Q2 2026 Snail Inc Earnings Call

August 11, 2026

Speaker #1: Thank you for standing by, and welcome to Snail, Inc.'s second quarter 2026 earnings conference call and webcast. I would now like to turn the call over to Steven Shinmachi with Investor Relations.

Operator: Thank you for standing by, and welcome to Snail, Inc.'s Q2 2026 earnings conference call and webcast. I would now like to turn the call over to Steven Shinmachi with Investor Relations.

Speaker #2: Thank you, and good afternoon, everyone. Welcome to Snail, Inc.'s second quarter 2026 earnings conference call and webcast. Joining us for today's call are Snail, Inc.'s Chief Executive Officer, Haishi; Chief Financial Officer, Heidy Chow; and Senior Vice President, Director of Business Development and Operations, Peter Kang.

Steven Shinmachi: Thank you, and good afternoon, everyone. Welcome to Snail, Inc.'s Q2 2026 earnings conference call and webcast. Joining us for today's call are Snail, Inc.'s Chief Executive Officer, Hai Shi; Chief Financial Officer, Heidy Chow; and Senior Vice President, Director of Business Development and Operations, Peter Kang. The company's Q2 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 10-Q that has been filed with the SEC and other SEC filings. The company makes these forward-looking statements as of today.

Speaker #2: The company's second 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/egger.

Speaker #2: During this call, management may make forward-looking statements regarding future events and the future financial performance of the company. Actual events are results may differ materially from our expectations and forward-looking statements are subject to certain risks and uncertainties.

Speaker #2: Please refer to the company's Form 10-Q that has been filed with the SEC and other SEC filings. The company makes these forward-looking statements as of today; it disclaims any duty or obligation to update them or to release public 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.

Steven Shinmachi: It disclaims any duty or obligation to update them or to release public 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 refer to bookings and EBITDA, which are non-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 GAAP measures in the earnings press release and the company's SEC filings. Now I will turn the call over to Peter Kang, Senior Vice President and Director of Business Development and Operations of Snail. Sir, please proceed.

Speaker #2: 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 the historical reconciliation of bookings and EBITDA to the corresponding GAAP measures in the earnings press release and the company's SEC filings.

Speaker #2: 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.

Speaker #3: Thank you, and good afternoon, everyone. Thank you for joining us today to review our financial and operational results for the second quarter ended June 30, 2026.

Peter Kang: Thank you, and good afternoon, everyone. Thank you for joining us today to review our financial and operational results for the Q2 ended 30 June 2026. Over the last several months, we have made encouraging strides across our gaming pipeline and diversified content roadmap. Through DLC releases, console launches, meaningful progress across key titles in development, and advances in our strategic initiatives, we have strengthened our foundation for the remainder of 2026. With additional content, products, and growth initiatives planned over the next several quarters, we believe Snail is well-positioned to build momentum across our portfolio. Starting with ARK, we maintained consistent activity and engagement during the quarter. ASE sold approximately 574,000 units with average DAU of approximately 105,000, and peak DAU of approximately 131,000. ASA sold approximately 1.2 million units with average DAU of approximately 120,000 and peak DAU reaching over 155,000.

Speaker #3: Over the last several months, we have made encouraging strides across our gaming pipeline and diversified content roadmap. Through DLC releases, console launches, meaningful progress across key titles in development, and advances in our strategic initiatives, we have strengthened our foundation for the remainder of 2026.

Speaker #3: With additional content, products, and growth initiatives planned over the next several quarters, we believe Snail is well-positioned to build momentum across our portfolio. Starting with ARC, we maintained consistent activity and engagement during the quarter.

Speaker #3: ASC sold approximately 574,000 units, with an average DAU of approximately 105,000 and peak DAU of approximately 131,000. ASA sold approximately 1.2 million units, with an average DAU of approximately 120,000 and peak DAU reaching over 155,000.

Speaker #3: And across ARC Mobile, average DAU was approximately 129,000, while total downloads exceeded 13 million. We are also pleased with the progress we have made in executing our ARC content pipeline.

Peter Kang: Across ARK Mobile, average DAU was approximately 129,000, while total downloads exceeded 13 million. We are also pleased with the progress we have made in executing our ARK content pipeline. Starting in May, we released the ARK Fantastic Tames Season 1 pack, which included three DLC creatures, Burrowbuck, Cerberax, and Enigmasaur. Burrowbuck was available at launch, while the latter two creatures are scheduled for release during Q3 and Q4, respectively, to extend the pack's content cadence through year-end. More recently, early July marked the return of the iconic ARK: Genesis Part 1 DLC to ASA and the Unreal Engine 5 experience. In tandem with Genesis, we released ARK: Tides of Fortune, a new premium expansion that transformed the Genesis ocean into a massive map-wise natural frontier. Alongside these two DLC releases, we also shadow-dropped ARK: Dragontopia.

Speaker #3: Starting in May, we released the ARC Fantastic Tames Season 1 pack, which included 3 DLC creatures. Burrowback, Cerberax, and Enigmasaur. Burrowback was available at launch while the latter two creatures are scheduled for release during the third and fourth quarter respectively.

Speaker #3: To extend the pack's content cadence through year-end. And more recently, early July marked the return of the iconic Genesis Part 1 DLC to ASA.

Speaker #3: And the Unreal 5 engine experience. In tandem with Genesis, we released ARC: Tides of Fortune, a new premium expansion that transformed the Genesis ocean into a massive, map-wide natural frontier.

Speaker #3: And alongside these two DLC releases, we also have Dragontopia. Content for the Dragontopia DLC will be released in phases throughout 2026, with DLC owners expected to receive included content updates throughout Q3 and Q4.

Peter Kang: Content for the Dragontopia DLC will be released in phases throughout 2026, with DLC owners expected to receive included content updates throughout Q3 and Q4. Together, these launches further expanded the ASA experience and established a strong foundation for the additional ARK content plan through 2027. Beyond ARK, we officially launched Bellwright on PlayStation and Xbox during Q2. Bellwright originally launched in 2024 as an early access Steam title and has since achieved over 1 million lifetime units sold, over 46.4 million playtime hours, and maintained a very positive Steam rating for the past two years. The strong and established Steam following carried into the console launch as well. Following the launch on console platforms, Bellwright reached the top five paid games list on Xbox and earned strong early user ratings on both PlayStation and Xbox.

Speaker #3: Together, these launches further expanded the ASA experience and established a strong foundation for the additional ARC content planned through 2027. Beyond ARC, we officially launched Bellwright on PlayStation and Xbox during the second quarter.

Speaker #3: Bellwright originally launched in 2024 as an early-access Steam title, and has since achieved over 1 million lifetime units sold. Over 46.4 million playtime hours and maintained a very positive Steam rating for the past 2 years.

Speaker #3: The strong and established Steam following carried into the console launch as well. Following the launch on console platforms, Bellwright reached the top 5 paid games list on Xbox, and earned strong early user ratings on both PlayStation and Xbox.

Speaker #3: Additionally, during the first 30 days, after the console launch, combined console DAU demonstrated positive early engagement, suggesting console monetization potentials. During a relatively measured second quarter for new game and content releases, Bellwright's sales helped support our overall performance.

Peter Kang: Additionally, during the first 30 days after the console launch, combined console DAU demonstrated positive early engagement, suggesting console monetization potential. During a relatively measured Q2 for new game and content releases, Bellwright sales helped support our overall performance. More importantly, its success reinforces our confidence in expanding beyond the ARK IP. Our rich history in the sandbox survival genre continues to support our broader diversification strategy, and we remain focused on growing this portfolio as we evaluate new investments and pipeline opportunities. Operationally, we are pleased to report a new initiative through our subsidiary, Eagle Fold, which is focused on the development of our new AI technology. Just last week at the European AI Forum, we introduced the AI Ranch initiative and unveiled a new product called the Non-Human Player, or NHP. At its core, NHP is an AI companion designed for gamers.

Speaker #3: More importantly, its success reinforced our confidence in expanding beyond the ARC IP. Our rich history in the sandbox survival genre continues to support our broader diversification strategy, and we remain focused on growing this portfolio as we evaluate new investments and pipeline opportunities.

Speaker #3: Operationally, we are pleased to be part of a new initiative through our subsidiary, Eaglefold, which is focused on the development of our new AI technology.

Speaker #3: Just last week, at the AI Forum Conference, we introduced the AI Ranch Initiative and unveiled a new product called the Non-Human Player, or NHP.

Speaker #3: At its core, NHP is an AI companion designed for gamers. Unlike traditional NPCs or scripted bots, NHP is intended to behave, learn, and adapt like a real human teammate to ultimately create a personalized and dynamic AI partner throughout a player's gaming journey.

Peter Kang: Unlike traditional NPCs or scripted bots, NHP is intended to behave, learn, and adapt like a real human teammate to ultimately create a personalized and dynamic AI partner through a player's gaming journey. What makes NHP unique is its approach to understanding games. Rather than relying on scripts, APIs, or game modification, NHP observes the game the same way a human player would. It watches the screen, interprets what is happening in real-time, understands players, objectives, environments, and user interfaces, develops a plan, and then executes actions through standard keyboard and mouse inputs. Over time, the technology is designed to learn from each user's play style and preference, creating an increasingly personalized companion experience. Our vision is for NHP to accompany users across multiple game titles, helping them not only enjoy games more but also improve their skills and shorten the learning curve when entering new games.

Speaker #3: What makes NHP unique is its approach to understanding games. Rather than relying on scripts, APIs, or game modifications, NHP observes the game the same way a human player would.

Speaker #3: It watches the screen, interprets what is happening in real time, understands players, objectives, environments, and user interfaces, develops a plan, and then executes actions through standard keyboard and mouse inputs.

Speaker #3: Over time, the technology is designed to learn from each user's playstyle and preference, creating an increasingly personalized companion experience. Our vision is for NHP to accompany users across multiple game titles, helping them not only enjoy games more but also improve their skills and shorten the learning curve with entering new games.

Speaker #3: We believe this technology has the potential to address several common challenges faced by both casual and hardcore gamers. These include difficulties finding reliable teammates, frustrations with inconsistent multiplayer experiences, the repetitive nature of content grinding, and the time required to learn increasingly complex games.

Peter Kang: We believe this technology has the potential to address several common challenges faced by both casual and hardcore gamers. These include difficulties finding reliable teammates, frustrations with inconsistent multiplayer experiences, the repetitive nature of content grinding, and the time required to learn increasingly complex games. NHP is being developed to serve as an AI partner that adapts to each player's individual goals and preferences to help elevate the overall gaming experience. To illustrate the concept, imagine a virtual pet that can play chess against you, learn how you play, and help you improve your game. That is the type of personalized consumer experience NHP aims to deliver. This new initiative reflects a broader effort to expand Snail's growth platforms while staying anchored in the communities, creators, and gameplay experiences that define our core business.

Speaker #3: NHP is being developed to serve as an AI partner that adapts to each player's individual goals and preferences, to help elevate the overall gaming experience.

Speaker #3: To illustrate the concept, imagine a virtual pet that can play chess against you, learn how you play, and help you improve your game. That is the type of personalized consumer experience NHP aims to deliver.

Speaker #3: This new initiative reflects a broader effort to expand Snail's growth platforms while staying anchored in the communities, creators, and gameplay experiences that define our core business.

Speaker #3: As we move through the second half of the year, and into 2027, we are pairing this new initiative with a clear slate of gaming content designed to sustain engagement, broaden our portfolio, and support long-term revenue diversification.

Peter Kang: As we move through the H2 of the year and into 2027, we are pairing this new initiative with a clear slate of gaming content designed to sustain engagement, broaden our portfolio, and support long-term revenue diversification. As we look ahead to the rest of the year, our gaming content pipeline is well-defined. Across ARK, we have phased releases planned for the Fantastic Tames Pack and Dragontopia DLC throughout Q3 and Q4. In addition, ARK Maker, our content creation tool, and the return of ARK: Survival of the Fittest are slated for launch in the H2 of 2026. At IGN Live in June, we unveiled a teaser trailer for ARK Maker as we continued preparing for the tool's official launch, and also released new details about the upcoming ARK animated series ahead of Part 2's return to Paramount+.

Speaker #3: As we look ahead to the rest of the year, our gaming content pipeline is well defined. Across ARC, we have phased releases planned for the Fantastic Tames Pack and Dragontopia DLC.

Speaker #3: Throughout Q3 and Q4. In addition, ARC Maker, our content creation tool, and the return of ARC: Survival of the Fittest are slated for launch in the second half of 2026.

Speaker #3: At IGN Live in June, we unveiled a teaser trailer for ARC Maker as we continued preparing for the tool's official launch and also released new details about the upcoming ARC animated series ahead of part 2's return to Paramount+.

Speaker #3: We are also pleased to share updates across the PixARK franchise. In addition to PixARK Worlds, which we unveiled in March, we recently announced the upcoming PixARK Teracrypt DLC.

Peter Kang: We are also pleased to share updates across the PixARK franchise. In addition to PixARK Worlds, which we unveiled in March, we recently announced the upcoming PixARK: Terracrypt DLC. Terracrypt marks the largest paid DLC expansion for PixARK and is planned to introduce more than 200 hours of gameplay, 80 new creatures, and a vast new environment designed to extend player progression and exploration opportunities within the PixARK universe. We were pleased to showcase a playable demo at the ChinaJoy event as we are preparing to launch the DLC this fall. With much of the upcoming ARK content centered around ASA, we are pleased to include PixARK's largest paid DLC expansion into our pipeline as well. Lastly, we are pleased to highlight continued progress across our three highly anticipated triple A titles in development: For The Stars, Nine Yin Sutra: Immortal, and Nine Yin Sutra: Wushu.

Speaker #3: Teracrypt marks the largest paid DLC expansion for PIX ARC, and is planned to introduce more than 200 hours of gameplay, 80 new creatures, and a vast new environment designed to extend player progression and exploration opportunities within the PIX ARC universe.

Speaker #3: We were pleased to showcase a playable demo at the China Joy event as we are preparing to launch the DLC this fall. With much of the upcoming ARC content centered around ASA, we are pleased to include PIX ARC's largest paid DLC expansion into our pipeline as well.

Speaker #3: Lastly, we are pleased to highlight continued progress across our three highly anticipated AAA titles in development: For the Stars, Lion Sutra Immortal, and Lion Sutra Wuxia.

Speaker #3: In April, we released a new developer diary for For the Stars, offering an in-depth look at the upcoming game's development progress, new pre-alpha footage, and unreleased concept art.

Peter Kang: In April, we released a new developer diary for For The Stars, offering an in-depth look at the upcoming game's development progress, new pre-alpha footage, and unreleased concept art. We also plan to showcase For The Stars at the upcoming Gamescom event later this month, alongside ASA, Bellwright, Honeycomb: The World Beyond, and another internally developed triple A title. In addition, Nine Yin Sutra: Immortal headlined our attendance at the ChinaJoy event. Making its public debut at the event, we released a new trailer alongside the game's official Steam page, marking a significant moment in the title's development cycle ahead of its release. As a reminder, the two Nine Yin Sutra titles currently in development builds on established Age of Wushu IP, which has a loyal fan base in China.

Speaker #3: We also plan to showcase For the Stars at the upcoming Gamescom event later this month, alongside ASA, Bell Wright, Honeycomb, and another internally developed AAA title.

Speaker #3: In addition, Lion Sutra Immortal headlined our attendance at the China Joy event, making its public debut at the event. We released a new trailer alongside the game's official Steam page, marking a significant moment in the title's development cycle ahead of its release.

Speaker #3: As a reminder, the two Lion Sutra titles currently in development build on established Age of Wushu IP, which has a loyal fan base in China.

Speaker #3: Lion Sutra Immortal will aim to deliver an open-world, sandbox cultivation experience aligned with current Chinese gaming market trends and preferences, while introducing a new experience to that established community.

Peter Kang: Nine Yin Sutra: Immortal will aim to deliver an open-world sandbox cultivation experience aligned with current Chinese gaming market trends and preferences, while introducing a new experience to that established community. To reiterate, the three triple A titles in our pipeline continue to represent a significant growth driver for Snail. These titles mark an important step in diversifying beyond the ARK IP and establishing new lasting franchises at a larger scale than we have historically pursued. As we advance these projects towards launch, we are focused on building durable communities, expanding our addressable audience, defining ourselves as a multi-franchise developer and publisher, and positioning Snail for a broader portfolio of long-term growth opportunities. Thank you for joining us today. I will now turn the call over to Heidy to discuss our financial results for Q2 ended 30 June 2026. Heidy?

Speaker #3: To reiterate, the three AAA titles in our pipeline continue to represent a significant growth driver for Snail, these titles mark an important step in diversifying beyond the ARC IP and establishing new, lasting franchises at a larger scale than we have historically pursued.

Speaker #3: As we advance these projects towards launch, we are focused on building durable communities expanding our addressable audience defining ourselves as a multi-franchise developer and publisher and positioning Snail for a broader portfolio of long-term growth opportunities.

Speaker #3: Thank you for joining us today. I will now turn the call over to Heidi to discuss our financial results for the second quarter ended June 30th, 2026.

Speaker #3: Heidi?

Speaker #2: Thank you, Peter. And good afternoon, everyone. Thank you all for joining us today as I review our financial results for the second quarter, and six months ended June 30, 2026.

Heidy Chow: Thank you, Peter, and good afternoon, everyone. Thank you all for joining us today as I review our financial results for Q2 and six months ended 30 June 2026. Net revenue for the quarter was $19.7 million, compared to $22.2 million in the same period last year. The decrease was primarily due to a $4.2 million decrease in sales of ASA, $1.8 million decrease from ASE, $400,000 decrease from ARK Mobile, $200,000 decrease from SaltyTV, and $200,000 decrease of other various titles, offset by a $1.5 million revenue increase from Bellwright and $2.8 million change in deferred revenues. Net revenue for the six months ended increased 11% to $47 million, compared to $42.3 million in the same period last year.

Speaker #2: Net revenue for the quarter was $19.7 million, compared to $22.2 million in the same period last year. The decrease was primarily due to a $4.2 million decrease in sales of ASA, a $1.8 million decrease from ASE, a $400,000 decrease from ARC Mobile, a $200,000 decrease from Salty TV, and a $200,000 decrease from other various titles.

Speaker #2: Offset by a 1.5 million revenue increase from Bell Wright and 2.8 million changing deferred revenues. Net revenue for the six months ended increased 11% to 47 million compared to 42.3 million in the same period last year.

Speaker #2: The increase was primarily due to a 3.6 million increase in sales of Bell Wright and a 5.3 million changing deferred revenues partially offset by a decrease in ASE revenue of 2.7 million and a decrease of 1.4 million attributable to lower sales of ASA.

Heidy Chow: The increase was primarily due to a $3.6 million increase in sales of Bellwright and a $5.3 million change in deferred revenues, partially offset by a decrease in ASE revenue of $2.7 million and a decrease of $1.4 million attributable to lower sales of ASA. Net loss for the quarter improved to a loss of $3 million, compared to a net loss of $16.6 million in the same period last year. The improvement is primarily due to the absence of the $14 million income tax provision recorded in the prior year, and an improvement in gross profit, partially offset by higher G&A and R&D expenses. Net loss for the six-month period improved to a loss of $900,000, compared to a loss of $18.5 million in the same period last year.

Speaker #2: Net loss for the quarter improved to loss of 3 million compared to a net loss of 16.6 million in the same period last year.

Speaker #2: The improvement is primarily due to the absence of the 14 million income tax provision recorded in the prior year and an improvement in gross profit partially offset by higher GNA and R&D expenses.

Speaker #2: Net loss for the six-month period improved to loss of 900,000 compared to a loss of 18.5 million in the same period last year. The improvement was primarily due to the absence of the 12.4 million income tax provision recorded in the prior year period.

Heidy Chow: The improvement was primarily due to the absence of the $12.4 million income tax provision recorded in the prior year period, which resulted from the valuation allowance recognized against the company's deferred tax assets, together with a $6.5 million improvement in gross profit. EBITDA for the quarter was a loss of $3 million, compared to a loss of $2.4 million in the same period last year. The slight decrease was primarily due to an increase in net income of $13.5 million and a decrease in depreciation expenses of $100,000, offset by an increase in the provision of income taxes of $14 million. EBITDA for the six-month period increased 88.8% to a loss of $600,000, compared to a loss of $5.8 million in the same period last year.

Speaker #2: Which resulted from the valuation allowance recognized against the company's deferred tax assets. Together with a 6.5 million improvement in gross profit. EBITDA for the quarter was loss of 3 million compared to a loss of 2.4 million in the same period last year.

Speaker #2: The slight decrease was primarily due to an increase in net income of 13.5 million and a decrease in depreciation expenses of 100,000 offset by an increase in the provision of income taxes of 14 million.

Speaker #2: EBITDA for the six-month period increased 88.8% to a loss of 600,000 compared to a loss of 5.8 million in the same period last year.

Speaker #2: The increase was primarily due to a decrease in net loss of 17.6 million offset by a decrease in provision for income taxes of 12.4 million.

Heidy Chow: The increase was primarily due to a decrease in net loss of $17.6 million, offset by a decrease in provision for income taxes of $12.4 million. Total units sold for the quarter were 2 million compared to 2.1 million in the same period last year. The slight decrease was due to a decrease in sales of ARK franchise IP by 200,000 units, partially offset by an increase in sales of Bellwright of 100,000 units. Total units for the 6-month period increased 500,000 to 4.2 million, compared to 3.7 million in the same period last year. The increase was primarily due to increased sales of ASA of 1 million units and an increase in Bellwright sales of 200,000 units, partially offset by a decrease in ASE sales of 700,000 units. Bookings for the quarter was $21.8 million, compared to $27.1 million in the same period last year.

Speaker #2: Total units sold for the quarter were 2 million compared to 2.1 million in the same period last year. The slight decrease was due to a decrease in sales of ARC franchise IP by 200,000 units partially offset by an increase in sales of Bell Wright of 100,000 units.

Speaker #2: Total units for the six-month period increased 500,000 to 4.2 million compared to 3.7 million in the same period last year. The increase was primarily due to increased sales of ASA of 1 million units and an increase in Bell Wright sales of 200,000 units partially offset by a decrease in ASE sales of 700,000 units.

Speaker #2: Bookings for the quarter was 21.8 million compared to 27.1 million in the same period last year. The decrease was primarily due to lower sales of ASE and ASA.

Heidy Chow: The decrease was primarily due to lower sales of ASE and ASA, partially offset by booking generated from Bellwright. Bookings for the 6-month period decreased slightly to $48.7 million, compared to $49.4 million in the same period last year. The slight decrease is primarily due to lower sales of ASE as the title continued to mature and consumer demand shifted towards ASA and its related downloadable content, offset by increased sales of ASA and Bellwright, which benefited from promotional pricing during the period. Lastly, as of 30 June 2026, unrestricted cash was $13.3 million compared to $8.6 million as of 31 December 2025. To review our detailed financial statements, please refer to the earnings press release and the Form 10-Q filed with the SEC.

Speaker #2: Partially offset by booking generated from Bell Wright. Bookings for the six-month period decreased slightly to 48.7 million compared to 49.4 million in the same period last year.

Speaker #2: The slight decrease is primarily due to lower sales of ASE as the title continued to mature and consumer demand shifted towards ASA and is related downloadable content offset by increased sales of ASA and Bell Wright.

Speaker #2: Which benefited from promotional pricing during the period. Lastly, as of June 30th, 2026, unrestricted cash was 13.3 million compared to 8.6 million as of December 31st, 2025.

Speaker #2: To review our detailed financial statements, please refer to the earnings press release and the Form 10 Q file with the SEC. We would like to emphasize that our Q2 results reflect the timing shift of ARC Title Fortune and ARC Genesis Part One Ascendant.

Heidy Chow: We would like to emphasize that our Q2 results reflect the timing shift of ARK: Tides of Fortune and ARK: Genesis Part 1 Ascended, both of which launched in early July rather than in June 2026 as originally scheduled. As a result, the related contribution moved into the Q3. As a reminder, we expect to recognize approximately $11 million from our deferred revenue balance in connection with the launch of Genesis Part 1 Ascended DLC. In addition to sales from Tides of Fortune in the Q3 of 2026. Additionally, we launched the ARK Fantastic Tames Season 1 pack in May 2026. Because the pack includes three creatures that are being released in phases, we did not recognize all revenue generated from the DLC in the Q2.

Speaker #2: Both of which launched in early July, rather than in June of 2026 as originally scheduled. As a result, the related contribution moved into the third quarter.

Speaker #2: As a reminder, we expect to recognize approximately $11 million from our deferred revenue balance in connection with the launch of Genesis Part One Ascendant DLC.

Speaker #2: In addition to sales from Title Fortune in the third quarter of 2026, we also launched the ARC Fantastic Team Season One pack in May 2026.

Speaker #2: Because the pack includes three creatures that are being released in phases, we did not recognize all revenue generated from the DLC in the second quarter.

Speaker #2: One of the three creatures was delivered to DLC owners at launch, while the remaining two are scheduled for release in Q3 and Q4. Accordingly, we recognized one-third of the sales related to the Fantastic Teams pack in Q2 and expect to recognize the remaining two-thirds as the additional creatures are released in Q3 and Q4, respectively.

Heidy Chow: One of the three creatures was delivered to DLC owners at launch, while the remaining two are scheduled for releases in Q3 and Q4. Accordingly, we recognize one-third of the sales related to the Fantastic Tames pack in Q2, and expect to recognize the remaining two-thirds as the additional creatures are released in Q3 and Q4 respectively. ARK: Dragontopia shadow drop in July 2026, alongside Tides of Fortune and Genesis Part 1: Ascended. Owners of the Dragontopia DLC will receive included content updates throughout Q3 and Q4. Thus, similar to revenue recognition treatment for the ARK Fantastic Tames Season 1 pack, the Dragontopia revenue will be recognized in phases during Q3 and Q4 as those content updates are delivered to DLC owners. The portion of revenue associated with content that has not yet been delivered is, and will be reflected in our deferred revenue balance through Q3.

Speaker #2: ARC Dragotopia will shadow drop in July 2026 alongside Title Fortune and Genesis Part One Ascendant. Owners of the Dragotopia DLC will receive included content updates throughout Q3 and Q4.

Speaker #2: Thus, similar to the revenue recognition treatment for the ARC Fantastic Team Season One pack, the Dragotopia revenue will be recognized in phases during Q3 and Q4 as those content updates are delivered to DLC owners.

Speaker #2: The portion of revenue associated with content that has not yet been delivered is and will be reflected in our deferred revenue balance through Q3.

Heidy Chow: The successful July launches of these DLCs, together with the robust gaming pipeline Peter previously outlined, and additional planned content releases in Q3 and Q4, position us well to build momentum through the remainder of the year. Lastly, turning to our $USDO stablecoin initiative. Our $USDO coin continues to make encouraging progress towards launch readiness. We have been building the platform infrastructure required to support wallet management, minting and burning, blockchain transfers, and KYC verification. We are also engaging proactively with regulators, and our money transmitter license applications have been submitted across multiple states. Our vision for $USDO includes multiple distribution channels operating in parallel. We are also evaluating a real-world on-ramp through the deployment of crypto ATMs in California to start.

Speaker #2: The successful July launches of these DLCs together with the robust gaming pipeline Peter previously outlined and additional planned content releases in Q3 and Q4 position us well to build momentum through the remainder of the year.

Speaker #2: Lastly, turning to our stablecoin initiative, our USDO coin continues to make encouraging progress toward launch readiness. We have been building the platform infrastructure required to support wallet management, minting and burning, blockchain transfers, and KYC verification.

Speaker #2: We are also engaging proactively with regulators and our money transmitter license applications have been submitted across multiple states. Our vision for USDO includes multiple distribution channels operating in parallel.

Speaker #2: We are also evaluating a real-world on-ramp through the deployment of crypto ATMs in California to start. As with our exploration of AI, we believe stablecoin technology represents an opportunity to extend our technological capabilities into new markets and develop additional revenue streams that can strengthen the business over time.

Heidy Chow: As with our exploration of AI, we believe stablecoin technology represents an opportunity to extend our technological capabilities into new markets, and develop additional revenue streams that can strengthen the business over time. The July DLC launches, the scheduled rollout of additional DLC content, our robust gaming pipeline, new business initiatives, together with the continued progress on $USDO, give us multiple avenues to build momentum through the remainder of 2026. This concludes our prepared remarks. We will now open the line for Q&A. As a reminder, some answers during the Q&A session may be answered in Chinese by our CEO before being translated into English. Operator, please proceed.

Speaker #2: The July DLC launches, the scheduled rollout of additional DLC content, our robust gaming pipeline, new business initiatives, together with the continued progress on USDO, give us multiple avenues to build momentum through the remainder of 2026.

Speaker #2: This concludes our prepared remarks. We will now open the line for Q&A. As a reminder, some answers during the Q&A session may be answered in Chinese by our CEO before being translated into English.

Speaker #2: Operator, please proceed.

Operator: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. One moment for questions. Our first question comes from Michael Kupinski with Noble Capital Markets. You may proceed.

Speaker #1: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.

Speaker #1: One moment for questions. Our first question comes from Michael Kopinski with Noble Capital Markets. He may proceed.

Michael Kupinski: Thank you for taking the question. Good evening, everyone. Q2 was the first quarter under the reduced ARK licensee fee structure, and I know that you quantified that there would be approximately $1.5 million of quarterly savings. How much of that was realized in the quarter? If maybe you could just talk a little bit about whether or not you are, at this point, retaining that savings, or are you reinvesting it elsewhere in the business?

Speaker #3: Thank you for taking the questions. Good evening, everyone. Q2 was the first quarter under the reduced ARC licensing fee structure, and I know that you quantified that there would be approximately $1.5 million of quarterly savings.

Speaker #3: How much of that was realized in the quarter? And if you could just talk a little bit about whether or not you're at this point retaining that savings, or are you reinvesting it elsewhere in the business?

Heidy Chow: Hi, Michael. Thanks for the question. In Q2, as you mentioned, from April of 2026, we started to have. We save on the licensing fee of approximately $500,000 on a monthly basis, which is about $1.5 million. We are actually, for the money that we save, of course, we are reinvesting that into our future games as well our in-own development. But the savings definitely improve on our company's gross profit. As you could see from Q2, gross profit, although revenue actually decreased, but gross profit actually increased.

Speaker #2: Hi, Michael. Thanks for the question. So in Q2, as you mentioned, from April of 2026, we started to save on the licensing fee—approximately $500,000 on a monthly basis, which is about $1.5 million.

Speaker #2: We are actually, for the money that we save, of course, reinvesting that into our future gains as well as our own development.

Speaker #2: But the savings definitely improve on our company's gross profit, as you can see from Q2, gross profit, although revenue actually decreased, but gross profit actually increased.

Michael Kupinski: Got you. Your current deferred revenue increased to $28.5 million, and I know that you said that you plan to recognize, I think, $11 million in Q3. I was just wondering if you could just give us some thought about revenue recognition over the next few quarters.

Speaker #3: Gotcha. And then your current deferred revenue increased to $28.5 million. And I know that you said that you plan to recognize, I think, $11 million in the third quarter.

Speaker #3: I was just wondering if you could just give us some thought about revenue recognition over the next few quarters.

Heidy Chow: Of course. This is Heidy again. Because we have to recognize our revenue according to Accounting Standard Codification 606. When we have a performance obligation that we have not met yet, we will have to defer the revenue. Some of our game, when we have a content that we have not released it yet, we will have to record that as a deferred revenue. Once the game is released, then we will turn the deferred revenue to revenue. A big portion on our balance sheet right now related to deferred revenue are actually a component from the ASA release. When we released ASA back in 2023, there was also five maps that were attached with the ASA. Genesis Part 1 and Genesis: Part 2 were part of the map.

Speaker #2: Of course, this is Heidy again. So, because we have to recognize our revenue according to Accounting Standard Codification 606, when we have a performance obligation that we have not met yet, we will have to defer the revenue.

Speaker #2: So, for some of our games, when we have content that we have not released yet, we have to record that as deferred revenue.

Speaker #2: Once the game is released, then we'll turn the deferred revenue into revenue. A big portion of our balance sheet right now related to deferred revenue is actually a component from the ASA release.

Speaker #2: When we released ASA, back in 2023, there were also five maps that were attached with the ASA. Genesis One and Genesis Two were part of the map.

Heidy Chow: Genesis Part 1 was released beginning of July of 2026, which means that because of a few days of delay, we were not able to recognize that in Q2 as revenue. As of right now, we already know it got released, so it will be recognized as Q3 revenue in related to Genesis Part 1.

Speaker #2: So we Genesis one was released on July beginning of July of 2026. So which means that we because of a few days of delay, we were not able to recognize that in Q2 as revenue, which it won't as of right now, we already know it got released, so it will be recognized as Q3 revenue.

Speaker #2: In related to Genesis one.

Michael Kupinski: Got you. Thanks, Heidy. The gross profit margins obviously are higher, but the Q2 operating expenses also increased. It sounds like your H2 is going to be really strong on the revenue side. I was just wondering if you can maybe give us some thought about how the expense run rate looks for the H2, and maybe the current R&D levels. Are they approaching the peak as these AAA titles advance through the development at this point?

Speaker #3: Gotcha. Thanks, Heidy. And a quick question here on the gross profit margins—obviously they're higher, but the Q2 operating expenses also increased. I was wondering, it sounds like your second half is going to be really strong on the revenue side.

Speaker #3: I was just wondering if you could maybe give us some thoughts about how the expense run rate looks for the second half, and maybe on the current R&D levels. Are they kind of approaching the peak as these AAA titles advance through development at this point?

Heidy Chow: Yeah. Most of our investment to our future development game are closing to the end right now. So we also not anticipated to have significant amount of increase in the future quarters for the new games that we will be launching. Our G&A expenses is also consistent quarter over quarter. So we're expecting a consistent G&A expenses and also R&D expenses. We're not expecting any significant changes quarter over quarter.

Speaker #2: Yeah, yeah. Most of our investment to our future development game of closing to the end right now. So we also not anticipated to have significant amount of increase in the future quarters for the new games that we will be launching.

Speaker #2: Our G&A expenses are also consistent quarter over quarter. So we're expecting consistent G&A expenses and also R&D expenses. We're not expecting any significant changes quarter over quarter.

Michael Kupinski: If I can just slip one last one in. On your stablecoin, what are the next hurdles at this point for rollout?

Speaker #3: And if I can just flip one last one in. On your stablecoin, what are the next hurdles at this point for rollout?

Heidy Chow: In regards to our stablecoin right now is for management, we are already submitted our application to the various states that we choose to conduct business in those states. The application has already been submitted. We're waiting to hear back from the state upon their review of the application.

Speaker #2: So, in regards to our stablecoin, right now there's some management. We have already submitted our application to the various states that we chose to conduct business in.

Speaker #2: The application has already been submitted. We're waiting to hear back from the state upon their review of the application.

Michael Kupinski: Got you. All right. That's all I have for now. Thank you.

Speaker #3: Gotcha. All right, that's all I have for now. Thank you.

Heidy Chow: Thank you, Michael.

Speaker #2: Thank you, Michael.

Operator: Thank you. This concludes Snail, Inc.'s Q2 2026 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. You may now disconnect.

Speaker #1: Thank you. This concludes Snail, Inc.'s second quarter 2026 conference call. If your question was not taken, please contact Snail, Inc.'s IR team at snal@gateway-grp.com.