Snail, Inc. (SNAL) Earnings Call Transcript & Summary

Hello, I'm John Jannarone, Editor-in-Chief of IPO Edge. Very happy to be here with Jim Tsai, who is the CEO of Snail Inc. This company is an independent developer and publisher of interactive digital entertainment, most famous probably for its ARK franchise. We're going to talk to Jim more about that momentarily.

But first of all, Jim, welcome to the show, tell us a bit about this business, how you got to where you are and what the company is all about.

Thank you, John. And yes, it's a great opportunity for me to be on this and then able to describe and tell you more about my background and also the video game company that I work for Snail Games. So I've been in the industry for more than 20 years. So it's very, very -- it's like seeing the game starting from like a single-player game, online game, free-to-play game and until today, the console and everything. Snail is pretty much the same. The experience that gone through everything. We've gone through the scratch and development and publishing organization -- operation on the multiple game -- multiplayer again, online. So what you seeing today, thanks to the technology and Internet that player able to play with real player that's online play, and that's our forte. And I would say the majority of the 100% -- probably 80% plus with all online game. We're all multi-players,and that's us.

All right. Great. So as I mentioned, you're very well known to the ARK franchise. Can you tell us about the success of that and what the best way to look at that and measure success perhaps in terms of our daily active players?

Yes. So the Wall Street Capital Markets often looking for the company as a unicorn, like what is the unicorn. Really meaning that it's a nascent new company, but it's a massive potential, right? So when we look at the IP, looking to the game itself other than the legendary IP and game in the past like Grand Theft Auto, Call of Duty, League of Legends, it was like, "Oh, yes, that's great". If we went back like 20 years ago, we would definitely say it's as a unicorn. Now I want to talk about this ARK: Survival Evolved is a unicorn, the new unicorn for a couple of reasons. One is that if you look at the game industry in the past, it's almost impossible unprecedented to create a new genre. Genre meaning that you have all different kind of games, you have shooting game, you have RPG game and you have racing game. But what is that new kind of joy, almost like you create a new sports like now playing piggy board and become a new trend. So the ARK: Survival Evolved actually create this new survival game, open sandbox survival game, no endgame and meaning that you can enjoy the game play over and over again. And thanks to the server and online play because the server is opened 24/7. So basically, you log into the game, you can play it anytime and playing with your friend, your family and to the player all over the world and whoever love this survival genre that it can get into this ARK. And then in the past 5, 7 years, this survival game has been trading since the beginning and also the new content being updated, and it's a fantastic integration between developer, publisher and the fans itself.

Great. Now Jim, when we're talking about these many millions of active gamers playing this. How do you monetize that user base because it looks like it must be incredibly valuable, but tell me how you actually make that work.

So yes, thank you. So I mentioned -- well, I didn't mention. So the game itself is a premium game. You bought the game and that's yours, and then you can play through lifetime without any additional charges. But with the online capability that you can play through friends and with non-endgame that you can play indefinite. And so for instance, at the daily active user until today by 7 years after it's still like 100, at least 200,000 active users now playing through every day. And now you have looking at new content and looking at how game altogether that it can play and cross in all different platform, it's just incredible. But if you look at the monetization part, it's not because the player able to pay to other content and like in a purchase, we don't do that, it's a premium game. So you pay to get the new content, you don't have to, but you pay to get the new content and add-on content is like a new completed content, but it has less price than the original game.

Got you. We're going to get to that downloadable content in a second. But before we do -- just sticking with ARK for a second, can you tell us about the successful launch of ARK ASA?

Yes. So we've been launching so-called downloadable content, DLC, since early 2016 or 2015. And every year, we launch a new content. Now we have the latest downloadable content called ARK Ascended -- ARK: Survival Ascended, ASA, that just launched in late last year. And it's very such -- originally, when we launch in it because the remake of the ARK itself and bringing it into Unreal 5. But after we launch fast forward today, we had a lot of good review and a lot of upside and anticipation for the new content add-on to the Unreal 5. So until today, I would say the player is very happy and optimistic of the new content and on the new technology Unreal 5.

Great. Now on this topic of downloadable content, DLC, tell us about how often this rolls out. And by the way, Jim, is this more efficient for your company to release downloadable content rather than launching an entirely new game? Is it more cost effective and perhaps does it have a better margin profile for you guys?

Absolutely. So when -- in the game industry, when you create something new, it's almost like you create a new movie, but -- and I think it's a very comparison. If you look at a new movie, it has a sequel, either it is Avenger, X-Men, or Aquaman, you certainly know what you are expecting to see. And you don't need to like, hey, what is the content about? I don't know if I like it or not. So the new downloadable content is like you like this game so much like, for instance, at ARK: Survival Evolved that Survival Open Sandbox, you absolutely know, the new content would base on the existing game technology and game [ pragmatic ] and then you can continue to add on new content, new map, new dyno, new item that you certainly know. This is something that you love, but it has a new content on top of it.

Great. And Jim, can you tell us about your creator program and how you can monetize that?

Yes, thank you. That is very exciting because in the past, it's always dependent on the developer to creating content. And a developer -- it's limited developer, it's only able to create in certain of time either 6 months or the year. Now we have this new platform called [ Mod ] player platform, meaning that we encourage all the players to create content instead of the developer. So whoever love this game that they can create the content, not just creating content, they can monetize it. So they can actually put their content on our platform and whoever player want to download it, they can pay directly to the creator, and we will share a percentage of it.

Great. By the way, Jim, I was just thinking of something when you and I met in Boca Raton a few weeks ago, we were talking about how some of your gamers like to use a PC or other who use a console. So it's about half and half. And then there's a little bit of mobile, right? Is that -- where are things going in the future? Is the future going to be the same? Or is there a shift towards console or PC?

That is a great question. So right now, the trend and then certain of the technology already proven called cloud gaming, right? So when the console, they all play online with the server to meet player online that basically it doesn't really make that difference when you play in PC versus Xbox and PlayStation. Now we have this exciting [ Mod ] program specifically, that probably happened never before that when you upload the content, the content will be placed through different platforms. No matter you are on Xbox or PlayStation, you'll be playing the same content, you'll be meeting the player on the other console. That is exciting news that is coming in, I think it's in this coming months.

All right. Great. So last question, Jim. You guys have a really impressive track record. We've talked about some important revenue drivers of the ARK franchise, downloadable content. Are there any other drivers of revenue you want to tell us about?

Yes. So since that our IP, ARK franchise, ARK: Survival Evolved franchise, meaning the background story, the narrative and the game play and the fans altogether. We think we want to not limit it to hardcore gamer. We want to let outside of hardcore gamer also able to understand and enjoy the entertainment value that it can bring. So for instance that we want to engage and expand it to different media, for instance, TV, video streaming. So we have an animatic series that actually going out in the coming months, I bet you will see it. And when people see it as a cartoon animation series, they may come back and say, "Wow, what is this?" They may not enjoy in the past. It may start in with mobile game first and then they come into either PC or console to understand what the IP has been able to provide it.

All right. Jim, this has been a really exciting stuff. Thanks a lot for joining us today. This has been Jim Tsai, who is the CEO of Snail Inc. It was a pleasure to see you again, Jim.

Thank you so much.