Snail Q4 2023 Earnings Report

Root EPS Results

• Actual EPS: $0.07
• Consensus EPS: $0.27
• Beat/Miss: Missed by -$0.20
• One Year Ago EPS: N/A

Root Revenue Results

• Actual Revenue: $28.57 million
• Expected Revenue: $31.60 million
• Beat/Miss: Missed by -$3.03 million
• YoY Revenue Growth: N/A

Root Announcement Details

• Quarter: Q4 2023
• Date: 4/1/2024
• Time: N/A
• Conference Call Date: Monday, April 1, 2024
• Conference Call Time: 4:30PM ET

Root (NASDAQ:ROOT) provides insurance products and services in the United States. The company offers automobile, homeowners, and renters insurance products. It operates a direct-to-consumer model; and serves customers primarily through mobile applications, as well as through its website. The company's direct distribution channels also cover digital, media, and referral channels, as well as distribution partners and agencies. Root, Inc. was incorporated in 2015 and is headquartered in Columbus, Ohio.

Root Q4 2023 Earnings Call Transcript

[Operator]

Thank you for standing by, and welcome to Snell Incorporated's 4th Quarter and Full Year 2023 Earnings Conference Call and Webcast. I would now like to turn the call over to Drake Pisano, Vice President at ICR. Please go ahead.

[Speaker 1]

Thank you. Good afternoon and welcome to Snail Inc. Q4 and full year 2023 earnings conference call and webcast. On today's call are Jim Tsai, Snail's Chief Executive Officer and Heidi Chao, Sales' Chief Financial Officer. By now, everyone should have access to the company's Q4 and full year 2023 earnings press release filed today after market close.

[Speaker 1]

This earnings press release is available on the Investor Relations section of Snail Inc. Website at www.snail.com. During this call, management may make forward looking statements regarding future events and the future financial performance of the company. Actual events and results may differ materially from our expectations and forward looking statements are subject to the risks and uncertainties. Please refer to the company's most recent 10 Q, 10 ks and other SEC filings.

[Speaker 1]

The company makes these forward looking statements as of today and disclaims any duty to update them. On today's call, we will refer to bookings and EBITDA, which are non GAAP financial measures that provide useful information for the company's 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 will turn the call over to Jin.

[Speaker 2]

Thank you, Dick, and hello, everyone. It's a pleasure to speak with you about our Q4 and full year results. We had a great year and accomplished many things, including releasing OX: Survival Ascended, releasing an improved product roadmap, announcing exciting initiatives like the arcade ambassador program and using artificial intelligence to bolster our product offerings. In October, we released the highly anticipated Ark Survival Ascended game. Since then, we have sold more than 1,500,000 copies and locked more than 97,500,000 gameplay hours.

[Speaker 2]

Our community is still captivated by the Ark experience and we continue to improve the game with exciting DLC updates. Since its launch, ARK Survival Ascended has had an average DAU or daily active users of 182,000, which is a healthy increase of 4 times the average DAU observed during the same period of the original ARP, the VIVAL DEVELOP launch. Increased DAU reflects our commitment to creating an enjoyable experience for our player base. We are making significant progress on our strategy to build communities, attract and retain new and existing players and continue growing our ARK player base. We also plan new DLCs for the ARK franchise, which are coming to ARK survival ascended.

[Speaker 2]

More news about this will be released soon. The ARK franchise will be reaching new heights coming up in late March. Our animation will be released by a well known streaming platform Paramount Plus initially in the North American region and globally 2 weeks later. The notoriety of the IP will reach a new generation of players and we are planning marketing campaigns to capitalize on this newfound reach. The fact that sandbox survival games are top rated currently with a plethora of new co opus games entering the market in this genre, we still stand alone at the top on a multiplayer level along with our technological advancements in our premium mod program that provides endless content based on user generated content.

[Speaker 2]

As the user base of sandbox survival games continues to grow, ARPU continue to be the standard by which other games are measured. All the while we continue to innovate on gameplay and technology keeping us on the frontier of innovation for this gaming genre. We are excited to start 2024 with an improved product roadmap. Last year with the emergence of AI technology, Nao began to research how AI could impact our production pipeline. We sought ways to reduce development time while maintaining a high quality standard.

[Speaker 2]

We quickly found that AI was progressing rapidly in the sector of AI generated 2 d assets. We adapted to this by training our 2 d concept artists in using emerging AI technologies and to this day have more than doubled our 2 d concept, our team's production capabilities. The results of this are that our development projects can dramatically reduce the time between ideation and implementation. As we look forward into the near future, we are now sampling emerging AI technology in the next step of the development pipeline where 2 d art is produced into 3 d assets. In this step, we have already identified several technologies that has shown great promise and we are confident that within the year they will be ready for direct use in our production pipeline for prototyping and ideating concept.

[Speaker 2]

The 2 main tools being researched on Meshi and Luma AI both progressing in AI generated 3 d assets. In the future, we will witness the emergence of AI actors who can replace some development team members Grouped in a common goal, they can act as a complete development team such as coders, artists, designers, project managers and marketing members. Independently operating, they can take feedback from social media and pass it directly into the development process to be evaluated and implemented into the game project. These AI agents can work together as a team to generate a game project. The 2 main tools we are researching in this sector are chat dev and Society of Brain by Google Brain.

[Speaker 2]

The industry is trying to hang onto the handcrafted model and compare games made by AI tools to those made by factories. At Snail, we want to use AI while making high quality games, reducing costs and passing the savings on to our consumers. We look forward to the developments we make during the year and we'll continue sharing more information on our upcoming quarterly earnings calls. I will now hand it over to Heidi to review our financial highlights from the quarter.

[Speaker 3]

Thank you, Jim. Hello, everyone, and thank you for joining our Q4 and full year call. Net revenues for the 3 months ended December 31, 2023 was $28,600,000 as compared to $15,300,000 in the 3 months ended December 31, 2022. The increase in net revenues was primarily due to the release of ARC: Survival Ascended. Net revenues for the year ended December 31, 2023 decreased by $13,500,000 to $60,900,000 or 18.2 percent compared to $74,400,000 in the prior year period.

[Speaker 3]

The decrease in net revenue was due to the decrease in ARK Mobile sales of 2,900,000 dollars a decrease in one time deferred revenue from contracts recognized in 2022 of $10,300,000 one time payments in 2022 of $8,500,000 that did not occur in 2023 and an increase in deferred revenues of $25,200,000 related to ARC sales, partially offset by an increase in ARC sales of 32,700,000 dollars Net income for the 3 months ended December 31, 2023 was $2,400,000 compared to the net loss of $2,300,000 for the 3 months ended December 31, 2022. The increase in net income is due to the release of ART SURVIVAL ASCENDIT, reduced general and administrative expenses of $2,500,000 and a decreased professional fees related to compliance with public company requirements and litigation related expenses, partially offset by increased advertising and marketing costs of $900,000 related to ARC's Survival Ascended release and a $3,900,000 decrease in the income tax benefit for the period. Net loss was $9,100,000 for the full year ended December 31, 2023, as compared to net income of $1,000,000 for the year ended December 31, 2022, representing a decrease of $10,100,000 Bookings for the 3 months ended December 31, 2023 were $52,600,000 as compared to $11,900,000 for the 3 months ended December 31, 2022.

[Speaker 3]

The increase was due to the strong release of Ark Survival Ascended on the Steam, PlayStation and Xbox platforms. Bookings for the year ended December 31, 2023 was 85,700,000 dollars as compared to $63,700,000 in the year ended December 31, 2022. The increase was due to the release of Rx: Survival Ascended in the Q4 of 2023. In addition to increased sales of Rx: Survival Ascended, the company deferred approximately $22,000,000 in revenues during the Q4 of 2023 for the Rx: Survival Ascended DLC that have not yet released and have $10,300,000 in onetime deferred contract revenue recognized in 2022 that did not occur in 2023. Earnings before interest, taxes, depreciation and amortization EBITDA for the 3 months ended December 31, 2023 increased by $8,800,000 or 169 percent as compared to the 3 months ended December 31, 2022.

[Speaker 3]

The increase was primarily the result of an increase in net income of $4,700,000 partially offset by an increase in provision for income taxes of $3,900,000 EBITDA decreased by $9,000,000 compared to the year ended December 31, 2022, primarily as a result of a decrease in net income of $10,100,000 partially offset by a decrease in interest income of $700,000 and an increase in interest expenses of 600,000 dollars As of December 31, 2023, unrestricted cash was $15,200,000 versus $12,900,000 as of December 31, 2022. To review our detailed financial statements, please refer to the earnings press release, our most recent 10 Q and our 10 ks filings. Thank you. We will now be conducting a question and answer session. Your first question comes from Pat McCan with NOBLE Capital.

[Speaker 3]

Please go ahead.

[Speaker 4]

Hey, thanks for taking my questions. My first question was just about the animated series. I'm wondering if you could give any information on how that has been received so far? And maybe you could also touch on the animated series DLC as well?

[Speaker 5]

Hi, this is Jim Tsai, CEO of Snail Games, to answer the question related to animated series. I think by far we already know that animated series, the first season, the episodes has been released in video streaming platform, which already received quite, I would say, positive review and also the critic and the score has been quite promising. And I think the another benefit from releasing the video on the video streaming platform is that it has provide a free promotion and marketing to outside of the art fans. So they can understand what the story is wrapped around for the art survival evolved video game. That's a great help and benefit for the sales of the survival evolved even back in 2015, the master game, if fans haven't heard about it and then they review animation and then they make curious and they start from the master game and going on DLC.

[Speaker 5]

The other question on the animated DLC, we are planning and then we don't have the exact day and news to be announced, but we are working on it and expect to have more visible day and schedule and information in the coming forum in the coming days.

[Speaker 4]

Thank you. And then my next question was given the mod revenue sharing program, I was just wondering how the modding has there been an uptick in modding? What are you seeing right now insofar as modding is concerned with the game?

[Speaker 5]

Okay. Yes. Thank you. This is Jim again. Thank you for the question.

[Speaker 5]

So if we talk about modding, this is very exciting news because before we hop in on to the mod platform, we're already doing the MATT program for 5, 6 years in the past. And if you look at the current server occupation, there's actually 50% or 60% or even more was we call it private server, which it would be very popular in the matter that they are playing the art in their own version. There's only like 10%, 15% and all a little bit about is official server that we provided in the past, which is to provide us the great potential to be on the modern system, right. So right now, the model platform we provided is not it's still the same features and more enhanced tool for the mother to be able to utilize whatever the data and the features in that tool. But also it opened up for the monetization, not just for the company, but also all the creator, the content creator.

[Speaker 5]

So it's exciting news, but this is just beginning. So other than the product cycle in the past, this is will be a new trajectory in the coming days, and we expect that it will be a long term strategy and also monetizing another long term monetization for the app franchise.

[Speaker 4]

Okay, great. And then if I could ask one more question. I was just I was wondering if you could comment any on the any updates in the development of ARC2 when you look at potential release, what quarter you might want to release it when you're looking at late 2024, early 2025. Just wondering how much flexibility you might have to kind of pick a time to release it that makes most sense as far as user adoption? I'm thinking about like in Q4 with the Christmas holiday, how are you viewing that and how much flexibility do you have when it comes to releasing ARP2?

[Speaker 5]

Yes. Thank you for the questions. Yes, there was another question rev around when is actually coming out even or especially after the app ascended got released and also the animated series got released and you see all the voiceover and then one of the voiceover of N. D. So it was actually in the UP 2 trailer.

[Speaker 5]

So you see the connection. The team is working very hard, try to have the UP 2 release early. But as we may know, because there was long time for the UP survival and ASCEND it and then definitely the UP 2 has the higher bar that the quality has Super Z than the past and even the other centers. So we don't have a set day. I think we would have a more clear schedule in the coming months, I can say for now, but it definitely would be good news and information in coming days.

[Speaker 4]

Great. Thank you so much. That's all I've got.

[Speaker 3]

There are no further questions at this time. This concludes today's teleconference. You may disconnect your lines and thank you for your participation.