Snail(SNAL) - 2025 Q1 - Quarterly Report

Financial Performance - For the three months ended March 31, 2025, the company generated net revenue of $20.1 million, a 42.5% increase from$ 14.1 million in the same period of 2024[188]. - The company reported a net loss of $1.9 million for Q1 2025, slightly higher than the$ 1.8 million loss in Q1 2024[188]. - Net revenues for the three months ended March 31, 2025, increased by $6.0 million, or 42.5%, compared to the same period in 2024, driven by increased sales of ARK products and a reduction in deferred sales[210]. - Gross profit for the three months ended March 31, 2025, was$ 5.8 million, reflecting a significant increase of $3.8 million, or 181.9%, from$ 2.0 million in 2024[209]. - EBITDA for the three months ended March 31, 2025, decreased by $1.3 million, or 75.5%, primarily due to an increase in income tax benefits and a slight increase in net loss[234]. Revenue Sources - The ARK franchise accounted for 91.6% of total revenues in Q1 2025, up from 78.6% in Q1 2024[187]. - Daily active users for ARK: Survival Evolved and ARK: Survival Ascended averaged 243,000 in Q1 2025, compared to 209,000 in Q1 2024, representing a 16.2% increase[187]. - The company sold 1.5 million units of games in Q1 2025, an increase of 36.4% from 1.1 million units in Q1 2024[191]. - The ARK franchise has achieved 96.3 million installs on consoles and PCs as of March 31, 2025[187]. - Bookings for the three months ended March 31, 2025, increased by$ 2.6 million, or 13.6%, compared to the same period in 2024, due to new game releases[228]. Expenses - Cost of revenues for the three months ended March 31, 2025, rose by $2.2 million, or 18.4%, compared to the same period in 2024, primarily due to increased software license royalties related to higher ARK sales[211]. - General and administrative expenses increased by$ 2.6 million, or 117.5%, for the three months ended March 31, 2025, largely due to higher salaries and stock compensation expenses[213]. - Research and development expenses rose by $1.8 million, or 103.2%, for the three months ended March 31, 2025, as the company expanded its internal development team[214]. - Advertising and marketing expenses surged by$ 1.2 million, or 826.3%, for the three months ended March 31, 2025, attributed to increased presence at industry events and marketing campaigns[215]. Cash Flow and Financing - As of March 31, 2025, the company's unrestricted cash was $9.4 million, an increase from$ 7.3 million as of December 31, 2024[236]. - Net cash flows provided by operating activities decreased by $6.0 million, totaling$ 0.8 million for the three months ended March 31, 2025, compared to $6.8 million for the same period in 2024, representing an 88.5% decline[242]. - Net cash flows used in investing activities were$ 1.9 million for the three months ended March 31, 2025, compared to none in the same period of 2024[248]. - Financing activities generated $3.1 million in net cash flows for the three months ended March 31, 2025, a significant increase from the$ 5.9 million used in financing activities in the same period of 2024[249]. - The company issued convertible notes with a principal amount of $3.3 million in February 2025, maturing in February 2026[239]. Future Plans and Developments - The company plans to release a new DLC, ARK: Aquatica, in June 2025, as part of the 10-year celebration of ARK: Survival Evolved[200]. - The newly released DLC map ARK: Astraeos sold 253,000 units across platforms since its launch in February 2025[199]. - The company has released 49 short film dramas through its Salty TV mobile application and expects to continue rolling out new content throughout 2025[201]. - The company has established a new division under the Interactive Films brand to focus on creating content in the vertical short film segment[190]. Accounting and Compliance - The company is classified as an "emerging growth company" and is eligible for exemptions from various reporting requirements, including reduced disclosure obligations regarding executive compensation[270]. - The company will remain an emerging growth company until it meets certain criteria, including total annual gross revenue of at least$ 1.235 billion or a market value of common stock held by non-affiliates exceeding $700 million[273]. - The company is also classified as a "smaller reporting company," allowing it to take advantage of scaled disclosures as long as its voting and non-voting common stock held by non-affiliates is less than$ 250 million[274]. - The company recognizes deferred revenues based on estimates of release dates and technical support obligations, which may change and impact financial statements[266]. - Deferred income tax assets are based on estimates of future taxable income and the utilization of tax loss carryforwards, which require significant judgment and may materially impact financial statements[268]. Risks and Estimates - The company expects accounts receivable from SDE Inc. to be repaid within the next two fiscal years, with outstanding balances of $6.0 million as of March 31, 2025[246]. - The company is projected to fail its debt covenants within the next 12 months, leading to the classification of the long-term portion of its promissory note as current[239]. - Changes in estimates related to release schedules and technical support obligations could materially affect the classification of deferred revenues[266]. - The company reviews its estimates on an ongoing basis to ensure they reflect changes in business or new information[265]. - The company has elected to delay the adoption of certain accounting standards, which may result in its financial statements being less comparable to those of other public companies[272].