$Snail, Inc.(SNAL)$ was founded at the beginning of this century in the era of web games and has gone through a complete content-operations--channel phase.
Company's Products
Snail's IPs include Voyage Century, Age of Wushu, Taichi Panda, and Ark: Survival Evolved, which are are well-crafted in content in the game industry.
The company's earliest work - China's first 3D online game, Voyage Century - was awarded with several "industry firsts" at the time.
- China's first domestic online game with a self-developed 3D engine
- China's first online RPG in the nautical genre
- China's first 3D online game to be truly exported overseas
When competing products were imitating Korean and European works, Snail Games independently developed games and exported to Korea, Europe and North America. However, due to the focus on content and not so much on operation at that time, the company was not able to cash in on the games like $TENCENT(00700)$ .
Early meta-universe game
In 2012, Snail released Age of Wushu, China's first MMORPG with an open-world sandbox, and the world's first sandbox online game of Chinese costume fairy dramas. Its game engine was also self-developed.
This game was different at that time, and it was closer to the essence of the virtual world of the game, instead, it was more likey a current hot topic of "meta-universe".
But Snail handed over the operation to Shanda. At that time, Shanda no longer considered games as its main business.
The new Age of Wushu 2 has not launched until now.
Snail Games also started channel agency.
In 2017, Snail Games' revenue from the introduction of the agency game Ark: Survival Evolved accounted for 32% of its revenue of all games, which exceeded the revenue of its self-developed games.
Key Financials
According to the prospectus, Ark: Survival Evolved accounted for 80.5%, 89.5% and 90.7% of Snail Games' revenue for the three years from 2019 to 2021, respectively, making it its main revenue.
Revenues of $86.3 million, $125.0 million, and $107.0 million for the three years 2019-2021, respectively, and $43.5 million for the first half of 2022;
Gross margins of 9.5%, 46.1%, 40.3%, and 39.5%;
Net income of -$15.2 million, $29.8 million, $7.9 million;
Adjusted EBITDA was -$15.1 million, $39.2 million, $25.5 million and $6.1 million
The current average enterprise multiple (EV/EBITDA) for the gaming industry is 20.8x. If the company reaches $15 million in adjusted EBITDA in 2022, or a 41% year-over-year decline, the company would still be reasonably valued at $310 million.
Risks: Snail is now a game distributor as its main source of revenue and has its main revenue collection in one game. The life cycle of the game becomes important.
But on the other hand, company may get more cash after the IPO and can participate in more games' agency. And it is possible to accelerate the progress of the previous original IP Age of Wushu 2. This is a difficult factor for small game companies to put a price tag on at the moment.
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