Snail, Inc. (SNAL) Q4 2025 Earnings Call Transcript

thank you for standing by and welcome to snail inc's fourth quarter and full year 2025 earnings call and webcast i would now like to turn the call over to steven shimachi with investor relations please go ahead thank you and good afternoon everyone welcome to snail inc's fourth quarter and full year 2025 earnings conference call and webcast joining us for today's call are Snail, Inc.'s Chief Executive Officer, Hai Shi, Chief Financial Officer, Heidi Chao, and Senior Vice President, Director of Business Development and Operations, Peter Kang. The company's fourth quarter and full year 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 slash edgar. 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-K that has been filed with the SEC 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've referred to bookings and EBITDA, which are non-GAAP financial measures and provide useful information for the company's investors. You will find a historical reconciliation of bookings and EBITDA to the corresponding gap measures in the earnings press release and the company's SEC filings. And now I will turn the call over to Peter Kang, Senior Vice President, Director of Business Development and Operations of Snail. Sir, please proceed. Thank you.

Good afternoon, everyone. Thank you for joining us today to review our financial and operational results for the fourth quarter and full year ended December 31st, 2025. The fourth quarter capped a pivotal year for Snail and the ARK franchise. We closed 2025 with several key milestones, including the successful launch of ARK, Lost Colony DLC, the debut of a robust multi-year content pipeline for ASA, and meaningful advances across our broader portfolio and initiatives. Since ASA's launch in 2023, the remastered title primarily focused on updates which centered on introducing targeted features, improving game stability, and ongoing polishing. While these enhancements in the release of ARC Astrios and ARC Bob's Tall Tales strengthened the foundation and experience of the game, we had not yet released a full-scale expansion Pack that truly brought into the narrative, gameplay depth, or overall scope of the ASA experience to fully realize its long-term engagement potential. Ark Lost Colony changed that trajectory. Released last December, Lost Colony represents the first of many major standalone DLCs designed specifically to expand the ASA universe and deliver the kind of immersive, content-rich experience our global community has been anticipating. We were very encouraged by the early response of the DLC with pre-sale demands exceeding our internal projections and reinforcing the consumer appetite for deeper ASA content. more broadly 2025 was a momentum building year for asa since launch the title surpassed 4 million units sold supported in part by a meaningful acceleration in steam playstation and xbox downloads during the second quarter of the past year taken together the traction we see across our titles and the sustained levels of player engagement continue to reinforce the durability and long-term strength of the ARC franchise. During the fourth quarter, ASA delivered strong performance with approximately 692,000 units sold, an average DAU of over 91,000 and a peak DAU of over 147,000. ASE also remained a consistent contributor with approximately 580,000 units sold in the quarter, average DAU of roughly 105,000, and peak DAU of about 137,000. Meanwhile, ArcMobile surpassed a major milestone of 10 million cumulative downloads and sustained an average DAU of approximately $130,000. Building on the strength of ASA's fourth quarter performance and the steady consistent result from both ASE and ARK Mobile, we are entering a content rich and strategically important period for the ARK franchise, with ASA at the center of this next phase. During our For December 2025 Investor Day, we outlined the next chapter of ASA's growth trajectory. The event featured Studio Wildcard co-founder Jeremy Stieglitz, who unveiled a comprehensive multi-year content roadmap for ASA that includes a robust slate of DLCs and content expansions designed to deepen the ASA universe, elevate engagement and support durable long-term growth for the franchise. Beginning in 2026, we plan to release four major DLCs and content updates, including the ARK Survival of the Fittest Remake, followed by ARK World Creator, ARC, Bob's True Tales, Tides of Fortune, and ARC, Dragontopia, to close out the year. Looking ahead in 2027, we plan to launch ARC, Atlantis, ARC, Bob's True Tales, Galaxy Wars, and ARC, Legacy of Santiago. In total, these 7 significant releases represent one of the most ambitious expansion cycles ever planned for ASA and provide SNAIL with meaningful revenue visibility through 2027. Just last week, during the 2026 Game Developers Conference, we held a private invite-only event to provide additional insights into the timing of some of these upcoming content releases. Jeremy Stieglitz kicked off the event with new details on Arc World Creator, Bob's True Tales, Tides of Fortune, and Dragontopia. Arc World Creator is a brand new in-game content creation tool for ASA that will support both console and PC players. up till now user generated content in arc was largely limited to pc players using external tools world creator removes this barrier and broadens the accessibility of user generated content to console players as well while this is not a paid for dlc or expansion pack arc world creator and introduces a wealth of new personalized content tailored to each player's preference and we hope to further drive long-term engagement on ASA. We are targeting a May release for this new feature. Following that is the launch of ARC Bob's True Tale Tides of Fortune DLC scheduled for June along with the free revamped Genesis Part 1 map for ASA. We also debuted an event-exclusive trailer highlighting the renewed look for ARC Survival of the Fittest and provided details around the upcoming ARC Dragontopia scheduled for December 2026. Separate from ASA, we were pleased to introduce PixArk Worlds, a new title and development featuring advanced user-generated content designed to expand the ARK universe onto Nintendo Switch 2 console. Needless to say, we are thrilled about the opportunities 2026 presents Snail as we continue to elevate the ARK franchise globally for players across both PC and consoles. Beyond ARK, we also announced several updates across our broader gaming portfolio starting with our indie portfolio we unveiled a brand new title gobby gang during gdc additional indie titles in the pipeline include stoneguard above the snow and survivor mercs to name a few we also recently celebrated Bellrite, surpassing 1 million units sold. In 2026, we will be launching Bellrite's console ports to Xbox and PlayStation while working towards the eventual 1.0 release. We will also see Honeycomb in 2026 for a full 1.0 launch across PC and console platforms. Lastly, we are pleased to announce the significant progress made across three developing titles for the stars Nanyin Sutra Immortal and Nanyin Sutra Wushu these three titles are all AAA projects meaning they are high-budget high-profile games designed to deliver expansive worlds cutting-edge visuals and strong marketing campaigns that far exceed typical games we have launched and license as a reference arc is considered a triple a game as well while the three games i mentioned are smaller in scale than arc these titles offer immense upside potential we have invested considerable time and resources into each game and they are now in the final stages of their development cycle we believe we are approaching the point where our long-term investment can fully realize its potential, and we look forward to sharing updates as we make progress throughout the year and into 2027. At GDC, we shared an event-exclusive trailer and early concept art of For the Stars, providing a deeper look at the titles Open Universe Exploration, Player-Driven Research Systems, and Evolving Frontier Civilization themes. We believe Snail is well-positioned for meaningful upside over the next two years, with ARK remaining the cornerstone of Snail, supported by a rich pipeline of content, continued investment in our Indie titles, and three upcoming AAA games with substantial upside. We are excited about our trajectory and remain committed to delivering consistent long-term results. With that, I will now turn the call over to Heidi to discuss our financial results for the fourth quarter and full year ended December 31st, 2025. Heidi?

Thank you, Peter, and good afternoon, everyone. Thank you all for joining us today as I review our financial results for the fourth quarter and full year ended December 31st, 2025. Net revenue for the fourth quarter was $25.1 million compared to $26.2 million in the same period last year. The decrease was primarily due to a decrease of deferred revenues that were recognized during 2025 of $3.5 million that were partially offset by our increased sales of the ARC franchise of $1.3 million and our Bell Rite franchise of $1.2 million. On a sequential basis, we are pleased to see Q4 net revenue increase 82% compared to $13.8 million in Q3 2025. Net revenues for the full year and December 31, 2025 were $81.2 million compared to $84.5 million in the same period last year. The decrease was primarily due to a decrease in recognition of deferred revenue of $15.5 million related to the ARC franchise. Increase in Bell-Ride and Mists of Empire sales of $1.5 million and $1.3 million, respectively. Upset by an increase in ASA sales of $11.3 million, ARC Mobile sales of $2.4 million, and revenue generated from Salty TV app of $800,000. Net loss for the fourth quarter was $900,000 compared to a net income of $1.1 million in the same period last year. The decrease was primarily due to a decrease in gross profit of $1.7 million and an increase in operating expenses of $2.8 million, partially offset by an increase in other income of $2 million and benefits from income taxes of $500,000. On a sequential basis, net loss improved significantly compared to the $7.9 million net loss in Q3 2025. Net loss for the full year ended December 31, 2025 was $27.2 million compared to net income of $1.8 million in the same period last year, primarily due to a non-cash tax expenses related to the full valuation of our deferred tax assets of $10.1 million, increase in general and administrative expenses of $5.2 million, increase in research and development of $2.9 million, increase in advertising and marketing of $3.7 million and impairment expenses of $1.5 million. EBITDA for the fourth quarter was lost $1.3 million compared to $1.6 million in the same period last year. The decrease was primarily due to the increase in operating expenses of $2.8 million is that for the full year and the December 31st, 2025, was lost $16.8 million compared to $3.2 million in the same period last year. The decrease was primarily due to the increase in general and administrative expenses of $5.2 million, increase in research and development of $2.9 million, increase in advertising and marketing of $3.7 million, and impairment expenses of $1.5 million. While we experienced some one-off non-recurring headwinds during Q2 and Q3, we continued to reaffirm the strong fundamentals of the snail business. For the year, total units sold increased 32.7% to 6.3 million, compared to 4.7 million units in the same period last year. This growth was primarily driven by an increase of 1.7 million units sold across the ARC franchise, partially offset by a combined decrease of approximately 100,000 units in Bell Rite and West Ham sales. Bookings for the fourth quarter increased to $20.8 million compared to $17 million in the same period last year. The increase was primarily driven by a lower portion of our sales deferred in 2025. Changes in deferred revenue decreased by $4.9 million while our MET revenue decreased $1.1 million. Bookings for the full year ended December 31st, 2025 increased 16.2% to $87.8 million compared to $75.7 million in the same period last year. The increase was primarily due to an increase of ASE sales driven by the launch of ART Love Colony, ART Estrells, and ASE's first sales event in June 2025 since the price dropped in August 2023. Especially with the robust ART content pipeline for the next two years, we do expect booking to continue growing on a quarterly basis while adjusting for gradual content launches coming off the backlog. Lastly, as of December 31st, 2025, unrestricted cash was $8.6 million compared to $7.3 million as of December 31st, 2024. To review our detailed financial statements, please revert to the Earnings Press Release and the Form 10-K file with the SEC. To close out the call, I would like to reiterate a few of the points Peter highlighted surrounding the significant momentum we carried out of 2025. As Peter mentioned, the latter half of 2025 was an especially exciting period for snails in the art franchise. The increased visibility of the ARC pipeline we have provided put us in a strong position to deliver consistent annual results over the next two years. We also remain strategic and committed to expanding our broader game portfolio. We continue to invest in smaller titles such as Bell Rite, Honeycomb, and our indie games While also advancing our interactive film business, as of Q4 and Salty TV had released over a hundred short film dramas. Interactive films also expanded beyond short-form content into narrative-driven game development, which is a direction we expect to continue moving forward. Importantly, our three upcoming AAA titles have reached the final stages of their development cycle. We believe these projects have a tremendous upside for the company, and we have dedicated as much time and resources to meet the potential these games hold. We expect profit margins to remain meaningful higher than what we typically see with external licensed titles. Additionally, the expensive content for each title supports a strong overall game lifespan. Beyond our gaming business, we also minted the first official USDO stablecoin during our December Investor Day event. We are currently working towards a potential partnership opportunity tied directly to our stablecoin business and we look forward to share more details later this year. 2026 and 2027 represent an exciting career for SMAO as we further prove our spending in the broader digital entertainment ecosystem. The time and resources investors across many of our projects and initiatives are beginning to bear fruit, and we remain focused on executing our strategy to drive long-term sustainable growth. Thank you all for joining us today. We will not open the line for Q&A. Operator?

Thank you. Ladies and gentlemen, to ask the question, please press star one one on your telephone then wait for your name to be announced to withdraw your question please press star one again please stand by while we compile the q a roster our first question comes from the line of michael kapensky with noble capital markets your line is open thank you i have a couple of quick questions um what is the uh ending deferred revenue balance in the quarter Could you just give me that number, if you have it, Heidi?

Thank you, Michael. Our deferred revenue number, I think it's stated on our 10K, I think around $30 million.

And I was wondering if you could give us an update. I know that we talked about this in the past about the technology gap. Is that still persistent, or have there been some changes there?

Good question, Michael. So I'll defer this question to our CEO, Mr. He will answer that in Chinese, and I will have a translator as well.

Thank you. The question is that I was in 24 years back as CEO. The main job is to put the company from a company from a company to a company. It's about the development of the company. In this case, I will answer your question. 其实就是说我们其中有一个很重要的项目,就是Forestop,这个项目的话呢,它最初使用的是我们内部研发的一个叫Flex引擎,那这个引擎的优势是在于它的服务器端和它的处理大数据的能力和数据的安全性,那么它的逆势呢,就是它跟Arrelash相比的话呢,它是在渲染上和这个叫 or Tudo. Tudo go on the show. It would be a lot of touch.

Hello. This is translator speaking. Mr. Sher stated that he became full-time CEO at Snail Inc in 2024. And the main goal for Mr. Sher was to make sure that he could revamp the overall system for Snail as a publicly listed company. so that Snail's main focus could shift from a company that mainly publishes external games to have its own production pipelines, especially for a game development site. So to answer your question, out of the entire Snail system, one of the important projects is For the Stars, or FTS. Initially, we're using our internal proprietary game engine. It's called Flexi Engine to develop that game. And the advantage of Flexi Engine includes its server management, processing capabilities for big data, as well as data security. However, compared to Unreal Engine, we can see that there's disadvantages for Flexi Engine for rendering as well as efficiency. 但是我们在应该是在24年底开始就是转 把整个引擎还是转向了虚幻引擎 那么你在转的过程当中呢 我们服务器端还是使用了flex引擎 然后在客户端呢 因为虚幻引擎它因为我们要创造一些 创造的星球是具有是一个圆形的 并且呢是可以挖掘的 So as a result, we upgraded our engine to Unreal. at the end of 2024, so now we're still using Flexi Engine to support the server side, and for the client side, since we really want to create the sphere-shaped planets in-game, and also want to make sure that we have different mobile terrains, which for Unreal, there's not yet enough mature plug-ins to support that kind of goals. So right now, we're using Unreal Engine and it's working very well for us, especially that we have very good server support and client-side support, and also we can guarantee efficiency in development. And very recently, we have fully upgraded to Unreal Engine 5.7. So right now, we don't see any technical gap in game development anymore.

Terrific.

If I could slip in just a couple of quick ones. um do you do you have a launch window for your triple a games at this point thank you michael i'll defer that to um i'll see you mr haishi so actually our internal development system has been fully transformed and built in the past two years so right now it's great timing for us um so So, before, Snell only had one internal development studio however now we already have four development studios and out of these four three of them are working on their own in-house projects and for one of the studios because the revenue trend is very positive so it's looking like we will be able to double the revenues of last year so we're doing a very successful job at studio development. And then we have this ambitious goal for the three internal in-house titles that we're working on right now. We are looking at about tens of millions of revenues here. So, all of these three in-house IPs will be immense IPs, we are aiming to achieve 500 million dollars in overall revenues for each IP.

First, just as we just mentioned, For the Star is a game for the stars.

So, the first IP is For the Stars. This is a space themed game. So for the stars, if for any mature gaming company, if they're able to achieve a game of this size, then they will be able to also gain great revenues out of the project. For example, we have Starfield, No Man's Sky, and Star Citizen. We have spent three years on the development for the stars, and now we're closing in on the development cycle. The core development team is based in the U.S. Some of the production tasks are taken over by the Poland Studio, Rustic Roost, and some of the tasks were outsourced to our Chinese teams.

So this game is about 8 different stages of the game. Now, to the end of the year, we will start testing outside of the game.

So the development cycle of this game includes eight sprints in total. By the end of this year, we are anticipating that we will start external testing or public testing of the game. Actually, we have initially showcased the game at GDC, and we will show more in-game capture in the later half of this year. And in For the Stars, we're able to achieve all the dreams of all the players who are passionate about space games. So, actually, the other two IPs were based off of the successful IP that we have released in the past in China. The IP's name is Nayin Sutra. This is coming from the Chinese culture. And in the past dozen of years, the IP has generated or about 800 million U.S. dollars in revenue. So for these two IPs, the first one is Nine Sutra Immortal. we're seeing that there's still great market potential market is tapping to especially because this is a new genre for the gaming industry because so far there's no real cultivation or cultivation games yet out on the market we want to put in the just the same efforts as we used to just like how we develop the Chinese nine-suture games 第二个是九云真经的武侠,那么过去我们在创造了武侠之后,实际上这些年所有的武侠作品还是在原先我们创造的这个框架里面一直在做,就是并没有什么太大的创新和变化,但是我们这次整个九云真经的这个可以说是九云真经二吧,

So we created a lot of new things in this process, and these things are able to make all of the players are new. So our goal is also very big.

For the second IP under Nine Sutra, it's called Nine Sutra Wushu. So in the past for the Chinese IP, Age of Wushu, there were not major changes or innovative changes in the original framework. However, now, with 9SUSHA WUSHU, we can consider it almost as a sequel of the original Chinese IP. We have implemented many different changes, and we are hoping that we can impress all the players. That's why we are very ambitious with this IP. For both of these IPs, for both of the 9SUSHA IPs, we will start testing this year. We have also confirmed that we will showcase all these IPs, or both of these nine social IPs in three major gaming events this year.

They include It Will Be World, China Joy, and Gamescom. which means that we will have uh the campaign running of the full the entire year for these ips thank you for that color i really appreciate if i could flip one more question in um you have a very strong release roadmap through 2027 and i was wondering if you could just talk a little bit about the impact of margins particularly as it relates to r&d and marketing spend so if you could just talk a little bit about the marketing spend cadence around the upcoming launches

thank you michael i'll defer the question for mr xi to continue to answer the question As Mr. Shi mentioned earlier,

All of these three IPs will be the main revenue drivers of our company, and they're all big IPs that we're working on. And to be more specific, we're hoping that the minimum, we can have at least $60 million to $18 million in revenues from each IP. So that's why we also don't want to fully release the games until they're definitely ready, and then we have big hopes for the revenues of these IPs.

So, in 2016, our sales growth is mainly in this part. One is that we have the Berlin University of the U.S. It's been a project for送中, and it's been a project for him. It's been a project for送中. It's been a project for this year. It's not a project for us. We have a project for the first季度.

So for our revenue growth in 2026, we're mainly looking at several different projects. The first one is Bellwright, developed by Donkey Crew in Poland. So far, the revenues of Bellwright is performing quite well. and this year we're going to release the console version of BellWrites. And this genre is actually not yet present on consoles yet. And then based on the revenues in the first quarter, our projections is that the revenues after a console release can at least double the revenues of last year.

So it looks like based on the current performance of that right, we can expect 12 million dollars in revenues from Donkey Crew. 其實這個產品做的還是很不錯的,但是在技術上沒有準備好,所以給社區造成了一些困擾,但整個工作時已經通過這樣的產品,他們已經成熟了。 所以今年他會做一個是方舟的電競,這樣會幫助方舟的人數再創新高,並且能夠讓方舟的營收還有提高,這是一塊。

The second one is Studio Sirens, who worked on Aquatica last year. The product itself is quite decent, however, there were certain issues that might not be fully resolved in terms of the technologies, which might have caused concerns among the communities. But through developing this game, Studio Sirens is now more mature with their capabilities overall. And this year, they will work on ARK Survival of the Fittest, which is the e-sports game. And we're hoping that this game can bring a new peak of the ARK players and then also increase the revenues. So, other than building our development teams in the public company, we also want to include more IPs into our company, which includes PixArk. We want Studio Sirens to take over the development for PixArk, which has made over $2 million last year. We have great hopes for Studio Sirens to work on this project because based on the past experience, they might go through a similar trajectory like Donkey Crew and can create millions of revenues in the future.

Of course, they have some other plans. In general, we don't need to pay money for this year.

Of course, Studio Sirens also has other plans and other projects to work on, but overall, we will not be at a loss with this studio anymore. The third studio is Matryoshka Games. So in the past, Matryoshka Games was involved in the combat development for Nine Sutra Immortal. Now, this year, they are also working on their own projects, which was announced at GDC, GobiGang. We have great hopes for this project as well. GobiGang is more of a fastly iterated project, similar to Peak. It's under the print slots in general. And then we are hoping that the game can perform very well on the market. The game's performance is only medium, maybe we can at least sell about 1 million units. However, if we're able to actually achieve the expectations of the development team, then it should be easy for us to exceed the 1 million units target. We can probably even sell 10 million units. The fourth studio that we have is Rustic Roost, which is based in Poland. Right now, they're helping with the For the Stars project, so they don't have their own projects to develop.

Okay, so there's one part of the IF company. The IF company has a short-term project in the past year. It has been a hundred and a hundred and a hundred. It has been a long-term project to 700-800. The other part of the game is the same as the new project.

It has been a long-term project. and we have another company called Interactive Films and then this year we will also work on a lot more short dramas with this company so last year Interactive Films already produced over 100 short dramas and then this year we will add another additional 700 to 800 short drama projects and then this year interactive films will also come out with this interactive game that is a sparticus genre and our goal for that interactive game is to sell around 5 to 6 million units however we don't really have a successful experience in this field yet so we cannot really guarantee that success

所以我们今年的营收的增长主要是来自于刚刚讲的这几个方面 包括我们的代理游戏

So our revenue growth for this year mainly comes from the previous mentioned areas and also from the games that we are publishing. and then so basically in general the revenue will have a 20 to 30 percent of growth compared to last year so you were you said that you're interested in the plan for or 2027. However, most of the major actions will probably happen by then. And we hope that we can achieve something very great by the end of this year. If not, then it will happen in 2027.

Terrific. Thanks for the color. Greatly appreciate that. That's all I have.

Thank you, Michael.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. At this time, this concludes SNAIL, Inc.'s fourth quarter and four-year 2025 conference call. If your question was not taken, please contact SNAIL, Inc.'s IR team at snal at gateway-grp.com. Thank you for your participation. You may now disconnect.