Gamehaus Holdings - Earnings Call - Q1 2026

Transcript

Operator (participant)

Good day and welcome to the Gamehaus Holdings First Quarter of Fiscal 2026 Earnings Conference Call. All participants will be in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. I will now turn the call over to today's speaker host, Mr. Jack Wang. Jack, please proceed.

Jack Wang (Speaker Host)

All right. Thank you, Operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss the financial results of Gamehaus Holdings for the first quarter of fiscal year 2026. We released our earnings results earlier today. The press release is now available on the company's website as well as from NewsWire Services. On the call with me today are Mr. Brian Xie Feng, Chairman of the Board, Mr. Carl Cai Yimin, Chief Executive Officer, and Mr. Shawn Zhang, Head of Capital Markets and Investor Relations. Brian will review business operations and company highlights, followed by Shawn, who will discuss detailed financial results. They will all be available to answer questions during the Q&A session.

Before we proceed, I would like to remind you that this call may contain forward-looking statements, which are inherently subject to risks and uncertainties that may cause actual results to differ from our current expectations. For detailed discussions of the risks and uncertainties, please refer to our filings with the SEC. Also, please note that, unless otherwise stated, all figures mentioned during the conference call today are in US dollars. With that, I would like to introduce our Chairman, Brian. Brian will deliver his remarks in Chinese, and I will follow up with corresponding English translations. Please go ahead, Brian.

Brian Xie Feng (Chairman of the Board)

[Foreign language] Gamehaus 2026 [Foreign language].

Jack Wang (Speaker Host)

Good day, everyone. Thank you for joining Gamehaus's earnings call for the first quarter of fiscal year 2026.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

This quarter, our business remained stable while we continued to make meaningful progress in enhancing our profitability. Revenue came in at approximately $27.7 million, in line with the guidance we provided last quarter. More importantly, net income continued to improve, growing about 18% year over year. Our net margin was approximately 6.7%, reflecting a sequential improvement from about 5% in the prior quarter. Over the past several quarters, we have taken deliberate actions across our product portfolio, user acquisition strategy, and cost structure to transition the company towards a more efficient, predictable, and sustainable long-term operating model.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

In the first quarter of the new fiscal year, we continued to optimize user acquisition and marketing spend with a sharper focus on return on investment. Specifically, we reduced advertising spend in user acquisition and refined our marketing strategy for mature titles, which helped lower overall promotional costs. As a result, our operating expenses came in leaner and more efficient, directly contributing to higher margins. These improvements, combined with the continued stability of our core business, have strengthened the foundation for long-term profitability.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

On the product front, we continue to advance our development and launch pipeline in a steady and disciplined manner. Towards the end of the quarter, we released a new RPG title that is still in early stages of operation. We will continue refining the game as we gather more data and player feedback. Importantly, this launch has also expanded our experience in the RPG category and strengthened our capability for future releases.

Brian Xie Feng (Chairman of the Board)

budgets for these future new products, striving to achieve excellent results when the new products are commercialized and launched.

Jack Wang (Speaker Host)

Looking ahead, we are laying the groundwork for a robust mid to long-term pipeline. Among our upcoming titles, we expect to launch a new RPG before March 2026. The project is backed by a highly experienced development team, and early testing results have been very encouraging. It represents one of our most significant and thoroughly validated investments in recent years. In parallel, we are evaluating several teams with promising but not yet fully commercialized games, where we believe our GBS capabilities can meaningfully improve their probability of success. Over the past several months, we have focused on identifying projects with clear product-market fit, verifiable traction, and a high likelihood of success. We currently have multiple titles in development or testing across both puzzle and RPG genres. We have set aside sufficient marketing budgets to ensure that these products are well supported at launch and positioned for strong commercial performance.

Brian Xie Feng (Chairman of the Board)

will also significantly improve our profit structure.

Jack Wang (Speaker Host)

We are also closely monitoring regulatory developments and the growing industry shift towards direct-to-consumer or DTC contribution. Google's recent policy changes in the U.S. significantly expand the flexibility for third-party payments, and we view this as a major positive catalyst for the mobile gaming ecosystem. We believe DTC adoption will become an industry-wide trend and an important driver of margin improvement over time.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

Within our own portfolio, we are accelerating DTC integration wherever possible. On iOS, the DTC revenue contribution from one of our flagship titles increased from roughly 10% in August to about 16% at the end of this quarter, and we expect this number to exceed 30% in the next fiscal quarter. This gives us a more direct relationship with players and reduces platform fees. At the company level, DTC still accounts for a single-digit percentage of total revenue, but we expect this mix to rise steadily in the upcoming quarters as more titles transition into DTC channels and as Google opens DTC access in additional markets. By the first half of calendar 2026, we anticipate our overall DTC contribution to reach or potentially exceed 15%, which should provide an incremental lift to our profitability.

The adoption of DTC strengthens direct engagement with players, enhances retention, and meaningfully improves margin structure by reducing store commissions. Over the mid to long term, we believe that the rise of DTC will reshape mobile publishing models by giving publishers greater control and economic upside.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

From a regional perspective, North America and Europe remain our largest revenue markets. However, as we advance multiple RPG projects, we plan to increase our investment in high RPU Asian markets, such as Japan, Korea, Hong Kong, Macau, Taiwan, and Southeast Asia. Compared with Western markets, where gameplay preferences tend to favor casual and shorter session formats, players in Asia show stronger engagement and monetization behavior in RPG genres. This aligns naturally with the new titles in our pipeline. The combination of AI and our GBS infrastructure gives us the ability to replicate and scale our publishing and operating capabilities across multiple regions, and we believe this will become a key driver of our long-term diversified growth.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

From a technology standpoint, we view AI as a core pillar of our mid to long-term platform strategy. As a publisher with deep experience in game operations and content distribution, Gamehaus is naturally positioned to apply AI across the full lifecycle of game development and publishing. We are actively exploring ways to embed AI into every critical stage of game production and operations. This quarter, we made further progress on our enterprise knowledge engine and our AI-driven assistant system. By structuring years of accumulated insights from development, live ops, and monetization, and enabling retrieval through RAG-based natural language queries, our teams can now access cross-project, cross-regional solutions with much greater efficiency. These tools are already reducing the trial and error costs, shortening learning cycles, and enhancing the support we provide to our development partners.

In the coming quarter, we expect to roll out an upgraded version of our AI Chat Engine, which will deliver stronger analytical capabilities and better enable collaboration across teams.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

In parallel, we are building an intelligent art asset management system that uses computer vision and metadata tagging to improve asset production, experimentation, and team collaboration efficiency. For a global publisher that relies heavily on continuous creative output and cross-region A/B testing, this type of infrastructure will be a meaningful differentiator over time. We are also advancing additional AI-enabled functions, including automated customer support, segmented pricing, and personalized content delivery. While many of these initiatives are still in the early stages and will take time to translate into financial results, they are already having a tangible impact on internal efficiency and product iteration speed. We believe these capabilities will form a critical foundation for our long-term growth.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

On shareholder returns, our board of directors approved a share repurchase program at the end of August, authorizing us to repurchase up to $5 million worth of Class A ordinary shares over a one-year period. As of October 31, we had repurchased approximately 200,000 Class A shares. Going forward, we will continue to execute this program with discipline and remain committed to maintaining a solid operating foundation while delivering long-term value to our shareholders.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

Looking ahead to the next quarter and taking into account the seasonal dynamics of our major markets during the holiday period, we are setting our revenue guidance for the second quarter of fiscal year 2026, ending December 31, 2025, at a range of $24 million-$27 million.

Brian Xie Feng (Chairman of the Board)

[Foreign language].

Jack Wang (Speaker Host)

With that, I will now turn the call over to Shawn, who will walk you through our financial results in more detail.

Shawn Zhang (Head of Capital Markets and Investor Relations)

Thank you, Brian, and hello everyone. I will now provide a detailed overview of our financial performance for the first quarter of fiscal year 2026, which ended September 30, 2025. Please note that all figures are in US dollars and all comparisons are made on a year-over-year basis unless otherwise stated. In the first quarter of fiscal year 2026, our revenue reached $27.7 million as we continue to scale back user acquisition spending, with our advertising costs decreased by 13.5% year over year. We intentionally redirected resources toward developing new game categories, advancing upcoming projects, and preparing for their launch and promotion. We view this as a healthy rebalancing towards sustainable long-term growth. As a result, the reduction in marketing spend led to lower traffic and new user acquisition, which in turn impacted our top-line performance.

Breaking down our revenue by segment, in-app purchase revenue was $25.3 million, compared with $26.9 million a year ago. Advertising revenue was $2.4 million, down from $3.0 million in the same period last year. Importantly, we continue to strengthen player engagement and monetization through enhanced in-game content and live ops features. This progress is reflected in the 24.4% increase in average revenue per daily active user during the quarter. Moving on to expenses, in the first quarter, total operating costs and expenses were $26.7 million, down 6.2% from $28.5 million in the same period last year. More specifically, cost of revenue declined 5.4% to $13.3 million, primarily driven by lower platform fees and reduced profit-sharing payments to game developers.

R&D expenses increased 18.3% to $1.2 million as we continue to strengthen our platform's AI technology and advance collaborations throughout the development and testing phases with multiple developers to build out our future game pipeline. Selling and marketing expenses were $10.8 million, 13.6% lower than $12.5 million in the same period last year, consistent with our strategy to scale back AD spending and optimize efficiency for mature titles. G&A expenses were $1.4 million, compared to $0.9 million a year ago, mainly due to higher salary expenses and professional service fees associated with being a public company and related governance enhancements. Now, moving to profitability, in the first quarter, operating income was $1.0 million, down from $1.5 million a year ago. Operating margin was 3.6% versus 5.0% in the same period last year.

Net income for the first quarter was $1.8 million, up 18% from $1.6 million in the same period last year. Earnings per ordinary share were $0.04, compared with $0.03 a year ago. We ended the first quarter of fiscal year 2026 with $15.3 million in cash and cash equivalents, slightly higher than $18.2 million as of June 30, 2025. We believe this is sufficient to meet our liquidity and working capital needs for the next 12 months. Before we conclude, I would like to briefly reiterate our outlook and capital allocation priorities. For the second quarter and fiscal year 2026, ending December 31, 2025, we expect the revenue to be in the range of $24 million-$27 million. This expectation is met in line with our disciplined approach during the calendar fourth quarter, when industry-wide user acquisition costs typically rise and overall retention trends to soften.

I would also like to remind everyone that our board authorized a $5 million share repurchase program in August this year. As of October 31, we had repurchased approximately $285,000 worth of Class A ordinary shares. Looking ahead, we will remain focused on strengthening our platform capabilities to enhance competitiveness across our publishing ecosystem, taking a prudent and selective approach to investments in games where we see clear potential and maintaining a balanced framework across growth, profitability, and returns to shareholders. With that, we can now open our call for questions. Our CEO, Carl, and I will answer your questions. Operator, please proceed.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Additionally, when asking a question, please state your questions in Chinese first, then immediately translate them into English for the convenience of everyone on the call. There are no additional questions. Oh, excuse me. Our first question comes from Jay Lee with Guojin Securities. Please go ahead.

Jay Lee (Analyst)

Thank you for taking my questions and congratulations on your strong results. I have two questions. First, we noticed an improvement in ARPDAU this quarter. How much of that increase was driven by the changes in product mix versus operational optimizations within the games? If you decide to ramp up your user acquisition again in the future, do you believe the current ARPDAU level is sustainable? My second question is regarding the capital market. The stock has shown some volatility recently, but we noticed the company has been actively executing its authorized $5 million share repurchase program with part of the buybacks already completed by the end of October. How does the management view the current share price performance? Going forward, what should we expect regarding the pace of the repurchase or your capital allocation priorities over the next few quarters? Thank you.

Brian Xie Feng (Chairman of the Board)

[Foreign language] Now I will translate my answer to English. Thank you for your question. The increase in UPDAU this quarter is primarily driven by our ongoing optimization of live ops and monetization efforts, which include adding user-favored operational events, exclusive maintenance for high-value users, and targeted package pushes based on user segmentation. Meanwhile, the launch of new RPG game Jira has increased the revenue share of RPG products with higher monetization capabilities, further boosting UPDAU. Overall, the improvement is largely attributable to game operation optimization, while product structure change has also contributed to a certain portion. Regarding sustainability, with our continued focus on live ops optimization and the upcoming release of new RPG games, we believe that the current UPDAU level can be maintained at a high level, even if we ramp up user acquisition efforts in the future.

This is supported by our long-term product and operational strategies, which balance user growth with monetization efficiency. Thank you.

Shawn Zhang (Head of Capital Markets and Investor Relations)

[Foreign language]. I will translate for myself. Thank you for your second question. As we mentioned on the previous earnings call, our management believes that the company's share price does not adequately reflect either our business fundamentals or the long-term growth potential of the global mobile gaming industry. This is why at the end of August this year, we launched our first share repurchase program, and the board has authorized us to repurchase up to $5 million of our Class A ordinary shares over a one-year period. As of the end of October, we have already repurchased approximately 200,000 Class A shares. By initiating and consistently executing this program, we aim to demonstrate our view that the company is undervalued at current levels. As you probably know, the SEC's rules, 10B-18 Safe Harbor, impose certain constraints on issuers during buybacks.

For example, our daily repurchase cannot exceed 25% of the stock's average daily trading volume, which is also called ADTV, over the prior four weeks. Given the current liquidity profile of our stock, you probably noticed that our repurchase activity through the end of October has actually been running near the upper bound of what these rules allow. Looking ahead, we plan to continue executing the repurchase program in a disciplined manner, taking into account our operating capital needs, while maintaining compliance with applicable limits. At the same time, we are actively exploring various ways to improve the liquidity of our stock. In addition to buybacks, we will continue to evaluate other potential shareholder return mechanisms so that long-term investors who believe in the company can benefit from the value created as our business grows. [Foreign language] Thank you. That will be my answer.

Okay, operator, we can take next question. Thank you.

Operator (participant)

Our next question comes from Zheng Wei Chen with Heji Capital. Please go ahead.

Zheng Wei Chen (Analyst)

[Foreign language] management mentioned a plan to increase the D2C plan mix for your flagship title from around 10% in August to approximately 30% by year-end. During this transition, what specific impact has the higher D2C mix had on key metrics such as user volume, upput, and profitability? The second question is, we saw a meaningful improvement in your net margin this quarter, yet the revenue guidance for next quarter remains relatively flat at $24-27 million and even slightly lower at the midpoint. How sustainable is this margin extension? With revenue expected to stay stable, what structural driver can continue to support further profitability improvements? Thank you.

Carl Cai Yimin (CEO)

English. Thank you for your question regarding the impact of the increased DTC share for the game on our, current, on our core metrics. We can break it down as follows: first and foremost, the most direct and significant impact is on our profit margin. The promotion of the direct-to-customer payment method effectively reduces the stock commissions paid to the platforms, which directly boosts the product's overall profit margin. This is a primary financial benefit derived from the increased DTC share. Secondly, concerning user base and upput, it's important to distinguish the effects. The DTC model itself as a payment method does not directly attract new users or instantly alter users' paying habit. However, the operational measures accompanying our DTC promotion, such as guiding users to register official website accounts, offering exclusive DTC payment incentives, and establishing more direct customer service communication, have significantly strengthened our connection with players.

This helps enhance player loyalty and activity, indirectly boosting their willingness to pay, which in turn provides positive support for the long-term stability and the potential improvement of output. Looking ahead, with Google in the U.S. market now fully opening up to DTC payments, we are in a more favorable position. We plan to systematically replicate the successful DTC strategy and operational model already validated with our current games across our other product lines. We expect this initiative to further drive the overall DTC penetration rate company-wide, and ultimately optimize our consolidated profit structure. [Foreign language] I will give the translation for myself. Since completing our public listing, the management has been consistently focused on improving profitability while gradually expanding our revenue base. As Brian mentioned earlier, our net margin continued to improve this quarter, reaching approximately 6.7%, which represents about 18% year-over-year growth.

Compared with the previous quarter, the three months ended June 30th, you can also see a clear and consistent upward trend. The margin improvement this quarter is indeed the direct result of our ongoing enhancement in overall operational quality. Our user acquisition and marketing expanding become more efficient, and our ROI-driven approach is working. Even in an environment where revenue remains relatively stable, healthier spending structure and higher efficiency naturally translate into better margins. In addition, as Carl just mentioned in response to the earlier question on DTC, increasing our DTC mix remains a strategic priority for us.

While most of the progress so far is still driven by our flagship title on the Apple App Store, and while DTC has not yet made a significant contribution to our company-wide profitability at this stage, we have already set clear internal objectives to steadily increase the DTC ratio from now until June 30th next year. We believe that during this process, the margin benefits brought by DTC will gradually become more visible. Regarding our revenue guidance for the next quarter, we continue to take a relatively flat view. There are two main reasons for this. First, during the global holiday season in November and December, the mobile gaming industry typically experiences higher traffic acquisition costs, and strategically, we will not pursue short-term revenue spikes at the expense of ROI discipline.

As Brian also mentioned earlier, our pipeline currently includes multiple new titles at different stages of development and testing. The more noticeable revenue growth trend will emerge progressively as these new games come to the market over the coming quarters. That will be my answer to your question, Zheng Hui. [Foreign language].

Zheng Wei Chen (Analyst)

[Foreign language].

Operator (participant)

There are no additional questions at this time. I will now hand back to Shawn Zhang for any closing remarks.

Shawn Zhang (Head of Capital Markets and Investor Relations)

Okay, thank you, operator, and thank you all for participating on today's call, and thank you for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.