GCL Global Holdings - Earnings Call - Q4 2025

Transcript

Operator (participant)

Good morning and welcome to GCL's FY 2025 earnings conference call. All participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. Please note that this call is being recorded. I will now turn the conference over to Crocker Coulson, Investor Relations for GCL Global Holdings. Mr. Coulson, the floor is yours.

Crocker Coulson (Head of Investor Relations)

Thank you so much. Hello, everybody, and thank you for joining us to review GCL's FY 2025 full-year results. This morning, GCL posted both the earnings release and the related investor presentation to our website, and you can find that at ir.gclglobalholdings.com. I'm pleased to say that with us on the call today, we have Sebastian Toke, GCL's Group CEO, and we also have Kenny Lin, GCL's Group Chief Financial Officer. After the prepared remarks have been concluded, we're going to open up this call to your questions. But before we begin, some statements in this teleconference will be forward-looking within the meaning of the federal securities laws. Although we believe these statements are reasonable, we can provide no assurance that they will prove to be accurate because they're prospective in nature.

Actual results may differ materially from those discussed today, and we do encourage you to review our most recent filings with the SEC for a discussion of risk factors that could materially impact our results. As I mentioned, the earnings release is available at ir.gclglobalholdings.com. And again, we encourage you to review the reconciliations of certain non-GAAP measures contained within. With those formalities now out of the way, it's my great pleasure to turn the call over to Sebastian Toke, Group CEO. Sebastian, over to you.

Sebastian Toke (CEO)

Thank you, Crocker. Hello, everyone. I'm Sebastian, Group CEO of GCL, and it's with a great pleasure to be speaking with you today on our first full-year earnings call since our NASDAQ listing on February 14th this year. Today, I'll be taking you through the performance of our financial year ended March 31st, 2025, which we refer to as FY25, so the group has grown significantly the past 12 months, and I'll also provide you with some perspective on what drove our performance and the strategic direction we're taking as we continue building out and strengthening our financial profile, along with our strategy towards both innovation and growth in the years ahead.

For those of you who are dialing in from the computer and would like a visual aid to this call, as mentioned by Crocker, our FY 25 earnings presentation is also available in the investor relations page for you to download and to refer to as well. So with that, let's look at our achievements for FY 25. Now, FY 25 was truly a transformative year for GCL Global Holdings. Not only did we become a public company during FY 25, we also delivered the strongest year of growth in our company's history, both in absolute revenue and in percentage terms. More importantly, the group returned to profitability this year, reversing a loss from FY 24. This turnaround reflects the underlying strength of our operating model, the scalability of our platform, and the successful execution of our strategic initiatives.

The growth this year was broad-based, with strong contributions across three of our four business segments. Our game distribution division saw a particularly strong uplift in FY 25, largely supported by the global release of several highly anticipated AAA game titles that drove an industry-wide surge in consumer demand. So among these titles, we have titles such as Black Myth: Wukong, Shin Megami Tensei V, Metaphor: ReFantazio, Elden Ring: Shadow of the Erdtree, NBA 2K25, Sonic X Shadow Generations, Warhammer 40K: Space Marine 2, Dragon Ball, Civilization VII, and Monster Hunter Wilds. So these titles were among some of our best-selling titles for FY 25, and this is also reflected by the 30% year-on-year growth in the number of game copies sold in FY 25.

For the financial year of FY 25, we saw distribution grow phenomenally, where we had grown from five million copies of games sold in FY 24 to 6.5 million copies of games sold in FY 25. These marquee releases not only invigorated retail and digital demand but also translated into materially higher sell-through volumes across core distribution markets. An example of this would be our role as a global physical publisher for Black Myth: Wukong, a AAA title where we managed the global launch of physical copies of the game, including the collector's edition units. The success of the game has truly boosted our credibility in publishing and distribution across global markets. Now, while we expect Black Myth to continue generating long-tail revenue over subsequent periods, we saw the bulk of its revenue generation during its first year of launch.

However, we believe subsequent downloadable content will be a catalyst for a boost in sales from the title again. Now, moving on to the game publishing front, we continue to expand our pipeline and deliver content that resonates with regional and global audiences. FY 25 marked continued traction in our strategy to publish high-potential titles, which includes titles that have launched as well as those that have yet to be launched as of FY 25, such as Black Myth: Wukong, Atomic Heart, JDM: Japanese Drift Master, S.T.A.L.K.E.R. 2: Heart of Chornobyl, Mandragora, Kong: Survivor Instinct, TerraTech Worlds, First Dwarf, Figment 2, and Daymare: 1994 Sandcastle. In line with our growth strategy in developing and investing into game IP, we made a strategic investment of a 20% equity stake in NEKCOM. This is an emerging but widely respected studio based in Asia.

With this investment, this marks GCL's first equity partnership with a game development studio and an important milestone in our concerted effort to move upstream into IP development. As part of this transaction, GCL secured global publishing rights to NEKCOM's upcoming game, Showa: American Story, a title that we believe has the potential to be one of the most culturally distinctive and globally resonant IPs that will be released. What gives us added confidence in the title's breakout potential is the engagement it has already generated ahead of the release. As of today, Showa: American Story has a total of more than 280 million collective views across social media platforms. This includes both direct video views and third-party content coverage spanning YouTube, TikTok, Bilibili, and other global channels. This level of organic pre-release traction is truly rare, and we believe it's a strong indicator of global audience interest.

The narrative universe of Showa: American Story as well lends itself well to future transmedia adaptation opportunities, including animation, web series, merchandise, and more. At GCL, we believe strongly in the long-term value of owning or co-owning culturally distinctive game IPs that can transcend formats, and Showa: American Story truly represents our first step in this direction. With that, I will turn the call over to our Group CFO, Kenny Lin, to discuss this year's results.

Kenny Lin (CFO)

Thank you, Sebastian. Fiscal Year 2025 was a year of record growth. We achieved the strongest financial performance yet in our company's history, and this can be highlighted through the key items such as group revenue that grew by 45.7% year-on-year against FY 2024 to $142 million. Gross profit growth exceeded that of revenues, increasing 59.5% year-on-year to $21 million as compared to the last fiscal year. These were primarily driven by the success of the uplift in revenue across game distribution and game publishing, boosted by the launch of Black Myth: Wukong. 2Game's digital distribution platform has also surpassed the 8,000-game threshold, an increase from just over 7,000 games last year, broadening our product offering and volume. Group net income saw record growth as we returned to profitability in FY 2025, reversing the first-ever record net loss in the company's history of negative $2 million in FY 2024.

The net was impacted mainly by listing expenses to a net income of $5 million in FY 25. EBITDA similarly grew close to 10X to $10.8 million from just $1 million in FY 24. While game distribution is still the main contributor of the group's total revenue at around 86%, we had a marked increase in game publishing of almost 3X, demonstrating substantial growth in FY 25 to $16 million from $3.4 million in FY 24. Game publishing's revenue contribution also grew from 3.5% of the group to 11.3% in FY 25, reinforcing our strategy to build out IP investment and development for the future. While the segment revenues for media and other decreased by 10% year-on-year, gross profit in these segments still managed to grow around 6% year-on-year from $1.5 to $1.6 million in FY 25.

In summary, I'm pleased to report that our record growth in FY 25 validates the group's growth strategy and the disciplined execution of our integrated business model, giving us the foundation required for sustainable financial health. With that, I now turn the call back to Sebastian.

Sebastian Toke (CEO)

Thank you, Kenny. So at this point in time, I want to take a quick moment in sharing what we feel would be GCL's future. So looking to the future, we expect our upcoming acquisition and subsequent integration of Ban Leong to broaden our business model in a very meaningful way. By incorporating Ban Leong's presence in gaming hardware and consumer electronics, along with its distribution rights to some of the biggest gaming hardware and consumer electronic brands, we believe we will benefit from its relatively stable revenue trajectory, helping to offset the natural highs and lows of content-driven IP cycles. We believe this portfolio will provide a solid foundation for reliable hardware-focused income, giving us greater visibility to our consolidated financials moving forward.

Furthermore, in an era where gaming software has driven the demand for gaming hardware, the acquisition of Ban Leong as a consumer electronic and gaming hardware group will complete GCL's ecosystem. We believe Ban Leong has also benefited from evolving consumer needs in recent years, with Ban Leong strategically positioned to capture the increasing demand in gaming graphic cards. Not only that, gaming cards aside, Wi-Fi routers, gaming PCs, and laptops, with everything in between that serves the larger gaming community, Ban Leong has been positioned strategically. Based on public filings of Ban Leong's unaudited financials prepared in accordance with Singapore Financial Reporting Standards, Ban Leong's revenue was $193.6 million, gross profit was $16.9 million, and total comprehensive income was $4.8 million for the 12 months ended March 31st, 2025.

We currently expect the acquisition to close by the end of August, and any financial impact of that will only be seen in the current financial year of FY 26. Subsequent to the acquisition of Ban Leong, we plan to streamline the group's business into two main pillars, where the first pillar will focus on the relatively stable distribution business, which now includes gaming software, gaming hardware, and consumer electronics. The second pillar will focus on game IP, anchored by game development, game publishing, content creation, and transmedia aspirations. Therefore, the overall group strategy will still revolve around capturing strong and interesting game IP, given that we believe we are well positioned to allow for IP adaptations across various mediums for potential further monetization.

Like in the example of S.T.A.L.K.E.R. 2, which was a game that we published last year, the anticipation of S.T.A.L.K.E.R. 2 led to a film adaptation last October, which became a catalyst for the game launch of S.T.A.L.K.E.R. 2 a month later. The trend of transmedia as well has been prevalent in the industry for many years now. Some of the examples include some of the biggest gaming IPs, such as Sonic, Mario, and all these large gaming IPs have been adapted into movies or TV series, which usually drives a boost in the underlying game demand as well. Looking ahead, we are trying to further strengthen our IP lab strategy. We have signed global publishing agreements with two promising development studios, such as Swordman and Leap Studio, during FY 25.

So with a quick introduction to both studios, Swordman Studio is currently developing The Swordsmen X, a high-fidelity action RPG rooted in martial arts fantasy. The game showcases exceptional combat design and worldbuilding, and we are actively working with the studio on its go-to-market and publishing roadmap. The Swordsmen X had a recent showing in Bilibili World in Shanghai, where it received many promising feedback from gamers alongside numerous media articles that highlighted the potential of the gameplay and the game IP. Meanwhile, Leap Studio is finalizing Realm of Ink, a visually stunning title that explores psychological themes through traditional ink brush aesthetics. It's an innovative title that pushes artistic boundaries while offering wide commercial appeal as well. Therefore, as a whole, our publishing strategy is not just financial.

We're currently looking out for game studios and gaming IPs to invest, to co-develop, to publish, to represent our commitment in building a long-term portfolio of valuable IP so as to enable creative studios with the capital, the publishing reach, and strategic support needed to scale globally. In summary, we expect our current financial year of FY 26 to be driven by several concurrent growth drivers, such as demand for Switch 2 games that we're currently selling, fueled by the heightened launch interest and an expanding library of enhanced titles, combined with the stabilizing impact of the Ban Leong acquisition and integration, along with a broadened distribution reach. Additionally, we believe our growing development pipeline and transmedia strategy will unlock new upside, with IP returns potentially amplified through film, episodic content, and other cross-platform extensions.

Therefore, as a summary, we plan to continue to invest selectively in IP development both within and outside of the GCL group. With that, I'll now hand back the floor to the operator for any Q&A. So please feel free to engage and feel free to question and to engage with us on any of our strategies for this year and beyond.

Operator (participant)

Thank you. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you are on a speakerphone, please pick up the handset to ask your question. We will just pause for a moment to allow questioners to enter the queue. Once again, that's Star 1 on your telephone and wait for your name to be announced. We will call for questions again. That's Star 1 on your telephone and wait for your name to be announced. We'll just give it about 10 seconds before we hand back. So that's just Star 1 on your phone. Your first question comes from Scott Buck with H.C. Wainwright.

Scott Buck (Managing Director)

Hi. Good morning, guys. How's everybody doing?

Kenny Lin (CFO)

Hey, Scott. Good. How are you?

Scott Buck (Managing Director)

Good. I just have a couple of quick ones for you. One on, I guess, more of a modeling question. On operating expense, outside of the acquisition, should we expect any kind of meaningful uptick in fiscal year 2026 from 2025? Are there places where you need to materially reinvest in the business, I guess?

Kenny Lin (CFO)

So far, I think in operating expense in the two fiscal years, 2024 and 2025, we have incurred significant listing fees. So in 2026, you will see that. And also, we are trying to optimize our cost and efficiency. So 2026, you see a better margin, not only from the GP side, but also at the net income. Does that answer your question?

Scott Buck (Managing Director)

Yeah. No, that's helpful. And then on gross profit or gross margin, as the business kind of branches out here, what is kind of the long-term expectation for what's possible on the gross margin side?

Kenny Lin (CFO)

I guess in general, we're looking to increase our profitability and margins as we move on to more publishing content and segment. But I can't give any specific guidance or target nor forecast in that area.

Sebastian Toke (CEO)

I think, Scott, just kind of adding on to what Kenny has shared. With the acquisition of Ban Leong, it truly represents a strategic acquisition where a lot of the business pillars have actually gone in overlay within both groups as well. So with the acquisition and a lot of the growth drivers that we're seeking to develop post-acquisition, it should lead to a lot of efficiencies and value drivers that hopefully will improve on the standalone margins through the operational efficiencies that's derived within the group post-acquisition.

Scott Buck (Managing Director)

Great. That's very helpful. And if I can squeeze in one last one, you touched on it a bit in the prepared remarks, but what is the acquisition criteria? What are you guys looking for in future transactions?

Kenny Lin (CFO)

I think, yeah, that's a great question, actually. I think for future acquisitions, the group having acquired Ban Leong, really, as a group profile, you see us evolve into a very dynamic group, so from before, pre-Ban Leong, we were just focused on gaming IP, game publishing opportunities, but post-acquisition was truly a dynamic group, so at this point in time, I think we don't have a hard and fast rule as to what kind of acquisitions would make sense. But what I can say is post-acquisition, as a more robust group, it certainly opens up more opportunities for us to look at any of the businesses that come along our way that could add value either on the content creation side of things or the hardware business side of things.

So as a group, I think we've been very aggressive in growing our business through the acquisition, and you can see this in our growth numbers as well. But moving forward, as a more robust full-spectrum gaming company, I think we are always in the lookout for businesses that would make sense either on the IP software side of things or the hardware side of things as well.

Scott Buck (Managing Director)

Great. Well, I appreciate the added color, guys. Thank you very much.

Sebastian Toke (CEO)

Thank you. Thank you, Scott.

Operator (participant)

And that's just Star 1 on your phone if you do have any questions. We are showing no further questions. I'll hand back to Sebastian for closing remarks.

Sebastian Toke (CEO)

Okay, so again, thank you, guys. I would really like to express my sincere gratitude to our shareholders, our partners, the interested parties that have dialed in. I invite your continued engagement, questions, and collaboration as well. So if you have any follow-up questions that you weren't able to ask on this call, please feel free to reach out to our investor relations team. With this, I bid you farewell and have a great day ahead. Thank you, guys.

Scott Buck (Managing Director)

Thank you.

Operator (participant)

That does conclude our conference for today. Thank you for participating. You may now disconnect.