Snail (NASDAQ:SNAL) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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The full earnings call is available at https://edge.media-server.com/mmc/p/wtes9g6j/

Summary

Snail reported a 35.7% increase in net revenue to $27.3 million for Q1 2026, driven by strong sales of ASA and Bellwright, and a rise in deferred revenue recognition.

Net income increased significantly to $2.1 million from a net loss in the previous year, supported by higher revenue and reduced operating expenses.

The company is advancing its strategic initiatives with a diversified content pipeline, including new AAA titles and indie game developments, aiming to expand beyond the ARC franchise.

Operational highlights include the successful launch of Ark Lost Colony DLC and the strong performance of ASA, which sold 1.4 million units in the quarter.

Future guidance is optimistic, with plans to release multiple new content updates and DLCs for ARC, alongside the development and upcoming releases of significant AAA titles such as For the Stars and Nine Yin Sutra.

Management emphasized a strategic focus on becoming a multi-franchise developer and publisher, with investments in new game IPs and a reduction in annual licensing fees.

The company is preparing to launch its stablecoin, USDL, with infrastructure and compliance frameworks being finalized across multiple states.

Full Transcript

OPERATOR

Thank you for standing by and welcome to Snail Inc. First Quarter 2026 Earnings Conference Call and Webcast. I would like to now turn the call over to Stephen Shymansky with Investor Relations. Please go.

Stephen Shymansky (Investor Relations)

Thank you and good afternoon everyone. Welcome to Snail Inc.'s first quarter 2026 earnings conference call and webcast. Joining us for today's call are Snail Inc's Chief Executive Officer Hai Shih, Chief Financial Officer Heidi Chow and Senior Vice President Director of Business Development and Operations Peter Kang. The company's first quarter 2026 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 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 10Q 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 its events, conditions or circumstances on which any such statement is based. Additionally, on today's call we refer to bookings and EBITDA which are non Generally Accepted Accounting Principles (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 Generally Accepted Accounting Principles (GAAP) measures in the earnings press release and the Company's SEC filings. And now I will turn the call over to Peter Gang, Senior Vice President, Director of Business Development and Operations of snail. Sir, please proceed.

Peter Gang

Thank you and good afternoon everyone. Thank you for joining us today to review our financial and operational Results for the first quarter ended March 31, 2026. Coming out of the fourth quarter last year, we reinforced the underlying fundamentals of our business. We exited 2025 with a diversified content pipeline that positions SNAIL to deliver more predictable, stable growth. We announced a content roadmap for ARK, including new DLCs, content updates and game modes that stretches through 2027. In parallel, we continue to strengthen snail's positioning as a developer with several indie titles in development and more importantly three AAA titles now in the final phases of their development cycles for the stars 9 Yin Sutra Immortal and Nan Yin Sutra Wushu. I will return to each of these titles later in my remarks, beginning with ARC engagement remained consistent across the franchise. During the quarter, ASA sold over 573,000 units, average Daily Active Users (DAU) was 117,000 and peak Daily Active Users (DAU) was 143,000. ASA's average Daily Active Users (DAU) was 127,000, peak Daily Active Users (DAU) was 188,000 and more importantly ASA's total units sold for the quarter rose to 1.4 million, supported in part by the Steam Winter event and the strong momentum from the successful launch of Ark Lost colony DLC in December 2025, Ark Mobile total downloads were approximately 11.9 million as of the end of the quarter, with average Daily Active Users (DAU) of over 141,000 over the next two months. We have several ASA's updates planned over the coming months. Starting in May is the upcoming fantastic tame season one expansion pack. Then in June 2026 we plan to release Ark Tides of Fortune, a new ASA DLC in tandem. We also expect to officially launch the ASA's remake of Ark Genesis Part 1, which will allow us to recognize approximately 11 million in revenue deferred from revenue balance at time of release. Beyond Ark, we released three new indie titles over the past few months. These include Echoes of Elysium on Steam Early Access, Survivor, Mercs 1.0 version and above the Snow. We also unveiled two new indie titles in development, Dead Party and Gobi Gang. While we are pleased with the consistency and stability ARC provides and the steady expansion of our indy portfolio, we are particularly focused about our broader diversified pipeline for the next several years. For many years, ARC has served as the foundational IP of our business. Our long stated strategy has been to build on that foundation and scale into a fully integrated developer and publisher capable of supporting multiple franchises at once. The investments we have made in our organizational development teams over the past several years have been made with that clear goal in mind. The three AAA titles currently in development represent the next major step into that strategy. Each is built with the production scope, depth and marketing skill required to potentially compete in the same tier as arc, and each is designed for a multi year lifespan. As discussed on last quarter's call, these games have now entered the final phase of their development cycles. These three titles are not designed to compete with one another. They address distinct audiences and markets. For the Stars is a global intergalactic experience built around a phased gameplay vision. 9 Yin Sutra Immortal and 9 Yin Sutra Wushu are based around our historical success with an established IP and a strong user base. With our previous launch of Age of Wushu that has held a strong hold in the Chinese market. This edition represents a two product strategy on that foundational IP I will now walk through each individually, beginning with for the Stars. We recently released a new developer diary featuring perspectives from key designers, engineers and new pre alpha gameplay footage alongside unreleased concept art. The game is being built around a vast universe with a strong emphasis on world building that generates an effectively limitless number of solar systems that players can explore and inhabit over time. Development is structured in phases. The initial phase focused on the single player and four to six player co op experience. The long term vision evolves the experience into an MMO style ecosystem where large numbers of players online can interact within a shared universe at a high level. For the Stars is designed as a galactic scale, conquest and grand strategy experience, drawing comparisons to titles like Eve. However, the moment to moment gameplay emphasizes hands on exploration, construction and progression, evoking the feel of the title no Man's sky and Satisfactory blended together. This combined gameplay experience aims to balance strategic depth with accessible, engaging gameplay that appeals to both hardcore and mainstream audiences. We have a slate of additional announcements planned for for the Stars throughout the year and look forward to sharing further updates as development progresses towards launch. Turning now to our two product IP strategy with Naiun Sutra Immortal and Naiin Sutra Wushu the Naian Sutra IP has a large and loyal fan base in China. Its predecessor Age of Wushu accumulated more than 85 million registered accounts across PC and mobile and defined the Wuxia genre. The Wuxia genre is characterized by content centered on martial arts heroes and ancient China. Fans have been waiting for the next chapter in this franchise for more than a decade. We believe the addressable market for these two titles is substantial. The Chinese gaming market remains highly attractive and many international publishers are consistently seeking meaningful entry points into the audience. Snail games is historically well positioned. We hold established IP that is beloved with a historical proven user base and development capacity to deliver at scale. Nian Sutra Wushu is the closest sequel to the original Age of Wushu game and will return to the core Wuxia genre in Universe. The title will replicate the MMORPG model and is intended to directly address long standing demand from fans over the past 15 years. The title is being built on Unreal Engine 5 with a goal to deliver a cinematic masterpiece that portrays the ancient China Wuxia setting at a level that has not previously been achieved in the genre. We expect to deliver more information during Gamescom later this year. Nian Sutra Immortal will take a different approach around the cultivation genre. Cultivation is a Wuxia adjacent subgenre focused on the progressive development of supernatural power over time. It is also one of the fastest growing categories across the broader martial arts space. Nain Sutra Immortal aims to leverage the existing IP to deliver a new cultivation genre experience that aligns with current gaming trends and preferences in China. The game is also being developed on the Unreal Engine 5. More information will be unveiled during Bilibili World and ChinaJoy events later in the year. The two genre strategy is intentional. It broadens the addressable audience for the nine Yin Sutra IP within China by serving both longtime fans of the original Age of Wushu and nine Yin IP alongside a new generation of players drawn to the cultivation of and martial arts genres. We believe this approach can support a multi year to multi decade lifespan across both titles and meaningfully expand Snail games beyond the Ark franchise. Taken together, the combined potential of these three titles is unlike anything Snail Games has worked on since Ark. As we move through final development, we believe Snail is approaching an inflection point where within the next several years to define Snail games as a multi franchise developer and publisher. In support of this strategy, I would also like to note that earlier in the month we amended the exclusive software license agreements for ARC Survival ascended. Under the amended terms, annual licensing fees will be reduced by 6 million annually. Going forward, we intend to reinvest the savings into the business with a particular interest towards development of the upcoming titles I have just described. The future is bright and we look forward to sharing new information across our games in the pipeline while continuing to deliver new immersive content and experiences within arc. Thank you for joining us today. I will now turn the call over to Heidi to discuss our financial results for the first quarter ended March 31, 2026.

Heidi Chow (Chief Financial Officer)

Heidi, thank you Peter and good afternoon everyone. Thank you all for joining us today as I review our financial results for the first quarter ended March 31, 2026. We entered 2026 with renewed momentum. The encouraging trend we saw coming out of Q4 2025, along with the strong business fundamentals we highlighted, have carried into 2026. As expected, our Q1 performance reflects that momentum and we believe we are well positioned to sustain this trajectory supported by the robust pipeline Peter outlined. Net revenue increased 35.7% to 27.3 million compared to 20.1 million in the same period last year. The year over year increase was primarily due to an increase of 4.2 million and 2.1 million in revenue related to ASA and Bellwright respectively, and a 2.5 million increase in deferred revenue recognized during the period, offset by a decrease in revenue from Ark Mobile and ASA's net income increased 210% to 2.1 million compared to a net loss of 1.9 million in the same period last year. The increase was primarily due to an increase in net revenue of 7.2 million and a decrease in total operating expenses of 300,000, partially offset by an increase in provision for income taxes of 1.6 million, an increase in cost of revenue of 1.4 million and a decrease in total other income of 500,000. EBITDA increased 173.3% to 2.4 million compared to a loss of 3.2 million in the same period last year. The increase was primarily due to an increase in net income of 4.1 million and a decrease in the benefit from income taxes of 1.6 million. Total units saw increase 42.6% to 2.2 million compared to 1.5 million units in the same period last year, primarily driven by an increase in sales of art franchise IPs of 500,000 units and Bellwright of 200,000 units. As Peter outlined at the outset of the call, ASA unit sold was 1.4 million for the three month ended period. The winter sale event supported this spike, which include a sale of both the ASA Base Games and also The Lost Colony DLC. Bookings increased 21.1% to 26% compared to 22.2 million in the same period last year, primarily driven by stronger sales promotions in 2026 compared to 2025, tailwind momentum of the December 2025 Arkloft Colony DLC release and Bellwright's highly regarded content Update in late 2025. Lastly, as of March 31, 2026, unrestricted cash was $14.3 million compared to $8.6 million as of December 31, 2025. To review our detailed financial statements, please refer to the earnings press release and the Form 10Q filed with the SEC. Our robust AHRQ pipeline will be the foundation for sustainable performance. Through looking ahead into the next few years, we foresee our revenue mix to evolve alongside the releases of key titles including for the Stars, Naive Sichuan, Imodo Naiku Wushu. As Peter outlined, we believe these titles offer meaningful upside and we remain bullish about their potential. We have several gaming events lined up throughout 2026 and we look forward to sharing additional updates on these titles over the course of the year. We remain focused on the fundamentals of snail's business. We believe continued execution on AHRQ and realizing the potential of the three aforementioned titles will propel SNAIL to deliver heightened results and shareholder value. This concludes our prepared remarks. We will now open the line for Q and A. As a reminder, some answers during Q and A session may be answered in Chinese by our CEO before being translated into English. Operator, please proceed.

OPERATOR

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. You'll hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press star 11. Again, we ask that you wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q and A roster. Our first question of the day will be coming from the line of Michael Kopinski of Noble Capital Markets. Please go ahead.

Michael Kopinski (Equity Analyst)

Thank you and congratulations on a good quarter. A couple of questions across your overall game pipeline. It looks like 2026 has a lot of content that's coming up. I was wondering if you can dive into the content game and DLC roadmap for the rest of the year. And if I can just add on to that, what is the expected cadence of ARC related content releases over the next 12 months and which launches are viewed internally as the most important catalyst for bookings growth?

Peter Kan

Thank you Michael. That was a great question. I'll defer the question to Peter Kan. Hey Michael. So just to recap, we definitely have a lot in the pipeline this year for the ARC franchise and also some of our other internally developed IPs. So in total the number is around 11. Anything from three new themes for Ark Survival, Ascendant's Fantastic Tame Season Pass Pack, Bob's True Tail will have another pack coming out asa Genesis Part 1. We also intend on releasing re releasing I should say ASA Survival of the Fittest, our esports mode for ASA a project called ASA's World Creator. And of course in December we're going to be releasing asa Dragon Topia. Along with that, Bellwright will have its console ports arrive this year for both PlayStation and Xbox. And we have an internally developed project named Gobi Game that was mentioned earlier and those are our internal projects we're working on. Along with that we have six additional licensed IPs that we'll be releasing throughout the year.

Michael Kopinski (Equity Analyst)

Great. In terms of salty TV and the short film business, can you briefly explain where we sit on that in terms of the short video business and the number of videos produced and maybe some insight onto the future outlook for that line of business?

Peter Kan

Absolutely, and I'm glad you asked that question. It is definitely a market segment that wide open and we're really trying to take advantage of the timing on this so the Salty TV app to date has launched over 49 IPs and these are IPs that we've developed internally. In 2026, in total, the number of IPs has grown to 279. We've done this through licensing and other acquisition channels. This represents a 5.7x growth in terms of content as far as subscribers go. While subscriptions are not the main payment model, it is one that we're very proud of. We had over 6,000 subscribers that have adopted to Salty TV's subscription model and these subscriptions are either half year or a year long. Total downloads of the app itself, over 400,000 across iOS and Android and this data is through May 12, 2026.

Michael Kopinski (Equity Analyst)

Sounds like it's off to a good start and then a couple of quick ones here. What level of development spending should investors anticipate in 2026 as the company advances its AAA pipeline? When should we start to see operating expenses moderate after the current development cycle?

Heidi Chow (Chief Financial Officer)

Thank you Michael. As you know for the company is actually while we're working on multiple projects we are cost conscious. We try to we're not spending extra significant amount of money while we're building all these kind of different projects, different DLCs company is remaining. As you know, we don't spend as much on the cost side in regards to the operating expenses. And on top of that Michael, our CEO actually Mr. Hai Xi, wants to add on top of the Salty TV's side of the business.

Hai Xi

For Salty tv, actually the product is not just the vertical dramas. More importantly, we're also trying to adopt a strategy where we're combining the dramas with the interactive games. So this year we're looking to release two interactive games for our internal AAA gaming projects. There are more large scale and then they are worked on by internal development teams. So in terms of the short term revenues maybe we're still looking to improve our strategy and that's also one of the reasons why we are trying to look into the business line of vertical dramas as well as the interactive games. So for these two interactive games, the internal development cycle might take around seven to eight months and we have high confidence into the performance potential performance of these two interactions games once they release and then we're looking at 1 million units of production. Both of these interactive games will be released around Q3 this year.

Michael Kopinski (Equity Analyst)

Great, thanks for the added color. If I could flip one more question in can you please provide a quick update regarding the stablecoin business? Specifically the number of states that currently that you're applying to and any general updates on that business?

Peter Kan

Yes. So this is Peter again and I'll give you an update on our stablecoin business. The USDL COIN is definitely moving from building phase to launch phase readiness. We've been working on the platform infrastructure. It's pretty much functionally complete across wallet management, on chain minting, on chain burning, blockchain transfers and KYC verification covering both enterprise and individual flows. Internal testing of the full digital marketplace is currently underway. On the compliance side of things and licensure, the Money Transmitter license application is actively progressing across multiple states right now. KYC AML vendor selection has been approved by the Chairman and CCO with some subcontracting in progress. Integration is already built and operational. Our compliance framework is being finalized in coordination with legal counsel ahead of launch distribution wise, we're positioned across three distribution channels operating in parallel. First of all is the Noise Digital Warehouse. It's, you know, Noise is getting a new addition. It's going to be our proprietary gaming digital goods platform with USDO integration for purchases and sales. It will serve as our first go to market launch for usdo. Additionally we have Crypto ATM network with a functional prototype already built for internal testing as we target real world on ramp for USDO purchases. So sooner or later we'll likely see some crypto ATMs machines deployed across various locations in the country.

Michael Kopinski (Equity Analyst)

Great. Thanks for the update. Thanks for taking all my questions.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.