Thank you for standing by, and welcome to Snail, Inc.'s First 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 first quarter 2025 earnings conference call and webcast. Joining us for today's call are Snail, Inc.'s Co-CEO, Tony Tian; Senior Vice President, Director of Business Development and Operations, Peter Kang; and Chief Financial Officer, Heidy Chow. The company's first 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 sec.gov/edger. During this call, management may make forward-looking statements regarding future events and the future financial performance of the company. Actual events and 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 SEC on March 26, 2025, and other SEC filings. The company may make 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 such 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 a historical reconciliation of bookings and EBITDA to the corresponding GAAP measures in the earnings press release and the company's SEC filings. And now, I will turn the call over to Tony Tian, Co-Chief Executive Officer of Snail. Sir, please proceed.

Thank you, and good afternoon, everyone. Thank you for joining us today to review our financial and operating results for the first quarter ended March 31, 2025. The first quarter saw strong growth across our top-line, delivering revenues of $20.1 million or 42.5% increase compared to Q1 2024. Our bookings also grew 13.6% to $22.2 million, compared to the same period last year and our total unit sold increased 45% to $1.5 million, primarily driven through our flagship ARK franchise. Following the successful launch of the Extinction DLC and Part 3 of Bobs Tall Tales DLC last quarter, we were excited to introduce the Astraeos Map for ARK Survival Ascended. This new content brings a unique twist steeped in Greek mythology, offering players a fresh and immersed experience. Player engagement across the ARK franchise continues to remain strong. 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. In late December, our last year, we marked a significant milestone in expanding the ARK Universe with the launch of ARK Ultimate Mobile Edition. The response has been exceptional. Since launch, the mobile title has surpassed 4.8 million downloads across iOS and Android platforms as of March 31, 2025. In the three months it ended March 31, 2025, ARK Ultimate Mobile Edition had an average DAU of approximately 144,000. We recently expanded the mobile experience further with the release of two fan favorite maps, Ragnarok and Extinction, and we remain committed to delivering fresh content through this rapidly growing segment. Mobile continues to be a key growth area for the ARK franchise, effectively lowering the hardware barrier to entry and expanding our reach to a broader global audience. We also attended the 2025 Game Developer Conference or GDC…

Thanks, Tony, and good afternoon, everyone. As many of you know, June 2025 will mark the 10-year anniversary of our flagship title, ARK: Survival Evolved. What began as an ambitious sandbox survival game with dinosaurs, robust taming mechanics and deep crafting systems has evolved into a global franchise with a passionate player base and a thriving creative content ecosystem. Looking back, ARK: Survival Evolved was more than just a game launch. It was a bold step into an up and coming genre that demanded innovation, risk taking and a close relationship with our community. From the early days of early access to the full release and the many expansions that followed, ARK has continuously pushed boundaries and adapted to new platforms, new technologies, and new player expectations. In the past 10 years, we've expanded the ARK Universe across PC, console, and mobile, brought cinematic storytelling and voice talent to the forefront, and connected millions of players worldwide. At the heels of the 10-year anniversary, we unveiled several exciting updates for the ARK franchise at this year's Game Developers Conference. The first was the reveal of a teaser trailer for ARK Aquatica, giving attendees an early look at the upcoming expansion map. The new map introduces a significant change in gameplay, with roughly 95% of the environment taking place underwater. The expansion reflects our continued efforts to diversify gameplay and evolve the ARK experience as the franchise approaches its 10-year milestone. The new DLC map is expected to launch in the coming months. We also unveiled the official trailer for ARK: Lost Colony, the next major DLC for ARK: Survival Ascended. This new expansion is being produced by Studio Wildcard, expected to launch at the end of the year, we're proud to collaborate with such a respected and talented studio and…

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 first quarter end of March 31, 2025. Net revenue for the first quarter was $20.1 million, a 42.5% increase compared to $14.1 million in the same period last year. The increase was primarily due to an increase in total ARK sales of $2.7 million, an increase in ARK mobile sales of $1.3 million, and the company deferring $3.3 million less sales during the first quarter of 2025 compared to the same period last year. We defer 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. Net loss in the first quarter was $1.9 million compared to a loss of $1.8 million in the same period last year as a result of the aforementioned increase in net revenue, offset by increase in cost of revenues and operating expenses, a result of our increasing headcount, research and development and marketing expenses. Bookings for the three months ended March 31, 2025, increased 13.6% to $22.2 million compared to $19.6 million from the same period last year. The increase was primarily due to the release of ARK: Survival Ascended DLC Astraeos this quarter and the release of Bobs Tall Tales and Bellwright in the later quarter of 2024. EBITDA for the quarter ended March 31, 2025, was loss of $3.2 million compared to a loss of $1.9 million in the prior year period. The decrease was primarily due to an increase in benefit from income taxes of $1 million, a decrease in interest expenses of $300,000 and an increase in net loss of $100,000 partially offset by a decrease in…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from Michael Kupinski with Noble Capital Markets. Please proceed with your question.

Thank you, and congratulations on your strong quarter. A couple of questions. I was wondering if you can just talk a little bit about your approach to revenue diversification. I know that you had a number of initiatives here. I just kind of wanted like to hear your strategy for that.

Thank you. This is Peter Kang and we'll address your question here. We're actively exploring and investing in new business or games that will improve revenue diversification. For example, we have launched a short drama business and signed an MOU with Mega Matrix to accelerate our penetration in that industry. On gaming, we're always releasing games we acquired from our gaming network this year with Robots at Midnight, Honeycomb: The World Beyond, and Echoes of Elysium, all releasing this year. We expect the new revenue streams will have a meaningful contribution for our revenue diversification efforts.

And Peter, you mentioned MOU. I was just wondering if you could talk a little bit about the revenue implications of MOU with Mega Matrix.

Thank you. I'll just -- I'll let Tony address this one. Tony?

Sure, sure. Hi Michael, I think at this moment, it's probably a little early to measure the potential revenue contribution from the short drama business as we just announced the MOU. But what I can tell is that we have an in-house team and we have been evaluating developing the land of business for quite a while. And over the past several weeks the MPO team and also our in-house team has been working together. At this moment, we are in the early stage to working on a couple of short drama series. So there will be some revenue contribution from that line of business. But at this moment, we don't have a specific number of how many short drama series we will be developing, producing this year. Based on the MOU, we're and the two parties has -- are willing to co-develop at least 10 drama series over the next 12 months.

Got you. And then I was wondering if you could talk about obviously you had some cost increase significantly some of the research and development costs certainly for some of these products and so forth, but also from advertising and marketing, which was up about $1 million or so. I was just wondering if you can just talk a little bit about advertising and marketing costs and how we should think about those line items as you kind of look to the upcoming quarters.

Got you. This is Peter again. Well, we increased the size of our portfolio and as such, marketing expenditures should be increasing. In 2025, we attended the GDC Expo, had a booth there and unveiled several games and DLCs in our content pipeline. Those unveiled including ARK: Aquatica, ARK: Lost Colony, Nine Yin Sutra: Immortal, Nine Yin Sutra: Wushu, just to name a few. Majority of the increase is associated with our GDC participation. We also increased our marketing spend to support game releases in 2025. In addition to the new DLCs for the ARK franchise, we also announced Robots at Midnight, Honeycomb: The World Beyond and Echoes of Elysium. We're truly excited about these releases. Moving forward, we do not expect to see such quarter-over-quarter increases as we refine our game unveiled strategies and explore our participation in other game shows.

Got you, Peter. And my final question is, obviously this is, you have a lot of expenses, a lot of product launches and so forth. And I would assume that you're going to monetize that in coming quarters. But how do we -- how should investors look at the bottom line and your approach to turning net income positive?

Great question. Our approach to positive bottom line really centers around cost control and diversified monetization. On the subject of cost control, we outsource certain development functions and reduce our fixed cost and internal headcount burdens. Furthermore, R&D and marketing expenses are tightly aligned with focused projects and near-term revenue targets. Onto monetization, we have expanded into the short drama business inside of MOU with Mega Matrix to accelerate the short-term drama of business growth. We have premium mods monetizing an ARK: Survival Ascended, allowing Snail to scale content with minimal internal investment. We have remade our ARK mobile game ARK: Ultimate Mobile Edition and that in itself can drive high margin micro transactions. We continuously seek our investments in profitable and scalable content to add to our content pipeline.

Terrific. That's all I have. Congratulations. Keep up the good work.

Thank you.

At this time, this concludes Snail, Inc.'s first quarter 2025 conference call. If your question was not taken, please contact Snail, Inc.'s IR team at snal@gateway-grp.com. Thank you for your participation and you may now disconnect.