Snail, Inc. (SNAL)·Q1 2025 Earnings Summary

Executive Summary

• Revenue rose 42.5% YoY to $20.1M on higher ARK franchise sales, ARK Mobile, and notably lower deferrals; however, sequential revenue fell vs Q4 as DLC-driven recognition normalized .
• Q1 revenue beat S&P Global consensus by ~12% ($20.1M vs $18.0M*), and diluted EPS of ($0.06) was better than the ($0.10)* consensus; both estimates were based on a single analyst, implying low coverage and higher dispersion risk. Bold beat on revenue and EPS. (S&P Global)
• Bookings improved sequentially to $22.2M from $17.0M, signaling underlying demand strength despite lower revenue recognition; EBITDA was a loss of $3.2M on elevated R&D and marketing tied to GDC and pipeline support .
• Key 1H25 catalysts: robust ARK content cadence (Astraeos, Aquatica, Lost Colony), mobile momentum (4.8M downloads; ~144k DAUs), and a new short-drama initiative via Salty TV and MPU MoU; management sees limited direct tariff risk .

What Went Well and What Went Wrong

• What Went Well

  • Strong top-line growth: net revenues +42.5% YoY to $20.1M, aided by ARK franchise (+$2.7M), ARK Mobile (+$1.3M), and $3.3M less in deferrals YoY .
  • Sequential bookings up to $22.2M (from $17.0M in Q4), indicating solid underlying sell-through despite revenue deferral dynamics .
  • Mobile traction and engagement: ARK Mobile surpassed 4.8M cumulative downloads and averaged ~144k DAUs in Q1; ARK franchise DAU on Steam/Epic up ~16% YoY to ~243k; ARK cumulative playtime reached ~4.0B hours (avg 162 hours/user) .

• What Went Wrong

  • Profitability pressure: EBITDA loss of $(3.2)M vs $(1.9)M a year ago, driven by higher opex (headcount, R&D, marketing) and tax/interest mix; gross margin contracted sequentially to ~29% from ~43% in Q4 .
  • Operating expenses stepped up materially: G&A $5.0M, R&D $3.6M, and marketing $1.3M vs Q1’24; management cited GDC and broader pipeline support, though expects q/q normalization in marketing tactics .
  • EPS remained negative (diluted $(0.06)) despite a top-line beat; net loss widened slightly YoY given higher costs tied to growth initiatives .

Financial Results

Recent quarterly P&L trend (oldest → newest)

YoY comparison

Bookings and cash

Vs. S&P Global consensus (Q1 2025)

Values with asterisks (*) retrieved from S&P Global.

KPIs and operating metrics (Q1 2025 unless noted)

Notes: Revenue benefited from deferring $3.3M less YoY; lower deferrals vs prior year aided recognized revenue, while sequential dynamics reflect timing of DLC-related recognition .

Guidance Changes

Management discussed the outlook qualitatively (content pipeline, tariff sensitivity, mobile growth) but did not provide formal quantitative revenue/EPS/margin guidance ranges -.

Earnings Call Themes & Trends

Management Commentary

• “The first quarter saw sustained growth and strong engagement across our ARK franchise… increase in daily active users in the first quarter of 2025 of approximately 16%, up to 243,000 on the Steam and Epic platforms” — Co-CEO Tony Tian .
• “As of March 31, 2025, ARK has been played for 4.0 billion cumulative hours with the average playing time per user reaching 162 hours.” — Co-CEO Tony Tian .
• “We deferred less revenue this quarter as the majority of ARK: Survival Ascended DLCs have been released requiring a lower percentage of each ARK: Survival Ascended sales being deferred in 2025.” — CFO Heidy Chow .
• “We believe that the direct impact of tariffs on our business is likely to be limited… PC accounted for ~48% of revenue in 2024… ARK mobile will help offset broader effects.” — CFO Heidy Chow .

Q&A Highlights

• Revenue diversification: Management is adding new launches (Robots at Midnight, Honeycomb, Echoes of Elysium) and expanding the short-drama business via an MoU with Mega Matrix; revenue contribution from dramas seen as promising but too early to quantify .
• Marketing spend trajectory: Q1 marketing increased due to GDC and 2025 releases; management does not expect similar q/q increases as unveiling strategies evolve and show participation is optimized .
• Path to profitability: Focus on cost control (outsourcing, aligning R&D/marketing to near-term revenue) and diversified monetization (short dramas, premium mods, ARK mobile microtransactions) to scale profitability over time .

Estimates Context

• Q1 2025 revenue: $20.11M vs S&P Global consensus $18.0M* (beat ~12%); Primary EPS: ($0.06) vs ($0.10)* (beat $0.04). Coverage depth: 1 estimate for both revenue and EPS*, implying higher variance risk. Values with asterisks (*) retrieved from S&P Global.
• Implications: Given the revenue beat and improved bookings, Street models may lift near-term revenue while reassessing opex intensity and gross margin trajectory amid DLC cadence and mobile mix .

Key Takeaways for Investors

• Underlying demand is healthy: sequential bookings acceleration to $22.2M despite revenue normalization underscores ongoing engagement and content monetization .
• Beat on low-covered estimates: $2.1M revenue and $0.04 EPS beats versus single-estimate consensus can still catalyze sentiment near term, but coverage thinness raises dispersion risk (S&P Global; ).
• Margin watch: gross margin fell q/q to ~29% on mix/recognition; monitor DLC pipeline, platform mix (mobile vs console/PC), and the cost base as the year progresses .
• Pipeline catalysts: Aquatica, Lost Colony, mobile content drops (Genesis P1/P2), and Bellwright Xbox in Q4’25 provide multiple inflection points for user growth and monetization .
• Expense discipline signals: management plans to temper marketing growth after GDC and align spend to near-term revenue, supporting a path back to EBITDA breakeven as content monetizes .
• Risk balancing: tariffs viewed as limited direct risk; mobile lowers hardware barriers, and PC’s ~48% mix cushions console uncertainty, aiding resilience into macro headlines .