Snail - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 net revenues grew year over year to $22.19M but missed Wall Street consensus ($26.0M*), while bookings rose 18.5% to $27.1M; net loss swung to $(16.56)M largely due to a $12.9M valuation allowance against deferred tax assets.
• EPS of $(0.44) missed the consensus of $(0.01); EBITDA of $(2.4)M was below the $(0.125)M estimate, driven by higher cost of revenues and operating expenses.
• Engagement catalysts included the 10-year ARK anniversary and a June Steam Publisher Sale (daily unit sales 10.8x non-promo run-rate), plus 8M downloads of ARK: Survival Ascended via PS Plus in May.
• Strategic pivot: management formally announced a proprietary USD-backed stablecoin initiative (subsidiary formed, legal advisors engaged, ATM for reserves), positioning a dual-pronged strategy alongside core gaming.

What Went Well and What Went Wrong

What Went Well

• Bookings increased 18.5% YoY to $27.1M; total units sold rose 58.4% to ~2.1M, supported by June sale events and Lost Colony presale outperforming internal projections.
• ARK franchise momentum: 8M ASA downloads via PlayStation Plus in May; ASE Q2 units ~1,196,583 and ASA units ~807,065; ARK Mobile crossed 6.9M cumulative downloads.
• Steam Publisher Sale drove discovery and monetization: daily unit sales were 10.8x non-promotional periods; “steep discounts to date” reinvigorated back catalog and indie titles.

What Went Wrong

• Revenue and EPS missed consensus; EBITDA below expectations as cost of revenues and OpEx rose; GAAP loss driven by $12.9M tax valuation allowance.
• Deferred revenue increased (press release cites $3.7M impact in Q2), muting recognized revenue despite strong bookings; Bellwright revenue fell by $3.0M YoY.
• Product headwinds: Aquatica DLC issues required a rollback option, indicating quality challenges and potential near-term churn risk.

Transcript

Speaker 0

Thank you for standing by and welcome to Snail Inc.'s second quarter 2025 earnings conference call and webcast. I would now like to turn the call over to Steven Shinmachi with Investor Relations.

Thank you and good afternoon, everyone. Welcome to Snail Inc.'s second quarter 2025 earnings conference call and webcast. Joining us for today's call are Snail Inc.'s Co-Chief Executive Officer, Tony Tian, Senior Vice President and Director of Business Development and Operations, Peter Kang, and Chief Financial Officer, Heidy Chow. The company's second quarter 2025 earnings press release was filed earlier today and is available on the Investor Relations section of Snail Inc.'s website at www.snail.com or the SEC's website at www.sec.gov. During this call, management may make forward-looking statements regarding future events and the future financial performance of the company. Actual events or results may differ materially from our expectations, and forward-looking statements are subject to certain risks and uncertainties.

Please refer to the company's Form 10-Q that has been filed with the SEC, the most recent Form 10-K that was filed with the SEC on March 26, 2025, and other SEC filings. The company makes these forward-looking statements as of today and disclaims any duty or obligation to update them or to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any statement is based. Additionally, on today's call, we refer to bookings and EBITDA, which are non-GAAP financial measures and provide useful information for the company's investors. You will find the historical reconciliation of bookings and EBITDA to the corresponding GAAP measures in the earnings press release and the company's SEC filings. I will now turn the call over to Tony Tian, Co-Chief Executive Officer of Snail. Sir, please proceed.

Speaker 1

Thank you and good afternoon, everyone. Thank you for joining us today to review our financial and operating results for the second quarter ending June 30, 2025. The second quarter was a transformative quarter for Snail Inc., highlighted by the official announcement of our proprietary stablecoin project. We believe this project positions Snail Inc. as one of the pioneers within the gaming industry to embrace and adopt such initiatives. Heidy will provide a detailed overview of the strategic rationale behind our entry into stablecoins later in the call. At a high level, the decision reflects strong alignment with our business model and external opportunities. As a gaming company, we see clear synergies and compelling use cases that make this move not just innovative, but also one with substantial long-term ROI potential. Snail Inc.'s vision remains rooted in delivering innovative products and content to the evolving gaming landscape.

Our pursuit of launching our proprietary stablecoin reflects that vision and offers a path to generate meaningful value for our business and shareholders. We have been intentional in selecting and retaining the right partners to establish a strong foundation for success and have initiated our capital formation strategy through the recent at-the-market (ATM) offering filed with the SEC, marking the first step in our broader capital raising efforts tied directly to this stablecoin project. We remain committed to transparency and will continue to share regular updates as the project progresses. We are confident in the transformative impact this stablecoin initiative will have once fully launched. Turning to our second quarter results, we saw a modest year-over-year increase in revenues, but more notably, saw meaningful growth in both bookings and units sold. Bookings rose by 18.5% to $27.1 million, and units sold increased by 58.4% to 2.1 million for the quarter.

This growth was largely driven by strong performance in June, supported by our annual publisher sale and the successful launch of new content celebrating the 10-year anniversary of the ARK franchise. The publisher sale event featured steep discounts across several of our most popular titles, driving a surge of new players across the ARK franchise and other games in our portfolio. A key highlight was ARK Survival Evolved, which was discounted for the first time since 2023, resulting in a significant uplift in its user base during the promotional period. Additionally, the ARK 10-year anniversary celebration brought substantial new content updates to ARK Survival Ascended, further fueling engagement and growth. We also launched the pre-sale for ARK: Lost Colony in June, which contributed significantly to our bookings. Pre-sale performance slightly exceeded our internal projections and was the primary driver of the growth in bookings during Q2.

Beyond the ARK franchise, we continued expanding our indie publishing portfolio under the Wandering Wizards label. During the quarter, we released several new indie titles and strategically acquired publishing rights to additional promising projects. Peter will share more detailed insights into our gaming portfolio and roadmap here shortly. A quick note on our subsidiary Interactive Films and other short drama business. We are continuing to progress on our MOU we announced a few months ago on the joint development, production, and global distribution of at least 10 short dramas. Both sides are collaboratively working across the development phase and look forward to releasing these short film dramas together over the next couple of months. We also announced just last week that Interactive Films will be developing and publishing a new dating simulation title called The Fame Game: Welcome to Hollywood. This marks a first for Snail Inc.

within this genre, and the project benefits from the streamlined mechanics that allow for cost-effective development and rapid iteration, while also preserving the game's emotional depth. Barrier to entry for the game is low, making the game accessible to casual players and for those who have an interest in a narrative-focused game. We expect a quick turnaround from development to launch and look forward to officially releasing this game later this year. Looking ahead to the future strategy of Snail Inc., we will aim to execute a dual strategy where we not only continue to drive growth in our core gaming business, but also steadily advance our stablecoin roadmap. Our gaming operations remain the cornerstone of our near-term focus and the foundation of our company. At the same time, the stablecoin initiative represents a long-term strategic opportunity with clear synergies across our portfolio.

While external use cases of the stablecoin still remain fluid over time, we see the potential of these two pillars to become increasingly interconnected, enabling us to deliver new user experiences, innovative solutions, and unlock long-term value, something none of our competitors have been able to activate. Our team remains highly optimistic about Snail Inc.'s future across both gaming and stablecoin initiatives. We are committed to executing on our vision and delivering sustained, meaningful results for our shareholders. I will now hand it over to Peter to dive deeper into our gaming operations. Peter.

Speaker 3

Thanks, Tony, and good afternoon, everyone. The second quarter proved to be a strong engagement driver across many of our titles, building on the momentum we highlighted in our previous earnings call. During this past quarter, the average DAU for ARK Survival Evolved and ARK Survival Ascended reached approximately 157,000 and 85,000, respectively. As of quarter end, ARK has been played for 4.1 billion cumulative hours, with the average screen time for users reaching 161 hours. Our mobile game also continues to grow as a result of delivering consistent new content, with the mobile title surpassing 6.9 million downloads across iOS and Android, an average DAU of approximately 104,000 during the quarter.

These encouraging engagement results are a direct reflection of our deliberate efforts through Q2, including the rollout of new content updates, strategic releases, and our publisher sale event that kept our communities consistently engaged and drove in new players. Starting in April, we kicked off the quarter with the seasonal Excellent Adventure event for ARK Survival Ascended and launched the Extinction Map on ARK Ultimate Mobile Edition. April also marked the one-year Early Access anniversary of Belrite, where we introduced substantial new content and player-requested features to support the franchise's long-term growth. On the indie front, we launched two new titles: The Seasol, The Journey Begins, and Chasm of Fear in April, and three more new titles to close out the quarter: Castle of Secrets, Robots at Midnight, and Zombie Rollers: The Last Airship.

Building on this momentum, May was highlighted by ARK Survival Ascended's participation in the PlayStation Plus subscription program, PS Plus. During the month, ARK Survival Ascended was downloaded over 8 million times via PlayStation Plus, signaling strong and growing engagement from our console player base. June emerged as the most impactful month of the quarter, marked by the 10-year anniversary of the ARK franchise in our annual Steam Publisher Sale event. The 10-year anniversary of ARK marked an important moment for both our team and our global community of players. As discussed last quarter, ARK's continued ability to attract a global audience across multiple platforms speaks to the franchise's enduring relevance and our commitment to serving the loyal player base that has supported us over the past decade.

We're proud of the enduring position ARK holds in today's sandbox survival market and remain focused on delivering consistent content updates and new DLCs that drive engagement and support long-term growth. To celebrate the anniversary, we rolled out several key updates across ARK, including the first major update to Astrios DLC on ARK Survival Ascended, the launch of ARK Ragnarok on ARK Survival Ascended, and the release of Genesis Part 1 on ARK Ultimate Mobile Edition. These activations led to a sharp rise in player engagement. ARK Survival Ascended achieved its highest peak concurrent users and daily active users on Steam in 2025, while ARK Ultimate Mobile Edition saw a 27.4% increase in first-time downloads and a 17.8% increase in daily active users during the launch week of Genesis Part 1, compared to the previous week.

Complementing the anniversary momentum, we also held our annual Steam Publisher Sale event in June, which served as a critical driver for both player acquisition and engagement across our portfolio. Starting with ARK, ARK Survival Ascended, ARK Survival Evolved, PixARK, and ARK Park were all discounted during this event. This was also the first time since 2023 that ARK Survival Evolved was on discount. ARK Survival Evolved saw a strong resurgence in both sales and engagement. Total units sold increased by 3.8 times, and average daily sales rose over 3,000% compared to prior months in 2025. Peak concurrent players reached approximately 66,000, demonstrating the franchise's continued global resonance even a decade after launch. Other games in our portfolio also saw a significant uplift, with deep discounts and new content updates supporting titles like Bellwright, West Hunt, The Satsol, Chasm of Fear, and Survival Mercs.

These promotions reinforce our ongoing strategy to increase the visibility, traction, and engagement of our smaller-scale indie games. Our publisher sale event remains a cornerstone of our annual engagement and monetization strategy. This year's event drove daily unit sales 10.8 times the average non-promotional periods in 2025. With the steepest discounts to date on key titles and the expanded portfolio featuring recent launches and updates, these sale events are powerful discovery engines, bringing in new players, reinvigorating our back catalog, and helping build long-term engagement and monetization across both established and emerging titles. In regards to ARK Aquatica, our team is working diligently to address the issues that came with the launch. We've made a pre-Aquatica branch available on Steam so players can roll back to the version of ARK Survival Evolved prior to the DLC launch.

We'll continue sharing updates on the Steam forums as we work towards a full resolution. Looking ahead to the content roadmap for the remainder of the year, we have a strong slate of updates and releases designed to sustain player engagement and expand our portfolio. For the ARK franchise, we will continue rolling out seasonal events, community-driven mods, and regular content updates to ensure a steady stream of fresh experiences for our players. A major focus will be on the preparation and launch of ARK: Lost Colony, the first map built exclusively for ARK Survival Ascended and the storyline that bridges ARK Extinction, ARK Genesis, and ARK 2. Following the pre-order sale launch in June, we've seen encouraging early results. Sales tracked slightly ahead of our internal projections during the first month, contributing meaningfully to our Q2 bookings growth.

During the publisher sale event, the Lost Colony expansion pass was number one pre-order on PlayStation as well. Beyond ARK, we are also preparing to launch several new titles across different genres and platforms, including Honeycomb: The World Beyond, Echoes of Elysium, Repel Engine, and The Fame Game: Welcome to Hollywood, a new relationship sim game to be developed in-house under Interactive Films. Together, these initiatives underscore our commitment to delivering high-quality content, nurturing our core franchises, and building the next generation of titles that will shape Snail's long-term success. With that, I will now turn the call over to Heidy to discuss our financial results and the direction of our stablecoin initiative. Heidy.

Speaker 2

Thank you, Peter, and hello everyone. Thank you for joining us today. I'm pleased to share the details of our financial results for the second quarter ended June 30, 2025. Net revenue for the second quarter increased to $22.2 million, compared to $21.6 million in the same period last year. The increase was primarily due to an increase in total ARK sales of $3.3 million, $3 million recognized for the inclusion of ARK Survival Ascended in the platform subscription program in 2025, an increase in sales of the ARK Mobile of $600,000 that was driven by the release of ARK Ultimate Mobile Edition, and an increase in revenues related to other games of $400,000 due to the release of various games.

These increases were partially offset by the increase in deferred revenue of $3.7 million and a decrease in revenue related to Belrite of $3 million in the three months ended June 30, 2025, compared to the same period last year. Net revenues for the six months ended June 30, 2025, increased by 18.4% to $42.3 million, compared to $35.7 million in the same period last year. The increase was primarily due to an increase in total ARK sales of $6.1 million, $3 million in revenues for the inclusion of ARK Survival Ascended in the platform subscription program, and an increase in sales of the ARK Mobile of $1.9 million that was driven by the release of ARK Ultimate Mobile Edition.

These increases were partially offset by the decrease in revenue specific to Belrite of $2.2 million, a non-recurring Angela Games settlement of $1.2 million occurring in 2024, the related decrease in Angela Games revenue of $700,000, and the increase in deferred revenue of $300,000 during the six months ended June 30, 2025, compared to the same period last year. Net loss for the three months ended June 30, 2025, was negative $16.6 million compared to net income of $2.3 million in the same period last year, primarily due to increases in the cost of revenues and operating expenses, a result of the company's increased headcount, research and development, and marketing expenses, and the recognition of a valuation allowance against the company's deferred tax assets of $12.9 million during the quarter ended June 30, 2025.

Net loss for the six months ended June 30, 2025, was negative $18.5 million compared to $500,000 in the same period last year, primarily due to increases in the cost of revenues and operating expenses, a result of the company's increased headcount, research and development, and marketing expenses, and an increase in income tax provision of $12.3 million, a result of the valuation allowance recognized against the company's deferred tax assets during the six months ended June 30, 2025. Bookings for the second quarter increased 18.5% to $27.1 million compared to $22.9 million from the same period last year. The increase was primarily driven by various sale promotions in 2025 that did not occur in 2024, specifically around ARK Survival Evolved and the release of ARK: Lost Colony to pre-sale in 2025.

Bookings for the six months ended June 30, 2025, increased 16.3% to $49.4 million compared to $42.4 million in the same period last year. The increase was primarily driven by the release of ARK Survival Ascended DLC Extractions in the first quarter of 2025, sales promotions that were the first of their kind for ARK Survival Evolved in 2025, and the release of ARK: Lost Colony to pre-sale in 2025. EBITDA for the second quarter was negative $2.4 million compared to $3.1 million in the same period last year. The decrease was primarily due to an increase in net loss of $18.9 million, partially offset by an increase in the provision of income taxes of $13.3 million, and the decrease in interest income and interest income-related parties of $100,000.

EBITDA for the six months ended June 30, 2025, was negative $5.8 million compared to $1.2 million in the same period last year. The decrease was primarily due to an increase in net loss of $19 million, a decrease in interest expenses of $300,000, partially offset by an increase in the provision for income taxes of $12.3 million. As of June 30, 2025, unrestricted cash and cash equivalent was $7.9 million. To review our detailed financial statements, please refer to the earnings press release and also the Form 10-Q filed with the SEC. Now, onto our stablecoin project. The adoption of the crypto treasury strategy was accelerated significantly, especially over the past year.

On brand with the ethos of our organization, innovation has been at the heart of our approach, and the growing market validation of these treasury models prompts us to begin a thorough exploration of how we can potentially adopt and incorporate a similar framework. After several months of internal analysis and discussion, we identified a unique opportunity to chart our own path, one that centers on the development and issuance of a proprietary US dollar-backed stablecoin. Rather than simply following prevailing models, we saw the potential to design a solution tailored specifically to our business ecosystem. We believe this initiative represents a natural evolution of our innovation-led strategy, offering the potential to address current market gaps in the digital payments and on-chain financial infrastructure by delivering a secure, regulated, and scalable solution.

Our decision to pursue this stablecoin project was both deliberate and timely, aligning closely with the strong regulatory momentum generated by the passage of the GENIUS Act. This legislation established a regulatory framework for US dollar-backed stablecoins, offering clarity and consistency in how such assets are governed. We believe this act is a tailwind across the digital asset space and reinforces the strategic relevance of our stablecoin initiative. To that end, we have taken several foundational steps to accelerate the launch of this project. A top priority has been identifying and engaging the right strategic partners and advisors to ensure long-term success. We're pleased to have retained Dr. George Chow, founder and CEO of Ascendus, a full-stack cryptocurrency financial platform, as an external consultant. Dr. Chow brings deep industry expertise and will play a crucial role in helping us design and implement the core infrastructure of our stablecoin.

In parallel, we have engaged an experienced legal advisor, including a nationally recognized law firm run by Chambers STEMTECH Legal USA, as a legal advisor to cryptocurrency and blockchain clients. Their support will be essential in building a robust and fully compliant legal and regulatory framework. Additionally, we have formed Snail Coins LLC, a wholly owned subsidiary of Snail Inc., which will serve as the dedicated entity responsible for the issuance, management, and operational oversight of our stablecoin. This structure also provides flexibility to explore broader opportunities in digital asset management as the ecosystem evolves. More recently, we have initiated our capital formation strategy through our at-the-market (ATM) offering to begin building the necessary reserve and backing needed for our stablecoin.

Looking ahead, we intend to stay transparent and maintain an open dialogue with our shareholders to ensure the public remains up to date on any material developments and key milestones achieved as the project progresses. At this stage, the project remains fluid, with ongoing internal discussions around the regulatory framework, infrastructure, and additional potential use cases that could enhance the coin's value and utility. In parallel, we are actively engaging with potential partners, consultants, and advisors to support key aspects of the project. At the same time, we are assessing future hiring needs for experts in blockchain, stablecoin, and digital asset strategy to determine which capabilities should be built in-house and which would benefit from external expertise. As Tony mentioned at the onset of the call, Snail Inc. is now pursuing a dual-pronged growth strategy.

This involves both the continued execution of our core gaming business, including the ongoing growth of the ARK franchise and the expansion of our indie game portfolio, and a long-term approach to our stablecoin initiative. Our team remains excited about the future of Snail Inc., and we look forward to the continued execution on all fronts to maximize shareholder value. Thank you all for joining us today. Operator.

Speaker 0

At this time, this concludes Snail Inc.'s second quarter 2025 conference call. If your question was not taken, please contact Snail Inc.'s IR team.