and answer session. Before pressing the star key.

Our first question is from Michael Kupinski with Noble Capital Markets. Please proceed with your question. Thank you. Congratulations on a solid quarter. I have a couple of questions.

When do you anticipate BellRite would be available on

Xbox? And then how many new games do you have access to BellRite? Or how many new gamers will have access to BellRite on Xbox? And could you just talk a little bit about whether or not it would be a good candidate for Game Pass?

Hi. This is Peter Kang. I am going to try to give some answers to this question. We do anticipate BellRite to be available on the Xbox cloud. As far as how many new gamers, well, that is hard to say. There are lots of console gamers out there that enjoy the survival simulation crafting type of gameplay. We do believe it is a unique product in that catalog. There are not too many of those types of games on that platform. If I were to have to guess, it might be at least as much as we have on PC over time. As far as if it would be a good candidate for the Game Pass program, you know, that is up to Microsoft to consider. We do have communications open with their team regarding that subject. So, you know, hopefully, that question can get answered in the future. But as of right now, we do not have a definite confirmation.

Thank you. And another question. I know that several gaming companies in the past have gotten into a little bit of trouble as they tried to develop more games and then just kind of ran out of resources. I know that you have a different process for that, and I was wondering if you can kind of describe that a little bit and then also discuss some of your newer titles and potential release timelines and also the benefits of doing some revenue diversification.

Sure. Sure. That is a very complicated question. But I will do my best to break it down. So we definitely have increased our licensing pipeline where last year we went out and signed eleven new publishing deals to publish content manufactured and developed by third parties. We also kicked off or continued development of three internal projects. These projects are bigger in scale using some new IPs like the project for the Stars, and some with flagship IPs that we have retained for many years, named Nayan Sutra, I believe. Right. And then, you know, as we move on, we are constantly looking for new projects to publish. So we are very active in the sector looking for different projects to publish. The projects that we have signed, Honeycomb, for example, that is coming out in the second half of 2025. Echoes of Elysium, another sandbox survival game, that will also be arriving in the second half of 2025. Robots at Midnight is going to be in the first half of 2025, so coming up here in a few months.

And then how do you allocate resources among the marketing spend against some of the titles and how do you allocate those resources?

Sure. The resource allocation is namely based on an analytical approach where we look at the size of the market that the game will be actively trying to establish a presence in. And based on the size of that market, we do some math and deduce the correct amount of marketing budget that we can afford to spend on the project.

Great. That is all I have. Thank you.

Thank you. There are no further questions at this time.

I would like to hand the floor back over to management for any closing remarks. This concludes today's conference. You may disconnect your line at this time. Thank you for your participation.